Inclusive entrepreneurship - growing economies by growing citizens

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Inclusive entrepreneurship -- growing economies by growing citizens

Remarks delivered by Graham Meadows in Brussels, 17 April 2008



Contents

The laws of finance

Thanks to Peter Ramsden.

I will begin by saying a number of things that we all know already, from our direct experience. Policy-making is a chaotic process.

As policy-makers, we’re always learning, either from experience or from academic research and we’re constantly up against the limits of what our policy permits. The policy-maker’s permanent condition is one of trying to interpret or bend regulations to do what now appears useful or necessary but which didn’t seem so when the policy was framed. And that’s true whether we’re making policy in a town, a city, a region, a Member State or the EU. It was in this chaotic way that EU regional and cohesion policy came to recognise the role of inclusive entrepreneurship in economic development and, therefore, the need to encourage it in our regions.

To give you an idea of what we’re talking about, I can recount our gradual awakening. First, remember that European Regional Policy was – still is, except, perhaps, for the Competitiveness regions – well-funded. I know that the First Law of Finance is that there is never enough money – but, in the period of our awakening to inclusive entrepreneurship, finance wasn’t a problem.

Next, we all of us know, and this is the Second Law of Finance, that it’s easier to get money for, or from, a policy than it is to spend it. This Second Law needs a small qualification: it’s easier to get money than it is to spend it well. We came to understand the role of entrepreneurship in achieving value for money in the use of public resources. The Third Law of Finance is that it is imagination which makes the difference. Imagination is as important as money – money, by itself, is not enough. Imagination, innovation and entrepreneurship are all closely linked – the entrepreneur’s imagination and spirit of innovation are vital.

All this we know from our experience.

Imagination

In an important sense, and I know I’m simplifying, regional economic development depends on imagination and innovation. This pushes the entrepreneur into the front rank.


One obvious area in which a region needs imagination is in analysing its strengths and weaknesses and working out its route to development, its investment priorities. But I don’t want to talk about the role of imagination in that part of the development process. Because there’s a need for imagination which is even more vital – the imagination which connects policy to the economy, to economic acts. This sort of imagination is in the minds of our entrepreneurs.


What do I mean ? Let’s assume that, as policy-makers, we always do the right thing. We diagnose correctly what our region needs to do in order to develop, we choose the correct priorities and allocate sufficient finance to them, we put in place the right measures. Then what ?


Like fisherwomen and men, we wait. We wait for entrepreneurs to come along and, through their imagination, connect our policy with the economy, so that “Bingo” something good happens, either a business is created, or an existing business grows, wealth and income spreads in our community and poverty is reduced.

So part of the chaotic evolution of European regional policy was the realisation that we needed to maximise imagination and innovation and entrepreneurship. The next task was to try to decide who had the imagination we needed. Yes, it was the entrepreneurs. But who were they ?

  • Were they already in economic activity ? Already the heads of businesses or senior workers ?
  • Were they rare ? Are we looking for such-and-such a region’s Henry Ford ?
  • Were they MBA graduates ?

We finally realised that the answer to all these questions was “No”. Who are the entrepreneurs with the imagination regions need to develop their economies ? Everyone. Everyone has the capacity to be an entrepreneur. Yet the paradox is that, although all have the capacity, entrepreneurs are in short supply. Many potential entrepreneurs never discover their talent. Others have an idea, a spark of economic inspiration, but fail, through no fault of theirs, to connect to the possibilities offered by policy. Others do connect, but their attempts to create businesses fail.

We have all realised that the search for entrepreneurs is a search for the many, not the few. Not a process of weeding out candidates to find the one in a hundred, but a process of inclusion. And we have all realised that policy needs to be specially tuned to the task if it’s to play its part. And this is where the chaotic nature of policy-making comes in.

What does good entrepreneurship policy look like?

We realised quite quickly that European cohesion policy – and, I have to say, many national policies, also – were not good at encouraging entrepreneurship. They were not tuned to the task. We had to set about finding ways to bend the policy in the right direction. And this always seems to be chaotic.

As I say, many potential entrepreneurs never discover their talent. Perhaps, if the right training were put in their path, this could change – and there are two ideas there: “right training” and “put in their path”.

Others have their spark of inspiration, their Eureka moment, but they can’t connect to policy in time to take action and the spark fades away. There may be many reasons for the failure to connect: the potential entrepreneur may not know of the possibilities offered by policy; the application forms may be too long and complicated; the wait for a decision may be more than the candidiate can suffer; she may come up against someone who’s a no-sayer (a widespread disease in policy management).

Or new entrepreneurs might fight through all the difficulties and then fail. Because they had insufficient capital, or because they were out of their depth, or they just felt isolated and lost their motivation to progress.

All these possibilities – and the list is by no means exhaustive – tell us something about the way we must tune our policy.

  • Policy must be known.
  • It must connect.

