Grabbed from Sociological Images – Again, more evidence that egalitarian policies are good not only for people, but for business.
“George W. Bush did not really say, “The problem with the French is that they have no word for entrepreneur.” But that statement does fit with the American tendency to view our country as the land of entrepreneurship (literally “enterprise”). America is, after all, the land of opportunity, where anyone can become rich. And the way to get rich is to be an independent, risk-taking entrepreneur and start your own business. That’s what we do here in the US, and we do it better than most. At least that’s what we think.
But look at this chart showing the rate of start-ups per working-age population:
The US ranks 23rd. That doesn’t quite square with all those photo-ops where the president (Obama, Bush, Clinton – they all do it) goes to some small successful company out in the heartland. What is it about these other countries that makes for more risk-takikng?
James Wimberly has an answer: the safety net. He makes the point with an analogy – his own photos of kids on a rope-walk – a single rope hung between two platforms in what looks like the Brazilian rain forest. (It’s really just a replanted hillside, formerly the site of a favela). The kids have safety devices – hard hats, a safety harness, guide-ropes to hold on to. Without these, only a few of the most f oolhardy would try a Philippe Petit walk. But the safety devices allow lots of kids to take a risk they would otherwise avoid.
The same logic applies to small business.
How many Americans are locked into jobs they hate by the fear of losing health benefits? No Dane ever has to worry about losing her right to medical care by quitting her job to go it alone
Safety devices cost money, but they pay off. On the rope-walk, you can see the reward in the expression on the kids’ faces when they reach the other platform. In the national data, you see it in the those start-ups.
The countries with significantly higher startup rates than the USA are those with stronger, more comprehensive, and more centralised social safety nets, along with correspondingly higher taxation.
See Wimberly’s entire post – with the photos, footnotes, and comments – for a fuller explanation.
9 comments
November 15, 2011 at 4:46 pm
Reneta Scian
Thank You, Arbourist! I thank you for not only pointing out why capitalism fails in your usual concise manner, but for also pointing out why socialized systems with democratic principles are beneficial. I only hope that people can break away from that cold war driven mindset about social systems, usually always equated to be ‘non-democratic, totalitarian, evil, and anti-religious’. But you are right. What is amazing is that we are only a little ahead of the Republic of Korea. Point simple, people always talk about business and capitalism, and bark about small business when this “big business” favoritism hurts business start-up, in addition to a shear lack of safety harnesses for those who try and fail.
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November 15, 2011 at 8:39 pm
The Arbourist
You are welcome. :)
I often hear people say things that do not jive for me internally, but do not want to get into a lengthy discussion about why system X is better than Y, but when a concise post comes out that crystallizes an issue, I simply feel the need to share.
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November 16, 2011 at 12:43 pm
Vern R. Kaine
As a Canadian having a business in both Canada and the U.S., I can say that to a significant extent the “safety nets” Canada has does help to encourage startups there. I think it’s a big part of the reason why Forbes ranks these countries so high as “business-friendly”.
That said, however, I’d hardly call Canada a startup haven, and I’d fall far short of patting the government on the bank for their role in helping them. Canada’s catering to the banks and the banking lobby, for instance, actually does more harm than good in a lot of cases to Canadian entrepreneurs and startups through activities that in the U.S. would be considered illegal. One example is the fact that Canadian banks force entrepreneurs to provide a personal guarantee to open a bank account for a corporation, piercing the corporate veil and automatically making them “first lender”, meaning no matter what other small businesses your company owes money to, the bank will force you to pay them first no matter what. Another is that they are able to hold your funds indefinitely without paying you interest, even after those funds have cleared their originating source. This is illegal in the U.S., and in either country can actually force a startup to go under. Then you get into the issue of unfair labor laws for businesses…
Anyways, as far as encouraging a startup, sure, Canada’s great but take the health care issue out of the equation and I’d say the U.S. still has us beat hands down.
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November 16, 2011 at 1:53 pm
Reneta Scian
That isn’t what the statistic shows, and no system is perfect. The problem is, that as a start up in the US, your actually severely penalized by our system in systemic ways, from tax breaks for the uber wealthy to start up costs in a paperwork laden system. It’s extremely hard to compete in a market with big business who is able to “bully” the system into what they want. In new markets, specialty items people want, or other obscure capital potentials, sure there is “decent start-up” options but strong market growth in those outsider, novelty (not referring to product, but a static market outside of the services of the mainstream) markets is nil to none. Very few ever break into that bubble in any major way, especially now post-cold war. The current big business model is like a forest, so if you aren’t one of the big trees already, you’ll be nothing more than a shrub your entire life if your even lucky enough for that.
