Saturday, November 27, 2010

Start Me Up

A Journal Sentinel editorial believes we should be building a, "Stronger climate for entrepreneurs to start and grow business." It then regurgitated the often-repeated list of business-friendly initiatives: making the Wisconsin Department of Commerce (DOC) a purely economic development oriented agency, focusing on businesses employing 50 or less persons, using bond authority to fund investment, and providing incentives for business.

I've invalidated the idea of transforming the DOC into an economic development agency in an earlier post. I won't repeat it here again. Please read the link for further information on this debunking.

They cite a study that concludes there is, "No difference in job creation between small companies and large ones. Size plays virtually no role. It's all age - start-ups are where the job-creation action really occurs." What they fail to mention is that start-ups are also where the job-destruction action also occurs. The reality is that start-ups rarely employee many people and 40 percent fail within five years. Steve Lohr explains why big companies matter in job creation.

The idea of focusing on a certain size of business is also ludicrous. Government should be laying the foundation - contracts, financing, infrastructure, and other necessary institutional elements - for day-to-day business to take place. Trying to pick specific winners is comparable to gambling at a casino and not good policy.

And, do we really need to get into detail why it's not a good idea to use bonding authority to make grants, low-interest loans, and giveaways for speculative, private investments? If an entrepreneur has a good idea - a sound investment idea - why wouldn't private dollars want to invest? The notion that taxpayers - through bonding - should be the supporters for such risky investments is ridiculous. Do private markets work at all? What happened to the magic of the market which the Journal Sentinel, business writers, and entrepreneurs always claims as efficient?

I've also punctured the incentive boondoggle in an earlier post. For more on that, follow the link.

Again, the Journal Sentinel has added nothing to the debate nor raised the level of discussion or understanding. They've simply repeated business-friendly talking-points of dubious credibility.

For Further Reading:
Bad Public Policy
Job Creation
The Little Engine That Can't
Myths About Entrepreneurship
New Firms Are No Job Engine
The Start-Ups We Don't Need
Young Companies Biggest Job Destroyers

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