These thoughts are written down – many of them while still in Macedonia and some upon my return to the US in mid January, 2009. I write these mostly in fun, mostly so I would not have to trust them to memory. Being just thoughts, there is no end. Just the last observation.
Fulbright experience
I had a great Fulbright experience – met people that I will remember for the rest of my life. Good decent hard working honest people. Too bad their economic life is so not full of hope. I wish them well.
Macedonia
The nations neighboring this country – Serbia, Bulgaria, Greece in particular have problems with Macedonian for different reasons – but one underlying theme is that this is a “made-up” country. They claim the language is just Bulgarian, the Serbs have problems with religion and the politics surrounding the diplomatic recognition of Kosovo, and the Greeks with the name. On top of that there are the ethnic Albanians who are not likely to ever call themselves “Macedonian” despite the fact they live in Macedonia. Many still talk of separating from Macedonia Others say it is just that – talk.
In traveling to most major cities in Macedonia, the downtrodden feeling one gets in Tetova is not felt in other places like Stip, Bitola or Skopje. Most of these other places are rather well kept and pleasant. Not so in Tetova. Garbage is everywhere, grass is not cut, plastic bags and bottles fill the one stream that runs through the heart of the city, no public transport, no movies or art galleries. The Tetova Cultural Center is run down with crumbling grey stucco and sidewalks, no signage, broken or missing tiles in the foyer and not even any lights to warm the place up when you go to an event. I ask why and some say it is bad local political leadership and others say it is wanton disregard for Tetova due to the politics of dislike of ethnic Albanians – the single largest ethnic group in Tetova. Others also suggest that the town has grown faster that it can keep up with as thousands of university students now flock to attend here. Who knows – probably all are true to some extent.
The obstacles to progress to Macedonia’s progress are formidable. I think that I will not see much of it in my lifetime but I wish them luck.
The Mountains
The snow in the mountains, which first appeared briefly in early October was permanent in the higher elevations by early December. It began to creep down to the lower elevations as temperatures dropped. Quite beautiful. This town of Tetova, probably now close to 100,000 people, has the physical potential to become an Aspen or Vail given its proximity to some really nice mountains. I say potential because this is a poor place, with dismal old gray and brown buildings, crumbling concrete monuments and public buildings and public spaces that are artifacts of the absence among the population of a sense of civic pride, involvement and responsibility. Oh yes, NO STREET SIGNS!
Mavrovo – the ski center and a nice man
A colleague in the economics faculty was really hospitable and called me to see if I would like to visit Mavrovo, a small village with a ski area about 60 km from my house. Of course I said yes and so we spent an entire day in some very interesting and beautiful places. He was most generous with his time and hospitality. His name is Afrim Alili (soon-to-be PhD in economics) and he is a nice man. He took me to a restaurant in the mountains – off the main road – for a meal of goats’ milk yogurt and corn meal. Don’t remember what it is called but while quite good, there was no way to eat all that had been served.
The Bread
I love the breads here. Not that there is anything really special about them. I mean they don’t have nuts or raisins or goat cheeses in them. It is just that they are crusty, full of flavor and no preservatives. While this helps make them good, you have to eat them within a day or throw them out. Not a problem, because a huge loaf costs 50-75 cents.
The Transition – Not easy
It really is not that bad when you deal with Tetova as a place in transition. It is struggling to make things work and the struggle is daunting especially given that the political leadership is without technical skills needed. It is probably because it is comprised of people who are more accustomed to using politics and parties to get things done as opposed to scientific management, technical analysis and professional staff, formal budgets and leadership. When transition came, the only people here with any kind of management or leadership experience were the old party and command system leaders. They and their families survived by what the Czech patriot Vaclav Havel called ”living the lie”. You towed the party line but got things done through private deals, favors and barter of state goods for private goods and favors for you and your family. So, no wonder that when transition and market economies burst on the scene, this way of doing business was all they new and the only leaders ready by experience where leaders schooled in the old way of doing things. .
Life and Transport and Adventure
One of the compelling reasons to come to a place like Tetova is that the experiences one accumulates here are much more interesting than those one might have in other countries of Western Europe. Just a few personal examples:
Taxis driving in reverse – story 1. Like the time I was taking a taxi to Skopje the capitol city. As we got on the freeway that joins Tetova with Skopje, about a mile up the road, I heard this loud thud first on the roof and then the trunk. Startled me for sure. Taxi driver stopped, put the cab in reverse and proceeded to back down in the opposite direction of traffic which whizzed by us at 100 km/hr.
Turns out his taxi sign, which had been suctioned on the roof, gave up its suction, let lose and fell to the highway floor. Of course the driver had to go back and retrieve it. Made sense to me to – so why not risk our lives for it?
Taxis driving in reverse story 2. Another cab ride to the capitol, or the story of probably one of the worst cab drivers I ever had. First off, we took the freeway from Tetova to Skopje and really there are only two exits off this freeway - the first exit being the one to Skopje. This driver proceeded to miss it, realized it about a kilometer up the road and, of course, backs all the way back on the freeway to the exit. Once on the road to Skopje, it got more interesting. This driver literally stopped every two blocks to ask passers-by if we were on the right road to Skopje. Each one of course said “samopravo” - yes - stay straight ahead. Over and over, with each stop, we heard the same word “samopravo”. Probably 10 times in 20 blocks. Yet, the driver continued until he got so nervous, he invited one of the passers-by to join us in the cab so he could be in the car giving us directions. And later I learned he over charged me some $10.
The bus! I really did try to use public transport like the bus from Skopje back to Tetova. Most of the time it never came when promised and the typical late departure notice was never part of the deal. No such thing as a late departure – just no departure. You ended up just waiting for another bus altogether. Of course no one would ever come to the gate to let you know your bus had been cancelled (cancelled is a kind word, it is more like it just disappeared.) After you wait for so long, you go back to the ticket window where someone tells you –“oh, yes that bus is not going. Here, give me your ticket we I’ll write you a new one for the next bus”. After a couple of these experiences I stopped trying to take the bus home from Skopje.
You really have to have a sense of humor about public transportation here. It reminds me of some of the experiences with the bus system in Slovakia in the 90’s. You get on a scheduled bus and somewhere along the line you find the yourself and the bus off in some small village dropping off or picking up a relative of the driver. Of course the bus never gets to its destination on time.
