The Power of the Entrepreneurial Spirit

“They rigged it so that everything is produced in China. Now we are dependent, and this is the mess we’re in,” a friend recently explained the global economy to me. Every simplified statement contains a grain of truth, doesn’t it? Still, I believe there is no “they” consciously steering everything.

Granted, China’s rise as a manufacturing powerhouse was not purely the result of market forces. State subsidies, technology theft, sorry, technology transfer, and a currency kept undervalued for years all played their part.

And yet, without “faster, better, more efficient, and cheaper,” this development would not have been possible. Suppliers today are pushed out of the race for more than just price. In many cases, only China can still produce the desired quality and quantity. That is the result of entrepreneurship, not state planning.

Entrepreneurship makes the difference.

That is the argument I am making, and it is one that is stated far too rarely.

Back in 1990, roughly one in three people lived in extreme poverty. Today, it is about one in ten. The situation improved above all where entrepreneurial spirit was allowed to work. Yes, including in China. And certainly not because of development aid.

What mattered were technological and medical advances that would be hard to imagine without private risk capital. Products became affordable through competition. One example: sequencing the human genome cost fifty million U.S. dollars in 2003. Today, the same service costs less than one hundred dollars.

Anyone who believes profit is solely the result of ruthless business practices gives capitalism too little credit. It takes on challenges and makes products and services affordable. And it does all of this on a voluntary basis.

As a shareholder, I invest, also voluntarily, in this idea of a free market economy. Over time, the share price reflects the economic development of a business model. It shows whether a company has earned its place in the world.