Democracy and Entrepreneurship

Bottom line: Democracy and entrepreneurship are inextricably linked together. It is a truism that decentralized, independent and autonomous decision-making fuels entrepreneurship as well as democracy. An important policy mandate for entrepreneurship is to foster this freedom, which is the cornerstone of democracy.

National Socialism in Germany emerged by suppressing both entrepreneurship and democracy. The eradication of entrepreneurship and cartelization of most major industries was a key policy implemented under National Socialism to effectively stamp out and suppress democracy. Subsequent to his election in 1933, Hitler and the National Socialists moved to destabilize democracy through eradicating entrepreneurship and leveraging legalized cartels in a grab to thwart decentralized independent and autonomous decision making.

In searching for the roots of Democracy in America, Alexis de Tocqueville found his answer in the pervasiveness and dominance of small business, “What most astonishes me in the United States, is not so much the marvelous grandeur of some undertakings, as the innumerable multitude of small ones.” According to Tocqueville, the autonomy and independence of small business was conducive to the critical and active questioning and challenging of authority but also responsibility inherent in democracy.

Both measurement and perception suggest a decline in democracy as well as entrepreneurship in the contemporary era. The empirical evidence clearly shows a marked decline in entrepreneurship in countries where democracy is being overtaken by more authoritarian regimes. This is consistent with the view that the freedom of thought, decision-making and action inherent in democracy is also essential for entrepreneurship. A decrease in entrepreneurship can be seen to accompany the decline in democracy in these national contexts. The share of the workforce in the United States accounted for by entrepreneurs declined from 7.8 percent in 1985 to 3.9 percent in 2018. These concerns are only exacerbated in the current Covid-19 crisis.

It is freedom that makes the most compelling link between democracy and entrepreneurship. Freedom has been linked to democracy, just as it has been to entrepreneurship. Because democracy reflects freedom, it also is conducive to the ability of people and organizations both to engage in behavior and activities to discover and create opportunities as well as to act on and pursue those opportunities.

Both democracy and entrepreneurship are manifestations of the same underlying force—freedom of thought, decision-making and action.

Read the full study HERE.