Montreal, May 15, 2010 • No 278

 

Harry Valentine is a
free-marketeer living in Eastern Ontario.
 

 

 THE EMPEROR'S DERRIΘRE

The Two Forms of State-sponsored Entrepreneurial Training Programs
 

by Harry Valentine
 

          Several years ago, Dr. Daniel Goleman published a book titled Emotional Intelligence that was followed by a series of sequels. In Working with Emotional Intelligence, Dr. Goleman suggested that the effectiveness of educational and training programs be measured over the long term, rather than the short term. Goleman discovered that while many companies sponsor in-house employee effectiveness training programs, the participants almost never used the acquired training within a year after completing such a program.

 

          The facilitators of such programs usually "measured" their effectiveness within less than a month of participants having completed them, sometimes within less than a week. In a recent newspaper advertisement, a public educational institute quoted statistics suggesting that 86% of new businesses succeed within the first year. The ad also suggested that 95% of new businesses started by graduates of their state-run entrepreneurial program will succeed within the first year. To measure success in the world of business requires a long-term period such as five years or more.

          There are two types of business and entrepreneurial training programs that can trace their origins to state involvement in education and in the economy. There is the official state-sponsored classroom program offered at colleges across the nation and a parallel real-world program that originated as a result of the long-term failure of government economic regulation. Well-intentioned state economic regulations only appear to succeed in the short term, as has been the case with state prohibition laws that restrict the sale of alcoholic beverages, tobacco products and substances classified as illicit drugs. The prohibition laws may inadvertently have given rise to the development of unofficial business and entrepreneurial training programs to teenagers.

          Despite an absence of entrepreneurial training and business management programs in the high school curriculum, some of the teenage population is able to acquire entrepreneurial skill and business acumen by extracurricular means. State drug laws may have inadvertently appointed local drug lords to the unofficial chair of high school departments of entrepreneurial development and business skills training. Their instruction method is the hands-on approach offered in the school of hard knocks and enforced with strict discipline. Students learn self-discipline and follow some basic ground rules of doing business in such programs, or they risk corporal punishment.

          Despite the strict code of discipline, many high school students in several western nations voluntarily enroll in such extracurricular business and entrepreneurial development programs. They learn the essentials of assessing market demand for a product or service, of the benefits of buying low and selling high, of paying bills on time and avoiding business-related debt, of saving their earnings and reinvesting a percentage of their profits in productive entrepreneurial activity. They learn to engage in discrete business-related communications and to maintain confidentiality in matters that pertain to their business dealings. They may find that their entrepreneurial skills could even be transferable to and applicable in numerous other sectors of the economy.
 

"There are two types of business and entrepreneurial training programs that can trace their origins to state involvement in education and in the economy. There is the official state-sponsored classroom program offered at colleges across the nation and a parallel real-world program that originated as a result of the long-term failure of government economic regulation."


          Extracurricular entrepreneurial training may be common in North American high schools where police drug raids occur. High school lock-downs and drug raids rarely result in a drug bust. While such raids perhaps intimidate a percentage of the student population, they could actually present a challenge to students who are enrolled in an extracurricular business-training program. These have the opportunity to impress their peers through innovative means of hiding drugs on school premises. A police dog with a keen nose could pick up a familiar scent and lead law enforcement officers and school officials straight to a dispensing machine on a bathroom wall, or to the door of a school principal's office.

          While the drug trade involves gangs and considerable violence, extremely violent gang activity probably only involves a small percentage of people near the top of the drug trade and represent the tip of the iceberg of the people who are involved in that trade. Most of the trade in drugs and other banned substances actually takes place quite peacefully between growers (and producers) and their customers and between local suppliers and their customers who can purchase on a cash-only basis. The cash-only customer is the preferred customer and he is free to terminate his purchases at any time. The customer who buys on credit is a more problematic customer who is best avoided.

          The estimated value of the illicit drug trade suggests that it is a thriving sector in the economies of many nations, despite it being part of the unofficial economy. It employs thousands of local distributors whose business acumen and customer relations ensures that the trade remains profitable. The volume of that trade suggests that the hands-on entrepreneurial training is successful. Government prohibition laws not only created demand for products and services that are only available outside of the official economy, it indirectly provided opportunity for thousands of people to acquire entrepreneurial training.

          By allowing central banks to print and circulate massive volumes of paper money, governments have thrown the world economy into an upheaval. The injection of liquidity into the market has incapacitated the ability of most national economies to generate accurate business information that would allow for sustainable new business development. State-sponsored entrepreneurial training programs are of little practical value in an economic system that cannot generate accurate market data on which new businesses to develop. The perceived success of such programs is strictly short term.

          Very few entrepreneurs in the official economy would be able to see new economic opportunity in fluctuating, rapidly changing and distorted markets. When markets collapse, the entrepreneurs who acquired their business acumen through their involvement in the unofficial or underground economy may actually be more adept at managing productive business activity in an unstable market. In India, 80% of the population is believed to be working in the unofficial economy. The sheer size of India's population hinders the government's ability to plan and manage a socialist economy. Many of India's entrepreneurs have acquired their business acumen in the unofficial economy, perhaps by being an apprentice. The entrepreneurial spirit that prevails in India's massive unofficial economy ultimately helps keep India's national economy functional.

          The upheavals in the world economy threaten several Western nations that include Greece, Spain, Portugal, Ireland and Iceland with economic collapse. Even the American economy could undergo a massive upheaval. Under such conditions, the entrepreneurial skill of massive numbers of people who honed their skills in the unofficial economy could help maintain local productive economic activity. They could keep communities economically and socially functional, perhaps using local currencies backed by some tangible asset. Prisoners in some jails actually use cigarettes as the medium of exchange because it had credible value. Local economies functioning on local currencies and overseen by entrepreneurs who honed their skills in the unofficial economy may be the ultimate result of state prohibition laws and excess state printing of paper currency.