Probably the travel story I like the best is about the public bus trip I had back from Skopje to Tetova. Of note for this trip is that the bus actually left the station and more astounding it was close to being on time. So here we are, a full bus load of people – me included - traveling down the freeway at around 100 km/hour. I was seated in the first row, immediately behind the driver. I noticed two men in the pit area to the right of the driver. I thought nothing of it. But then one man stands up and positions himself next to the driver. The driver then stands and while he holds one hand on the wheel and one foot on the gas, the other man proceeds to slide underneath him to take over the wheel slides into the seat underneath the driver while the driver deftly moves to the right and gives up the gas pedal to the new guy. All this happened smoothly and with nary pause in the bus performance all while the bus careened down the road at full speed with 50 passengers on board. I’d like to see Greyhound bus drivers try that one! It was a thing of beauty and precision. I got the distinct impression they had done this before -- many times.
The kombi – a must-have experience
They have these vans – they look like delivery vans - but with seats for about 9-10 people. All of them are privately operated and run mainly between Tetova and major population areas nearby. Skopje is the target of most operations as is Pristina in Kosovo because a large number of students attend one or the other universities here and they commute. The best part of the Kombi is price. A cab ride to Skopje for example would normally cost about 1200 Denars or about $30. A kombi costs only 120 Denars about $3.00. As you can imagine, the transport of choice for most of the residents is the Kombi. Unlike the buses, when they are there they are reliable.
A challenge for the foreigner is knowing what all these vans are doing at the major intersections, where they are going (no signs of course) and what happens when you get there. Advice – go up to a van driver, ask in a questioning tone “Skopje?” and if he says yes, just get on. You can pay then or when you get off. However, be prepared for sitting in this sealed compartment with cigarette smokers.
On one trip, a family of three got on and sat in the bench seat in front of me. Husband close to the window, a 6 or 7 year old girl child in the middle and the mother, who looked about 60 years old (but who was probably only about 35) – long, dark heavy woolen coat, babushka over her head worn so as to cover most of her cheeks and hair and sunken, malnourished-looking facial features. There she sat when all of a sudden she whips out a pack of cigarettes, searches in her coat pocket for a lighter and with a flame about a foot long lights up and produces a puff of smoke so big that the entire van is immediately filled with a choking while cloud. She continued to smoke her cigarette with a vengeance and it was gone in matter of minutes. No one thought anything of it – except me.
Ah, the power grid!
The power went out for 12 hours one day. I walked home from the university that day - about 1.5 kilometers - and noticed shopkeepers in their shops sitting there in the dark as if nothing was wrong. As Bob Dylan wrote in “Talking World War III Blues”,
to them “it was a normal day”.
Next morning still no power but now it was accompanied by no water in my apartment. Interesting because I really thought nothing of it. I concluded that I was starting to get the hang of living in the Balkans.
Tetova as Lewis Mumford’s city
The streets are filled with people, walking! And the sidewalk coffee shops, lots of them are also filled with groups of 2 – 4 people talking over small cups of coffee – Expresso or Makiado (like Latte). I like this. Most small towns in America (like Wilkes-Barre) would die for this kind of raw vibrant energy. I have not been here that long and still with this kind of place with people milling about, I frequently have chance meetings with people who know me. Sometimes I stop where I am off to and sit and have a coffee or brandy with them. What fun!
Where do all these Mercedes and BMWs come from?
You can’t help but notice here the contrast that is represented by the Mercedes and BMW’s sharing the roads with horse drawn carts loaded with cabbage. Have no idea where the money comes from for these Mercedes and BMWs.
Are these building coming or going?
There are still many gray and brown concrete structures here constructed with mass- produced, grey or brown depressingly-the-same concrete slabs. And, at the same time there are new buildings, most of them still made from concrete but now with color!
There are hundreds of buildings at various stages of construction. Many have gotten to past the stage of having the load bearing pillars and poured concrete floors and are further along with outer and inner walls. Some even have windows but no one living in them because, I guess, the insides are not completed. My overall guess is that many builders here build until they run out of money. They walk away for a while until they can save up more and then return to the project. When there are buildings that are actually being worked on, the work crews rarely are larger than 4 or 5 men.
What building codes?
Got to be careful walking around here. Apparently building codes do not cover steps and stairs and handrails or materials for stairs. Many stairs and business entryways are covered with really attractive marble or some similar polished stone or ceramic – but these surfaces are slippery as all get out and you really do have to walk carefully.
Also, door jambs can be at times about three inches higher than the sidewalk and above the floor in the shops. I found myself tripping over these entryways all the time. Even in my flat, I had such raised jambs in the entryways to both bathrooms. Can’t figure out why, but at least in my apartment I managed to save my toes by rolling up throw rungs and placing then at each doorway to create a kind of warning track that a three inch step is coming up.
These steps also can appear in the middle of a sidewalk. Out of nowhere in the middle of a flat stretch, you can run into a step – literally. And, in front of many a shop, storekeepers will dress up the entry way by putting down those marble entryways I mentioned earlier, But they put them on top of the concrete sidewalk so even if you are not going into the shop - because it juts out into the sidewalk - if you are not careful it too can jump up and grab your toes causing a rather awkward balance-saving stumble forward.
On one stretch of sidewalk between the university and my flat there are OPEN manholes. If one were walking down that stretch at night?
THE END
Monday, January 19, 2009
Friday, December 5, 2008
Macedonian National Business Plan Competition: 2008
Prior to beginning my Fulbright Professorship in Macedonia to teach entrepreneurship and economics at the State University of Tetova, I wrote a proposal in search of financial support to conduct a national business plan competition for university students in Macedonia.
I could find no support in the US and tried also to find a US corporation with a presence in Macedonia who might be interested in supporting a Macedonian project. The US corporations in Macedonia were totally non-responsive. Not even the courtesy of a rejection letter!
The US Embassy let me know they had a grants program that might be able to support such a project as I envisioned, but there was a stipulation – the grant could not go to me or even the State University - it had to be to a Macedonian based NGO (non profit). So, I started researching NGOs in Macedonia, contacted a few and was fortunate to get an enthusiastic response from the Macedonian affiliate of the international organization Junior Achievement. The JA organization in Macedonia had a good history of sponsorship of entrepreneurship programs at the high school level and Ms. Jasmina Maneva, JA-Macedonia executive director, was very interested in expanding its programs into the universities.
