Philosopher and theologian, Michael Novak recently delivered a speech at the Catholic University of America on the vocation of business and Forbes published the transcript. Novak argues that “capitalism is lifting the world out of poverty.” As many Asian and African economies shift from socialist to capitalist, they are seeing enormous economic growth, and small businesses are the force behind these economic gains:
Even in developed nations, most jobs are found in small business. In Italy, over 80 percent of the working population works in small businesses. In the U.S., the proportion is just about 50 percent, but some 65 percent of new employment is in small businesses.
During the great economic expansion of 1981-1989, the U.S. added to its economy the equivalent of the whole economic activity of West Germany at that time. Sixteen million new jobs were created in the U.S., the vast number of them in small businesses. Startups peaked as new businesses came into being at a rate of 13 percent (as a portion of all businesses) – an all-time high. Much the same happened under Clinton in 1993-2001, but even better – 23 million new jobs were created.
In the creation of small businesses, four factors are necessary. First, ease and low cost of incorporation; second, access to inexpensive credit; third, institutions of instruction and technical help (such as the system of local credit unions in the U.S.), and the steady assistance of the extension services of the A&M universities; and, fourth, throughout the population habits of creativity, enterprise, and skills such as bookkeeping and the organization of work. Economic development is propelled, as John Paul II said, by know-how, technology, and skill (Centesimus Annus 32). Therein, perhaps, lie the greatest entry-points for Americans and others who wish to help poor nations by proffering assistance in economic development from the bottom up. (more…)
If your next date night costs you more, you can thank Obamacare. Regal Entertainment Group, the country’s largest movie theater chain, has announced that it is cutting employee hours due to Obamacare related costs.
One Regal theater manager told FoxNews.com the move has sparked a wave of resignations from full-time managers who have seen their hours cut by 25 percent or more.
“In the last couple weeks, managers have been quitting on a daily basis from various locations to try and find full-time work,” said the manager, who asked not to be named. “Regal up until now has never restricted anyone to anything below 40 hours.”
Mitt Romney may have lost to Barack Obama but his was not the biggest loss of the election—at least not economically. Despite the millions the GOP spent to elect their candidate, the real economic losers of the 2012 election, as Joel Kotkin explains, are entrepreneurs:
The real losers are small business owners, or what might be called the aspirational middle class. The smaller business — with no galleon full of legal slaves pulling for them — will face more regulation of labor, particularly independent contracting. There will be more financial regulation, which is why Romney’s top contributors were all banks.
Small businesses will also face challenges associated with Obamacare, which now will sail on unchallenged. Health care costs are expected to go up 6.5% per employee. Some 58% of businesses say they will shift the costs to their employees. Many owners will face a higher individual tax bill: couples making $250,000 or more and singles making $200,000 or more will pay a 3.8% Medicare tax starting 2013.
All this is troubling, as American start-up rates are already falling. Much of what happens now occurs not from a great hunger to succeed as a desire to maintain. Outside of the inherently entrepreneurial immigrant classes, the only group of Americans starting business more than before are the fifty somethings and above. Many of these may simply be former employees of larger firms, now doing work sometimes in the same industry and even for the same company.
Back in February I argued that since bias is inherent in institutions we should encourage the government to be biased toward entrepreneurship and away from corporatism. The result of such a bias would be to favor newer—and presumably smaller—businesses over more established—and presumably larger—ones, thereby reducing the levels of regulatory capture and crony capitalism (at least in theory).
An implicit assumption in my post was that we should value small businesses. But Veronique de Rugy had made a compelling case against “America’s Small-Business Fetish” that has caused me to modify my position: (more…)
My latest for Acton Commentary. I’m also adding a couple of videos from Hotep and the Institute for Justice.
Let the Hustlers Hustle
By Anthony Bradley
If necessity is the mother of invention, then there is nothing worse than quenching the entrepreneurial spirit of people seeking to improve their situation by imposing arbitrary third-party constraints. America’s unemployment problems linger because hustlers cannot hustle.
For many, “hustling” connotes business activity that is shady, or even illegal. But in the black community it is common to use the term to describe the entrepreneurial spirit that drives people to take risks to meet one’s needs and to provide legitimate services through creative enterprise in the marketplace. The latter view is the one taken by indie Hip-Hop mogul Hotep, who has created Hustler University as an effort to redeem hustling as a way to create space for economic empowerment. Clients include the NAACP, the Urban League, Clemson University, the National Education Association, Illinois Public Schools, and Morehouse College.
Hotep defines a “hustler” as “an enterprising person determined to succeed, [a] go-getter.” Participants in Hustler University are exposed to the idea that human beings were made to be innovative and creative and “to manifest our dreams into creation,” says Hotep. Among the Hustler’s 10 Commandments that Hotep aims to teach today’s entrepreneur are the aphorisms “your network is your networth,” “the early bird gets the worm,” and success is “where opportunity meets preparation.”
Hotep offers helpful direction, but for independent-minded hustlers to succeed and thereby benefit both themselves and their communities, they need an environment that provides them opportunities to work freely. While there are many factors that keep entrepreneurial spirit dormant such as laziness, the absence of mentors, and skill deficiencies, one of the greatest obstacles is the mass of regulations generated by federal, state, and local governments.
The Institute for Justice recently released a report describing how government regulations prevent entrepreneurs from taking off. In Houston, for example, hustling a mobile food truck business is nearly impossible. For starters, a would-be mobile food entrepreneur must obtain a license from the City of Houston Department of Health and Human Services. Potential hustlers must submit, in-person, two sets of plans that satisfy a 28-point checklist. During the government truck inspection, the vendor must provide extensive documentation including an itinerary and route list. He is required to pay $560 in fees, which includes $200 for the installation of an electronic tracking device. Operators must also disclose their menu, including every ingredient used as well as its origin, and how each dish is prepared. Even worse, a form must be filled out for each ingredient. This is just a sampling of the regulations in one city. Similarly daunting tangles of red tape exist in every jurisdiction in America, preventing entrepreneurs from starting and maintaining small businesses.
It’s clear that this regulatory regime especially hurts small businesses, the primary source of new jobs. Mark Crain, William E. Simon Professor of Political Economy at Lafayette College, conducted a study several years ago describing the disproportional burden imposed by federal regulations on small business. Crain found that firms with fewer than 20 employees spend 45 percent more per employee complying with federal regulations than do larger firms. Small firms spend 67 percent more per employee on tax compliance than larger firms do, and, compared to the largest companies, more than 4 times as much ($3200 vs. $700) per employee to comply with environmental regulations.
The black unemployment rate currently (January 2011) stands at 15.7 percent. Hispanics are a little better at 11.9, but both lag whites at 8 percent. The last thing we need are burdensome government regulations preventing hustlers from hustling. Whether intentionally job-killing or not, these types of government regulations dampen the entrepreneurial spirit of people who are trying to improve their situation and make contributions to the civic good by providing services that people need. Based on employment figures, these regulations arguably affect blacks and Hispanics disproportionately.
If America is really serious about addressing abysmal unemployment rates, federal, state, and local governments would do well to take the handcuffs off of hustlers and free them from the regulations that keep them from creating wealth. In other words, get government out of the way and let the hustlers hustle!
Michigan ranked 10th in the list, which examines 29 governmentally-influenced factors such as personal income tax, capital gains tax, corporate income tax, property tax, death tax, electricity costs, and number of bureaucrats. Michigan was in the top half of most categories (it did rank 47th in the state rankings of gasoline taxes, which underscores the question of who profits from gasoline sales).