The death of the entrepreneur is never from natural causes

January 22nd, 2008
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In this interesting recent column, economist John Tamny takes issue with those in the U.S. who claim that the era of the entrepreneur is in its twilight, and that – surprise – policies designed to encourage entrepreneurship, like low income taxes, are no longer appropriate.

As he notes in his engaging opening:

Back in the early ’70s, a time well known now for confiscatory tax rates and a falling dollar, an economics textbook proclaimed, “The era of the entrepreneur may be over in terms of the individual owner-manager who single-handedly built up a large firm.” A few years later Bill Gates started Microsoft, a garage-entrepreneur venture that now employs 79,000, and which has made Gates the richest man in the world.

This should be seen as an important topic here in Alberta. First, nearly anything that affects the U.S. economy is important, almost by definition, to Canada’s economic prospects. Second, it shows how bad policy ideas never die, they just keep recurring in an infinite process of recycling, to be adopted by the next generation of activists for foisting on the gullible.

It also seemed eerily familiar, even if in an indirect way. Closer to home, Alberta strikes me as sliding away from an entrepreneurial culture and towards something more bureaucratic and corporatist – along with much of the ambience, adjectives and outlook that go along with each mindset.

Where the 90s seemed infused with boundless confidence and optimism – $3 per mcf natural gas prices and US$25 per barrel oil being hailed as profit-driving miracles – now there’s a palpable sourness smothering the province. Instead of demanding that government stay out of our way, we look to government for better “infrastructure”. Where once we led Canada in simplifying and driving down taxes, now the majority of us demands punishment of the industry responsible for our prosperity.

Tamny notes a trend to forcibly push the U.S. down a similar route. There, liberal to left-leaning people see a chance to exploit the “anxiety levels rising among America’s middle class” to discredit and repudiate the very policies that have worked so well in creating history’s most gigantic, and most upwardly mobile, middle class. In so doing, they must first proclaim the death of the entrepreneur.

But, as Tamny counters:

First off, to whom should workers give thanks for their wages other than to entrepreneurs? Any policy centered on wage earners that doesn’t elevate the entrepreneur is the equivalent of cheering sunlight while ignoring the role of the sun. You can’t have one without the other, and it is entrepreneurs who sense unmet needs in the marketplace, attract the capital necessary to fulfill those needs, and who deploy that capital in myriad ways, including for the purpose of hiring the less entrepreneurially minded among us.

And he adds:

All businesses, from old-guard institutions such as Ford Motor Co. and the New York Times Co. to modern capitalist marvels such as Amazon and Google, were once entrepreneurial ventures that started out small.

I would go further: Not only were large companies once small companies, large companies simultaneously support and depend on innumerable small companies. A large company like Ford (or, here in Calgary, EnCana or Suncor) can often be the “first big account” or the “company-making customer” for an entrepreneurial venture that makes a cool new feature or option the large company can sell, or makes an existing part or process better/faster/cheaper. It’s a symbiotic relationship.

Here I stand in contrast to those who worship small business as creating essentially “all” new jobs. The small enterprise I’m involved with (and which Mrs. K., a gifted entrepreneur, has built up) would not exist without customers of up to $15 billion enterprise value. These in turn depend on innumerable suppliers offering specialized products and services that are superior to their in-house efforts, saving them money and making them just a little bit more competitive. Indeed, I would say the largest company can continue to be seen as entrepreneurial in always pursuing the search for better solutions in creating its core products.

The age of the entrepreneur never reaches its twilight – unless governments driven by resentful populations draw the curtains. Entrepreneurial cultures don’t pass away – they’re put down. Alberta’s history is given to great waves of alternating optimism and disgruntlement or even despair. Self-reliance and individualism reign in one era, to be periodically replaced by envy, dependency, vast government and stagnation. Eventually, we come back to our senses.

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