Political entrepreneur
Encyclopedia
The term Political entrepreneur may refer to any of the following:
involves people taking a risk
in order to create new business ventures, to gain advantage over a competitor, and to maximize profits.
Traditionally entrepreneurs have been associated with the world of business, however the term is used in the political arena also. For example Choi Taewook in 2004 wrote:
. Partisan
leaders, not businesses or other policy-seekers themselves, have the strongest incentives to absorb the transaction costs associated with either broad-scale business or countervailing collective action
. When partisan entrepreneurs see an opportunity to alter the distribution of power at the national level, they engage in a discursive exercise to remold business or oppositional interests and undertake the mobilization of these interests.
An analytical framework for dealing with political entrepreneurship and reform is proposed which is based on some new combinations of Schumpeterian political economy, an extended version of Tullock's model of democracy as franchise-bidding for natural monopoly and some basic elements of New Institutional Economics. It is shown that problems of insufficient award criteria and incomplete contracts which may arise in economic bidding schemes, also - and even more so - characterise political competition. At the same time, these conditions create leeway for Schumpeterian political entrepreneurship. The same is true for various barriers to entry in politics. These barriers affect a trade-off between political stability and political contestability which will be discussed with special emphasis on incentives and opportunities for political entrepreneurship in the sense of risking long-term investments in basic political reforms.
, government contracts, or other such favorable arrangements with government(s) through political influence (also known as corporate welfare
).
Ed Younkins (in 2000) wrote: "Political entrepreneurs seek and receive help from the state and, therefore, are not true entrepreneurs." Similarly, Thomas DiLorenzo
says, "a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors." He says, in contrast, the "market entrepreneur succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect." He gives the example of a mousetrap manufacturer who seeks to gain market share by making a better mousetrap as being a market enterpreneur, and a manufacturer who lobbies Congress to ban the importation of foreign-made mousetraps as a political entrepreneur. (DiLorenzo, Thomas, Chapter 7 of How Capitalism Saved America) http://www.mises.org/story/2317
In practice, the division between the market entrepreneur and the political entrepreneur can be hazy. Many business entrepreneurs share both characteristics in varying degrees. The term appears to have been coined by Burton W. Folsom Jr. in his book, The Myth of the Robber Barons.
- someone (usually active in the fields of either politicsPoliticsPolitics is a process by which groups of people make collective decisions. The term is generally applied to the art or science of running governmental or state affairs, including behavior within civil governments, but also applies to institutions, fields, and special interest groups such as the...
or businessBusinessA business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
) who founds a new political project, group, or political partyPolitical partyA political party is a political organization that typically seeks to influence government policy, usually by nominating their own candidates and trying to seat them in political office. Parties participate in electoral campaigns, educational outreach or protest actions...
- a businessman who seeks to gain profitProfit (economics)In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...
through subsidies, protectionismProtectionismProtectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
, government contracts, or other such favorable arrangements with government(s) through political influence (also known as a rent-seeker).
- a political actor (not necessarily a politician) who seeks to further his or her own political career and popularity by pursuing the creation of policy that pleases the populace.
Politician as a political entrepreneur
In the field of business, entrepreneurshipEntrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...
involves people taking a risk
Risk
Risk is the potential that a chosen action or activity will lead to a loss . The notion implies that a choice having an influence on the outcome exists . Potential losses themselves may also be called "risks"...
in order to create new business ventures, to gain advantage over a competitor, and to maximize profits.
Traditionally entrepreneurs have been associated with the world of business, however the term is used in the political arena also. For example Choi Taewook in 2004 wrote:
A political entrepreneur refers to a political player who seeks to gain certain political and social benefits in return for providing the common goods that can be shared by an unorganized general public. These common goods that political entrepreneurs attempt to provide to the populace generally include foreign- and domestic-related public policy, while the benefits they hope to gain involve voter support, public recognition, and personal popularity.
