We Need Entrepreneurs — How Vital They are to Our Economy

Entrepreneurs are the lifeblood of any economy.  Policies have to favor risk-taking, and have to reward those with the energy and zeal to start businesses.  Without entrepreneurs, there are no jobs.  The large enterprises of today were all started by single entrepreneurs willing to take risks to claim the rewards from risk-taking.  Americans sometimes take for granted that there is gainful employment, but the Great Recession of 2008 made it abundantly clear that no one can take employment for granted.  There are simply not always jobs available.  It is imperative to continually increase the supply of jobs for a stable and productive society of working citizens.  

Can the government create jobs?  Actually no, although the politicians do try to “sell” their legislation by claiming they are creating jobs.  In fact, the best the government can do is take money citizens, and pay a government official to do something that the private sector was not willing to pay for. Does this create a job?  It does create a government job, but it does not create a net number of new jobs.  This is so because when the government takes money from citizens, they have less to spend for their activities.  Thus, the will not spend that extra tax money at the hardware store, the movies, a restaurant, fixing a car, etc.  Jobs will be lost or not added at the hardware store, a restaurant, the movies, the car repair shop, etc.  

An entrepreneur on the other hand creates a new product or service that citizens voluntarily wish to buy.  They shift their expenditures to this new product or service, and the entrepreneur hires people to satisfy the demand for the new product or service.  Everyone is made better off because everyone chooses voluntarily what to buy and sell.  Rather than being forced into giving up a meal at a restaurant in order to hire a new government official, a person wants to give up that meal to buy the new product or service from the entrepreneur.  A person who loses their job at the restaurant might work for the entrepreneur in the new business.  If the business is successful, it will add more and more jobs, creating a demand for employees.  With greater demand for employees, their wages will rise.  Google was just two employees about 15 years ago, now it is many thousands of employees in a new industry that did not exist 15 years ago.   It was created by entrepreneurs.

What do we need to do to stimulate entrepreneurial activity to create more jobs.  One, allow entrepreneurs to keep more of what they earn — lower tax rates.  Create incentives for starting a business.  Two, stimulate employment by making employees less expensive.  If every business has to pay huge employer taxes (social security, medicare, unemployment insurance, workers compensation), and be subject to lawsuit for the smallest of infractions, then those are disincentives to hiring workers in the U.S.  Reduce those legal costs to hiring.  Third, reduce government mandated paperwork.  The government requires a lot of paperwork to run a business.  That takes time and detracts from the time for running a business.  Starting a business is already more than a full time job; layering on useless paperwork is a big disincentive to the vital economic function of entrepreneuring.  

We need entrepreneurs to do their magic more now than ever.  Let’s give them room and stay out of their way so they can create great businesses and help us through this economic downturn.