RiverForest Group

• Rules of the game
• The Legitimacy of the rules
• Social capital issues
• The enforcement of rules

• Security of Private Property Rights
• Freedom of Contract
• Monetary restraint
• Fiscal responsibility
• Free Trade

Entrepreneurship is omnipresent 

Entrepreneurs are present in all settings. Cultural explanations for a lack of entrepreneurship overlook what people have in common – namely alertness for profit and to improve their general situations. Underdeveloped nations do not lack entrepreneurship. Rather, entrepreneurial activities exist but are not directed toward productive ends conducive to economic progress.

A Government cannot create entrepreneurship 

Given that entrepreneurs are omnipresent, government policy cannot “create” entrepreneurship. Instead, emphasis should be placed on creating a general institutional framework, making payoffs to productive entrepreneurship relatively high compared to unproductive and evasive activities. Resources should not be allocated to “encouraging” or “training” entrepreneurs, but to develop the necessary institutional context to allow productive activities to come to the forefront - KPMG LLP

Transparency and accountability are critical for reform 

In many cases, the lack of transparency and accountability allows officials to abuse the law for personal gains. One key mechanism for creating transparency is a free media industry which serves as a check on those in positions to abuse the political and legal institutions (see Coyne and Leeson 2004). Increased transparency and accountability reduce the payoff to unproductive activities.

Reform needs to be decentralized 

Reform efforts should be decentralized to the local level so that those that truly understand these challenges are involved in the reform process. For example, as discussed previously, entrepreneurs in rural Romania face a special set of challenges. Currently, the national government controls all reform efforts and neglects the unique situation of rural entrepreneurs.

Identifying and maintaining indigenous institutions is key

Indigenous institutions are embedded and accepted means of coordinating activities and overcoming situations of conflict. As such, they provide a ready-made framework for increasing coordination on a large scale. Institutions, practices and markets that are informal or “black” should be incorporated into the formal sector. - KPMG LLP