There is a fundamental difference between developed countries and the developing world. First World countries have institutionalized a culture of entrepreneurship.

This is not to say that developing countries are populated by people with less ambition and capacity, or an inferior work ethic. It is simply a case of public and private institutions, almost as if by accident, conspiring against the aspirations of potential small business owners and innovative entrepreneurs.

The banking industry in Bolivia is a perfect example. In some banks, to open a business account requires an investment of $2000 US dollars. If the account goes under $2000 at any time, it is converted to a personal account. $2000 of frozen capital can be a challenge for an emerging small business in the United States. In Bolivia, it makes a business account inaccessible to all but the wealthiest.

At .03%, interest rates in Bolivian savings accounts are nearly criminal. Now, if you want to get a loan from a Bolivian bank, that’ll cost you between 15 to 20 percent. Mysteriously, all Bolivian banks maintain about the same rates of interest; quite frankly, the entire Bolivian banking system has collusion and price fixing written all over it.

Incorporating a new business, or achieving legal recognition for a producer cooperative, is also a nightmare. The amount of paperwork and red-tape one must wade through has surely discouraged many hopeful entrepreneurs. It’s as if Bolivian institutions were saying:

Que verguenza que quieres que Bolivia vaya adelante. Tienes que quedarte pobre como todos, y te vamos a hacer sufrir por tus aspiraciones.

For those of you living in developed countries, take note: though your public institutions may seem unresponsive, your tax rates may seem too high, and your banking sector may seem inefficient, there’s a reason why you make twenty, thirty, forty times as much as a professional living in the Third World. The reason, perhaps more so than any other, is a social, legal, and institutional framework that has made conditions favorable for small business and innovative entrepreneurs.

Don’t believe me? All across America new businesses are formed with money from SBA guaranteed loans. Small Business Development Centers offer business owners free consulting services, low-cost training, and networking opportunities. Incorporating a business takes about a week’s time. New business accounts can be opened with as little as $500 of initial investment. National laboratories and state universities offer strategic alliances and technical assistance to small businesses for technology transfer and commercialization. Every year venture capitalists and “angel” investors finance high risk investments in search of big returns.

In the Third World, public policy and private institutions have become mechanisms of oppression against the small entrepreneur. The cynic in me says that this is by design, as the haves squeeze ever harder on the have-nots, keeping them in a compromised position in order to maintain their own. The realist in me says that this is simply another case of powerful self-interest gone horribly wrong, creating a situation where, in the long run, economic development stagnates, and everybody loses.

To engage in commerce is human nature. Go anywhere in the world and you will see people trading goods, either for money or for barter; the world has no shortage of local markets, even in its most traditional and “backward” places. If the Third World is ever to develop, it must find a way to reform institutions, both public and private, so that these very basic human instincts are given a favorable environment in which to develop, and small, locally-owned businesses can have the same advantages as large ones.