So, together with Ms. Maneva, we wrote a proposal, submitted it to the Public Affairs Democracy Grants Program at the US Embassy and received an award of $18,200. The competition was to culminate in an awards dinner on November 21, 2008 – to coincide with the worldwide celebration of Global Entrerpreneurship Week, sponsored in part by the E M Kauffman Foundation in Kansas City, MO. My immediate hope was that we could get the Ambassador to be part of the awards ceremony. So I mentioned it to several Embassy staff and then directly to the ambassador when he appeared at an orientation meeting for Macedonian Fulbrighters at the Embassy. Most thought his attendance was a possibility, including the Ambassador. (As it turned out the Ambassador did attend to everyone’s delight!)
Work on the project began while I was still in the US as publicity materials, rules for the competition, and venues were considered and written in draft form. One complication was the need to have all materials available in three languages – English, Macedonian and Albanian. Through the hard work and competence of Ms. Maneva and the input and advice from my State University of Tetova colleague Mr. Blake Childs (Peace Corp volunteer) the materials were drafted, reviewed and disseminated first by email to all university faculties in the nation and then, in early October, printed materials including posters were distributed and hung in all universities,
It was my opinion that my personal appearance would be vital to garnering faculty and student interest in the competition. I was pleased to learn that most university programs included entrepreneurship and business planning in their formal curriculum and not just in the economics faculties but in other faculties like engineering and law. What this meant was that I would not have to spend a lot of time explaining what entrepreneurship and business plans were. So, as promised in our proposal, I spent half of the month of October traveling around the nation talking directly with students and professors about the role of business plans and competitions including some instruction in key business plans concepts like the value proposition and business model.
My visits to universities were made possible and coordinated by JA’s Ms. Maneva and this was not a trivial task. She had to make hundreds of phone calls, follow-up calls, return calls to people not in their offices, calls to people who did not return phone calls, wrong numbers and various other sundry insults. The problems were overcome through her persistence and hard work. She succeeded in arranging 12 different presentations in all of Macedonia’s major population and university centers. In all I spoke to more than 600 students and faculty in a 14 day period.
After that we sat back and waited to the plans to arrive. In the proposal we said we hoped for 30 but I would accept 20 as a measure of success. In the end when the submission deadline of November 7 rolled around we had 37 plans representing 10 universities from throughout the country. Quite a relief for all of us who put so much effort into this project!
With 37 plans in three different languages, the week of November 7-14 was quite hectic with doing translations into English and then meeting with a panel of judges to select the top 10 teams for the oral competitions a week later on November 21. We did it and then sat back to wait to see how the oral competitions would unfold.
The ten finalists and their academic mentors/advisors were invited all expenses paid to the State University of Tetova to present their plans orally to a distinguished panel of judges. The judges who appear in the group photo are from left to right: JUDGE Dr. Nasser Raimi, entrepreneurship text author and member of State University Economics Faculty; Dr. Bexheti, Rector, State University of Tetova, JUDGE Mr. Ilya Vuckov Mr. Ilya Vuckov, Entrepreneur, winner of Best Business Plan of Year, Macedonia 2007 and President and Founder, AGV Design, Skopje, MK, US Ambassador Philip Reeker, JUDGE Ms Jasmina Maneva, Executive Director JA- Macedonia and JUDGE Mr. Blerim Zlatku, President North-West Macedonia Chamber of Commerce. (JUDGE John Sumansky is not in the group photo. He is shown in the photo making remarks in front of event signage.)
The oral part of the competition began at 1:30 PM and was done by 4:30 PM. The judges worked from 4:30 to 5:30 and in that time selected the top five and then from that group named the first and second place winners. The first place team received $1,000 cash, second place got $500, three honorable mentions got $250 per team while the remaining five finalists each got $100. Faculty mentors also received cash prizes of $100.
The highlight of the day occurred when the US Ambassador Philip Reeker joined us in Tetova to make a brief speech on entrepreneurship and announce the winners! One of the photos in this blog the Ambassador making remarks at the awards ceremony. He made himself available for photos afterwards. Everyone in Tetova was most happy that the Ambassador would come to town to participate in this event.
This turned out to be a very successful event and as it turns out, for me, a great Fulbright experience. I met and had coffee with dozens of faculty at 10 universities, talked with hundreds of students, drove to and visited all of Macedonia’s major cities and together with JA and my colleague Blake Childs at State University of Tetova (SUT) orchestrated a national event that, because it took place at State University, helped increase the visibility and presence of one of the nation’s newest and least know higher education institution.
I’ll take this opportunity to thank everyone: Ambassador Reeker,. Embassy staff especially Gazmend Ilazi, Amy Storrow and Public Affairs Officer Ryan Rowlands, Ms. Jasmina Maneva, JA, Mr. Blake Childs, SUT Rector Dr. Bexheti, Ms. Maja Vucinic, translator and also Professor Senad Abduli, International Affairs Office, SUT. If I missed someone please forgive me because there were many others who made this event possible.
Entrepreneurship policy in a different context
By design, I have been fairly involved in entrepreneurship-related things during my visit here. I have spoken with government officials, entrepreneurs, NGO leaders, educators and private citizens and I have learned some things.
Among the more important things learned are that: 1. ) the role of entrepreneurship as public policy for economic growth needs to be broadened and 2,) the context of economies in transition influence a great deal how we assess especially the longer term impacts of entrepreneurship promotion programs.
The broadening of the role of entrepreneurship programs as economic development policy
The argument used to support government intervention to generate more entrepreneurial activity is founded in the thinking that entrepreneurship per se generates not only direct economic benefits like jobs and income but it also produces positive economic externalities. And, economic theory suggests that when the production of something generates positive externalities, market solutions result in too little of that activity being produced – to the detriment of society.
When applied to entrepreneurs, externalities theory tells us that the market is not likely to produce enough entrepreneurs, the assumption being of course that entrepreneurs generate economic growth. Getting more entrepreneurs requires some market intervention like government programs and other incentives to get more than what the market alone would produce. This is the realm of public policy.
