How to nurture innovative entrepreneurship

IN these hard times, the buzzword is 'innovative entrepreneurship', seen as a catalyst for a positive change to end the current pause in socio-economic progress and general prosperity. Innovations can bring about constant improvement in management, productivity, quality of goods and services as the Japanese were known for, the world over before their economy fell a victim to stagnation more than a decade ago. Prior to the outbreak of the severe financial crisis in the developed economies in 2008, the Anglo-Saxon financial model was projected as a roaring success because of a series of innovations much of which proved to be superfluous. In fact there was no major innovation in the financial system worth the name that instead was headed towards a collapse. It cannot be denied that innovations particularly major technological breakthroughs radically increase productivity of both capital and labour and diversify the range of products to serve the needs of a growing market, but they need to be nurtured by a vibrant society- a task that is beyond the scope of a dysfunctional state. In Pakistan. rent-seeking has played a pronounced role in keeping productivity low and perpetuating inefficiencies in the economy. By deliberately weakening regulatory bodies, cartels, monopolies and oligopolies have been patronised, stifling the growth of new entrepreneurs. The country needs innovative entrepreneurship for which, it is said, the government needs to create an enabling environment and offer the right incentives within timelines. Here the experience of the industrialised states may be worth emulating. It is not the big firms but small enterprises which are now proving to be innovative. Because of shortage of funds they are forced to sell their inventions to the big firms that are now being increasingly compared by eminent economists with the bureaucratic machines. But mere incentives will not work. The best results are achieved by a socio-economic model conducive to innovation, creativity and entrepreneurship; otherwise Japan would not have lost the GDP race to China. Peoples China is reported have moved up to second place in the number of articles published in the international science magazines and is predicted to take over the top position from the US in a few years. In Pakistan, the government subsidies for research and development given to companies are not generally utilised for the purpose they are intended for. Similarly, much of the funds provided to agricultural research bodies are used for the upkeep of their outfits. There is no link between universities and industry for producing new technologies. The development of human capital has not gone much beyond the rhetoric stage. Then the new technologies bring about 'creative destruction'. Seen in the historical context people use tractors instead of bullock-driven ploughs, cars instead of horses, electricity instead of steam and mobile phones are preferred to landlines. Modern technology once applied to farming leads to commercialisation of agriculture and corporate farming. The crop-sharing between landowner and tenant gives away to wage-labour system that brings about a transformation in social life in the rural areas. The failure to rapidly modernise agriculture has resulted in the drastic drop of its share in Pakistan's gross domestic product to about 22 per cent while engaging 44 per cent of the population against three per cent in the United States. Big farmers pay nominal 'income-tax' The critical issues in boosting productivity are the mode of production (technology) and the prevailing farming practices. Pakistan's economic progress has been retarded because it has not been accompanied by social progress; it has not been socially sustainable because of the lag in human resource development and absence of any social democratic structure. Ayub's 'development decade' was not followed by democratisation of the state structure to manage growing pluralism as the natural course for the policymakers to take. The tragic consequences that followed are well known to be repeated here. Ultimately, the 1973 constitution was framed unanimously by the elected representatives of the people which has survived two military rulers, Ziaul Haq and Musharraf. Every phase of economic development needs corresponding political system. The fallout of Musharraf's rule have led to a stable constitutional rule and some notable changes taking place in the state structure, made possible by the seventh National Finance Commission award and constitutional amendments by the present government. But it was preceded by disbanding of the representative district governments which have not been restored through promised elections, a retrogressive step in the journey towards grass root democracy and self-reliant socio-economic progress of districts. The state is caught in a web of conflicting interests, a legacy of military dictatorships. The military rulers proved totally incapable in reconciling conflict interests in a growing pluralistic society, a task for which democracy is more qualified. 'Permanent reconciliation' is not only needed to resolve outstanding (international) issues between Pakistan and India as Prime Minister Manmohan Singh has said but also required to resolve major national problems. Innovative entrepreneurship is a catalyst for change but it cannot prosper unless the right social. political and economic environment is provided. The political turbulence in the Middle East and North Africa is result of failure of their rulers to recognise the emerging social forces that they themselves have unleashed. It is an age of vibrant people and weakening states in which the governments need to heed the voice of an active citizenry to reform the prevailing social structures and improve governance.