What makes entrepreneurship possible? Countless volumes of business literature are devoted to answering that question for individuals, but details about wider social conditions tend to come from history books. Entrepreneurs rely on secure property rights, open and competitive markets, and an honest legal system for their business to succeed. Many take these conditions for granted.
In truth, the modern system is relatively new. During the early modern era, developments in the West allowed for the shift from an aristocratic deal (“do as I say and I’ll let you work”) to a bourgeois deal (“leave me alone and I’ll make you rich”). Traditional bourgeois folk, which included shopkeepers, merchants, and innovators, went from suspect to the drivers of progress. Working in one’s own interest changed from being a sign of poor character to a standard expectation of anyone who sought to make it commercially.
What effect did this have on the world? A sharp increase in global wealth and standard of living. Global poverty has declined a great deal over the past two centuries. 85% of the globe in 1800 lived on less than $2 per day, but only 9% did in 2017. That change comes in spite of the unprecedented increase in global population which occurred over the same time period. In the US specifically, the national poverty line went from including 22.4% of the population in 1959 to 10.5% in 2019. These reductions in poverty meant an increase in the standard of living for Americans. Today, 90% of modern American households have air conditions. The average household owns nearly 2 cars. Things that would have been made exclusively for the rich decades ago are commonplace today thanks to the work of entrepreneurs.
Liberty and dignity for every potential entrepreneur (that is, everyone) make societies rich. Higher income levels occur when people are encouraged to innovate, and innovators can only reap the profits they desire in an environment that lets them keep the results of their blood, sweat, and tears. Government controlled economies that allow monopolies to prosper and stifle innovation stop would-be innovators from pursuing their dreams. Certain regulations on the free market can reverse society’s trajectory and return the world to the aristocratic deal.
Free markets are a necessary component for prosperity, but they alone are insufficient. Recognizing each individual’s right to self-author requires society to extend liberty and dignity to everyone. Prosperity can’t reach everyone unless everyone, including women and minorities, is empowered to see innovation as an available option to them. The ideal world is one where anyone can be a merchant. Women and minorities are able to embrace the entrepreneurial maxim (“we are rich because we are free”) every bit as much as their white male peers.
Society creates entrepreneurs by embracing their innovative spirit. As prolific economist Adam Smith once said, “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”