National Archives - GUJRAT INDIA

National Debt History

Introduction

The United States has a long history of carrying public debt, dating back to the Revolutionary War. In fact, ever since Alexander Hamilton proclaimed “a national debt, if not excessive, will be to us a national blessing,” the US has only been debt-free for one year, between 1834 and 1835. Recently, the national debt has exploded, raising concerns that our country’s budget deficits are unsustainable.

In this article we discuss the United States’ public debt and the factors that contributed to its accumulation. We then compare the US to other heavily indebted countries such as Japan and post-World War II UK.

There are many parallels and a few differences between how the nations accumulated their very substantial debt loads. We review how Japan and the UK dealt with their situations and discuss the implications for the US.

United States

Deficit spending during World War II brought the ratio of total outstanding US national debt to the US Gross Domestic Product (GDP) ratio to 121%, its highest level in history. The Debt to GDP ratio is a common way to measure the indebtedness of a country relative to the size of its economy.

From the 1950s to the early 1980s, modest budget deficits increased the national debt more slowly than inflation and productivity gains raised the GDP. As a result, the Debt to GDP ratio declined to a post-war low of 40% in 1982 and increased to about 60% in the late 1990s.

Over the past eight years, large deficits have become the norm as spending on the Iraq War, entitlement programs, and financial bailouts effortlessly outpaced tax revenues. The proposed health care reform and other new spending measures will almost certainly add to our budget deficit and therefore to our national debt.

Neither war spending nor health care reform and bailout packages are likely to be productive investments that will put our economy on a more solid footing. While some of these spending measures may have been necessary, there is virtually no chance that these investments will generate sufficient returns, either through higher future tax revenues or profitable asset sales, to pay off the debt incurred to finance them. We will see that this is a common theme when we look at Japan and the UK.

The most recent estimates put the Debt to GDP ratio at about 84%. This ratio is expected to increase to 100% by 2011. The US currently spends nearly 14% of the national budget in interest payments. Any significant debt issuance or interest rate increase will make the interest payments the largest expense in the US budget, surpassing military spending for the top spot.

The US currently enjoys a historically low cost of borrowing, especially for long-dated bonds. Two broad groups buy virtually all of the US government debt and they are willing to accept very low yields for different reasons.

The single largest buyer of Treasury Bonds is the Social Security Trust Fund, which holds, together with other government entities, about 50% of the national debt. The Social Security Trust Fund is willing to pay more for these bonds than other market participants would. This is a great deal for the government, because high bond prices translate into low interest rates, but it hurts all Social Security participants because low interest rates entail low returns on Trust assets. A key reason why the Trust is willing to overpay for Treasury Bonds may be that the Secretary of the Treasury is also the chairman of the Board of Trustees.

Domestic and foreign non-government entities each hold half of the remaining 50% of the national debt. There is still a prevailing perception that US Treasury Bonds are the safest investment available. Private entities often buy bonds in times of crisis, such as our current recession, which drives the prices up and the yields down. This, together with the high prices paid by the Social Security Trust, has kept long-term interest rates in the US near historical lows.

Japan

In the late 1980s, when Japan’s real estate and stock markets were constantly reaching new highs, the global consensus was that Japan would soon be “eating America’s lunch.” Then, in 1990, the Japanese real estate and stock markets crashed.

Initially, the government responded to the crisis by lowering interest rates to revive the Japanese economy. When this did not yield the desired results, the government attempted to stimulate the economy through massive infrastructure investments, bank bailouts, and similar measures. These programs contributed to several years of outsized budget deficits.

As in the US, only a small fraction of the bailout funds were used for potentially productive investments into useful infrastructure, education, fundamental research and other areas that can improve the competitive position of a country’s economy. Instead a significant portion went towares building infrastructure that nobody needed, the so-called “roads to nowhere.”

The Japanese bank bailouts in the 1990s, like their US counterparts, amounted to passing on the cost of past mistakes to tax payers. Some of these bailouts may have been necessary, but they are unlikely to be profitable investments.

The government’s response to the financial crisis inflated the national debt from 65% of GDP in 1992 to 180% in 2005. The Debt to GDP ratio has held steady near these levels since then.

Currently, Japan spends about 24% of their annual budget on interest payments. Any significant increase in interest rates would push this expense into crippling territory, but so far rates have shown little inclination to rise.

A decade of long-term interest rates in the low single digits should lead to inflation, but in Japan inflation has been very tame. We can understand why this is the case by looking at how money flows through the Japanese economy.

The first major difference between the US and Japan is that the savings rate in Japan is very high and many Japanese invest their savings into government debt. Ninety-three percent of the Japanese national debt is held internally. This would be unthinkable in the US because consumers are themselves over-leveraged and can’t lend much to their government.

Japanese banks tend to use deposits to buy government bonds rather than lending them out to consumers. Presumably this reflects a reluctance of individuals and businesses to borrow, and a reluctance of banks to lend to any but the most credit-worthy borrowers.