Entrepreneurship as public policy also has gained favor stemming from the pragmatic needs of policy makers to have some policy alternative they can use to grow regional and local economies. Old regional growth policies aimed at attracting existing businesses from elsewhere through elaborate and generous tax incentives are proving to be not successful.
Policy makers around the world have become increasingly aware that not every region in every state is going to get that next Toyota or Volkswagen plant - no matter what the size of tax incentives a region or nation is willing to offer. Regions are not likely to be able to use incentives to grow jobs in a region by importing them. Consequently, to grow, regions may have to rely on growth from within through entrepreneurship, small business growth, jobs and income expansion.
The above text is pretty much orthodox thinking as it relates to places like Northeast Pennsylvania. Entrepreneurship policy and programs in Macedonia presents us with a different context in which to look at policies and programs related to entrepreneurship and economic growth.
Macedonian Context: Economy in Transition
Macedonia falls into a category of a developing transitional economy and as such I suggest that in a developing, transitional economy any entrepreneurial activity is good. Entrepreneurship literature might suggest that to have growth, a nation or region should allocate resources to activities that promote entrepreneurship of the kind that actually contributes to the growth of the regional or national economic pie. It is of the kind of entrepreneurship Professor Baumol labeled “productive”*.
To be sure, productive entrepreneurship is desirable and some evidence of it can be found in Macedonia. USAID support has produced a major study that has identified sectors where entrepreneurial activity could generate growth based on certain comparative advantages. The identified sectors are: Electro-mechanical (light manufacturing), Fashion industries (apparel, footwear and furniture) and Information and communication technology. And policy and program dollars are following this path as support is available to existing firms in these sectors. But the curious part of this effort is that there are no direct linkages between this work and the entrepreneurship support programs of the national government support. While they are no precluded from seeking support from other government programs, there is no direct support available that set aside as incentives to start up new ventures in these three sectors. At best this renders the policy incomplete.
Productive entrepreneurship while most desirable may be the most difficult to generate in an environment of ineffective government, poor education infrastructure, weak legal and financial systems, poor transport and postal systems and corruption, etc. It might be true that at certain stages of economic development, public policy aimed only at producing “productive” entrepreneurship may be unrealistic. The basic economic infrastructure may be insufficient to allow for productive entrepreneurship to drive economic growth.
Baumol also described a brand of entrepreneurship labeled “unproductive”. The label sounds pejorative and I think not wholly satisfactory in the context of under developed transition economy like Macedonia. In keeping with Baumol’s description, unproductive entrepreneurship is “less good” than productive because they only end up dividing up a constant economic pie and clearly are not growth engines. In an examination of the status of entrepreneurship in Macedonia most of entrepreneurship is of this kind. But, unlike what the term “unproductive” implies, the context of Macedonia in transition from command to market causes us to look at so called unproductive entrepreneurship in a more favorable light for two reasons: 1.) unproductive entrepreneurship can have use as employment policy and 2. ) unproductive entrepreneurship can build a business culture which has significant positive intergenerational effects.
Employment Programs. Unproductive entrepreneurship programs can be used to sop up excess talented labor. Indeed, the Macedonian Ministry of Economy has a specific program that provides 2500 Euros to unemployed people to help them cover the costs of registering and formalize their own businesses – any business. This program as of 2008 provided 530 grants to register new businesses and an additional 170 grants for formalizing plans.
In an economy that is not yet able to provide enough jobs for its skilled and educated people, entrepreneurship of ANY KIND appears to be a clever way to get people to use their talents as entrepreneurs and be self-employed. The annals of entrepreneurship in the US are filled with stories of people who used being fired or laid off or downsized as an opportunity to start their own business. Why not incentivize the unemployed in Macedonia to start their own businesses? In this sense, unproductive entrepreneurship may fall short as development policy but may be good as employment policy.
Business Culture. Programs that encourage, create and support private entrepreneurs create a business class that did not exist but which are vital to the future of transition economies. The transition from more than 50 years of command type systems to market systems with private ownership of business, can be made easier if there is an indigenous business class to draw upon. As in most transition economies in the post-command economy era, there are no few models and mentors for new entrepreneurs to draw upon and few children are able learn business from their parents. Foreign business advisors do not help. There are no locally grown and owned social or cultural or behavioral business models to pass on the next generation. So, government programs that increase the number of business owners – could be seen as laying a foundation in the form of a business class on which future generations can draw.
Overall, current entrepreneurship programs in Macedonia will surely help identify entrepreneurs who do have the potential for business activities that could generate growth – export sales, import substitution and locations for foreign investment. If Baumol is correct and there is a fixed amount of entrepreneurial talent available to Macedonia given its population, then Macedonia cannot afford to miss even one potential entrepreneur.
With this perspective based in the context of a transitional economy entrepreneurship takes on a much broader role as an engine of growth. This broader model is probably something worth much further investigation over the longer term- especially the intergenerational transfer of business culture. Also, to what extent is entrepreneurship as employment policy setting the stage for subsequent entrepreneurial activity that does produce economic growth, more jobs and more income wealth and prosperity? I don’t know that such a question has ever been addressed before.
_____________________________________________________________________
Note: In Baumol’s work, reference is made to a type of entrepreneurship labeled “destructive”. Destructive entrepreneurship refers to activities that might fall into the realm of illegal or corrupt or use of power for personal gain. This idea is elaborated upon in a paper by Desai and Acs which explores the extent of destructive entrepreneurship in developing economies where opportunities for profit outpace the evolution of institutions” [page 3]. While I agree with their observation that this kind of entrepreneurship may be a very large part of entrepreneurial activities in Macedonia, I do not have enough information about these kinds of activities to offer any comment but I did want to acknowledge their existence in Macedonia. Some estimates of the underground economy say that, if measured, it would add about thirty percent to the reported national GDP.
References
Baumol, William, J. (1990), “Entrepreneurship: Productive, Unproductive and Destructive”, Journal of Political Economy, 98(5), 893-921
Desai, Sameeksha and Zoltan Acs (2007) “A Theory of Destructive Entrepreneurship”,
JENA Economic Research Papers, 2007-085
Among the more important things learned are that: 1. ) the role of entrepreneurship as public policy for economic growth needs to be broadened and 2,) the context of economies in transition influence a great deal how we assess especially the longer term impacts of entrepreneurship promotion programs.
