Yet there is a proven model for just such economic growth right in front of U.S. policymakers' eyes: the entrepreneurial model practiced in
It is imperative that the U.S. military develop its competence in economics. It must establish a new field of inquiry that treats economic reconstruction as part of any successful three-legged strategy of invasion, stabilization or pacification, and economic reconstruction. Call this "expeditionary economics."
A DISCOURAGING RECORD
The U.S. military often cannot accomplish its long-term missions by force of arms (postinvasion
Yet U.S. military planners and U.S. troops on the ground often turn to U.S. and international development agencies or nongovernmental organizations (NGOs) for practical guidance on improving local economic conditions only to find that the putative experts are little help. The record of recent economic reconstruction efforts in postconflict settings is discouraging, to say the least. In
Elsewhere, the sweeping structural reforms that have often been mandated by lenders at the
Two points stand out from these experiences. First, when rebuilding postconflict and post-disaster countries, it is not enough merely to restore the economy to a level resembling the pre-crisis status quo. The economy is often part of the original problem in places that become trouble spots.
The second key point is that stabilizing a troubled country requires economic growth more than economic stability. For this, job diversity is needed in the private sector -- in other words, options well beyond the usual public-sector sinecures are essential. New opportunities must be created that are more attractive than trading on the black market or making bombs.
The U.S. military is well placed to play a leading role in bringing economic growth to devastated countries. It may have little resident economic expertise, but it has both an active presence and an active interest in places where economic growth is sorely needed. The U.S. armed forces usually are the most formidable and best-resourced entity in the troubled countries in which they operate; indeed, the
The U.S. military must therefore formulate a doctrine of expeditionary economics designed to spur solid growth as rapidly and effectively as possible. For this, it should draw on some of the more recent wisdom of the international development community -- a growing number of scholars are rejecting the decades-old doctrine of big plans and dictated reforms and turning instead to more modest yet more effective projects. Some military officers, in fact, have already been doing work along these lines. The military could then use the various means of influence at its disposal to steer international development practices in the direction of the new doctrine.
U.S. and international development policies would be much more successful if they applied to other countries the salient features of
The creation of high-growth firms has multiple benefits, chief among them the constant creation of new wealth and new jobs, even as older firms recede because of global competition, changing lifestyles, or advancing technology.
Such transformative entrepreneurship is not a modern phenomenon or a phenomenon that occurs only in already developed economies. In the late 1800s and early 1900s, when
Entrepreneurial capitalism is messy, since it is highly organic rather than centrally planned or centrally managed. Many different people and entities bring the elements -- from new firms to university research to federally funded research -- into place, and activity flourishes from letting them all evolve and interact in the marketplace. It is nearly impossible to predict what outcomes these activities will bring beyond a broad trend toward higher productivity, rising standards of living, and continued economic growth. By contrast, the problem with international development today is that it is dominated by the theory and culture of grand central planning. Successful development requires a strategy, not a plan.
This is the template that U.S. officials used for restructuring
Although international development policy is beginning to recognize the importance of entrepreneurship, it is so far doing so in ways that make little substantial difference. Microfinance for tiny enterprises helps many individuals earn a living, for example, but it does not stimulate high-growth enterprises. Attempts to cultivate high-growth firms, meanwhile, have focused on attracting venture capital and other growth incubators. Such important support mechanisms are, indeed, found in entrepreneurial capitalism, but in advanced economies, they do not help as much as is commonly believed. Less than 16 percent of the fastest-growing U.S. firms in the past decade received any venture capital. In developing economies, such capital sources should not be considered an agent for inducing entrepreneurship. Studies show that it is entrepreneurial activity that creates venture capital, not the other way around.
The U.S. military's economic programs in
AN INTEGRAL GOAL
A doctrine of expeditionary economics, with practical guidelines for economic expansion, must begin with a clear notion of what works. Whenever
Nor should economic development be seen as a separate task that can wait until after the others have been achieved. Although the various steps involved may compete for attention, there are also ways in which they can inform and reinforce one another. Counterinsurgency campaigns, for example, can facilitate economic growth by helping identify the entrepreneurial aspirations of certain individuals.
Going in, detailed economic planning probably is not necessary and may even be counterproductive. What is most needed then is a good assessment of the work that lies ahead (and attention paid to such assessments), with a range of options for how to meet the likely needs and with well-defined economic goals.
Too often, in both the military and the international development spheres, there has been a failure to consider the postwar economy in any strategic sense. Military doctrine has usually treated operations other than war as secondary matters to be handed off to other agencies. These agencies, USAID in particular, have rarely conceived of their work as part of a larger strategy for the country in question or for promoting U.S. interests. One-off projects and bureaucratic delays -- due in no small part to congressional constraints on USAID -- have created the impression that dependence and subsistence are the inevitable future for countries such as
Economic growth must be an integral goal of U.S. postconflict and post-disaster strategy. Growth is not simply a mechanistic composite of statistical indicators. It is in a very real sense an expansion of the imagination. "For income growth to occur in a society," the economist and Nobel laureate
Economists sometimes get tripped up trying to measure growth; it can be misleading to look at a single standard, such as GDP growth. For example,
In other words, signs that real growth is occurring include the fact that new firms are being founded; that the number of jobs in firms younger than five years old is rising faster than that of jobs in older enterprises, including government-owned companies; and that new firms are growing to large sizes by bringing new products or new services to the market. For this growth to be sustainable, it is vital that firms regularly give birth to new lines of business or entire new industries, especially since existing industries tend to contract as they mature and as they face ongoing competition. Only then can real GDP expansion follow.
International development researchers have often been perplexed by the fact that a program that produces good results in one country may not work in another. They should not be: every situation is different; formulaic approaches cannot work. It is not necessarily true, for example, that an economy needs great infusions of outside capital in order to grow. Start-up ventures do need capital, but the best sources of this capital may differ from one state to another. In poor postconflict countries, few entrepreneurs can finance their own projects, especially if these are ambitious ventures with high growth potential. In those instances, some direct investment from the U.S. military or other U.S. government agencies, preferably working through local lending institutions, may be required. Another possible model is something like
Even for companies that are already growing fast but need financing to continue, venture capital is hardly a one-size-fits-all solution. Venture-capital financing, which is based on investors' ability to cash out quickly, may not be desirable in developing countries. In such places, one should prefer to see local entrepreneurs hold on to their ventures and eventually build iconic homegrown firms, like
Planners and decision-makers everywhere try to control events and steer their policies toward predictable outcomes. But a successful entrepreneurial system requires a willingness to accept messy capitalism even when it appears chaotic, trusting that the process will eventually bring sustained growth, as it has in
Such an approach may seem to contradict the U.S. military's usual goal of imposing order in postconflict zones. But this is so only at first glance. The stability that the military seeks is primarily social and political, not economic. Some of the world's most dynamic economies exist in some of the most stable countries --
A successful example of this is the National Solidarity Program in
If they want to do better at building vibrant economies in countries that have been devastated by war or natural disasters, U.S. military planners will have to look beyond international development organizations, which are prone to self-reinforcing thought patterns. They will have to consult people with practical experience, such as entrepreneurs who have gotten concrete results from launching successful firms.
Helping other countries' economies grow may be
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