A message which says “Do you know that at my college we can help train you to set up and run your own business ?” hits two bells – gives people the idea, tells them how to connect.

  • Policy must be easy to access.

A message which says you can get an application form off our website and complete it electronically will look like an invitation to the dark side of the moon for many potential entrepreneurs. A twenty-page paper application form is just as bad.

  • It must have a short decision time.

If you’re unemployed and have had an idea to set up a business, you don’t want to wait 90 days for a decision. If you’re already running a business and need help with an expansion, you want it this month not next year.

  • The policy’s culture must be “yes-saying”.

The frequency with which a policy says “yes” or “no” to entrepreneurship ideas will largely depend on how good it is at evaluating and managing risk. A “yes-saying” policy is one which is skilled at risk-management; a policy which frequently says “no” is inefficient and is protecting itself by risk avoidance.

  • Policy must be able to handle diversity.

Entrepreneurs come from all population groups and their ideas will be equally diverse.

A policy which has these characteristics will be one which promotes enterpreneurship and which safeguards motivation. It will recognise the drama of the entrepreneur’s choices and be sensitive to her circumstances.

Conclusion

I could probably rest my case for the importance of inclusive entrepreneurship by citing three statistics.

  • 90% of all businesses are micro enterprises (employing less than 10 people).
  • They account for 30% of non public sector employment (38million people) and
  • 20 % of output.

These figures indicate the contribution which inclusive entrepreneurship is already making to our development. But its importance to us as policy-makers is that it can make an even bigger contribution to our dynamism, our income growth and to the reduction of poverty and inequalities.

In short, it is clear that entrepreneurship is a major driver of transformation in people’s individual lives and in their communities.

So let’s sum up the story so far.

First, inclusive entrepreneurship describes a commitment by us as policy makers and practitioners to make entrepreneurship open and easily accessible.

It means widening entrepreneurship opportunity to people from all walks of life. It should be equally possible for a young mother to set up a new enterprise as for a venture capitalist. It should be easy for a new migrant to register their business in their new country. It should be possible for anyone with a good business idea to get a loan and to get started. Inclusive entrepreneurship is about making the setting up a business possible for all.

Evidence shows that people from any background can be successful in business. Education is no guide to business success (although obviously a bit of education can help). We see, and are motivated by, remarkable transformations of people who had been inactive in the labour market and, for this reason, sidelined by society and who have reinvented themselves and gone on to create jobs for others. But as we know there are also problems and many people are held back or become trapped in the informal sector because of barriers and lack of support. Second, it means in practice a process of modernising entrepreneurship policy in all its forms to address diversity of people, of places and in a range of enterprise formats (including inter alia self-employment, limited companies and social enterprises). Now, this is something with which you are all familar because it’s what you are doing daily – taking entrepreneurship policy forward so that it reaches more and more people. And in the chaos of your own policy development you have to work out how to bend and modify institutional frameworks and structures.

This effort marks you as being different. There is a body of opinion which bemoans the lack of entrepreneurial spirit shown by European economies and tries to find the cause. Is it, for example, Europe’s social market model which makes people too comfortable ? This is the sort of discussion one hears.

You start from a different belief. We all have the potential to be entreprenerurs. The question then becomes “How can we adjust policy so that it reflects this truth, so that support for entrepreneurship is inclusive and accessible to all ?” I have many examples to offer, both from your experience and my own. Wales is one leader, with its adoption of the Welsh Entrepreneurship Action Plan back in 1999 and the use of EQuAL resources up until last year to implement a genuinely braided approach by which mainstream agencies linked to specialist providers of support for women, minority ethnic groups, the old and the young and so on.

Initiatives like the UK's Inner City 100 published annually in the Financial Times were able to show that disadvantaged communities were full of enterprise.

Meanwhile projects funded under EQUAL have pushed the envelope to demonstrate that there are techniques for reaching some of the most excluded groups in society and that when you do reach them they can surprise you with their entrepreneurial zeal. I'm hoping that there are people from the Association of Community Based Business Advisers ACBBA in the audience. They have developed a technique of training business advisers from within refugee and migrant community associations. It means that their adviser already speaks Somali or Farsi or Chinese. They have doubled the number of minority ethnic business advisers in London and created the concept of the 'embedded business adviser. Their project reached 1300 clients and is scalable.

We have seen amazing innovation around supporting young people to become entrepreneurs. Who would have thought that Valnalon, a former Objective 2 area in Asturias with a closed steelworks, would be the place where 'minicompanies', one of the most successful school based enterprise programmes, would be developed? Or that the UK's Make your mark campaign where school children had £10 (about €10 at the new exchange rates} to launch an enterprise project in their school. some of the winners had made £400 six weeks later and the ultimate winner did this as a social enterprise where the profit went to African schools. I could also mention the Merseyside Objective 1 partnership where, in 1994, Peter Ramsden dveloped the concept of Pathways to Integration, so that people could be active in transforming their own run-down communities. This was founded on the belief that every person has the potential to contribute to economic development. One of the lessons we learnt in Merseyside was that entrepreneurship was as important as employment in helping to turn these communities around.