The broadening of the role of entrepreneurship programs as economic development policy
The argument used to support government intervention to generate more entrepreneurial activity is founded in the thinking that entrepreneurship per se generates not only direct economic benefits like jobs and income but it also produces positive economic externalities. And, economic theory suggests that when the production of something generates positive externalities, market solutions result in too little of that activity being produced – to the detriment of society.
When applied to entrepreneurs, externalities theory tells us that the market is not likely to produce enough entrepreneurs, the assumption being of course that entrepreneurs generate economic growth. Getting more entrepreneurs requires some market intervention like government programs and other incentives to get more than what the market alone would produce. This is the realm of public policy.
Entrepreneurship as public policy also has gained favor stemming from the pragmatic needs of policy makers to have some policy alternative they can use to grow regional and local economies. Old regional growth policies aimed at attracting existing businesses from elsewhere through elaborate and generous tax incentives are proving to be not successful.
Policy makers around the world have become increasingly aware that not every region in every state is going to get that next Toyota or Volkswagen plant - no matter what the size of tax incentives a region or nation is willing to offer. Regions are not likely to be able to use incentives to grow jobs in a region by importing them. Consequently, to grow, regions may have to rely on growth from within through entrepreneurship, small business growth, jobs and income expansion.
The above text is pretty much orthodox thinking as it relates to places like Northeast Pennsylvania. Entrepreneurship policy and programs in Macedonia presents us with a different context in which to look at policies and programs related to entrepreneurship and economic growth.
Macedonian Context: Economy in Transition
Macedonia falls into a category of a developing transitional economy and as such I suggest that in a developing, transitional economy any entrepreneurial activity is good. Entrepreneurship literature might suggest that to have growth, a nation or region should allocate resources to activities that promote entrepreneurship of the kind that actually contributes to the growth of the regional or national economic pie. It is of the kind of entrepreneurship Professor Baumol labeled “productive”*.
To be sure, productive entrepreneurship is desirable and some evidence of it can be found in Macedonia. USAID support has produced a major study that has identified sectors where entrepreneurial activity could generate growth based on certain comparative advantages. The identified sectors are: Electro-mechanical (light manufacturing), Fashion industries (apparel, footwear and furniture) and Information and communication technology. And policy and program dollars are following this path as support is available to existing firms in these sectors. But the curious part of this effort is that there are no direct linkages between this work and the entrepreneurship support programs of the national government support. While they are no precluded from seeking support from other government programs, there is no direct support available that set aside as incentives to start up new ventures in these three sectors. At best this renders the policy incomplete.
Productive entrepreneurship while most desirable may be the most difficult to generate in an environment of ineffective government, poor education infrastructure, weak legal and financial systems, poor transport and postal systems and corruption, etc. It might be true that at certain stages of economic development, public policy aimed only at producing “productive” entrepreneurship may be unrealistic. The basic economic infrastructure may be insufficient to allow for productive entrepreneurship to drive economic growth.
Baumol also described a brand of entrepreneurship labeled “unproductive”. The label sounds pejorative and I think not wholly satisfactory in the context of under developed transition economy like Macedonia. In keeping with Baumol’s description, unproductive entrepreneurship is “less good” than productive because they only end up dividing up a constant economic pie and clearly are not growth engines. In an examination of the status of entrepreneurship in Macedonia most of entrepreneurship is of this kind. But, unlike what the term “unproductive” implies, the context of Macedonia in transition from command to market causes us to look at so called unproductive entrepreneurship in a more favorable light for two reasons: 1.) unproductive entrepreneurship can have use as employment policy and 2. ) unproductive entrepreneurship can build a business culture which has significant positive intergenerational effects.
Employment Programs. Unproductive entrepreneurship programs can be used to sop up excess talented labor. Indeed, the Macedonian Ministry of Economy has a specific program that provides 2500 Euros to unemployed people to help them cover the costs of registering and formalize their own businesses – any business. This program as of 2008 provided 530 grants to register new businesses and an additional 170 grants for formalizing plans.
In an economy that is not yet able to provide enough jobs for its skilled and educated people, entrepreneurship of ANY KIND appears to be a clever way to get people to use their talents as entrepreneurs and be self-employed. The annals of entrepreneurship in the US are filled with stories of people who used being fired or laid off or downsized as an opportunity to start their own business. Why not incentivize the unemployed in Macedonia to start their own businesses? In this sense, unproductive entrepreneurship may fall short as development policy but may be good as employment policy.
Business Culture. Programs that encourage, create and support private entrepreneurs create a business class that did not exist but which are vital to the future of transition economies. The transition from more than 50 years of command type systems to market systems with private ownership of business, can be made easier if there is an indigenous business class to draw upon. As in most transition economies in the post-command economy era, there are no few models and mentors for new entrepreneurs to draw upon and few children are able learn business from their parents. Foreign business advisors do not help. There are no locally grown and owned social or cultural or behavioral business models to pass on the next generation. So, government programs that increase the number of business owners – could be seen as laying a foundation in the form of a business class on which future generations can draw.
Overall, current entrepreneurship programs in Macedonia will surely help identify entrepreneurs who do have the potential for business activities that could generate growth – export sales, import substitution and locations for foreign investment. If Baumol is correct and there is a fixed amount of entrepreneurial talent available to Macedonia given its population, then Macedonia cannot afford to miss even one potential entrepreneur.
With this perspective based in the context of a transitional economy entrepreneurship takes on a much broader role as an engine of growth. This broader model is probably something worth much further investigation over the longer term- especially the intergenerational transfer of business culture. Also, to what extent is entrepreneurship as employment policy setting the stage for subsequent entrepreneurial activity that does produce economic growth, more jobs and more income wealth and prosperity? I don’t know that such a question has ever been addressed before.
_____________________________________________________________________
Note: In Baumol’s work, reference is made to a type of entrepreneurship labeled “destructive”. Destructive entrepreneurship refers to activities that might fall into the realm of illegal or corrupt or use of power for personal gain. This idea is elaborated upon in a paper by Desai and Acs which explores the extent of destructive entrepreneurship in developing economies where opportunities for profit outpace the evolution of institutions” [page 3]. While I agree with their observation that this kind of entrepreneurship may be a very large part of entrepreneurial activities in Macedonia, I do not have enough information about these kinds of activities to offer any comment but I did want to acknowledge their existence in Macedonia. Some estimates of the underground economy say that, if measured, it would add about thirty percent to the reported national GDP.
