chapter  10
Models to Support Entrepreneurship Activities in Developing Countries: The Role of Government
Pages 15

Stable governments are critical to the wellbeing of any country. Stability is essential for economic development and growth as are frameworks that provide some security for investors. Many developing countries have new and often unstable political structures, and the infrastructure, both financial and physical, is underdeveloped. As we learned in the previous chapter, much of the finance that the governments of developing countries receive comes from aid, and there are often conditions attached to this aid with regard to how it must be used to develop the economy. The philosophy behind the required policies and actions depends on the funding body and seldom reflects the priority needs in the borrowing country. In this chapter we look at the role of government in enabling entrepreneurship at the bottom of the pyramid (BoP). At the height of the Depression in the US, in a famous 1932 radio address, President Franklin D. Roosevelt called the poor “the forgotten man”. In that speech, Roosevelt proclaimed that plans for economic recovery must rest upon the forgotten – the unorganised but indispensable units of economic power. “From the bottom up and not from the top down. We must put faith once more in the forgotten man at the bottom of the economic pyramid” (Roosevelt 1938 p. 627, cited in Elyachar 2012). This is a message that resonates in many parts of the world today. The misery of extreme poverty in a world of growing prosperity is both terrible for those who are poor and dangerous for those who live next door. The simplest form of aid provided to governments of developing countries is called ‘budget support’ which basically means that the donors give, or lend the government money which is then spent on whatever it chooses as if it were its own

tax revenue (Collier 2007). For governments inexperienced in economics and governing this can be a recipe for ostentatious projects and corruption rather than the development of infrastructure needed by those at the BoP. Sachs (2008) identifies six kinds of public interventions that governments need to make to overcome extreme poverty and stimulate economic development.