In effect, the Japanese population lends its savings to the government, either directly or by keeping its savings in a bank, which uses the deposits to buy bonds. Interest payments are usually reinvested back into government bonds.

This process creates significant demand for Japanese government debt, which keeps bond prices high and interest rates low. It also prevents inflation, because a lot of bank deposits are used to fund the budget deficit rather than consumer and business spending, which could drive up prices.

This unusual arrangement enabled Japan to sustain an inherently unstable situation for the last decade. If the Japanese population decides to spend money instead of saving it, or the banks decide to look for higher returns by lending to individuals and businesses, inflation and interest rates will rise and Japan will have to address its debt burden.

United Kingdom

Another example of an over-leveraged country was the United Kingdom after World War II. The cost of World War I had left the country heavily in debt, and World War II required the British to borrow even more to finance their defense.

An attack by a foreign power is surely one of the most compelling reasons for a government to run a budget deficit. Nevertheless, war spending is similar to the US and Japanese bailout programs in that it was unlikely to generate a return on investment that is sufficient to repay the incurred national debt. Because of this similarity, the post-war UK can shed light on what may be in store for the US.

By 1950, the UK had a Debt to GDP ratio of 250%, up from about 125% before WWII. About half of the run-up in debt occurred during the war and mostly reflects war spending. The other half includes rebuilding loans denominated in dollars that the UK obtained from the US and Canada in 1945. These loans amounted to about 30% of GDP in 1945. This portion of the national debt was used for infrastructure investments that helped restart the peace-time UK economy. Presumably these investments did generate sufficient revenues to pay back the loans.

Over the next forty years, the UK lowered its Debt to GDP ratio to 35%. Most of this decline is due to an average annual GDP growth of 9.4%. About 7% of this growth rate can be attributed to inflation. By 1990, inflation shrank the original debt of 250% of GDP to 5.8%. (We assume that none of the principal was paid back and ignore the exchange rate between the British Pound and the dollar, which is immaterial compared to inflation.)

While inflating away debt has worked for the UK, it has not been a smooth ride. Especially in the 1960s and 1970s, the government was struggling to keep inflation from getting out of control while not completely choking off economic activity. The resulting high unemployment caused social tensions and enabled unions to gain power. Frequent strikes and labor unrest further harmed the local economy and limited the ability of businesses to compete internationally. The UK economy lagged far behind those of most other European countries during those years because of the economic turmoil that ultimately stemmed from the need to inflate away an unmanageable debt load.

Conclusion

Both Japan and the US took out loans for projects that were intended to restart their respective economies, but which had little hope of generating enough tax revenue to pay off the debt. The UK, on the other hand, was forced to spend on self-defense during World War II and reconstruction after the war’s conclusion. Nevertheless, all three countries found themselves significantly in debt with dim prospects for paying it off.

The economic similarity between the US and UK suggests that the US will emulate the UK’s strategy of inflating away the national debt. It seems unlikely that the US will follow in Japan’s path. Japan’s ability to remain in a state of suspended animation for over a decade is partly due to high savings rates and a slow flow of money. In the US, banks, businesses, or individuals would eventually end the suspended animation by taking on more risk in exchange for yields higher than the 2.5% currently available in the Japanese government bond market.

If the US follows the same trajectory as the UK did after World War II, we should expect the next 20 to 30 years to bring some of the same difficulties that plagued the UK in the decades after the war. However, one important difference between the aftermath of WWII and the current situation is that there is no pent-up demand from rebuilding Europe to stimulate economic activities. Consequently, we expect that the UK’s economy in the years following its post-war reconstruction, rather than in the years immediately following World War II, will be a more indicative predictor for the United States’s present economic outlook.

Specifically, we should expect inflation significantly above historical averages. This helps devalue the outstanding debt in real terms as long as new deficit spending remains under control. The UK inflation rate of about 7% reduced the debt outstanding in 1950 to 1/16th of its original value by 1990. This is an example of inflation reducing a formerly unmanageable amount of debt to a sum that could be paid off fairly comfortably.

Inflation is very good for debtors, but it can destabilize the economy and it is hard on individuals. Normally, it hits lower-income brackets hardest, because wages tend to change more slowly than prices rise. For low-income families, this can make paying the bills difficult until wages adjust. Perhaps this is the reason why inflationary periods tend to coincide with periods of social unrest, such as the labor unrest in the UK during the 1960s and 1970s. As we work our way out from under our still rapidly expanding national debt, it is likely that inflation will squeeze low-income families, as well as retirees with fixed incomes that do not adjust for inflation.

The US government will have to return to some semblance of fiscal responsibility. If this fails to happen because government officials decide it is good for the country, it will happen because borrowing costs jump when inflation sets in. During the 1970s, 30-year UK government debt yielded around 14% per year compared to just 4% currently. Running large deficits becomes impossibly expensive when interest rates are this high.

In order to pay back existing debt, reduce the budget deficit, and meet the ever expanding list of obligations, the US government will have to raise taxes. In the UK and the US, the top income tax rates until the late 1970s were well in excess of 80%. It is highly likely that tax rates across the board will rise dramatically from the current historically low levels.