There isn’t enough sunlight (market capital) getting to the ground to allow very many new trees (business) to grow. Essentially, the “Old Growth” is choking out small business, unless you are in one of those “novelty markets”, and in this marginal gap between big businesses all you get is the “crumbs”, you could say. You can’t afford to make your prices “comparable” without seriously affecting your profits, as you most likely will not qualify for the same “tax breaks”, or have as much capital to make them effective. However, using US law as a comparison for the validity of laws that are different between them is not a valid basis for the determinacy of law. You need evidence more than just “it’s illegal in America” to refute a law you feel is unfit, or not feasible for Canada. The logic should stand on it’s own. I don’t see that the law is wrong, morally or otherwise though holding someones funds indefinitely without interest certainly crosses a line.
Every system has it’s advantages, and it’s disadvantages in addition to it’s own problems. Pointing out it’s imperfections in Canada doesn’t mean the US is better, when it’s really bad all around. Obviously Canada isn’t the best, otherwise it would be first. The point requires a paradigm shift in our thinking about what really is good for business. Our current system benefits only the super wealthy and threatens to destabilize the system, I don’t care what your business is, whether mainstream or novelty. You tend to be very dismissive of this, and give the green light to capitalism for anecdotal reasons that are a drop in the bucket to the “Cons” of our current system. If you already have a business, I can see why you might be leery of rocking the boat, but I feel your intentions and interests are mildly misplaced. I feel you “stand” on your intuition, as many people do rather than on evidence and reason on all issues.
It’s high time as a culture that we test our intuitions, and prove what is good for us, rather than standing on good intentions. However, knowing that greed is good for no one is axiomatic. Health care is a huge issue as well as other social programs, taking that out of the argument invalidates your whole position, and is simply begging the question.
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November 16, 2011 at 6:06 pm
Vern R. Kaine
“Our current system benefits only the super wealthy and threatens to destabilize the system, I don’t care what your business is, whether mainstream or novelty.”
If we’re talking business here, I have to ask you based upon what fact? Our system provides much benefit for businesses either wealthy or trying to be wealthy. Except to that, of course, is where big business is in bed with government but that’s a problem solved by government, not business.
I feel you “stand” on your intuition, as many people do rather than on evidence and reason on all issues.
Evidence? Well I’m not at liberty to start scanning and posting my business documents. are you asking for an article from someone that corroborates what I’m saying? Not sure what you mean here by evidence. As for my reason, I worked in business banking for two of Canada’s major banks. I’ve been involved with literally dozens of companies from the startup stage both in Canada and the U.S., and currently own 2 businesses actively (management) and a number of others passively (investor only). Thanks to the Internet yes, what I’m talking about is anecdotal but if another business owner wants to come forward and challenge what I’m saying here, I’d welcome it. I don’t believe my experience is different than most, however.
“It’s high time as a culture that we test our intuitions, and prove what is good for us, rather than standing on good intentions.
How do we prove what is good for us without actually doing it and finding out first hand? Hopefully we’re not back to the “I have to wait until someone publishes a study on it” thing. Socialists are picking one aspect of socialism and concluding that “Socialism is Good For Business.” I’m not disputing Canada’s position on the list of best places for one, but I disagree with the conclusion as it stands.
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November 17, 2011 at 4:28 pm
Reneta Scian
Fact is that small business end up paying greater percentages of tax, and paying for a greater percentage of inflation in their daily and annual operating costs. With more limited production, with more limited resources they can’t afford to “let’s say” charge “Wal-Mart” or “Target” prices for the goods they purchase or for similar goods they manufacture. They don’t get as much incentive, or have the means to take advantage of massive tax benefits that those industries have access to. They get some of it, but because of the way those big businesses, not just the aforementioned, move the economy to produce the maximum profit purchase en masse for the maximum discount. It’s the culmination of tax law giving breaks for loses, earned interest, disabled employees, fuel costs, et cetera and the overall bullying of the market with massive capital that makes it impossible for smaller businesses flourish in our system.
What I am saying is that these big companies are getting an unfair advantage that either isn’t available to others, unknown/unpublished, or they lack the manpower to dedicate to taking full advantage of it. Small businesses suffer in this system, and that is a fact but not a blanket statement of all businesses (as I specified prior). A quick look at the law will reveal there is a serious gap between the middle class, and small business group, and the big business and upper 1% when it comes to available benefits inscribed in law. This isn’t my conjecture, or “some study that hasn’t been published yet”, its in the numbers, and it speaks for itself without question. It is because Corporate America has influenced that law, intentionally for that purpose, and they think nothing of it because “everyone else is doing it”. You really need to read up more on that whole “predictable irrationality”. We as a culture have the capacity to learn, and test things on an whole other level now.
