The Guardian: 'We Built It'? Republicans' invocation of entrepreneurism has a hollow ring

This is older now, and I thought about it posting it before, but especially after the debate, I thought it was interesting because Obama seems like he wants to essentailly match the Republican tit-for-tat with respect to entepeneurs and small businesses.

I don't really see anybody in politics question if we should really be encouraging new businesses that much.

http://www.guardian.co.uk/commentisfree/2012/sep/24/we-built-it-republicans-invocation

"No reasonable person can question the importance of entrepreneurs in our economy. We need them to create new businesses and jobs. Of course, we also need schoolteachers, firefighters, auto mechanics and custodians. The question is: do we necessarily need more entrepreneurs, and, if so, what policies should we pursue to persuade more people to start businesses?

There is more than the usual amount of silliness around discussions of entrepreneurs and small businesses, and it infects both political parties. While it is easy to point to the Apples, Googles and other recent upstarts that have grown into large, successful companies, the vast majority of new businesses fail within their first decade of existence. At the most immediate level, more entrepreneurs means more failures.

If we make it easier for people to become entrepreneurs, then we should expect many more failures. The failure rate of the people who are induced by new government policies to become entrepreneurs will almost certainly be even higher than the average for the current group of entrepreneurs."

I added the emphasis.

There's more at the link:

http://www.guardian.co.uk/commentisfree/2012/sep/24/we-built-it-republicans-invocation

I think this also gets into the issue of what is REALLY wrong with the economy. Is it job growth due to lack of hiring (i.e. more small businesses to hire people), lack of consumption so no reason for businesses to grow, or other things.

4 out of every 5 businesses fail within 5 years. Thats just one of those things.

However new businesses have such a multiplier effect, in terms of hiring, office space, furniture, etc, etc.

business creation is messy, and efficient allocation requires that new ideas be tried.. AND that new ideas often fail, and the true success comes at teh 4th or 14th attempt to impliment the new idea. This means 3 or 13 failures even for a successful idea.

this is something the US does better than just about anywhere else.. promote the "try, even if you fail (and then try again)" mentality. it is a precious thing for us.. perhaps our single greatest global comparative advantage

(but i say that as a risk averse "salary guy" that would NEVER personally risk it all to start a business and swing for the fences )

Isn't favoring "small business" another form of government picking winners and losers?

Is it possible that the growth of large businesses is best for the economy?

And is there a conflict between supporting "small business" and supporting entrepreneurs? If we are helping to support failing small businesses, won't that make it more difficult for new entrepreneurs to break into the market? Don't we have to let small businesses fail to aid in the creation of new businesses?

Isn't favoring "small business" another form of government picking winners and losers?

Is it possible that the growth of large businesses is best for the economy?

And is there a conflict between supporting "small business" and supporting entrepreneurs? If we are helping to support failing small businesses, won't that make it more difficult for new entrepreneurs to break into the market? Don't we have to let small businesses fail to aid in the creation of new businesses?

when people try to measure this (which is VERY hard) there isn't much evidence that small business help the economy more than larger ones (put very very very simply, small business create alot of heat --create big job gains and profits, but also implode, destroying jobs etc... big firms go slower, but give less back)

but one thing IS clear.. the credit/lending/investing models don't do a great job getting capital to small businesses. so even if they aren't better than big firms (which they probably aren't) they ARE disproportionately starved for capital, and the economy overall can still benefit from pushing extra capital their way. THat isn't the same as "picking winners" (which involves pushing capital towards specific businesses).

business creation is messy, and efficient allocation requires that new ideas be tried.. AND that new ideas often fail, and the true success comes at teh 4th or 14th attempt to impliment the new idea. This means 3 or 13 failures even for a successful idea.

this is something the US does better than just about anywhere else.. promote the "try, even if you fail (and then try again)" mentality. it is a precious thing for us.. perhaps our single greatest global comparative advantage

(but i say that as a risk averse "salary guy" that would NEVER personally risk it all to start a business and swing for the fences )

I think this probably true. I suspect Dean Baker, the guy that wrote the article, would agree.

I do think though there has to be a line somwhere so I think it is interesting to ask/think:

1. Where is the line?

2. Is there anyway to determine if you are at all close to the line or even way over the line?

3. Do politicians think/worry about this at all?

Don't many innovations and advances come from entrepreneurs and small business?

The inflexibility in large companies tends to squash creativity and they seem to favor acquiring new ideas that have been field tested by others.

Lowering the barriers to new start ups is beneficial in much the same way R&D is,and generally much less costly.

I don't see that as favoring,since the odds and obstacles they face are already greater.

Increasing opportunity to do things better is beneficial if you control the costs/risks to the country.

Just something I noticed yesterday, and it may fit in here.

(As y'all know, economics topics are not my best)

Yesterday I did some driving and I noticed something.. in nearly every shopping center I passed.. i looked at the businesses inside.

Hair salons. Nail salons. Insurance agents. Liquor stores. Food.

That's pretty much it.

No small shops of any kind selling a product.. except Verizon.

Every store in which you could buy anything BUT a service or food was a big box.

Now, we all know the Wal \Mart effect, but I wonder how much of that has to do with small business in decline. No one can open a shop and sell products anymore,, they can't compete. so unless you provide a service or are a restaurant of some kind, you're not opening up.

So destruction of that segment of our small business is one,, and we also know that Wal Mart is so big as to force companies that want to do business with them to provide goods to them at a certain cost, and they don't care how many people get fired to get the price down to what Wal mart expects.