Governments have more financial tools at their disposal than individuals do, but even with this expanded toolbox there is no painless way to excape from too much debt. The most useful tool is the ability to print money, which causes inflation and reduces the effective debt load without having to pay back a single penny. The current Debt to GDP ratio of the US is alarmingly high and it is expected to get much worse in the near future. Nevertheless, by printing money, returning to fiscal responsibility and drastically raising taxes, the US should be able return to a sustainable situation.

Navigating Through Tough American Economic and National Health Care, Health Insurance Reform Issues

For Practicing Agency Brokers, Trusted Insurance Advisers, And Financial Planning Consultants….

From time to time, there is a need for guidance in Financial Services Practice; now is definitely one of those times. There are two distinct issues working in tandem which determine modifications in the future conduct of our business: The Economy and the Reforms. Here are ideas on how to navigate our way through the maze. This can most certainly be done. With care, thoughtful performance, and innovation, Financial Services Professionals can serve the general public and make the experience satisfying and profitable. Let’s begin with some commentary on the general economic circumstances first. Following that, we’ll take up the Reform issues, how to move through them, and how the way we advise members of the general public on savings, insurance, investment, and retirement concerns.

1.To begin the economic discussion, we need to address the full and true extent of just what we as a nation and we as practitioners are up against. As of this writing, in the winter of 2009, unemployment, including the employed, self-employed, and business owners, has passed 10%, about 15 to 16 million people. Add another 6 to 7 percent to that, which includes the part-timers, disabled, retired, and those of working age who have stopped looking. We are looking at about 22 million Americans not drawing active paychecks. The closing of businesses, branch locations, shops, stores, retail, wholesale, and service sectors, adds to the severity of the overall problems. It is conceded that there are many who are drawing from savings, taking early pensions/Social Security income, receiving extended unemployment compensation, and retirees on full pensions. That said, the loss of productivity is simply staggering. All this decreases the taxes available from which cities, counties, states, and the federal government must fund budgets. Naturally, all this leads to ever worsening annual deficits and unfunded liabilities. Finally, federal government for the past 30+ years has pursued deficit-spending policies which add to all of this. A look at USDEBTCLOCK.ORG tells the whole story in real time. Take a look and notice a few things.

The national debt stands at some $12+ trillion, while the federal budget shows in the neighborhood of $3+ trillion. Take a closer look and it can be seen that $1.7 trillion is taxes, while the difference is annual debt – sale of treasuries, printing of currency. The unfunded liabilities of Medicare/Medicaid, Prescriptions, Social Security top $106 trillion! To get an idea of what these liabilities mean, consider that this funding is what must be contractually paid out in entitlements over the lifetime of those presently enrolled in these programs, say, from now and over the next 20 to 30 years. And that will become progressively larger as the Baby Boomers begin checking into the systems. This is merely the highlighted treatment of the issues and doesn’t take in figures on the levels below the federal programs and subsidies: state, and related deep concerns over inflation, tax increases, brain drain, not to mention the TARP, STIMULUS, industry handouts/loans, and funds to individuals and non-governmental organizations under Acts in force, such as new mortgages and existing mortgage relief.

We read, see, and hear the word “unsustainable” a lot. Another phrase is ” the debasing of our currency.” Still another is “breaking the buck.” Are these figures actually important to us? Well, yes. One example will suffice: the interest alone on just the national debt is about $340 billion/year, or about 12% of the national budget. And that is going to get much higher. Relate that to a family making, say, $75,000/year. With this level of household debt, that family will pay some $9,000/yr. merely to pay interest, not even to reduce its debt obligations! Just recently on CNBC, a professor of finance designated the U.S. Dollar as fiat currency, which it is. Watch just about any television station and note all the advertisements about gold. Yet, many Americans just roll on as if everything is going to be just fine. Let’s hope for that miracle. The American People have been through some very difficult times over the past 250+ years and have managed to rebound. That could happen again. This time, however, things are quite different and difficult.

Does all this mean that Americans should just roll over, play dead, and let the federal government take care of everything? As a nation, will we file for default and a kind of national bankruptcy? This may be a legitimate senario; and it could be solved through establishment of a new currency sometime in the future, after everything gets paid off in near worthless U.S. currency. But, nations and the people in them, get hurt—badly. Russia, Panama, Argentina, Germany, Cuba (and there are more examples out there), all went through this, and the people there know just how bad this is: a national nightmare from which one cannot awaken. Special note on Argentina: The collapse of that country’s currency, the Peso, not long ago, lead to black markets, swap meets, trading for needed goods with hard assets, such as gold, bartering and trading in kind, not to mention increases in violence and crime. When new prices and wages readjust to some new currency, the resultant pricing of goods and services is extremely unfavorable to individuals and businesses. One can hope and pray that this does not happen or at least is some years away. Some experts suggest anything from 2 to 20 years—-read: nobody knows for sure! That said, this leads to strategies that we in the financial services industry can and should probably look into and maybe adopt. If all this sounds like gloom and doom and just too ridiculous, let me assure readers that this writer has done his research, can back it all up, and is most assuredly not making it all up as he goes along! Independent corraboration and documentation on all of this is readily available on the internet, libraries, university papers/archives, and other public records.

