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Creating Jobs: Honouring the Entrepreneur

March 15, 2015

 

Entrepreneurs create jobs. So if we want more jobs then we have to create an environment in which entrepreneurs flourish. The converse is also true; if there are insufficient jobs being created then the conditions for entrepreneurs are not sufficiently conducive.

 

The conventional wisdom is somewhat different. Our politicians promote themselves as the ones who create jobs; presumably most people believe this. It is worth considering in what ways politicians create jobs.

 

Firstly they can increase the number of public sector jobs. Depending on your world view you may see this in a positive or negative light. You may applaud a government that increases the numbers of nurses and teachers for instance, but baulk at increases in those performing administrative functions. Over the past hundred years there has been a significant increase in the role of the state and the consequent increase in public sector employment. Belatedly, we are beginning to realise that the extent of the social democratic welfare state has become untenable. There are many reasons for this. Here are two main ones. The private sector needs to be large enough to fund the public one. Large bureaucracies are inefficient and unresponsive. So increasing the size of the public sector tends to reduce prosperity.

 

Secondly, politicians can support businesses which promise to create or maintain jobs. They are particularly prone to do this in marginal electorates. But if these businesses need government handouts in order to operate profitably, it follows logically that funds must be diverted from more profitable opportunities to allow this to happen. Again, overall prosperity is reduced.

 

Thirdly, they can create the environment in which a free market can flourish. They can support the concept of private property so that risk takers and hard workers can retain the benefits of their labours. They can support the rule of law so that citizens can be confident that they will be treated fairly and consistently. They can support a judicial system that enforces contract law enabling citizens to trade with confidence. They may provide the transport, communications, power, water and sewerage infrastructure too.

 

Only in the third way do citizens as a whole benefit.  The first two favour sectional interests.

 

Over the past two hundred years, starting in the Anglosphere but gradually spreading to many parts of the world, there have been unprecedented improvements in prosperity. One of the major contributors to this was sociological change. It became honourable to be in commerce, to work hard and to innovate. There was liberty and dignity for ordinary people. Society came to admire the entrepreneur, those who venture and invent.

 

In the market process, entrepreneurs are the ones who sense where opportunities are to be found. They act in the face of uncertainty to help society achieve the fullest levels of production. They assess what products or services their customers may want. They innovate to provide better products and services. They initiate productivity improvements within their own organisations. They calculate how much the proposed goods would cost to produce, how much they expect the customers to pay and how much risk is involved. If they believe that they can make a profit, commensurate with the risk, they proceed with their endeavours. To the extent that they are successful, they accumulate wealth and expertise that the business can use in future projects or to reward the shareholders for taking the risks.

 

Entrepreneurial talent is scarce. Not everyone wants to take the risks. Not everyone has the ability or inclination. Yet their actions are essential to the prosperity of us all. People who work hard, who take risks and become well off if they succeed should be praised and encouraged.

 

Jobs are created by entrepreneurs. We need to honour them and to create the conditions for them to flourish.

 

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More.    Read The Fragiity of Freedom: Why Subsidiarity Matters.

 

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