History and cultural context
The political activism of American business as a class has surged and ebbed at various historical moments. Variations in both business and countervailing political mobilization should be approached as problems of collective interpretation and action. To explain the historical patterns of class-wide business activism, we need to look at the dynamics of partisan regimes in American politicsAmerican politics
American politics is an area of study within the academic discipline of political science. It is primarily, but not exclusively, studied by researchers in the United States...
. Partisan
Political Parties
Political Parties: A Sociological Study of the Oligarchical Tendencies of Modern Democracy is a book by sociologist Robert Michels, published in 1911 , and first introducing the concept of iron law of oligarchy...
leaders, not businesses or other policy-seekers themselves, have the strongest incentives to absorb the transaction costs associated with either broad-scale business or countervailing collective action
Collective action
Collective action is the pursuit of a goal or set of goals by more than one person. It is a term which has formulations and theories in many areas of the social sciences.-In sociology:...
. When partisan entrepreneurs see an opportunity to alter the distribution of power at the national level, they engage in a discursive exercise to remold business or oppositional interests and undertake the mobilization of these interests.
An analytical framework for dealing with political entrepreneurship and reform is proposed which is based on some new combinations of Schumpeterian political economy, an extended version of Tullock's model of democracy as franchise-bidding for natural monopoly and some basic elements of New Institutional Economics. It is shown that problems of insufficient award criteria and incomplete contracts which may arise in economic bidding schemes, also - and even more so - characterise political competition. At the same time, these conditions create leeway for Schumpeterian political entrepreneurship. The same is true for various barriers to entry in politics. These barriers affect a trade-off between political stability and political contestability which will be discussed with special emphasis on incentives and opportunities for political entrepreneurship in the sense of risking long-term investments in basic political reforms.
Businessperson as a political entrepreneur
However the term is also used in a very different way by those that wish to contrast what they see as a pure "market entrepreneur" with someone that uses the political system to further a commercial venture or their own career. On this definition a political entrepreneur is a business entrepreneur who seeks to gain profit through subsidies, protectionismProtectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
, government contracts, or other such favorable arrangements with government(s) through political influence (also known as corporate welfare
Corporate welfare
Corporate welfare is a pejorative term describing a government's bestowal of money grants, tax breaks, or other special favorable treatment on corporations or selected corporations. The term compares corporate subsidies and welfare payments to the poor, and implies that corporations are much less...
).
Ed Younkins (in 2000) wrote: "Political entrepreneurs seek and receive help from the state and, therefore, are not true entrepreneurs." Similarly, Thomas DiLorenzo
Thomas DiLorenzo
Thomas James DiLorenzo is an American economics professor at Loyola University Maryland. He is an adherent of the Austrian School of Economics. He is a senior faculty member of the Ludwig von Mises Institute and an associated scholar of the Abbeville Institute...
says, "a political entrepreneur succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors." He says, in contrast, the "market entrepreneur succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, direct or indirect." He gives the example of a mousetrap manufacturer who seeks to gain market share by making a better mousetrap as being a market enterpreneur, and a manufacturer who lobbies Congress to ban the importation of foreign-made mousetraps as a political entrepreneur. (DiLorenzo, Thomas, Chapter 7 of How Capitalism Saved America) http://www.mises.org/story/2317
In practice, the division between the market entrepreneur and the political entrepreneur can be hazy. Many business entrepreneurs share both characteristics in varying degrees. The term appears to have been coined by Burton W. Folsom Jr. in his book, The Myth of the Robber Barons.
See also
- Social entrepreneur
- PoliticianPoliticianA politician, political leader, or political figure is an individual who is involved in influencing public policy and decision making...
- Crony capitalismCrony capitalismCrony capitalism is a term describing a capitalist economy in which success in business depends on close relationships between business people and government officials...
- Corporate welfareCorporate welfareCorporate welfare is a pejorative term describing a government's bestowal of money grants, tax breaks, or other special favorable treatment on corporations or selected corporations. The term compares corporate subsidies and welfare payments to the poor, and implies that corporations are much less...