2. Here are some practical suggestions for Financial Services Professionals. While nobody can predict the future, this portion of the narrative is best described within two arbitrary time frames: A. 2010 to 2014-2015. B. Beyond that to, say, 2020-2025. This time division is established for specific reasons. At the time of this writing, the U.S. Government is poised to pass and place into effect a national healthcare/health insurance reform act. It doesn’t much matter whether or not one is in favor of this particular piece of legislation or some others, reform is necessary and will come very soon regardless of what the final act turns out to be.

Care rationing is a matter of fact, already in place for some years, and will get more pronounced for everyone. There really is no other sustainable way to do any kind of reform in attempts to control steeply increasing costs of insuring seniors and those below age 65 yr. who can either not afford to be insured, can’t qualify, or act as though they don’t want to protect themselves(checking into their local hospital ER so we can all pay for that; and hospitals, in order to remain in business are already tightening up on the emergency provisions of the law). The projected costs of the one that looks like it will become the law of the land, warts and all, is estimated at between $1 and $2 trillion over the next 10 years. It will no doubt end up by 2019 considerably more. If it doesn’t, it will stand alone among all the U.S. entitlement programs in the history of the Republic to come in at or below the CBO cost estimates. Look for increasing income taxes, fewer paychecks to tax, very slow employment recovery, very fragile equities markets, more federal currency creation, more inflation, weakening U.S.Dollar.That’s the context in which we find ourselves and determines what we do as financial services advisors and implementers. Good luck. That said, let’s discuss Part A – the next 3 years.

Part A. During the next three years, things will proceed at more or less normal conduct of business in an atmosphere of continuing inflation and increasing taxes. As practitioners, we can expect to market the same or similar coverages as we do now. Adverse Selection(taking into account pre-existing conditions) will still be there to control premiums on life, individual, family, group healthcare, disability coverage, long term care insurance, retirement plans(more on this later), to mention the prominent ones. We still will be doing our due-care, due-diligence, financial planning, fact finding, observing compliance, and doing what is best for the client. There are going to be less people and businesses with which to work, and they will have less money with which to do things. Remember, the client always comes first. Words to live by.

Certainly, we owe it to those who favor us with their business to let them know what is coming as soon as we know what is in store for them and for ourselves. For the most part, we will try to continue as before – for about the next several years. After that, things begin to get very different. Let us progress to Part B, Beyond that.

Part B. After 2014-2015, health insurers drop Adverse Selection and pre-existing conditions no longer play a part in the health underwriting process, at least for much of the individual, family, small group medical insurance, and Medicare Supplementary coverages. We’ll all most likely be undergoing training, certification testing, and more state/federal regulation. There’s an upside to all of this. As long as the health insurance industry remains in play, we should be able to make as much or even more money. Nobody knows what the effect of some U.S. Health Insurance Company, Co-op, or Exchange might have on the viability of the health insurers. The CBO states that some very small percentage of the public will enroll in the Public Option plans. That remains to be seen. Many people will be subject to non-enrollment penalties and fees.

What we do know about public plans and elimination of pre-existing conditions is the example we have in Texas. This public option is called the Texas Health Insurance Risk Pool, under the jurisdiction of the State of Texas. In Pool plans, there are no pre-existing conditions to stop one from procuring a pretty good major medical insurance coverage; in fact, one actually has to have significant medical condition or conditions to be eligible. Approximately 29,000 Texans are presently enrolled, out of the millions who have commercial coverage of individual, family, or group coverage. Even with State and Federal subsidy grants each year, the premiums on these plans run 2.5 to 4 times what a similar commercial plan might cost and the coverage is not as good. In a word, it is really expensive. It may be that, since the great majority of Americans probably generally qualify by providing medical evidence of insurability anyway, the impact of accepting all applicants by the commercial insurance companies may not send the overall individual/group premiums skyrocketing(an outcome with which this author does not agree). Those who can’t afford health insurance may get federal subsidies. The fact is that nobody really has a clue. We won’t discuss the MA and OR state-run health care/insurance plans. Not working out very well. Adverse Selection Elimination is a main culprit, leading into healthcare rationing and increasing premiums.

For insurance professionals, the marketing opportunities may just turn out to be positive. Bringing into the insuring public millions of previously uninsured and underinsured younger people may be a good thing. Supplementing health insurance for seniors will be there. We need to work hard at staying in the game and not getting squeezed out by federal competition. All people out there will certainly still need competent financial services professionals, maybe even more than at present. There are those in professional positions of economics, demographics, medicine, actuarial science, and other disciplines who think that any public option may not drive out the insurers, especially knowing that private enterprise, ingenuity, innovation, increased efficiency, would allow the private sector even to drive out the public option. Look at how the Post Office, Medicare, Medicaid, VA hospitals, Social Security, and other entitlements have worked out. Remember that $106 trillion(and climbing) of unfunded liabilities and where that has put the nation and the American People. As these liabilities keep coming due, they increase the federal budget! Doesn’t sound like some great efficiency to this writer.

