An Election About the Economy Will Really Be About Entrepreneurs
For the first time in our history entrepreneurs are becoming part of the political furniture. Speakers at both the Republican and Democratic conventions mentioned small businesses, firms with fewer than 500 employees, endlessly -- actually 106 times.
Small business is an expected mainstay of convention rhetoric. But, the debut of entrepreneurs as the people who form our new firms is critical because they were, accurately, described as the people who take risks and create, according to the Kauffman Foundation, over sixty percent of all new jobs in our economy.
Starting more new firms is not only the best path to resolving the recession, they are the principal source of wealth for America's future. In fact, Republican speakers described the role they play in the economy 13 times while Democrats did 9 times. Joseph Schumpeter would be smiling that the little guys, the entrepreneurs, the people who challenge the incumbent firms with their upstart startups, the causers of all the "creative destruction" that drive government regulators crazy, the new companies that seem to relish what he called the "gales" of competition that big companies fear, are somehow beginning to be seen as the champions they are. Karen Mills, head of the Small Business Administration, said "America's entrepreneurs are our greatest asset" during her speech to the Democratic convention.
But, while entrepreneurs might have been recognized on the podium for their critical role in reviving the economy and helping it grow, not everyone is comfortable with entrepreneurs emerging as a new political tool. Some see entrepreneurs as the small business people who become big (and bad) business people. They are seen as the people who are embraced by venture capitalists -- really bad guys. They are the people who made the businesses that made Mitt Romney rich. While this is not technically true (he was an expert in corporate buy-outs and restructuring failing businesses), the narrative of entrepreneurs as people who start businesses only to get rich is well rooted.
The entrepreneur, unfortunately, is seen not as a regular person pursuing a dream at substantial personal risk, but rather as a star-struck Mozart who has a little idea that makes him a billionaire overnight. Mark Zuckerberg is the current icon. He was preceded in this role by other boy-wizards like Bill Gates and Steve Jobs.
It is no surprise to see the political left attack Paul Ryan for his emphasis on the importance of entrepreneurs to economic growth. What is startling is that some on the right share a blindness to business formation as the engine of our economy. From the American Conservative, Scott Galupo writes that, "In Ryan's world there are entrepreneurs on one side and parasites on the other." The theme of such controversy, certainly prompted by the President's "you didn't build that" gaffe, seems to be that an emphasis on entrepreneurs alienates regular workers. Galupo warns that the celebration of new business creators marginalizes "the gray expanse of janitors, waitresses, hotel front-desk clerks, nurses . . . who work hard but at the end of the day, what can they be said to have "built"?"
But this critique itself misses the very essence of America's exceptional entrepreneurial experience. Other than Israel, no country produces more new businesses per capita than the United States. And, as the son of a nurse, when I became an entrepreneur it was just an unforeseen outcome of the general aspirational path my parents had built for me that is similar to that which most parents build for their kids. To have a son or daughter who starts and owns a successful business is, for most parents, an outcome right up there with being a brain surgeon at Mayo.
Now more than ever before parents encourage their kids to become entrepreneurs. Unlike fifty years ago when our iconic entrepreneurs were all dead men (Westinghouse, Eastman, Carnegie, Ford), parents today know that their kids could be Zuckerberg, Gates or Jobs. Junior Achievement reports that nearly 70 percent of high school students aspire to become entrepreneurs at some point in their careers! Parents joke with their kids that if they can become the next Gates they might be able to pay back them back for, say, the cost of their college education. Today becoming an entrepreneur is widely regarded as an achievement, a good thing, and a role that contributes new products and new jobs to the society.
Paul Ryan's celebration of entrepreneurs as central to the revivification of our economy is not a focus-group tested line. It is likely that he will double down on his emphasis of the importance they play in job creation during the campaign, because as the House budget chairman he knows the data: job creation ultimately is in the hands of new companies. Big companies, in their pursuit of productivity gains, destroy jobs. And, big companies will always seek shelter from the rigors of competition by seeking government protection which inevitably leads to slow growth.
Ryan has made crony capitalism an issue in part because it denies entrepreneurs a fair chance at entering new markets. Expect to hear more about entrepreneurs in the next two weeks. The role they play in the economy is much bigger than the role they play in the election. But, given that this election is about the economy it really will be about entrepreneurs.