Former State Department Adviser Says Economic Desperation is Root Cause of Conflict

Steven Koltai speaks at UMass Lowell Image by K. Webster
Entrepreneur and former State Department adviser Steven Koltai talks to business students about building peace through entrepreneurship.

By Katharine Webster

Compare Jamaica with Singapore. Both are island nations with few natural resources, and 50 years ago, they were nearly identical in every demographic and economic measure.

Today, Singapore is one of the wealthiest countries in the world, while Jamaica is the second-poorest country in the Western Hemisphere, entrepreneur and former State Department adviser Steven Koltai told students in the Manning School of Business last week.

The difference? Singapore’s government adopted policies encouraging entrepreneurship, which leads to job creation, while Jamaica’s government became mired in corruption, leading to a downward spiral of poverty, violence and political repression, he said.

“The single biggest problem in the world that contributes to instability is not religious differences. It’s not arguments over resources or boundaries. It’s actually economics and joblessness,” he said. “Joblessness is the root cause of the global unrest threatening American security. Fostering entrepreneurship is the remedy.”

Koltai spoke at an event sponsored by the Manning School, the university Office of Entrepreneurship & Economic Development and the Nancy L. Donahue Endowed Fellowship in Values and Ethics. His talk was titled “Peace Through Entrepreneurship” — which is also the title of his new book, co-authored with Matthew Muspratt.

Vice Chancellor Steve Tello talks about entrepreneurship programs at UMass Lowell Image by Ed Brennan
Steven Tello, senior associate vice chancellor for entrepreneurship and economic development, talks about the university's entrepreneurial programs, from DifferenceMaker to the iHub.

Economic desperation and income inequality are the root causes of violence, from crime and civil unrest to war and terrorism, he said. That makes economic growth a security issue — and should make encouraging entrepreneurship the focus of U.S. foreign policy, he argued.

“The Middle East and North Africa have the highest youth unemployment in the world, and two out of every three Arabs are under 30,” Koltai said, citing unemployment rates from 30 percent in Yemen to 40 percent in the Palestinian territories.

Likewise, he said, the United States should tackle domestic unrest by investing in scientific and technological research, as well as promising infrastructure projects like ARPANET, the precursor to the internet. It should also simplify regulations that make it nearly impossible for small- and medium-sized companies to bid on government contracts.

“The last election was about jobs, and it was about a growing inequality in the country and a sense of desperation on the part of those who felt they’d been left out,” he said.

Encouraging entrepreneurship helps create a “bridge class” — people who can bridge social and political groups — because entrepreneurs come from all walks of life and they’re much more focused on collaborating and exchanging ideas than on political and social differences, Koltai said. Young entrepreneurs in the Palestinian territories routinely ask him to invite them to the United States so they can meet with their Israeli counterparts to form partnerships and access capital — and vice versa.

“They want to team up. That’s true every place I’ve worked,” he said.

Steven Koltai with Ashwin Mehta at UMass Lowell Image by K. Webster
Steven Koltai and lecturer Ashwin Mehta, who runs the Global Entrepreneurship exchange program, listen to Vice Chancellor Steven Tello.

Koltai said his convictions grew out of his personal history. He was born in Budapest, Hungary, to parents who had both been in concentration camps during World War II — which started because Hitler’s message resonated with Germans suffering from massive unemployment. A decade later, Koltai and his family fled Hungary after the failed uprising of 1956 and the subsequent Soviet crackdown, coming to the United States as refugees.

“I was very much formed by this sense that really terrible things happen when the political system falls apart,” Koltai said.

In the land of opportunity, Koltai made good, co-founding one of the world’s largest television satellite companies, SES. He also worked at Warner Brothers as senior vice president of corporate strategy and development, and he founded Event411, an online event management business.

Koltai “retired” in 2007, but joined the Obama administration in 2009 as senior adviser for entrepreneurship under Secretary of State Hillary Clinton. He started and ran the Global Entrepreneurship Program, which was intended to promote economic development in Muslim-majority countries. But the program was woefully underfunded, he said.

After leaving in 2011, he started Koltai & Co. to advocate for entrepreneurship in the developing world. Koltai lobbies government officials to change policies, tries to change cultures that value safe jobs over risky start-ups and brings young entrepreneurs together in incubators and informal communities to increase their chances of success.

Koltai talks to senior international business major Sophia Laura at UMass Lowell Image by K. Webster
Senior international business major Sophia Laura talks with Steven Koltai as he signs books.

Fortunately, he said, even where the United States is most hated, Americans are admired for their entrepreneurial spirit.

“It’s an important part of our national brand,” he said.

Students had some pointed questions for him. Senior international business major Sophia Laura, whose parents are from Brazil and who went to Hubli, India, last winter with the university’s two-week “Global Immersion in Innovation and Entrepreneurship” program, asked him what could be done in countries like Brazil and Haiti that suffer from widespread corruption.

“Find allies in the government and promote early successes,” Koltai said. “If you can’t find somebody in government who gets it, there’s no point in staying — pack your suitcase and go somewhere else.”