Finally, there is this prediction regarding earned and renewal compensation. Don’t look for some sudden drop off just because of Reform. This author has found from experience that most people are quite cautious and suspicious of new programs and will tend to retain what they have for just as long as they can, until they gain confidence in such programs, or are forced into them. Even then, many, if not most, will still retain current health insurance coverage in some form to pick up what Reform does not. That was this writer’s great surprise with Harris County here in Texas, when in 1970, the County government replaced an outdated and woefully inadequate set of fringe benefits with full comprehensive coverage. Most all the supplemental coverages that were marketed to large numbers of employees from 1965 to 1970 remained on the books for many years. That is likely to happen in our national future. So take heart.

Earlier, the topic of currency debasement, creation of trillions of dollars by the Fed out of thin air, and inflation(about 2.5% annually, by the way) was touched upon, especially as related to obtaining goods, services, and accumulation/distribution of retirement funding. This leads into the arena of retirement capital, funds formation, equities markets, cash value life insurance, annuities, precious metals, commodities, bank deposits, money markets, treasury instruments, and the like. This also includes non-tax qualified and tax-qualified retirement vehicles, such as IRAs and 401(k)s, as examples. One suggestion is the recommendation that some portion of a client’s capital or retirement portfolio of funds be placed in hard assets. Gold and silver come to mind. We would defer to a precious metals specialist for that. Hedging and potential gains are two objectives that come to mind.

Everything is open to new ideas based upon the changing circumstances. Your practice is obviously going to change; caution and creativity are the guides. Whether we operate in single needs, multiple needs, or comprehensive planning modes and implementations, all of our recommendations are going to be different as compared to past years. It is a bit like attempting to walk in quicksand. And this applies to all product implementation, not just the health insurance arena. So be careful out there.

The way we operate in ethical conduct of business will change. The suggestion is put forth that in the future, starting in 2010 and beyond, we in financial services when advising businesses and individuals, will need to either form alliances with other financial professionals who are licensed in areas where we are not, or refer people to other trusted advisors in order to fully inform the people we serve of the risks and rewards to allow them to make proper, informed decisions that work for them and provide them the opportunity to form strategies and thus to protect themselves. We are definitely in for quite a ride; so fasten your seatbelts. A tip from one who is an investor, not a sales agent: dollars are currency;gold is money. Get to know the difference. Know all the new rules, regulations, and compliance requirements. Study. Engage with other professionals. There is a big job ahead for all of us, starting now.

This is by no means an exhaustive analysis of what’s ahead, but it is a beginning. Still, taken to heart, it gives us inspiration to continue to provide the most excellent advice and coverage implementation to our clients and would-be clients. We who are true professionals are in the unique position to guide, advise, offer direction, clarify, and eliminate confusion. No government bureaucrat can come close to what we do. Imagine that!

The Place of Entrepreneurship Competence in Business Success and National Development

The pivotal position occupied by entrepreneurship as a sustainable tool for rapid economic growth and development of a country cannot be over emphasized. This is evident in several available literatures written by scholars on the subject matter but a closer examination of these literatures show tilted emphasis and concentrations on some common areas relating to entrepreneurship.

Increasing competitions, rapid and constant changes in internal and external environment of business activities, and the significant influence of Small and Medium Scale Enterprises (SMEs) on the economy generally have resulted in a growing interest in studying the role of factors stimulating successful entrepreneurship, business success and national development.

Though, entrepreneurship, have played and can play more of these positive roles, is not an easy vocation as it does not always guarantee a hundred per cent triumph. There are several critical areas of knowledge and factors that must be acquired and put in place to enable entrepreneurs achieve a measure of business success and consequently contributing to national development.

Several researches have been conducted in areas of entrepreneurship competency, entrepreneurship success and national development.

Most literatures relating to entrepreneurship and entrepreneurship success tend to unquestionably argue that most entrepreneurial fiascos are essentially due to inadequate financial resources (e.g. Adeyemo and Onikoyi, 2012). Such research outcomes have no doubt influenced government policy direction in many developed and developing countries of the world through the creation of financial agencies and provision of financial resources to business units for the sole purpose of boosting and sustaining entrepreneurial development for rapid national development.

The above, policy strategy unfortunately has led to the continuous negligence on the part of the government, scholars and business operators in these countries to considering other vital factors like entrepreneurial competency which equally contributes to successful entrepreneurship, business success and national development.

The current literatures on the subject do not provide sufficient explanations to the role general and/or specific competences play in successful entrepreneurship, business success and national development. This has thus, made the relationship between entrepreneurial competence and entrepreneurship success to be important topic within organizational literatures. The above fact is evident in several available studies done by scholars on the subject matter (e.g Crook, Todd, Combs, Woehr, and Ketchen, 2011; Mitchelmore and Rowley, 2010; Inyang and Enuoh, 2009; Laguna, Wiechetek, and Talik, 2013 e.t.c).

