Entrepreneurship and Workaholism - Part I
By Sam Vaknin
The Dutch proudly point to their current rate of unemployment at less than 2%. Labour force participation is at a historically high 74% (although in potential man-hour terms it stands at 62%). France is as hubristic with its labour policies - the 35 hours week and the earlier reduction in employers' participation in social contributions. Employment is sharply up in a host of countries with liberalized labour markets - Britain, Spain, Ireland, Finland. The ECB brags that employment in the euro zone has been rising faster than in the USA since 1997.
This is a bit misleading. Euro zone unemployment is far higher and labour force participation far lower than America's. The young are especially disadvantaged. Only Britain is up to American standards. The European labour market is highly inefficient in matching demand and supply. Labour mobility among regions and countries is glacial and generous unemployment benefits are a disincentive to find a job.
Reforms are creeping into the legislative agendas of countries as diverse as Italy and Germany. Labour laws are re-written to simplify hiring and firing practices and to expand the role of private employment agencies. But militant unions - such as Germany's IG Metal - threaten to undo all the recent gains in productivity and wage restraint.
The European Commission - a bastion of "social Europe" - has just equalized the rights and benefits of temporary workers (with more than 6 weeks of tenure) and full-time ones. Yet another reformist adviser to the Italian Minister of Labour was assassinated. This was followed by a million-workers strong demonstration in Rome's Circo Massimo against minor reforms in firing practices.
But the most successful and efficient labour market in the world, in the States, is associated with a different ethos and an idiosyncratic sociology of work. The frame of mind of the American employee and his employer is fundamentally at odds with European mentality. In Europe, one is entitled to be employed, it is a basic human right and a public good. Employers - firms and businessmen - are parties to a social treaty within a community of stakeholders with equipotent rights. Decisions are reached by consensus and consultation. Peer pressure and social oversight are strong.
Contrast this with the two engines of American economic growth: entrepreneurship and workaholism.
The USA, according to the "Global Entrepreneurship Monitor", is behind South Korea and Brazil in entrepreneurial activity prevalence index. But 7 percent of its population invested an average of $4000 per person in start-ups in 2000.
A 10-country study conducted in 1997-9 by Babson College, the London School of Business, and the Kauffman Center for Entrepreneurial Leadership found gaping disparities between countries. More than 8 percent of all Americans started a new business - compared to less than 1.5 percent in Finland. Entrepreneurship accounted for one third of the difference in economic growth rates among the surveyed countries.
Entrepreneurship is a national state of mind, a vestige of the dominant culture, an ethos. While in Europe bankruptcy is a suicide-inducing disgrace bordering on the criminal - in the USA it is an integral and important part of the learning curve. In the USA, entrepreneurs are social role models, widely admired and imitated. In Europe they are regarded with suspicion as receptacles of avarice and non-conformity. It is common in the States to choose entrepreneurship as a long-term career path. In Europe it is considered professional suicide.
In the USA, entrepreneurs are supported by an evolved network of financial institutions and venues: venture capital (VC), Initial Public Offerings (IPO's) in a multitude of stock exchanges, angel investors, incubators, technological parks, favourable taxation of stock options, and so on. Venture capitalists invested $18 billion in start-ups in 1998, $48 in 1999, almost $100 billion in 2000.
The dot.com crash deflated this tsunami - but only temporarily. US venture capitalists still invest four times the average of their brethren elsewhere - c. 0.5 percent of GDP. This translates to an average investment per start up ten times larger than the average investment outside America.
American investors also power the VC industry in the UK, Israel, and Japan. A Deloitte Touche survey conducted last month (and reported in the Financial Times) shows that a whopping 89 percent of all venture capitalists predict an increase in the value of their investments and in their exit valuations in the next 6 months.
Entrepreneurs in the USA still face many obstacles - from insufficient infrastructure to severe shortages in skilled manpower. The July 2001 report of the National Commission on Entrepreneurship (NCOE) said that less than 5 percent of American firms that existed in 1991 grew their employment by 15 percent annually since, or doubled their employment in the feverish markets of 1992-7. But the report found high growth companies virtually everywhere - and most of them were not "hi-tech" either. Start-ups capitalized on the economic strengths of each of the 394 regions of the USA.
As opposed to the stodgy countries of the EU, many post-communist countries in transition (e.g., Russia, Estonia) have chosen to emulate the American model of job creation and economic growth through the formation of new businesses. International financial institutions - such as the EBRD and the World Bank - provided credit lines dedicated to small and medium enterprises in these countries. As opposed to the USA, entrepreneurship has spread among all segments of the population in Central and Eastern Europe.
In a paper, prepared for USAID by the IRIS Centre in the University of Maryland, the authors note the surprising participation of women - they own more than 40% of all businesses established between 1990-7 in Hungary and 38% of all businesses in Poland.
Virtually all governments, east and west, support their "small business" or "small and medium enterprises" sector.
The USA's Small Business Administration had its loan guarantee authority cut by half - yet to a still enviable $5 billion in FY 2003. But other departments have picked up the slack.
The US Department of Agriculture (USDA) beefed up its Rural Business-Cooperative Service. The Economic Development Administration (EDA) supports "economically-distressed areas, regions, and communities". The International Trade Administration (ITA) helps exporters - as do OPIC (Overseas Private Investment Corporation), the US Commercial Service, the Department of Commerce (mainly through its Technology Administration), the Minority Business Development Agency, the US Department of Treasury, and a myriad other organizations - governmental, non-governmental, and private sector.
Another key player is academe. New proposed bipartisan legislation will earmark $20 million to encourage universities to set up business incubators. Research institutes all over the world - from Israel to the UK - work closely with start-ups and entrepreneurs to develop new products and license them. They often spawn joint ventures with commercial enterprises or spin-off their own firms to exploit technologies developed by their scientists.
MIT's Technology Licensing Office processes two inventions a day and files 3-5 patent applications a week. Since 1988, it started 100 new companies. It works closely with the Cambridge Entrepreneurship Center (UK), the Asian Entrepreneurship Development Center (Taiwan), the Turkish Venture Capital Association, and other institutions in Japan, Israel, Canada, and Latin America.
(continued)
About the AuthorSam Vaknin ( http://samvak.tripod.com ) is the author of Malignant Self Love - Narcissism Revisited and After the Rain - How the West Lost the East. He served as a columnist for Central Europe Review, PopMatters, and eBookWeb , and Bellaonline, and as a United Press International (UPI) Senior Business Correspondent. He is the the editor of mental health and Central East Europe categories in The Open Directory and Suite101.
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