Market Day in France

Image:  UCLA 

Lets face it:  no one on the right or the left knows how to create jobs.  The Dems are jousting at windmills with a series of lip service speeches and the Repubs are spreading that ol’ voodoo magic.  But nearly anyone would agree that small business is the engine of job growth.  So why don’t we focus our attention there?

            Granted, legislative gridlock still rears its ugly head at every turn, and nothing substantive is likely in our future at a national level, but that doesn’t mean that we sensible people can’t plan to extricate ourselves from this jobless mess while government tries to extricate its head from…the sand.

            The first step is to counterbalance the fact that economies of scale eliminate jobs.  After all, jobs are an economic product, too.  Therefore, we should be using the tax code and regulation to penalize businesses that needlessly eliminate worthwhile work—and workers.  I’ve been thinking about France recently (hoping to hop a plane to Toulouse sometime soon).  Despite overbearing regulation and high taxes, France supports a vibrant small business climate that bolsters the economies of medium and small businesses and small cities and towns in every region of the nation.  And when a hypermarché moves in on  the local food chain, sometimes government responds with restrictions designed to mitigate its effect on nearby smaller providers.  Sounds fair to me.

            These businesses in turn support culture and property values in a manner that allows regional wealth to accumulate, despite the hegemony of Paris.  The French organizational principle of groupes d’enterprises, enterprise groups or, simply, clusters, promotes similar entrepreneurial activities in ways that leverage individual efforts.  This, I believe, is a natural outgrowth of the French view of agriculture as a small business patrimonie, or vested tradition, that lies at the core of its economic and cultural life.  But they don’t stop there.  A group of Indiana Unversity researchers looking at the French model of entrepreneurialism wrote in 2001:

In France clusters of research-intensive SMEs [small & medium enterprises] abound. This type of cluster develops an innovative environment in which the scientific community and other intermediate organizations play a 'temporary' role, in addition to SMEs. These innovative clusters are often referred to as 'technopoles'. Within these 'technopoles' numerous publicly funded research labs, universities and agencies, that develop high technology products and skilled workers, are brought together.

            The upshot of all of this is that the French economy is far less hollowed-out than ours, both in terms of the vibrancy of small business culture and the distribution of wealth throughout the regional economies of Frence.  When I visit the thriving locovore-driven small businesses of northern California I see groupes d’enterprises.  When I see the until-recently self-sufficient shrimp fisheries of southern Louisiana, I see groupes d’enterprises.  In technology too, we witnessed over the last two decades the entire gaming economy rise from start-up clusters from Mountain View to Redwood Shores, California.

            What we are good at in the U.S. these days is talking entrepreneurship.  We have yet to set up a single health insurance exchange to provide affordable plans for start-ups.  We have yet to embrace small business incubators like San Francisco Renaissance Entrepreneurship Center that house and nurture micro-businesses during their first critical years.  We have yet to rethink the economic value of self-employment.  In fact, the purest form of shark-eat-minnow capitalism is found in our start-up sectors.  Got a great food product?  Go fish when it comes to shelf space.

            My wife tells me that the French Auchon hypermarché company—a gargantuan entity as found in mid- and southern France—houses micro-businesses within its enormous confines.  Local vendors provide fresh food products much as they would in a Saturday morning town-square location.  Why is it that such concepts as that, also embodied in a different form in San Francisco’s Ferry Building, remain rare, and rarified, in the U.S? 

            The Indiana University researchers spoke of “forced creativity.”  If there ever was a moment of forced creativity it is here and now.  Yet its economic impetus is lost in what I call the “informal” (some say “underground”) economy.  While it’s hard to measure, some economists put the combined output of the informal economy at eight percent of GNP.  That’s a hefty chunk of change by any measure.  So what is it about our economic values that drives it all underground?  Yes, there’s taxes.  Big deal. Taxes on one’s first fifty thousand must stand in line behind all those business expenses that eat up the gross in short order.

            The truth is for many is that there is little benefit in going legit. Going legit just triggers a bunch of regulations that no longer correspond to the working realities of perhaps 20 percent of our working population.  I’m all for minimum wage and all that, but I am also for creativity.  If a band, for example, had to pay its members minimum wage to include rehearsal time there would be no bands.  Sometimes it’s question of definition.  Band members are independent contractors.  We offer independent contractors little by way of incentives, except the ability to write off their expenses.

            As much as most people are just sick of the whole topic, we choose to forget that entrepreneurs around the world are covered by some form of universal or subsidized health care—except here, of course.  Even health care slowpoke Barack Obama used to speak of the economic sparks small business access to health care would represent.

            In short, we are forgetting here.  We are forgetting how to make money.  We know small business is the engine of job growth and yet both parties stack the odds in favor of entrenched, monopolistic mega-corps that suck our wealth, regardless of derivation, offshore, or into tax-sheltered black holes.  In the meantime, just try to set up a little company of three people trying to break into some sector designed only for players like Walmart.

            So how, then? I’m not talking about dumb-ass, state-mandated enterprise zones.  I’m talking about demonstration projects, research incubators, government money channeled to nonprofits like San Francisco Renaissance to provide business incentives to start-ups so they sign up, show up and start hiring.  And I’m talking about things like net neutrality, to put a few of the new tech sharks in their places.  And simplifying barrier regulations to start-ups as opposed to gutting regulations like the Clean Air and Clean Water Acts, which is what the Republicans mean when they say "cut regulation."

I’m beginning to think that if we don’t innovate our way out of this, there is no way out, or up.  Waiting for corporations to hire is waiting for Godot.  Never much liked the play.  Never much liked the waiting:

Estragon: I can't go on like this.

Vladimir: That's what you think.

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Note:  The study I named is:

DETERMINANTS OF ENTREPRENEURSHIP IN FRANCE: POLICIES, INSTITUTIONS AND CULTURE

by Candice Henriquez, Ingrid Verheul, Ineke van der Knaap, and Casandra Bischoff, ISSN 01-4 August 2001 Indiana University