References
Baumol, William, J. (1990), “Entrepreneurship: Productive, Unproductive and Destructive”, Journal of Political Economy, 98(5), 893-921
Desai, Sameeksha and Zoltan Acs (2007) “A Theory of Destructive Entrepreneurship”,
JENA Economic Research Papers, 2007-085
Tuesday, November 11, 2008
Looking at US Elections from Afar
The US presidential election was a political out-of-body experience for me. I sat in my Tetovo, Macedonia flat watching events unfold in another country – my country!
Of course I stayed up all night watching the returns on CNN Europe. Because of the time difference, the election results did not start coming in until after midnight. So, it was not until 5 AM - with me in a caffeine-induced stupor – that I heard the announcement that Obama had reached the 270 electoral votes mark.
It was rather exciting, so I flipped through the channels to see what other stations were doing for coverage. I counted five different stations doing live coverage of the elections in five different languages. I was impressed with how much LIVE coverage was being given to the election from places like Kosovo, Albania, Croatia and Serbia not to mention BBC and local Macedonian stations.
I can’t say that I was surprised by the extent of coverage. In the weeks leading up to the election, local residents were quick to ask my thoughts about the election and to give theirs. Some of their comments had to do the two candidates’ friendship with Greece and what that implied about their sympathy – or lack of it - with Macedonia on the issue of name. Many thought McCain would be more sympathetic to the Macedonian side on the name issue. Other Macedonians were curious about whether America was ready to elect a black president. Regardless of the issue, local residents had a much greater level of awareness and interest in the election than I expected.
As I recall, during the time of my last residency in Eastern Europe (1994), there were no conversations about the US that revealed this level of interest and political awareness. I suspect that cable TV and stations like the BBC and CNN (now in most homes here) can account for some of the interest and more importantly the informed nature of that interest. Also, Macedonia’s application for membership in the EU has made many here more aware of how their future is tied to other countries – in both Europe and America.
About these conversations about America. Yes, they are more informed. But, at the same time they are also much more complicated than they used to be in 1994; going far beyond a simple curiosity about a mysterious place called America. America is no longer a mystery to most Eastern Europeans. And they were not the kind of conversation I had decades ago about an America where streets were thought to be paved in gold. No one here thinks that anymore. Gone also are the days where America was talked about as a place to be revered, the America that saved Europe in THE war, aided poor countries and occupied a high moral ground. The Bush years all but washed away the latter views and replaced them instead with talk about America’s warts and shortcomings: a free press that has all but sold its soul to the party in power, the misadventures in Iraq, the feckless hunt for bin Laden, the “cowboy” who alienated European allies and the American financial excesses now wreaking havoc with the world’s economy and so on.
Yet, amidst this new and more sobering view of America, there remain many here who
speak sadly of the fact that the it is now likely that they may not ever have a chance to visit, let alone emigrate to America. On local TV there are businesses that advertise trying to sell hope to Macedonians - hope that they can get a visa to gain access to America. I can tell you, visas are not for sale.
Why is it significant that many in eastern Europe no longer see America as a possible dream? Because when many live in an economy unable to provide jobs to its talented people (40 percent overall unemployment and by some estimates as high as 60 percent for those under 30 years of age), the absence of America as a dream makes life here just a little less hopeful. Today, the reality is that US immigration policies offer them little hope for realizing the dream as my parents did in the early part of the 20th century.
Life is also a little less optimistic for Macedonians because in a real sense many feel left out, even within Eastern Europe. Bulgaria, for example is now an EU member and as such does not allow free and easy border crossings for non member Macedonians. Albania to the west is in no better economic condition that Macedonia. The same for Kosovo to the North. No reason to go those places. Political tensions remain with Serbia especially after Macedonia’s official state recognition of Kosovo. To the South is Greece with whom Macedonians have an uneasy relationship because of the Macedonian name and because Greece like Bulgaria is in the EU.
Nowadays, the most hopeful thing for many Macedonians is entrance into the European Union. Some unrealistically see EU membership as THE thing that will change life for the better. For their sakes, I hope they are right; but I know better. The move to prosperity will be harder than a simple political accession into the European Union.
Of course I stayed up all night watching the returns on CNN Europe. Because of the time difference, the election results did not start coming in until after midnight. So, it was not until 5 AM - with me in a caffeine-induced stupor – that I heard the announcement that Obama had reached the 270 electoral votes mark.
It was rather exciting, so I flipped through the channels to see what other stations were doing for coverage. I counted five different stations doing live coverage of the elections in five different languages. I was impressed with how much LIVE coverage was being given to the election from places like Kosovo, Albania, Croatia and Serbia not to mention BBC and local Macedonian stations.
I can’t say that I was surprised by the extent of coverage. In the weeks leading up to the election, local residents were quick to ask my thoughts about the election and to give theirs. Some of their comments had to do the two candidates’ friendship with Greece and what that implied about their sympathy – or lack of it - with Macedonia on the issue of name. Many thought McCain would be more sympathetic to the Macedonian side on the name issue. Other Macedonians were curious about whether America was ready to elect a black president. Regardless of the issue, local residents had a much greater level of awareness and interest in the election than I expected.
As I recall, during the time of my last residency in Eastern Europe (1994), there were no conversations about the US that revealed this level of interest and political awareness. I suspect that cable TV and stations like the BBC and CNN (now in most homes here) can account for some of the interest and more importantly the informed nature of that interest. Also, Macedonia’s application for membership in the EU has made many here more aware of how their future is tied to other countries – in both Europe and America.
About these conversations about America. Yes, they are more informed. But, at the same time they are also much more complicated than they used to be in 1994; going far beyond a simple curiosity about a mysterious place called America. America is no longer a mystery to most Eastern Europeans. And they were not the kind of conversation I had decades ago about an America where streets were thought to be paved in gold. No one here thinks that anymore. Gone also are the days where America was talked about as a place to be revered, the America that saved Europe in THE war, aided poor countries and occupied a high moral ground. The Bush years all but washed away the latter views and replaced them instead with talk about America’s warts and shortcomings: a free press that has all but sold its soul to the party in power, the misadventures in Iraq, the feckless hunt for bin Laden, the “cowboy” who alienated European allies and the American financial excesses now wreaking havoc with the world’s economy and so on.
