In 2006, when Columbia University’s Professor Edmund Phelps accepted the Nobel Memorial Prize in Economic Sciences in Stockholm, Sweden, he stressed that the attitude of businesspeople is essential to economic growth.
When talking about how to develop and stimulate the economy, people often get focused on reducing taxes, changing the labor law, or finding cheaper sources of capital. Economic stimulus is being discussed by Mongolians today, as we are talking about getting rid of corruption, strengthening our political and economic institutions, and reviving our weakened economy.
These are important subjects that should be discussed. But, what we have not been talking about is the culture, attitude, and mindset of businesspeople, and what effect these things have on economic indicators such as unemployment, labor productivity, and growth. Values and attitudes are components of an economy – just like policies and institutions are.
The difference between developed and less developed countries can be explained by the attitude of a country’s business people (how they approach accountability, teamwork, risk management, etc.), rather than policies on employee rights and unemployment benefits.
Entrepreneurship is the capacity and willingness to develop, organize, and manage a business along with its risks to make a profit. Entrepreneurship only results in profits when combined with land, labor, natural resources, and capital. This mindset, which is based on innovation and bearing risk, among a field of competitors, is an important ingredient for success in a globalized market with increasing competition.
Let’s look at where Mongolia’s entrepreneurship is today, and how the entrepreneurial mindset is shaping up in our country.
Compared to when the majority of fresh graduates wanted to start businesses in the 1990s, new graduates today are now more interested in working for the government and becoming politicians than they are in careers in the private sector. This shows that Mongolians today have a less entrepreneurial mindset.
Mongolia’s economy has become based on mining minerals using foreign capital and exporting the industry’s raw products. Entrepreneurial thinking has been limited to exploring minerals, obtaining a mining license somehow, having a discovered deposit approved, and attracting foreign investment.
Our mining industry has been on a downward slide since the government started engaging in entrepreneurial activities itself, claiming that the resources beneath the ground belong to the people. The clearest example of this is Tavan Tolgoi’s coking coal deposit. Businesspeople who follow political parties have spent many years fighting to obtain financial advantages through the ability to influence government decisions. In the meantime, state-owned Erdenes Tavan Tolgoi has become a debt machine, instead of a company that earns a profit. Due to the absence of a clear vision and policy, the Tavan Tolgoi mine still does not have a railroad or power plant. A private company built a road for the mine, but the government purchased it to pay off its debt by transporting coal by truck for 270 kilometers.
The entrepreneurial mindset has not really found its way into sectors other than mining. The domestic market is limited by a population of three million consumers. Although there is willingness to send products abroad, capacity to meet the demands of export is lacking. The only sectors that have direct access to the outside world are aviation and transport. However, the so-called “national airline”, which exclusively possesses all rights to conduct international flights, is a state-owned company and does not let competition enter the industry. It has been running deficits for decades. This is a clear example of how the entrepreneurial mindset is being shackled.
CHANGING THE MINDSET
In order to develop the economy, Mongolia needs to revive the entrepreneurial mindset. In the absence of entrepreneurial minds, we will never be able to achieve long-term development and a strong economy, regardless of how much we borrow from abroad, pay off existing debt, and put food on the table each day.
A country like ours, which has relatively high welfare expenditures, can bring about flourishing development by ensuring that our economic institutions support entrepreneurship, and by building a culture where challenges and competition are acknowledged in the economy.
Without competition, our labor productivity will not improve. And, without improvement in labor productivity, we cannot expect improved livelihoods.
Our economy is not developing and the entrepreneurial mindset is not being brought back. This is another reason why Mongolians are leaving the country to do physical labor abroad for better pay. In order to change this situation, government policy should focus on reviving the entrepreneurial mindset, helping to change behavior, and encouraging activities that promote entrepreneurship.
Bringing back the entrepreneurial mindset requires ensuring free competition, freeing up prices, reducing the government’s involvement in the economy, and offering broader opportunities to the private sector. The government must fulfill its key duties only: ensuring the safety and security of the people and their private property. If this happens, there will be innovation and creative thinking throughout society, which will create new jobs and challenges. It will gradually bring flourishing development to the country.
On the other hand, in order to change our attitude, Mongolians need to study, learn, and practice the values and principles that have been created and forged by mankind over time – Aristotle’s teachings on knowledge, Plato’s laws on responsibility, Kant’s teachings on jealousy, and Bergson’s teachings on existence and change
Translated by B.Amar