Why First World Entrepreneurs Are the Third Worlds Best Friend

by: Geoff Ficke

Many years ago I watched a television news interviewer allow Flight Lieutenant Jerry Rawlings, the de-facto dictator of Ghana at that time, to rant about the absolute rape of his tiny, poverty stricken west African nation, by multi-national companies like Nestle. Ghana’s major export product was the cocoa bean. Nestle, Hershey and other major chocolate purveyors were Ghana’s major customers for the cocoa bean. Rawling’s gripe: commodity prices were unfair to Ghanian growers based on the high retail prices enjoyed by the manufacturers as reflected in their finished products.

A bit of perspective is important as regards cocoa beans, and, indeed, all commodities. The cocoa bean, as grown and harvested, is inedible. It is tough, dry, bitter and rock hard. Native Ghanian’s historically had no use for the beans and considered them a nuisance.

That is, until the 19th century when Europeans perfected the process of converting the cocoa bean into refined lusciously tasty, highly desired chocolate food products. For centuries, chocolate was a dilettante’s delight, the food of royalty. Chocolate was rare, expensive and difficult to distill. Nestle, Cadbury and Hershey were among the many businesses that perfected the mass manufacturing processes essential to bringing the delights of chocolate to the masses, and as a result, created the market for the formerly unwanted Ghanian cocoa beans.

The pricing of the raw cocoa beans that Flight Lt. Rawlings was so agitated about are controlled by market forces. A socialist dictator, of course, does not understand market forces. Supply and demand, drought, market conditions and competitive forces determine what any commodity is worth on any given day. Without an industrial process capable of converting a commodity into a finished product, a system to distribute that finished product and an organized marketplace for the sale and consumption of finished goods, there would be virtually zero value in most of the world’s raw materials.

The genius of capitalist markets is reflected in the sweep of Adam Smith’s “Invisible Hand”. As entrepreneurs have pursued opportunities to commercialize their ideas they have unwittingly created sub-markets for commodities that were once considered useless. The cocoa bean, without the modern creation of a manufacturing system, distribution channel and consumer desire for refined chocolate products, is only one obvious example of markets turning something of no value into a marketable commodity with real value.

For centuries the Middle East camel caravans and traders were confronted with a constant nuisance: trade routes were often submerged in a bog of oil seeping uncontrolled from beneath the earth. The resulting need to chart and create new routes was time consuming and expensive. Oil was considered the “devils drink”.

Camels could not drink oil. The Bedouin could not sleep or wear the oil.
The dawn of industrialization, mechanization, steam engines, the internal combustion engine and mobile transit created a need for significant stocks of oil.

Initially, oil was plentiful and affordable in the United States. Petroleum engineers, anticipating the coming worldwide demand for petroleum distillate products, visited the Middle East in the 1920’s. The first oil concessions were negotiated with the House of Saud, and thus began the rise of omnipotent Middle East oil principalities. This is but another example of an unwanted, valueless commodity suddenly gaining remarkable currency as a result of industrial, really entrepreneurial success.

Bauxite, plutonium, titanium, cobalt, magnesium, and dozens more raw materials and minerals are of immense value in our contemporary world because, and solely because, modern economies have created products and industries that have need of these elements. The final products we see on our store shelves, personally consume or utilize to perform our work usually consist of a perfected blending of the world’s commodities that alone, have little use or value.

Have peoples and countries been exploited of their indigenous raw materials? Absolutely, and forever and a day this has occurred. Long before the industrial revolution people were robbed, enslaved and exploited by stronger groups in order to exploit water, salt, cattle or some perceived benefit that was not readily available to them. The modern industrial craving for raw materials to propel industrialization has been a real fact.

My point and perspective is to simply state the obvious: raw materials often have no intrinsic value as stand alone products or consumables. Without a marketplace that creates demand and valuations for minerals as product components, native peoples would enjoy even lower standards of living than Jerry Rawlings and so many current third world leaders, continually complain about.

The discussion of the appropriate use of mineral revenues by third world countries is for another article and another day. Suffice it to say that rarely does a specific nations mineral wealth benefit the native population. Vast amounts of revenues that could be applied to indigenous poverty, lack of education and economic development seems to wind up in off-shore accounts, yachts and Parisian shopping sprees.

The third world peasant unknowingly has a great benefactor in every entrepreneur. Because so much of the second and third world lacks basic property rights and rule of law, there is a resulting lack of entrepreneurial activity in these poor countries. Patent protection, intellectual property rights and transparent legal systems are essential for entrepreneurial endeavor to thrive.

Innovation that utilizes the raw materials so prevalent in many poor countries is the engine that can, and should be instrumental in eliminating poverty and ignorance. Demagogue’s ranting about the abuses of capitalism inevitably are key to keeping their populations poor. The entrepreneur, with a better mousetrap and a plan to market the device, is far more beneficial to the peasant living in darkness than the charismatic blowhard with a bushel full of rhetorical claptrap and a Swiss bank account.

Since the dawn of capitalism and the industrial revolution, entrepreneurs have created products, services and whole industries that have improved the human condition. The poorest amongst us, living in the most remote third world villages, have enjoyed at least some indirect benefits of this flood of inventiveness. The real shame is that demagogues, charlatans and political poseurs keep so many people in the dark and removed from the full benefits of participating in capitalist, profit seeking, entrepreneurial enterprise.

Inventions such as polio vaccine, the telephone, the laser, freeze-drying and flight are of amazing benefit to the poor. The capacity of the internet and electronic media to enlighten, and thus embolden formerly untouched villagers with hope, education, and ambition to improve their lot is on display in many areas of the third world. This march will not be stopped. Once people are exposed to modern comforts, opportunities and methods to peacefully improve their lot, well, as the old saying goes: “It is hard to keep them down on the farm”.

The drive to be entrepreneurial is deeply imbedded in human nature. The opportunity to use natural resources productively and profitably is just as possible in the third world as anywhere else, if transparent legal systems are in place. Creating jobs, profits and new products is what successful entrepreneurs do best. It is unfortunate that third world poverty is wrongly blamed on productive uses of indigenous resources that would be of no value to anyone if left in the ground. The real misfortune for the worlds forgotten poor is their exclusion from full economic participation in so many economies based on the willful, spiteful complicity of their leaders.

As a counselor and consultant to many entrepreneurs I am always amazed at the spirit and drive they exhibit. As I have become an internet user over the years, I am really encouraged by the contacts I receive on a daily basis from prospective entrepreneurs living in countries and continents that are not normally associated with creativity and free markets. In most situations, these hopeful entrepreneurs will not have the ability to commercialize their ideas. However, the mere fact that they have ideas, ambition and courage, despite the circumstance of their geography should be of great solace to all of us. A better world can happen and freedom, personal and commercial, will be the first rail of such a world.