It is possible to economically test principles without effecting the entire economy to do so. It’s called limited economic zones. You work with economists to provide the data, the experimental location, et cetera. You can work it all out in a practical review prior, but to understand the real effect it has on the economy. It is possible to test our intuitions, by understanding what helps people achieve and what leads the system to cheating, and possibly collapse. Understanding people is the underpinning to this system’s success or failure. As a culture we act on intuition on a lot of things which are actually wrong, because that is how we are taught. We have the ability to test this effect without even performing economic experiments, or special economic zones. We can test human nature, and figure out how we think. We need to be dedicated finding the truth for ourselves. That isn’t socialism, that is common sense.
The problem I see with your arguments is that you don’t understand why Canada is on that list, not fully. The other problem, is that “by appearance” you are still infected with “American Intuition” which can be, and very often is wrong. A problem in the American scope of things is the belief that social programs erode freedom, which they don’t. There is a difference from good risk assessment, and putting in place stabilizing mechanisms, and relinquishing freedoms for security. But the problem is that this mentality is systemic, and cultural in nature and is largely untested. And lastly, being skeptical means acknowledging that you don’t know, and while you still act as you know best how to do, you await solid evidence on which to formulate your final judgement.
I understand that the Y part (socialized systems) of the system causes X to occur (business start-up), but Z (Greedy Banks) is not a factor of Y, but a factor of W (Bad Bank Code). I simply dismantled the mechanism to understand if cog Y had anything to do with cog Z, and it doesn’t. Socialized systems help stabilize a community by giving people the capacity to think beyond their most basic survival, and increases the quality of life, by extension (health, marriages, sex life, et cetera). The fear factor of systems, like the ones in the US as bad for your health, and bad for your sanity. If you read enough of Arbourists blogs, most of which I have already read or concluded on by the time he makes a blog of them you’d see the patterns of which I speak. I also write about it a bit, but I have my individual priorities on which I write. I was also involved with a small family business for half of my childhood, and I spent a lot of time talking to my dad about small business, and about laws around the.
I also know what happens, first hand, when politicians get it wrong. Perhaps knowing that I have experience in what I am talking about well help you understand where I am coming from. The business laws, and tax codes wrote in the 90’s branching on the 80’s ones nearly made me and my family to be homeless. We were farmers, and the legislation passed made it increasingly difficult for us to make a livelihood, and with the industrialization of food it put us out of business. We couldn’t compete with big business, especially not after the law changed. And in our systems we are dependent on our income for housing, food, water, safety, and medical care which is where the “Fear” part comes in and wreaks havoc in our lives. Any system which claims to function on fear barely functions. When you are afraid, you do the bare minimum to get by, which is just how it works. You have to be able to put all the factors together to understand how the system works, it’s that simple.
Small business is hurt by “American Intuition” as is the middle and lower class, and poor because it values profit over people and because it induces fear which inherently makes the systems unstable. I understand your position, but have a lot of sensible reasons why it is wrong. American Intuition has a bad tendency to “hate being wrong” and be “unwilling to test is intuitions” to validate them. The knowledge is out there, but you must be willing to seek it. http://renetaxian.files.wordpress.com/2011/11/800px-maslows_hierarchy_of_needs-svg.png
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November 19, 2011 at 6:36 am
Alan Scott
As usual you socialists mislead. Why don’t you add a fact to give context to your chart ? Put the corporate tax rates per country on your chart . Many of your leftwing nanny states are more business friendly than the US currently is . They are just more entitlement spending stupid .
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November 19, 2011 at 8:18 am
The Arbourist
They are just more entitlement spending stupid .
Before your first coffee of the day? :)
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November 19, 2011 at 1:29 pm
Reneta Scian
Must be because that comment makes no sense at all. There is a difference between a culture of entitlement, and a culture of social security. A culture that takes care of the most of it’s people with the least intervention of typical government conventions usually wins out. Neither me nor the Arbourist are for ‘staunch, hardline’ socialistic ideals, just for a better balance of social and democratic processes. Once again, Alan proves the conservatives are still stuck in the cold war mentality that “anything with social in the title” is some how evil, atheistic, anti-religious, et cetera.
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