The entrepreneur gap

It has always struck me as ironic that the word we Americans use for creative business visionaries, the men and women who go out and start a new business, thereby generating wealth, jobs, tax revenue, economic growth, and many other positive consequences, is of French derviation" entrepreneur."

The Continentals have far too few of them these days, as this article in the International Herald Tribune points out. Naturally, the EU launched a study five years ago to understand why. Certainly jobs were created byt his effort, as study teams coordinated with bureaucrats, and they held conferences, published papers, and designed programs to measure their impact. All the while merrily spending tax money coillected from the remaining surviving businesses that were once, long ago, created by entrepreneurs.

...the poll found that people from smaller countries like Portugal, Greece, Ireland and Latvia were much more enthusiastic about working for themselves. In Portugal, for example, 62 percent said they would choose self—employment over being an employee. This compares with 42 percent in France, 35 percent in Sweden, 33 percent in the Netherlands and only 28 percent in Finland.

But putting these regional variations aside, the bottom line for Europe was that fewer European respondents said they would choose self—employment — 45 percent said it was their preference — than their American counterparts, at 61 percent. And the most striking part of the survey was the Europeans' explanations of their responses.

It has long been assumed here that red tape is holding back Europe's entrepreneurial spirit. With shorter waiting times to register companies and easier procedures for hiring, the argument goes, new European businesses would sprout like tulips in a Dutch greenhouse.

The survey told a different story. Europeans essentially told pollsters they couldn't be bothered with the effort involved in starting a business: they wanted a stable income and a reliable, relatively risk—free job.

The IHT article makes much of the apparent risk—aversion of Europeans, comapred to Americans. And it is true that fear of failure seems mich higher there than in the United States. And it is also true, as the article notes, that European demographics are rapidly yielding a much older population, on average, and that risk—taking is typically the province of the young.

But there is a dog which isn't barking, at least in this press report: taxation. Risk, after all, entails a calculus of risk versus reward. If the reward will be mostly confiscated by the tax man, only suckers bear the risk. The list of countries in Europe with a relatively high inclination towards entrepreneurial risk—taking also looks like a list of countries with comparatively low income taxes. High levels of social service compound the calculation. If health care, housing, transportation, and other basic living needs are assured, why bother with extra effort, especially if it benefits the state more than it benefits the person extending the effort?

Ireland, now known as the Celtic Tiger, used to export people, wallow in comparative poverty, and nurse its grudges against England which brutally exploited it as a colony. Today, after less than two deacdes of a low—taxation experiment, Ireland leads the way, and, on some measures, has higher average income than its former colonial master, the UK.

I actually like Europe and Europeans, for the most part. I wish them well. But they need to lose a lot of their attitudes, not just toward the United States, but also toward taxation, the role of the state, the value of Western Civilization (which they largely created), and many other facets of modern life. I hope they keep worrying about the entrpreneur gap.

Hat tip: Ed Lasky

Thomas Lifson  1 18 05