Among all the other draws of immigration into the US, the support for entrepreneurship is perhaps the most precious and American of them all. As the “Land of Opportunity,” the US pulls hopeful expats from across the planet to try their hand at making a better life for themselves and their families through hard work and ingenuity.
For a case study on the importance of a culture that values entrepreneurship, the nation of Honduras is a perfect example. Honduras is the gem of the Northern Triangle of South America, with a massive well of untapped potential. Many of its business people and entrepreneurs choose to travel to the United States to execute on that untapped potential.
However, today, the nation is suffering from a massive flight of migrants. At this very moment, a caravan of Latin American citizens, many of whom are from Honduras, are making their way into the US without the proper documentation. The members of the caravan say they are in search of a more economic opportunity, but their means of entering the US have drawn the attention — and anger — of President Trump, who fired off a tweet decrying the openness of the southern border. The population of Hondurans in the US has sextupled since 1990 to nearly 800,000 Honduran expats living in America at present, but that number could go down significantly if the President chooses to end their asylum seeker status.
In hard numbers, the reason for the flight is clear: Hondurans in the US fare much better economically than their counterparts in Honduras.
Pew Research Center compared the incomes of Honduran people living in Honduras to Honduran people living in the US so that their Honduran nationality serves as something of a “control.” In 2013, the average income per capita of Hondurans in Honduras was just over $2000 ($2136.77, to be exact). However, the average income per capita of Hondurans in the US was $19,000 — almost ten times what their compatriots in the home country make. In hard numbers, that means that Hondurans are conducting about $15 billion worth of economic activity in the US instead of in their home country.
What’s the difference between these two groups that allows one to make 10x the yearly income of the other? The answer is surprisingly simple: the environment in which these two groups live and work. Specifically, it is the institutions in which these two groups live that explains the difference. Institutions are those frameworks, entities, and legal and cultural norms that come together to support free exchange and the entrepreneurial spirit. The most important of these institutions is governance, or the creation and sustaining of the rules that enable the economy to flourish. It is this differentiating factor–namely, governance institutions– that boosts Hondurans’ potential income by a factor of 10 in the United States. The US goes out of its way to support entrepreneurship and innovators of all kind. The US government, small business development organizations, banks, and other organizations work hand-in-hand to ensure that people with great ideas have the guidance, funding, culture, and ruleset necessary to turn their ideas into reality. Honduras recognizes that it hasn’t had as many such institutions to encourage entrepreneurship, which is why the government is working to develop these sort of governance and cultural institutions more and more every year.
The flight from Honduras was eminently foreseeable — what the Honduran people want is the ability to actualize their untapped potential by participating in value-for-value exchange unhindered by obstacles and aided by the support of an entrepreneurial culture. Those are the cornerstones the Honduran government will hopefully continue advancing to develop these kind of institutions for Hondurans.
I foresee a day in the near future where Hondurans no longer have to travel to the United States to find the institutions which allow them to unlock their full potential, but rather find those institutions right at home in Honduras.