I wrote a post last week at my blog, The Entrepreneurial Mind, on another example of the disturbing trend toward what I call socialized entrepreneurship. We have had an explosion of entrepreneurial activity in the economy, not just in America, but around the globe. Politicians and bureaucrats have just now started to notice this change. Their reaction? They want to manage it and control it. They are trying to institute control over the private equity markets through tax policy and government largess. And they are trying to gain control and favor over the entrepreneurs by offering government hand-outs for new businesses in certain industries that they have picked as future winners. None of these policies, which I collectively call socialized entrepreneurship, have been shown to work over the intermediate and long term.
The specific program I blogged about was about a new set of initiatives in Oregon called The Oregon Innovation Plan.
Here is what I said about this plan:
This is bad policy. The best thing the state of Oregon could do to increase innovation and entrepreneurship is to simplify and reduce taxes, and cut any regulations that are getting in the way of small business formation and growth. Use the $38 million to cut taxes. Also, angel investment networks don’t need the government’s help in getting started. Freeing up the market will spur business creation, which in turn attracts investment money. Finally, the worst part of this new policy initiative is to have politicians and bureaucrats pick winning industries. That is what free markets do best.
The post created some interesting comments.
One reader said the following:
Young people with the notion of starting a business are going to see a government program as being far more accessible, thusly realistic and possible, than existing Angel networks. Cutting taxes does little to incentivize entrepreneurs; I’d hardly believe that one might think to themself “oh man, the taxes are just too high in my state to start a business. I guess I’ll just find a job.”
What have we come to in this country when people think that a government program is more accessible than individual investors? With government programs come the inevitable government regulations. Every study that looks at entrepreneurship and innovation find that free markets work better and that less regulation leads to more start-up activity. The latest example can be found in the newest study from the World Bank on business start-up activity around the globe.
And the comment about taxes is just plain wrong. We have also seen study after study that show clearly that tax rates to matter in entrepreneurial activity. Look at the studies using the Global Entrepreneurship Monitor data for evidence of the power of taxes to encourage or squash entrepreneurial aspirations.
Another commenter said this:
While I don’t disagree that politicians ought not to pick markets, you should have looked at the who’s who in that committee group before you made that assumption. It’s chaired by Dave Chen, one of the smartest venture capitalists anywhere. Although I’ve never met him, I’ve heard him speak and I’ve got a post featuring him on my blog called “Choose Investors Wisely or Not at All” and you have to admit it’s a refreshing point of view for a VC. The vice chair is from Open Source Development Labs, and the group includes (along with some politicians) an honor role of high-tech business in Oregon. That means Intel, IBM, Batelle, Microsoft, some other companies you’ve heard of, plus two other VC firms besides Dave Chen’s. It’s a pretty good group.
So its OK to create government welfare for an industry if everyone guiding that program is in that industry? That sounds vaguely like the rationale for the military industrial complex. We saw how efficient and effective those politicians and business leaders were — including all of their $500 toilet seats, not to mention all of the weapons programs that not a single general wanted or supported.
There is more money available for high tech investment than there are deals to invest in. That is called “over hang” in the market, which we have a lot of right now. Let free markets put that money to work and see what it can really do.