When war erupted in 1996 between the Hutu and Tutsi tribes in Rwanda, a citizen named Mr. Emmanuel fled to nearby Congo. Three years ago, when he felt it was finally safe to return to his nearly devastated country, Mr. Emmanuel discovered an economic opportunity in the specialty coffee business.

As he scraped together his own small operation, Mr. Emmanuel noticed others attempting to do the same thing and he had the idea to form a premium coffee-growing cooperative. His fledgling company flourished and currently represents 70 firms on the world market.

“The real brilliance of this story is that Mr. Emmanuel now works with both Hutus and Tutsis,” said Brian Hooks, Director of the Global Prosperity Initiative at The Mercatus Center at George Mason University. “It proves free enterprise can transcend even the most inflamed difficulties, such as ethnic hatred.”

Rwanda’s national disaster was dramatic for the speed with which it struck, but the suffering caused is far from unusual across the globe. In fact, it’s estimated that nearly half the world’s population lives on an income of less than $2 a day. To alleviate such widespread deprivation, sound public policy that is based on research and experience must be developed.

Asking What Works in Enterprise-Based Solutions to Poverty?, the John Templeton Foundation recently sponsored a $1.5 million prize competition seeking answers to this crucial question. An independent panel of leading scholars and practitioners reviewed proposals developed by academic researchers and consulting and project development groups. In May, the Foundation announced awards of $500,000 each to three prominent think tanks to promote public understanding of how entrepreneurship and market reforms can help alleviate poverty.

George Mason University’s Mercatus Center, in association with the Free Market Foundation, South Africa, and the London-based Institute for Economic Affairs has launched Enterprise Africa! to document the challenges and successes of African entrepreneurs. The Independent Institute in Oakland, California will create a new Center on Global Prosperity to examine how market-based institutions are helping to reduce destitution in Latin America and elsewhere. The Fraser Institute of Vancouver, Canada, in partnership with the Oman-based International Research Foundation, will measure how free enterprise operates throughout the Arab world to lift people from poverty.

Fred McMahon, Director of Trade and Globalization Studies at The Fraser Institute, suggested that many different factors beset Arab nations. “Grinding third-world poverty affects countries like Algeria, Tunisia and Jordan,” he said, “while other places, like Oman, are deeply troubled by oil wealth which actually creates unemployment.”

Wounds are still raw from colonial times when an arbitrary division of formerly sovereign nations occurred. Iraq, Libya, Algeria and Lebanon—among other Arab states—are currently or have recently been involved in internal and external wars, creating yet another set of economic difficulties.

What most Arab countries have in common is a strong desire to improve public policy, to become more business-friendly, and to encourage enterprise. The Koran, McMahon noted, is friendly to the idea of markets, and Mohammed himself was a trader. It can even be argued that Islamic civilization was the world’s first experience of something like modern day globalization.

“To a large extent, Arab leadership sees open markets as a way to defuse radical Islam. It is possible to create a world where people can become famous for building things up, rather than blowing things up,” said McMahon. “This Templeton grant gives us a chance to promote economic freedom—which is the best way for people to take charge of their lives and find a route out of desperation into prosperity.”

In speaking of “prosperity” rather than poverty, McMahon was making a deliberate point—one that is shared by his colleagues at the other grant-receiving organizations.

“We don’t like to talk about poverty alleviation, as that makes the poor person a victim, and the relief agency a savior,” said Brian Hooks of the Mercatus Center. “We prefer to talk about wealth creation, as that makes the poor our allies in spurring development. This is not just semantics, but an important shift in perception.”

One of the biggest challenges in Africa has been a tendency to encourage top-down, government-driven planning, while paying scant attention to how people actually live in specific countries or neighborhoods. “There is no one-size-fits-all solution,” Hooks asserted. Thus, The Mercatus Center is taking an interdisciplinary, anthropological approach, by documenting individual case histories such as Mr. Emmanuel’s in Rwanda, or that of South Africa’s Langa Township.

“It was one of the most unpleasant places in the world to live that I could imagine,” said Hooks of this town built in the 1950s to house black African men who worked in Cape Town’s white-owned businesses. Shortly after Apartheid was abolished in the early 1990s, however, residents of Langa were granted property rights.

“What happened in the next decade is fairly miraculous,” Hooks explained, describing how Langa’s inhabitants set about improving their homes and living standards by forming communities and business cooperatives. “All this was driven by Africans, not outsiders. By learning from local conditions for indigenous development, we think we can find solutions that might be implemented elsewhere in the world.”

Such as, perhaps, in Latin America, which possesses enormous natural resources, and a rich history of cultural and ethnic diversity, according to Alvaro Vargas Llosa, a Senior Fellow at The Independent Institute.

“We have everything in place for the region to take off, yet it hasn’t. What explains this?” The problem, Llosa suggests, is a variety of institutional factors, or what he calls “the rules of the game,” and how those rules are enforced or not enforced.

Despite obstacles, there are numerous instances where entrepreneurship has flourished even in Latin America’s most unfavorable circumstances. Consider, for example, the “trading clubs” that sprang up among the Argentinean middle class after that country’s economy collapsed at the end of 2001. Plans are also underway to study La Victoria, a poor neighborhood in Lima, Peru.

Here, about two decades ago, people began trading textiles, produce and other goods at a small market known as La Gamarra. Because they lacked the funds and political savvy to obtain official business licenses, many dealers were persecuted by the Peruvian government and sent to jail. Despite this bureaucratic meddling, La Gamarra continued to flourish and now attracts 150,000 visitors a day who make transactions representing nearly a billion dollars a year.

“If it weren’t for all the regulations, taxes and inadequacies of the judicial system, there could be five or six such commercial centers in Lima,” concluded Llosa.

Sir John Templeton offered prescient remarks on these issues in a lecture at Oxford University. “A shift away from autarchy towards free trade will unleash tremendous potential,” he predicted. “This trend will not only create efficiency gains, but greater wealth.”

With these studies of current realities in Africa, Latin America, and Arab nations, plus broad dissemination of the findings, and an increase of philanthropic activity in the free enterprise area to an estimated 20 to 25 million dollars annually by 2010, the Foundation hopes to effect change, giving downtrodden people around the world practical examples of how entrepreneurship can alleviate poverty.

Links of Interest
   Mercatus Center
   The Independent Institute
   The Fraser Institute

Stephen Henderson is a Manhattan-based journalist who writes for publications including The New York Times, The Baltimore Sun, and is a frequent contributor to Milestones.

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