Babson economist works to reduce world poverty

The United Nations' annual human development report delivered a stark warning on world poverty. Despite growing global prosperity, the gap between rich and poor continued to widen, with the poorest 40 percent of the world's population living on less than $2 a day. Without a renewed effort to assist poor countries, the September report warned, the gains against poverty over the past 15 years could be lost. Babson College economist Maria Minniti, a lead researcher for a prominent international study of the role of entrepreneurs in the developing world, was recently named an adviser to the UN's poverty reduction project, which seeks to halve the proportion of people living in extreme poverty within the next decade. Minniti recently discussed her research and strategies for reducing poverty with Globe staff writer Peter Schworm.

Q: You have studied the relationship between economic growth and levels of entrepreneurship. What motivates people to start new businesses?

A: Entrepreneurship is the creation of businesses and the churning of businesses, and it plays a very important role in a country's well-being. It's a complex phenomenon, but few highly entrepreneurial countries have low economic growth. It's one of the great economic mechanisms through which people can improve their condition, particularly women. In developed countries, people who start businesses usually have high levels of education, and some experience and financial backing. They are the engine that pushes countries forward and makes economic growth sustainable over time. In developing countries, starting a business is mainly a way to get out of poverty, because they have no better job opportunity.

Q: What steps can developing countries take to promote new business creation?

A: There is no one-size-fits-all strategy to help entrepreneurs. Basic education, property rights, and respect of human rights are crucial. We also know that government intervention doesn't seem to be a desirable thing. What's important is the underlying business environment has to be conducive. A lot of poor countries don't have that. There is too much uncertainty.

Q: What characteristics do societies with active business and investment cultures share?

A: There are many universal cultural factors, which surprised us. Self-perceptions are very important in all countries, regardless of income. People that think the condition of the country is positive and think they have the sufficient skills are way more likely to start businesses than other people. We thought educated people would perceive themselves as being more likely to succeed in certain situations. We found no such evidence.

Q: Some experts believe that removing trade barriers is a better way to reduce poverty than financial assistance. What's the best strategy in your view?

A: Markets! In the early 1990s India began a program of pro-market reforms, which have been very successful. China started about a decade earlier and has experienced high annual rates of growth. Ireland has also developed a similar program and has been incredibly successful. If you have a good investment environment, you will have economic growth. But you need a government that is strong enough to enforce contracts, protect property rights, and maintain order. But governments strong enough to do that often use their power to enrich the powerful at the expense of commerce. . . . The bad news is that economic institutions cannot just be imposed. We cannot just decide this is going to be a market economy. Things just don't work that way.

Q: There seems to be a sharper focus on reducing world poverty in recent years. Why do you think that is?

A: I think the interest in poverty is part of globalization. As we become more aware of foreign people and places, we become more aware of poverty overseas as well. They become more real to us.

Q: It is said that the poor will always be with us. Do you agree?

A: Globalization can do a lot to reduce the gap between rich and poor by bringing capital into other regions of the world. The gap is growing, but my hope is we will see a reverse of this trend. . . . Poverty is not necessary. It's not a zero-sum game. The richer you are, the more I have to gain from trading with you.

Q: Are you excited about your work with the UN? Is it hard conducting research on a subject that at its core is often heartbreaking?

A: It's a very rewarding experience. As an academic I am used to studying things, and working with the UN is making things more real. The problems are very practical and the questions come from people on location. Just the opposite, I'm inspired to work harder and make a difference. It's difficult and I often feel inadequate to the task. But it's very motivating. I always tell my students to find a problem that matters.