Many of these studies identified entrepreneurship competences like communication competence, financial competence, marketing competence, business ethics competence, social responsibility competence, decision-making competence and leadership competence as catalysts to entrepreneurship success and national development. We shall be duelling on our discussion more on these entrepreneurial competences to see how they individually contribute to successful entrepreneurship, business success and national development.

As said earlier at the beginning, entrepreneurship and entrepreneurship success play strategic roles in economic growth, economic transformation and development of the society. These roles are noticeable in the numbers of jobs created, the level of wealth generated and the rate of indigenous entrepreneurship promoted in several countries around the world.

There is no doubt that government of the world have put great efforts in promoting entrepreneurship development, business success and economic development through provision of financial resources directly or otherwise through various agencies and under different terms and conditions, this fact prompt one to ask a question of high concern.

Why are there still high rate of business failure around the world? Without much thinking, the failures are due mainly to entrepreneurial incompetency of those concerned with making the daily business decisions of these businesses. Many business failures can be said to be and are largely attributed to lack of entrepreneurial competence.

Most of the businesses failed unknowingly even before there are started because of lack of one of the required competence; project evaluation and management. This does not therefore; make it surprising while entrepreneurship competence has often been identified as the missing link for successful entrepreneurship, business failure and consequently crawling national development and in some instances stalled economy. What then is entrepreneurship competence?

Before we proceed to defining and explaining entrepreneurship competence and understand the contextual meaning in which it is employed in this writing with simplicity, it will be very imperative to first and foremost comprehend what entrepreneurship is.

Entrepreneurship may be defined as the process through which something new and valuable is created through the dedication and effort of someone who takes on financial, psychological, and social risks and seeks personal satisfaction and monetary rewards (Hisrich & Peters 1986).

European Commission, (2006) defined Entrepreneurship as a dynamic and social process where individuals, alone or in collaboration, identify opportunities for innovation and act upon these by transforming ideas into practical and targeted activities, whether in a social, cultural or economic context.

Critical assessment of the above two definitions summarized the concept of entrepreneurship by stressing creation processes and performance of targeted activities. Entrepreneurship as defined above is not necessarily limited to the roles and characters of entrepreneurship involving creativity, innovation and risk taking, and most importantly, the ability to plan, manage projects and to turn ideas into action in order to achieve set objectives for successful entrepreneurship. But, it requires tact, art and competency to achieve winning edge success.

Entrepreneurship success is a multidimensional phenomenon. It includes multiple criteria of financial characters like profit maximization, revenue maximization, dividend maximization as in the case of shareholders etc., and non-financial characters for example larger share of market, customer satisfaction, perpetual enterprise existence etc. To achieve success in any of the following sections, one must be competent in his/her chosen area of enterprise.

Entrepreneur competence can therefore be defined as the cluster of related knowledge, attitudes, and skills which an entrepreneur must acquire or possess to achieve an outstanding performance and optimize the business objective(s) amidst several constraints. Every job/role has a skill and competency requirement. Every career like entrepreneurship draws on the competence of an individual. For every entrepreneurial undertaking one needs certain competencies. Entrepreneurship competence is simply the skill which an individual needs to do an allotted entrepreneurial job successfully.

Entrepreneurship competence constitutes a cluster of related knowledge, attitudes, and skills, which an individual acquires and uses together, to produce outstanding performance in any given area of entrepreneurial responsibility. Some of these competences may be general and some peculiar to the chosen areas of enterprise. We may describe competences to mean abilities and skills, for a teacher or a performing artist, for example, it is the skill to communicate that plays a decisive role in their effectiveness besides, of course, their knowledge. For a craftsman or an artist, it is the creativity and skill in the chosen craft.

In like manner, entrepreneurial competences are critical success factors required for successful entrepreneurship, business success and of course national development. The subject thus, deserves solemn attention in entrepreneurial discourse and not to be neglected. There is no substitute for entrepreneurship competence for successful entrepreneurship, not even abundant financial resources can. There is no doubt as explained, entrepreneurial competence play important role in any successful entrepreneurial activities.

The following are some of the necessary entrepreneurial competences required for successful entrepreneurship and rapid national development. We shall be discussing below 8 of the basic essential entrepreneurial competence for successful business.

1. Time Management competence: Time is an economic good; it is an economic good worthy of effective and efficient management because of it scarce nature (Dan-Abu, 2015). Time is unique, unlike any other economic resources (input) such that it has no wing but can “fly”. Time is irreplaceable and irreversible. Time lost is lost forever and can never be recovered, and by that I it includes, time lost doing insignificant things. This is why few things are more important to an entrepreneur and for successful entrepreneurship than learning how to save and spend time wisely. One major causes of entrepreneurship failure in relation to time management is doing too many things at the same time in an inefficient manner.

To achieve more and be successful in the day to day running of an enterprise, the entrepreneur must be thoroughly equipped with time management skill. Investing and practicing effective and efficient time management skill is a profitable investment for every entrepreneur, since every efficient business act is a success in itself. It therefore means that, if every single act of entrepreneurial activity is undertaken with consistent efficient one, the enterprise as a whole must be a success.