Yet, amidst this new and more sobering view of America, there remain many here who
speak sadly of the fact that the it is now likely that they may not ever have a chance to visit, let alone emigrate to America. On local TV there are businesses that advertise trying to sell hope to Macedonians - hope that they can get a visa to gain access to America. I can tell you, visas are not for sale.
Why is it significant that many in eastern Europe no longer see America as a possible dream? Because when many live in an economy unable to provide jobs to its talented people (40 percent overall unemployment and by some estimates as high as 60 percent for those under 30 years of age), the absence of America as a dream makes life here just a little less hopeful. Today, the reality is that US immigration policies offer them little hope for realizing the dream as my parents did in the early part of the 20th century.
Life is also a little less optimistic for Macedonians because in a real sense many feel left out, even within Eastern Europe. Bulgaria, for example is now an EU member and as such does not allow free and easy border crossings for non member Macedonians. Albania to the west is in no better economic condition that Macedonia. The same for Kosovo to the North. No reason to go those places. Political tensions remain with Serbia especially after Macedonia’s official state recognition of Kosovo. To the South is Greece with whom Macedonians have an uneasy relationship because of the Macedonian name and because Greece like Bulgaria is in the EU.
Nowadays, the most hopeful thing for many Macedonians is entrance into the European Union. Some unrealistically see EU membership as THE thing that will change life for the better. For their sakes, I hope they are right; but I know better. The move to prosperity will be harder than a simple political accession into the European Union.
Sunday, October 26, 2008
Final Thoughts
As the rest of my class has noted, Macedonia is a beautiful country, full of culture and hospitality, especially from people like Dr. Behxeti and Blake Childs. After a week in the country, the most surprising realization I had was the fact that the states of Macedonia and Northeast PA economies were essentially no different. Emile also noticed this connection when she said “Macedonia and Northeast PA are very close” in her Blog. To be honest, this was not a realization I expected, especially since Macedonia was a post communist society, and Northeast PA was part of the United States free market economy. However, a number of similarities between the two regions make the comparison possible. For example:
· Both regions are transitioning. (Macedonia from a centralized system of communism and Northeast PA from mining and exporting coal)
· Both regions are in a position to transition because of a number of developable and exportable products. In Macedonia, agriculture and competitive labor for both domestic & international business. In Northeast PA, education and technology.
· Both regions are providing benefits to business through tax free zones, tax breaks, and incubators to facilitate this economic transition.
What these examples begin to show are the similarities between countries that many people, including myself, miss today in the United States because of our blindness to other countries and their economies. Frank, while I agree with you, these similarities between our countries (especially from a program stand point) should not have been so surprising. In reality they really were. Possibly it is the physical distance between countries, or the general perception of our economy is so strong that we do not need to look at other economies. Also, American society may lack knowledge or understanding of how an economy develops. Whatever the reason may be, people overlook how similar our country is to other developing countries around the world, and how much can be learned from looking at these other economies.
The last observation I would like to make is the impressive educational facilities and programs Macedonia has in place. Both the State University of Tetevo, and the Private University of Tetevo reminded me of Misericordia University, in terms of appearance, culture, and education. As Eric discussed in his blog, business education is taken seriously in Macedonia. Especially since people from the national government, the city of Tetevo, the city of Skopje, local entrepreneurs, and the USAID, all took time to come and present to our class. This dedication to education in Macedonia is another parallel to Northeast PA and the United States proving our countries are not that different.
In conclusion, my experiences in Macedonia have taught me a number of life & educational lessons. In terms of our class, whether or not economic development can be influenced by public policy promoting entrepreneurship? The answer is yes. The most eye opening part of this answer is the fact it does not matter which part of the world you are in or how developed an economy is, entrepreneurship can spark development (Macedonia) or continue it (the United States). In terms of life lessons, the world is a big place and there is a lot to learn from it. I look forward to exploring it even farther and I especially look forward to returning to Macedonia.
By Billy desRosiers
· Both regions are transitioning. (Macedonia from a centralized system of communism and Northeast PA from mining and exporting coal)
· Both regions are in a position to transition because of a number of developable and exportable products. In Macedonia, agriculture and competitive labor for both domestic & international business. In Northeast PA, education and technology.
· Both regions are providing benefits to business through tax free zones, tax breaks, and incubators to facilitate this economic transition.
What these examples begin to show are the similarities between countries that many people, including myself, miss today in the United States because of our blindness to other countries and their economies. Frank, while I agree with you, these similarities between our countries (especially from a program stand point) should not have been so surprising. In reality they really were. Possibly it is the physical distance between countries, or the general perception of our economy is so strong that we do not need to look at other economies. Also, American society may lack knowledge or understanding of how an economy develops. Whatever the reason may be, people overlook how similar our country is to other developing countries around the world, and how much can be learned from looking at these other economies.
The last observation I would like to make is the impressive educational facilities and programs Macedonia has in place. Both the State University of Tetevo, and the Private University of Tetevo reminded me of Misericordia University, in terms of appearance, culture, and education. As Eric discussed in his blog, business education is taken seriously in Macedonia. Especially since people from the national government, the city of Tetevo, the city of Skopje, local entrepreneurs, and the USAID, all took time to come and present to our class. This dedication to education in Macedonia is another parallel to Northeast PA and the United States proving our countries are not that different.
In conclusion, my experiences in Macedonia have taught me a number of life & educational lessons. In terms of our class, whether or not economic development can be influenced by public policy promoting entrepreneurship? The answer is yes. The most eye opening part of this answer is the fact it does not matter which part of the world you are in or how developed an economy is, entrepreneurship can spark development (Macedonia) or continue it (the United States). In terms of life lessons, the world is a big place and there is a lot to learn from it. I look forward to exploring it even farther and I especially look forward to returning to Macedonia.
By Billy desRosiers
Thursday, October 23, 2008
Public Policy, Promotion, and Publicity
As Emilie had noted, there appears to be strong support for entrepreneurship in Macedonia. This was evidensed not only by the number of agencies involved, but the passion of some of the speakers. For example, one of our speakers showed up for class prepared not only with a presentation, but with another speaker he had recruited to provide still more insight. A number of our speakers were not even from Tetovo; they drove from the capital Skopje to meet with us.
