Forget a Foreign Policy Based On Military
or Political Solutions-Try Exporting Entrepreneurship

"For the United States to survive and continue its economic and political leadership in the world, we must see entrepreneurship as our competitive advantage," asserts Carl Schramm, the CEO of the Kauffman Foundation, the nation's largest foundation dedicated to promoting entrepreneurship.

The message of his new book, The Entrepreneurial Imperative, passionately states that entrepreneurship is America's strongest resource, and we need to exploit it fully, both at home and abroad. "We have an entrepreneurial imperative," he writes.

Schramm firmly believes entrepreneurship must be the basis of our foreign policy, as opposed to military, political, or other solutions.

"Engendering economic success within other countries is by far the most certain way to support the emergence of democracy," he writes.

Schramm tells us:

• Fostering the means to create wealth in every country will make the world more stable, even if it means more competition for America.
• Schemes such as forgiving debtor nations have a very limited impact. Only when citizens can live in nations where wealth expands and they take ownership of it can democracy flourish.
• Failing to advance this model will inevitably result in a mistaken worldview that sees the issue of wealth through the lens of redistribution, not expansion.
• The American Dream is not just for Americans anymore. The inarguable conclusion is that entrepreneurial capitalism is our single most important export! If others copy our economy and if we assist them in doing so, we can expect our own wealth to grow.

Schramm's playbook for an entrepreneur-centric foreign policy looks like this: Entrepreneurial capitalism produces expanding economics; as the pie grows, more people benefit from expanding wealth. More people own their own business and share in growing businesses. More ownership will secure and strengthen democratic governments. Expanding economies, as a rule, produce stable democracies, thus, increasing the chance for peace.

"The problem with our foreign policy today," says Schramm, "is that much of it is still grounded in rather simplistic modes of thinking shaped by the Cold War Era - that is, if we encourage democracy and give direct aid to those who lead down that path, somehow representative governments will naturally flourish. Nonsense!"

He shows how this approach has often yielded disappointing results. "Many economies in Latin America, Eastern Europe, and elsewhere are stagnant or back-sliding, and most of the world's poorest economies show few signs of new life," he says. "The current template is incomplete. In particular, it fails to reproduce a vital element of the U.S. economy: support for entrepreneurship."

So what should be done about this?

Schramm outlines the following solutions:

1. Developing nations must establish certain underlying conditions that allow the entrepreneurial process to flourish with favorable business policies and regulations, and access to investment and human capital.
2. In many developing nations, starting a business is fraught with expensive and time-consuming red tape, while all the paperwork for starting a corporation in the U.S. can be completed in a day. That must change.
3. Developing countries must ensure that there is a level playing field between old and new firms. The United States tries to achieve this in a variety of ways, such as by protecting intellectual property and discouraging monopolies and unfair trade practices. Developing nations must resist pressures from existing businesses to preserve markets and prevent innovations.
4. In the government sector, nations should do as much as possible to invest in infrastructure that supports entrepreneurship.
5. Another infrastructure investment beneficial to entrepreneurs is the subsidization of laboratories and testing facilities for shared use, which young technology firms often need but cannot afford on their own. Shared facilities also encourage entrepreneurs to cluster geographically, as they do in the United States-gathering in certain cities or around research universities-thereby gaining a dense network of peers for partnering and mentoring.
6. In colleges and universities, the current approach rightly calls for countries to invest in education, but it emphasizes primary education. Higher education should be made a priority, too.

Encouraging entrepreneurship may do developing countries more good in terms of long-term growth and gains in productivity than policies aimed at accelerating near-term growth. As individuals step into the market, assume risk, and work to turn their aspirations into businesses, they will insist on political and economic liberalization - the very goals we seek.

"Of course," concludes Schramm, "the growth of worldwide capitalism will be good for us, since it will provide more markets for our goods, but it will benefit everyone. The opportunity to create wealth in an entrepreneurial way - that is, in a way that has widely dispersed it throughout a society - is the soundest approach to spreading democracy. Developing and spreading entrepreneurial capitalism will revolutionize the world."