Time management involve among others practices, commitment to work contract and taking personal pains to complete a task on schedule, this will promote confidence and loyalty on your business/organization and will thus led to winning of more contracts from clients again and again; prioritizing of task based on urgency and importance in relation to a project activities and delegating of task to subordinates.

Some common time consuming activities include slow decision making, inability to delegate, unnecessary interruptions, failed appointments, delays while traveling, poorly conducted meetings, procrastination, etc.

2. Communication competence: Communication is a two-way process characterized by sending and receiving of messages through a channel between sender and receiver. This may be verbal or non-verbal for example, telephone call and procurement proposal respectively. Good communication skill is an indispensable management tool for a successful entrepreneurship. It is through communication that procurements are made, business products/services are sold, business objectives are discussed, employees are recruited etc.

Communication competence is very important to the survival and success of every organization, this is regardless of whether the organization is a profit or non-profit making, private or public enterprise, involved in provision of services or sales of products, online or offline business etc. Communication competence is so vital to successful entrepreneurship that it goes beyond inter-personal communication; of course this too is indispensable to the success of the entrepreneur’s business.

A winning communication competence in an enterprise will help in disseminating circulars, minutes, letters and memos effectively reaching every intending individual, team or unit in an organization. It also facilitates efficiency through the saving of cost involved in sending and receiving the messages on the part of both the organization and the employees. Communication competence in enterprising organizations will facilitate large turn out and compliance when meetings are called or directives are given to be followed respectively.

Communication competence in like manner can speed up the time taken to make merchandize procurement in period of high demand; this can help the concerned firm increase profit during the period of shortages and high demand.

Developing and employing good communication skill in an organization will definitely lead to two fold success; the firm will be able to benefit from internal interactions among persons, departments and units, and externally benefit from interactions between it and the business transacting partners (outside world). We can therefore say in summary that, there is no business without communication.

3. Human Resources Management Competence: The relevance of human resources management competence to successful entrepreneurship, business success and national development cannot be over stressed. Though materials and capital are of equivalent importance to the entrepreneur, they are inanimate and unemotional; they demand no understanding of human requirements and inspirations for their effective utilization unlike human resources which need good and competent human resources management skill by the entrepreneur to successfully utilize it to optimum level in productive activities.

Human resources of some enterprise are the most difficult to obtain, the most expensive to maintain and the hardest to retain. Without the acquisition and practicing of effective and efficient human resource management skills, the capital resources earlier mentioned will not be effectively used. Generally, small and medium scale enterprises often managed by an entrepreneur do not have the luxury of human resource department that can interview, hire and evaluate employees.

Most of these decisions taking regarding the above are the responsibility of the entrepreneur and perhaps one or two other key employees. This is good why human resources management competence is important for successful entrepreneurship and national development. As the firm grows, there will be need to hire new employees; entrepreneur must follow important procedures for interviewing, hiring, evaluating and preparing job description for new employees. Instituting an effective organizational culture is best implemented when an entrepreneur is competent in human resources management.

4. Marketing Management Competence: The success of every enterprise involves selling of products/services; this is largely enabled through good marketing management, it is therefore imperative for an entrepreneur to have good marketing management skills.

Ebitu (2005:196) concord, that marketing is crucial to the survival and growth of any organization. It is through marketing that revenues used for bills settlement, assets acquisition, pursuing of business diversification and expansion objectives, settlement of dividend and tax liabilities and social responsibility projects are generated. The entrepreneur in developing good marketing strategies and marketing management competence must be conversant with and employ the four marketing mix of place, promotion, price and product.

5. Adherence to Business Ethics Competence: Every business has its ethics. Ethics deals with moral ability and obligations. It can be defined as a system of rules and principles that define right and wrong, good and bad conduct and the ordering of values in undertaking business activities in society. Business ethics is sometimes called management ethics, and it is the application of ethical principles to business relationships and activities.

Business ethics is becoming a subject of intense concern for society, which is now demanding that organizations should operate responsibly and uphold very high ethical standards to improve the quality of life of the people. Entrepreneurs, in light of the above, need to be competent in dealing with different public policies, trade union’s established standards and norms and customers’ concerns for high quality work for successful entrepreneurship.

6. Financial Management Competence: Every business enterprise requires capital with which to start and continue with its operations. Capital here means two things; money (finance) needed to start and operate the business and assets representing the resources provided by owners (equity) and creditors of the business (liabilities).

Mbat (2001:3) defines financial management as the planning, organizing, directing and controlling of the firm’s financial resources. Finance is the blood at the centre of any successful business enterprise, one of the features common to successful entrepreneurs is their ability to source for funds for their enterprise. The funds mobilized internally or externally have to be properly managed to ensure that at any point in time, there is adequate funds to cater for the day to day running of the enterprise.