In retrospect, the similarities Macedonian programs to those available in Northeastern Pennsylvania should not have been as surprising as it seemed. A few of the NGOs and government agencies operating are modeled after, or even associated with, successful Western economic development programs, such as: Junior Acheivment, and an Angel Investor Network. Even funding, at least a portion of the initial amounts, was provided by US and EU agencies; who see economic development in Macedonia as important for the future of the Balkans.
The most obvious difference between the two reagions was the level of establishment of the programs. Many of the US programs have simply been around a lot longer; many in existance well before Macedonia's fairly recent emergence as an independent country. For example, in Tetovo, we visited a business incubator that was about to open; they were still finishing the rooms. This compares to a number of operating incubators in the Wilkes-Barre area.
The most striking similarity was the need for publicity. A few of the speakers in Macedonia had asked our fellow classmates whether they were even aware that such programs esisted. Usually they were not. When asked about public policy towards Entrepreneurship, our contact at the Wilkes-Barre Chamber of Commerce said the biggest need was awareness. There are useful programs available to entrepreneursin both areas, but not everyone knows they even exist.
I would also like to echo the appreciation already expressed by my classmates for the hospitality shown to us in Macedonia; especially the State University of Tetovo and Dr. Behxeti. Also worthy of mention are Blake, who helped logistically in Tetovo; Alexander, who helped with arrival, departure, and a glimpse of the capital; the many speakers who took time out of their schedules to meet with us; and even our other classmates (those regularly attending the Univesity), who were flexible enough to rearranged their schedules to accommodate our limited time in country.
by Frank Yamrick
In retrospect, the similarities Macedonian programs to those available in Northeastern Pennsylvania should not have been as surprising as it seemed. A few of the NGOs and government agencies operating are modeled after, or even associated with, successful Western economic development programs, such as: Junior Acheivment, and an Angel Investor Network. Even funding, at least a portion of the initial amounts, was provided by US and EU agencies; who see economic development in Macedonia as important for the future of the Balkans.
The most obvious difference between the two reagions was the level of establishment of the programs. Many of the US programs have simply been around a lot longer; many in existance well before Macedonia's fairly recent emergence as an independent country. For example, in Tetovo, we visited a business incubator that was about to open; they were still finishing the rooms. This compares to a number of operating incubators in the Wilkes-Barre area.
The most striking similarity was the need for publicity. A few of the speakers in Macedonia had asked our fellow classmates whether they were even aware that such programs esisted. Usually they were not. When asked about public policy towards Entrepreneurship, our contact at the Wilkes-Barre Chamber of Commerce said the biggest need was awareness. There are useful programs available to entrepreneursin both areas, but not everyone knows they even exist.
I would also like to echo the appreciation already expressed by my classmates for the hospitality shown to us in Macedonia; especially the State University of Tetovo and Dr. Behxeti. Also worthy of mention are Blake, who helped logistically in Tetovo; Alexander, who helped with arrival, departure, and a glimpse of the capital; the many speakers who took time out of their schedules to meet with us; and even our other classmates (those regularly attending the Univesity), who were flexible enough to rearranged their schedules to accommodate our limited time in country.
by Frank Yamrick
Wednesday, October 22, 2008
Follow Up
Expanding a bit on what Eric has already noted, it was very interesting to see that Macedonia is very close to Northeast PA in its efforts toward entrepreneurship, economic development, and public policy. I was honestly surprised after hearing from some of the speakers that there was such strong support for entrepreneurs in a country that I hadn't known much about before this trip. I think that as Americans we sometimes don't realize our similarities to somewhere like this until we put ourselves in their setting and culture.
As a class we have conducted many interviews in Macedonia as well as in the States. I think it should be noted that almost every person we heard from feels that a good way to increase entrepreneurial activities is through education. Entrepreneurs may have certain characteristics in common (i.e tolerance of risk, creativeness, etc.), but they are not necessary factors to becoming an entrepreneur. If we can teach the people of our communities, whether in Macedonia or Wilkes Barre, certain skills such as risk management, handling finances, and things of that nature, they may take on an opportunity to open a business that they thought wasn't possible in the past.
There are many organizations in Macedonia, much like those in Wilkes Barre and Scranton that promote public policy to support economic development. Entrepreneurs need public policies to support them in their endeavors to grow and bring business, as well as money, into the local communities. The major difference that we face in the U.S. is that we are dealing with so many government groups within a small area. Macedonia has the advantage of having one set of policy makers to go to, while in PA we are dealing with many groups which makes it very difficult to get everyone on the same page. Hopefully we can lessen this gap by taking the education to an even higher level and informing our decision makers of the important role that entrepreneurship plays in economic development.
Thank you again to everyone that helped us during our adventures in Macedonia. The hospitality we were shown was truly remarkable. A special thanks to Dr. Behxeti for his generosity the entire week. Also, thanks Blake for putting up with us :)
Emilie Pearson
As a class we have conducted many interviews in Macedonia as well as in the States. I think it should be noted that almost every person we heard from feels that a good way to increase entrepreneurial activities is through education. Entrepreneurs may have certain characteristics in common (i.e tolerance of risk, creativeness, etc.), but they are not necessary factors to becoming an entrepreneur. If we can teach the people of our communities, whether in Macedonia or Wilkes Barre, certain skills such as risk management, handling finances, and things of that nature, they may take on an opportunity to open a business that they thought wasn't possible in the past.
There are many organizations in Macedonia, much like those in Wilkes Barre and Scranton that promote public policy to support economic development. Entrepreneurs need public policies to support them in their endeavors to grow and bring business, as well as money, into the local communities. The major difference that we face in the U.S. is that we are dealing with so many government groups within a small area. Macedonia has the advantage of having one set of policy makers to go to, while in PA we are dealing with many groups which makes it very difficult to get everyone on the same page. Hopefully we can lessen this gap by taking the education to an even higher level and informing our decision makers of the important role that entrepreneurship plays in economic development.
Thank you again to everyone that helped us during our adventures in Macedonia. The hospitality we were shown was truly remarkable. A special thanks to Dr. Behxeti for his generosity the entire week. Also, thanks Blake for putting up with us :)
Emilie Pearson
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