Entrepreneurship in conflict and post-conflict states

Conflict and post-conflict countries generally share several characteristics: high levels of unemployment and underemployment among young men, severe corruption, low rates of real growth - except from natural resource exploitation – and, of course, a high level of violence. These characteristics have led to increasing interest in encouraging entrepreneurship as a means of facilitating not only an acceleration of economic development but also as a mans of achieving a more politically stable society. Research has identified characteristics of entrepreneurship in developing countries that are often exacerbated during conflict. Much entrepreneurial activity is invisible to an outsider or an official. Most entrepreneurship in developing countries is “necessity driven” often resulting in a high/low “bed post” income distribution among entrepreneurs. Most small-scale entrepreneurs are in the informal sector with its low barriers of entry. And, in many post-conflict countries, the rewards to unproductive rent seeking are greater than those of productive entrepreneurship. More controversial is the belief that the binding constraint on private business growth in post-conflict countries is a shortage of Kirznerian (arbitrage/speculative) entrepreneurs rather than any shortage of Schumpeterian (innovative) entrepreneurs. This paper examines the entrepreneurial environment in eight nations that are undergoing conflicts that involve 1,000 or more violent deaths a year: Afghanistan, Colombia, India (Naxalite-Maoist insurgency), Iraq, Mexico, Pakistan, Somalia, and Sudan. Despite the social, political, and economic diversity of this set of nations, their ongoing conflicts have produced similar barriers to entrepreneurship.  Analysis of these countries reveals that political instability/conflict, poor governance, regulatory hostility to private business, and widespread corruption are tightly interwoven. Therefore, the challenges faced by entrepreneurs in conflict states may not lend themselves to a piecemeal policy approach.  This study ends with policy recommendations to encourage Kirznerian entrepreneurship in conflict states.