I saw a piece on some of these American companies that manufacture for Wal Mart.. Their employees are basically working at the poverty level to stay in business because theyhave t meet Wal Mart's demand.the one factory they profiled showed something like 80% of their workfoRce on public assistance because they work for minimum wage, and there's next to no chance of that changing.

How much effect does this have on this topic?

~Bang

It's got a big effect. Even bigger is the impact of the internet. No overhead alows much cheaper prices than even the warehouse stores. So, for many items, the brick and mortars are dinosaurs. I still think there is a place for clothing and jewlery because sizing is important as is appearance, but for spatulas or batteries, books, computers, music, etc the need for a store is growing smaller and smaller which is squeezing their margins.

That's why a circuit city, a best buy, a borders, or your local record shop is either gone or holding on by its fingernails.

Seems to me that's a lot of jobs, and a lot of people shuffled into relative economic slavery.

(and I apologize for that word.. I don't know a better one for this, and i know that is not a good one.)

~Bang

Seems to me that's a lot of jobs, and a lot of people shuffled into relative economic slavery.

(and I apologize for that word.. I don't know a better one for this, and i know that is not a good one.)

~Bang

In my job as reporter, often after the interview, one of the things I've asked economists over and over is how we are going to redefine productivity, because it's pretty clear that the way we have historically defined value or productivity has got to change. With the internet, computerization, roboticism, etc. we are going to dynamically change the work force and who's needed.

There's no point to hire the same number of people just have to the numbers. So, what we need to do is philosophically redefine what it means to be valuable to society. We are living in the 21st Century using 19th Century economic models and it's going to get worse esp. if we want to keep a free market philosophy.

Facebook has 1 engineer for every 1,000,000 clients. That's a ratio that is downright scary if you think about it.

are our policies then subsidising the Walmart effect?

or this one as well?

http://opinionator.blogs.nytimes.com/2012/06/12/the-20-million/

Food workers use public assistance programs (including, ironically, SNAP or food stamps), at higher rates than the rest of the United States work force. And not surprisingly, more than a third of workers use the emergency room for primary care, and 80 percent of them were unable to pay for it. These are tabs we all pick up.

it only becomes economic slavery if we limit options

are our policies then subsidising the Walmart effect?

I would say so,at least to an extent.

Lets assume that corporations really are people. In that case, they would seem to fit well into the "clinical sociopath" category. And not just any sociopaths...the aggressive, predatory type. With our policies for the past several decades, we haven't just turned a blind eye to the predatory actions and tendencies of these sociopaths (until they do something really really horrible that we can't ignore because of the public backlash, then they get a figurative slap on the wrist and a "tsk tsk"), but we've been actively encouraging them to be more predatory. The USA is a codependent enabler of these corporations.

nice post

but are they predatory, or simply functioning in the the atmosphere we create thru social supports?

If you enable people to work at lower wages they will,you just shift the costs to the taxpayers at large

I would say so,at least to an extent.

Lets assume that corporations really are people. In that case, they would seem to fit well into the "clinical sociopath" category. And not just any sociopaths...the aggressive, predatory type. With our policies for the past several decades, we haven't just turned a blind eye to the predatory actions and tendencies of these sociopaths (until they do something really really horrible that we can't ignore because of the public backlash, then they get a figurative slap on the wrist and a "tsk tsk"), but we've been actively encouraging them to be more predatory. The USA is a codependent enabler of these corporations.

How long before we simply adopt the Rules of Acquisition. :doh:

Just something I noticed yesterday, and it may fit in here.

(As y'all know, economics topics are not my best)

Yesterday I did some driving and I noticed something.. in nearly every shopping center I passed.. i looked at the businesses inside.

Hair salons. Nail salons. Insurance agents. Liquor stores. Food.

That's pretty much it.

No small shops of any kind selling a product.. except Verizon.

Every store in which you could buy anything BUT a service or food was a big box.

Now, we all know the Wal \Mart effect, but I wonder how much of that has to do with small business in decline. No one can open a shop and sell products anymore,, they can't compete. so unless you provide a service or are a restaurant of some kind, you're not opening up.

So destruction of that segment of our small business is one,, and we also know that Wal Mart is so big as to force companies that want to do business with them to provide goods to them at a certain cost, and they don't care how many people get fired to get the price down to what Wal mart expects.

I saw a piece on some of these American companies that manufacture for Wal Mart.. Their employees are basically working at the poverty level to stay in business because theyhave t meet Wal Mart's demand.the one factory they profiled showed something like 80% of their workfoRce on public assistance because they work for minimum wage, and there's next to no chance of that changing.

How much effect does this have on this topic?

~Bang

The opposite is true where I live (San Francisco) there are small shops everywhere. Small grocery stores, clothing stores, book stores, even small hardware stores. One reason is that there just isn't a whole lot of space here for big box stores. Another reason is that there are a lot of wealthy residents and tourists who want stuff that is more exclusive than big boxes have to offer. Finally people are downright hostile to the big boxes. Though there is a Target moving in downtown soon so who knows if that's the future for this place as well.

nice post

but are they predatory, or simply functioning in the the atmosphere we create thru social supports?

Sorry, missed this.

I think its probably some of both. However, I would put more towards the "nature" side of it as far as them being predatory. Most of the time these corporations (and business in general) have a single goal: profits. Everything else is secondary. If something or somebody gets hurt because of what the company does...well that's just too bad, this is business. The sociopathic tendencies are hardwired into the genes. But they're also supported and nurtured through the atmosphere we create. So that predatory impluse is hardwired to a point but then also nurtured and encouraged.

If you enable people to work at lower wages they will,you just shift the costs to the taxpayers at large

Of course they will. People have to at least try to put food on the table and keep a roof over their heads. That doesn't mean this "race to the bottom" is a good thing.