Most entrepreneurial failures are due to the inability of the entrepreneurs to effectively distribute and manage funds. For example, an entrepreneur needs to acquire knowledge on financial management issues like anticipation of financial needs for the enterprise, fund raising sources, cost of raising fund from external sources, acquisition of funds, allocation of funds in order to yield optimum result through identification and maintenance of correct proportion of the firm’s finances in areas of savings, insurance and investments policy of the enterprise.

The important of financial management competence to achieving entrepreneurship and business success cannot be over stressed. We have seen many at times when financially buoyant “start-ups” crumble down to pieces after successful take off because of financial management incompetence of the management, caused by tied up funds as they watch helplessly as the business dive into ocean of failure due to lack of reserve funds to successfully execute contracts or perform business operation.

Leadership Competence: leadership can be defined as the ability to influence and motivate other person or group of persons towards achieving a shared a set objective. Leadership competence is also another important single factor determining business success or failure in our competitive, turbulent, fast moving, free global market economy.

According to Ilesanmi, (2000: 187) successful entrepreneurs are successful leaders; they have power and motivate the entrepreneurial venture. The ability to produce the necessary leadership is the key determinant of achievement in all-human activities, the quality of leadership is therefore a decisive strength or weakness of any successful entrepreneurial endeavour.

Successful entrepreneurship requires creative, unique leadership qualities and personal styles. It involve seeking opportunities, initiating projects, gathering the physical, financial and human resources needed to carry out projects, setting goals for self and others, directing and guiding others to accomplish goals. Effective leadership is therefore a powerful tool required for successful entrepreneurship, business success and national development. Good leadership competence helps an entrepreneur to turn his/her business vision into reality.

7. Social Responsibility Competence: The establishment of every business enterprise is backed up by the profit motive. It is the profit that drives entrepreneurs to starting businesses, motivate shareholders into buying shares and private capital owners into investing their capital in a company. The profit motive though leads to the production of goods and services; the entrepreneur’s business venture also has the responsibility to embark on certain projects within and outside its operating environment as part of its social obligations.

Businesses should not only be concerned about the quality of goods and services they produce to generate profit but must also pursue policies that sell their enterprises by contributing to the quality of life in their operational environment. The business operators have responsibility to protect and improve society. Their actions during production and marketing should not in any way endanger the community or society. Entrepreneur can earn more profit by displaying high degree of corporate responsiveness, which is the ability of an organization to relate its operations and policies to the environment in ways that are mutually beneficial to the organization and the society.

The entrepreneur for example needs to make contribution to community development, product safety, employment generation, ethical business practices, and contribution towards educational activities in the community of operation. An enterprise for example can award scholarships to students, create opportunity for apprenticeship training and so on. Undertaking some of these social responsibilities may endear the entrepreneur’s enterprise to its host community; enhance his image and social standing, and consequently contributing significantly to his business success.

8. Decision making Competence: Decision making is very important to the success of an entrepreneur, this skill is at the core of every successful entrepreneurial activities. Decision making is the process of selecting a line of action from available alternatives. This selection process may be very difficult especially when the available alternatives are numerous or the decisions to be made or chosen from are risky ones.

Many potential entrepreneurs have difficulties in bringing their ideas to the market and creating a new business because making a decision is one thing and making the right decision in a given circumstance is another. The actual making of effective entrepreneurial decisions has resulted in several new businesses being started throughout the world by those having this decision making skill necessary for successful entrepreneurship.

An entrepreneur makes decision on a daily basis and therefore has to acquire adequate knowledge and skills in decision making to enable him/her make the right decisions.

Most of the entrepreneurial competences have been studied in isolation and with little effort to recognizing their mutual relationships to entrepreneurship success and business success. In a study aimed at explaining entrepreneurial competences in order to rank them according to the level of their importance to successful entrepreneurship by Edgar, Dirk and Danny, (2005) shows that, entrepreneurs on one hand considered decision making the most important competence while scholars in their different writings are in support of identifying business opportunities competence as the most important when embarking on an entrepreneurial venture.

In another study aimed at explaining how general and specific managerial competencies relate to the business success of small and medium scale enterprises (SMEs) by Laguna, Wiechetek, and Talik, (2013) proved that general and specific managerial competency is significant predictor of success in running a business. They further stated that specific managerial competency demonstrated to be a mediator between general competence and Small and Medium Scale Enterprises (SMEs) success.

In a similar study conducted by Rosária de Fatima Segger Macri Russo and Roberto Sbragia, (2010) who opined that the operational responsibilities of a project manager (planning and controlling) are in stark contrast to the characteristics of an entrepreneur. In light of the above contradictory viewpoint, their research which was directed at assessing whether managers showing entrepreneurial characteristics are associated with more successful projects or not found within their study sample an empirical evidence supported their hypothesis that the possibility of a given project having a successful outcome increases with the enterprising tendency of its manager.

After critically examining the necessary entrepreneurial competences required for successful entrepreneurship, business success and rapid national development. It will be important to quickly add here that no single or sets of entrepreneurship competence are more important to the other. It is only through the combination of the competences that an entrepreneur can achieve maximum business success.

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