Entrepreneurship Is Our Biggest Stick In the Arsenal of Democracy –

Of the many grisly tragedies authored by Iraqi insurgents since the fall of Saddam Hussein, perhaps none is more chilling than the recent machine-gunning of 12 people inside a family-owned bakery in the heart of Baghdad. While suicide attacks on U.S. military installations and Iraqi police training facilities should never fail to shock, this brazen murder in cold blood of a family pursuing a simple desire to sell bread and claicha to its fellow citizens cuts at the very core of what it means to live in a free and democratic society.

Of course, fueling fear by terrorizing business districts is no novel tactic-especially in places like the West Bank or Gaza-but attacks of this ilk highlight rather poignantly the inextricable link between democracy and the entrepreneurial spirit. As the founding fathers of this country realized so many years ago, both flourish and feed off of one another when the individual citizen feels a sense of personal agency and potency in affecting change in his material circumstances, and in controlling his own destiny through his actions and choices. Correspondingly, both suffer when those feelings are undermined.

In our society, entrepreneurs supply our economic and political lifeblood. They are relatively free to start and build enterprises geared toward turning new and innovative ideas into desirable products and services, with the belief that by providing such choices to the marketplace, their companies can make money. Simultaneously fueling and streamlining this process is our vibrant venture capital industry, which helps to funnel capital, attract talent and provide oversight to the most innovative thinkers and promising technologies. The work of such entrepreneurs and venture capitalists serves as both a symbol and a driver of economic freedom in our system, which-through the right blend of economic, legal, regulatory and educational policies and apparatus-enables motivated individuals to challenge entrenched corporate hierarchies and force positive change. In this way, entrepreneurs function in much the same fashion as upstart challengers to elective office: They keep the industrial giants (the incumbents, if you will) on their toes, and step in only when those giants (who do drive GDP, for the most part) falter, or when the public, through its purchasing power (their vote, so to speak), indicates that change is necessary.

In systems where such entrepreneurial activity is not encouraged, or is hindered by undue restrictions on the flow of capital, artificial barriers to entry or-in the absolute worst cases-danger to life and limb, mature enterprises, whose goals are principally stability and the maintenance of the status quo, can stifle the senses of freedom and individual economic self determination that are so essential to a democratic society. It is these very same senses that insurgents and other terrorists strike at when they target nascent private businesses in Iraq and other emerging democracies. For this reason, the U.S. must commit itself not just to establishing a viable representative government in Iraq, but also to fostering an entrepreneurial culture that will serve as the second, stabilizing leg on which the country can stand and eventually move forward. Iraqi entrepreneurs can then finish the job of rebuilding what we have begun.

Fortunately, we already know the formula for doing so: Provide entrepreneurial training, facilitate capital formation, establish favorable legal and regulatory frameworks and encourage the embrace of innovation on the part of the populace. In fact, the U.S. Department of Commerce has already begun the process of helping our trading partners-both established and emerging to stimulate the development and maturation of these conditions in their economies through its Entrepreneurial Forum. As a presenter and a participant, I have seen firsthand how this dynamic cultural exchange of ideas among entrepreneurs, government officials, venture capitalists and academics has been laying the groundwork for a democratic global marketplace marked by viable enterprises, healthy competition and free flow of capital. It’s more than just sound trade policy and education; it’s diplomacy in action-powerful diplomacy that can break down more barriers than our military in places like Afghanistan (where weaning the populace off the poppy trade is also key to drug interdiction) and the Palestinian territories (where corruption and stagnation have robbed most people of a decent living).

Naturally, putting this policy into practice is easier said than done, as the post-Soviet/Russian experience proved. In fact, those of us who operate within our system every day may take its complexity for granted. To function properly, however, this model requires that all four components mentioned above act in concert. That means a cultural environment in which the benefits of taking risks outweigh the penalties. It also means access to capital-especially equity capital-the basic fuel on which our economic cylinders fire. It means that the flow of that capital is not unduly restricted or impeded by arcane regulatory policies and overbearing legal controls. And finally, it means that companies and consumers are willing to reward innovation by incorporating new technologies into their daily lives, rather than clinging to old modes and outdated preferences.

While the prospect of fostering such a complex entrepreneurial system may be daunting, the rewards bolster democracy and transcend economic self-sufficiency, especially where globalization is concerned. After all, globalization does not stop in the boardrooms of international corporations; it penetrates every facet of our lives. Thus, encouraging the development of an entrepreneurial culture and venture capital component in foreign economies can achieve international results by weaving fledging democracies more tightly into the larger global fabric-effectively encouraging the development and maturation of democracy and free enterprise while radicalizing and ostracizing those elements opposed to them.

When considered in this light, our entrepreneurial system rates as one of our most valuable exports, and perhaps our most potent weapon against the suicide bombs of those who fight against our democratic principles.

Jack Biddle is a General Partner and co-founder of Novak Biddle Venture Partners, an early stage venture firm based in Bethesda, Md. Biddle sits on the boards of Trusted Edge, SafeView, Vision Chain and CorasWorks. He is a frequent speaker on entrepreneurship for the U.S. Department of Commerce and has made presentations for the department in Russia, China and Japan. He may be reached at jack@novakbiddle.com