Later in the 1990s, South Yorkshire set up the South Yorkshire Key Fund . South Yorkshire had suffered terrible economic restructuring in coal and steel, and the area needed desperately to be turned around. Our original idea was that anyone from the poorest communities could come forward to get support to work up a business idea or a social enterprise, and within two weeks they would either receive the go ahead for their investment or they would get extra help to prepare their idea further. This has now become the Key Fund Yorkshire and supports social and micro entrepreneurs in their communities. I'm convinced that finance plays a major role in helping individuals to set up initiatives.

In 2006, Maria Nowak from European Microfinance Network pressed for support in promoting Microcredit also known as Microfinance. Her organisation ADIE, which she set up nearly 20 years ago, last year lent small sums of money to 18,000 mostly start-up micro enterprises across France. 40% were women and around a third from a migrant background often in the Banlieues. To achieve this, however, she has had to sign nearly 1,000 agreements with municipalities, funding bodies like ERDF and ESF and banks. It shouldn't be so difficult to do the great work that they do.

As a result of her initiative at European level, last autumn the Commission published an initiative on Micro Finance that will provide loan capital and technical assistance to help micro finance institutions with potential to reach more clients and grow rapidly. But we need to get back to where we started, to chaos.


When we discuss the issue of inclusive entrepreneurship, we comfort ourselves by listing our successes – and the list is long and awareness is growing and we should be encouraged by this. But if we’re truthful with one another we have to face the fact that awareness of this great economic potential is not growing quickly enough. As a child I was taught that if you make the best mousetrap, the world will beat a path to your door. Life teaches us that this is not true or, to be kinder to my teachers, that to be true it presupposes many things. And perhaps the most important of these is that great ideas have to be disseminated and developed.

This is where COPIE comes in. It provides a way

  • of linking you across Eurpope, you the actors in inclusive entrepreneurship;
  • of creating a knowledge bank of good practice;
  • of developing tools that you can use to demonstrate to policy makers that there is undeveloped potential, that you can locate it and that you can tap into it.

Inclusive Entrepreneurship sits at the intersection between social policy and economic policy. It is pure Lisbon agenda.

  • We know that economies that have more dynamic entrepreneurial cultures have higher levels of growth.
  • We also know that for many people on the margins of society, entrepreneurship offers more hope of escaping the revolving door of unemployment than going through national schemes.
  • We know that becoming an entrepreneur can be a transformative experience. The danger is that to both the employment and industry ministries, sometimes even the enterprise people think that micro enterprises are too small to register on their radar. It means that they get away with ignoring the contribution that Inclusive entrepreneurship makes. Such ministers are happier meeting the captains of industry. But, remember, micro enterprise makes up over 90% of European enterprise


What COPIE demonstrates is that to make Europe more entrepreneurial and more inclusive requires a range of interventions across the whole of enterprise policy.

  • This is why the COPIE approach of engaging with all of the stakeholders is important for future success.
  • This is why the Declaration on Inclusive Entrepreneurship that is being made today by the Managing Authorities founder members of COPIE is so important.


COPIE is showing that policy and practice on inclusive entrepreneurship are indivisible. Whereas policy is essentially a top down exercise, practice is from the bottom up. Policy is easy, implementation is hard. You have created a space in which these two groups, policy makers and practitioners, can hold a dialogue. You have even brought the voice of the user, the entrepreneur into the room. By working in this way and especially by creating your own knowledge base on Wikipreneurship you will enable to ensure that developments in one part of Europe are known about and understood in another.

You might believe that the transmission of ideas is simple and straightforward. Well it isn’t. You might have thought that, once uttered, the thoughts of famous people would provide you with encouragement and motivation. Well, it’s not true.

If things were as simple as they seem, you would have noticed one of Margaret Mead’s remarks and have drawn strength from it. For she said: “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has.”

But, alas for Margaret, her saying went practically unnoticed until it was popularised by President Bartlett in the TV series West Wing. Until President Bartlett gives us his thoughts on inclusive entrepreneurship, COPIE is the best we’ve got.

Notes and references

Joint Employment Report 2007/2008

[1] found nothing Joint Employment Report 2006/2007 inclusive entrepreneurship actions page 11 1st and 2nd para, p 13, 2nd para

inclusive entrepreneurship employment guidelines GL 15 last report with recommendations annual progress report on growth and jobs 10 countries have reported actions on start ups or entrepreneurship on DG Regio website [2]

the Community strategic guidelines on cohesion entrepreneurship 1.2.2 last para, end of 1.2.4 last item in box, 1.2.4 3rd last bullet