Innovation, Entrepreneurship and Peace

The recent award of the Nobel Peace Prize to Grameen Bank and its founder, Muhammad Yunus, has called renewed attention to the microfinance movement, which seeks to stimulate economic development by making very small loans available to remote rural areas not served by traditional banks.

Management and strategy guru John Hagel has an excellent post on his blog entitled Peace and Entrepreneurship that looks at the relationship between economic development, entrepreneurship, innovation and peace. The connection, he says, is not the obvious one. Micro-credit is only one of many elements that will help address global poverty, but without corresponding legislative and institutional reforms to foster entrepreneurship, it will be a wasted effort.

The real relationship between entrepreneurship and peace, says Hagel, is this:

Entrepreneurship and business innovation are key ingredients in shifting economic activity from zero sum to positive sum games. Positive sum games, by expanding the overall returns, tend to dampen conflict and foster collaboration while zero sum games, with a fixed set of resources, intensify conflict. In this respect, the entrepreneurship of Muhammad Yunus indeed may contribute to global peace by inspiring entrepreneurs everywhere.

For some related reading, Edmund Phelps, the economics professor at Columbia University who was just awarded the 2006 Nobel Prize for Economics, has an opinion piece in last week's Wall Street Journal entitled "Dynamic Capitalism", in which he argues that removing restrictions on private entrepreneurs and financiers helps even the lowest wage-earners and is still "economically just", even though capitalism in practice falls short of idealized capitalism.