Entrepreneurship, Not Socialism, Is the Answer to Economic Problems
The attack on capitalism in some intellectual circles has opened up a new front: entrepreneurship itself.
The latest talking point about how unfair capitalism is comes from Rolling Stone, where Occupy Wall Street organizer Jesse Myerson writes about The Five Economic Reforms Millennials Should Be Fighting For.
There are a lot of pieces pointing out the idiocy of these proposals, noting that it sounds more like satire than a Millennialist Manifesto. (It also seems horribly discriminatory to Millennials themselves, since it works under the assumption that this particular generation doesn't want to work - and shouldn't have to.) But the biggest flaw that business owners and entrepreneurs no doubt see is that it takes direct aim at entrepreneurship and free markets, and fails to see how taking your economic future into your own hands can lead to success.
Let's look at the five points from the viewpoint of entrepreneurship.
Guaranteed jobs. Myerson suggests the government guarantee jobs for all at a living wage. He doesn't suggest how this will be paid for. (Hint: That is because taxes will drive it, and no one likes to discuss taxes.) But here is the greatest misunderstanding: "Imagine a world where people could contribute the skills that inspire them - teaching, tutoring, urban farming, cleaning up the environment, painting murals - rather than telemarketing or whatever other stupid tasks bosses need done to supplement their millions."
Well, that world exists. Entrepreneurship allows people to take what drives them and make a business out of that. In some cases, it is urban farming or wall murals. In other cases, folks can set up one of those "stupid" businesses like telemarketing. Nothing stops a person in this country from pursuing their passion and turning it into a business.
Related: Preaching the Morality of Capitalism
Ironically, guaranteeing a job takes away opportunity. The outcome sought is simply a job, not a successful business. Sure, you are guaranteed the chance to farm beets in Brooklyn, but your ability to take that skill and make it into something where you can grow it, hire workers and sell those beets to a bigger crowd is diminished because the government is removing any barriers to other people getting into your business. It is subsidizing your competition, thus crushing your opportunities for growth. Supporting free-market entrepreneurship rewards your work by allowing you to prosper and grow. A guaranteed job doesn't create an equal opportunity (which entrepreneurship already provides), but rather an equal outcome, which is anathema to an entrepreneurial society.
Social Security for All. This is the biggest head-scratcher. It is a call for universal basic income, where the federal government writes you a check every month. As Myerson writes, it makes participation in our labor force "truly voluntary."
Ummm, why? Yes, we need to have more of a work-life balance. (Maybe.) But work is fulfilling. It helps define who we are. It helps us to support what lifestyle we want. For some, there are simple tastes. Others want the yacht or the country club (or both). These personal life goals help inform the business decisions we make.
Plus, one can argue that universal basic income won't change income inequality. Rather, it might make it worse. As people settle for the lowest income they are guaranteed, there is no cap on what someone can ultimately make (except, theoretically, for the tax burden these people will face to support those who are devoting their lives to their PlayStation 4's). That means the entrepreneurs will continue to make more, while the income is fixed for many.
Take Back the Land. Myerson has suggested a land-value tax before. In short, he promotes a tax for all landowners since they sit "idle" as landlords, making you pay rent (while, in theory, you are idle, too, with your universal basic income). But there is risk in landowning. Generally, we take loans to buy property - and not just personal property, but property for our businesses. We bear that risk because we seek reward. Sometimes that works; other times we fail. But the risk is there for us to take. Risk assessment leads to good decision-making.
Also, ownership of property helps define our goals. I want property near enough to where I work to not put an undue burden on my life, so maybe I rent an apartment in New York City. But I also want to live on a golf course, with access to tennis and a pool in a warm climate, so I might buy a summer retreat in Boca. That might sound elitist to some, but I would never suggest I am somehow entitled to either, or, more importantly, that the people who achieved that need to have it taken away. Rather, I can incorporate these goals into my own plan, choosing professions and making lifestyle choices that help me reach that. That might mean starting my own business. That might mean striving to succeed within my enterprise. But the ownership of property is a reward for my labor. Letting anyone, irrespective of what they pay, have access to the same, cheapens that reward and diminishes productivity and drive. Squatters living in a tent on the golf course because they somehow feel, without evidence, that they have a right to live there runs counter to American entrepreneurship. (And, with my swing, is dangerous to the squatters' health.)
Myerson also suggests the government owning all the property, or simply holding land in common trust. But does he honestly think everyone won't assert their "right" to the ocean view? Also, in America, property is part of our dream. The pursuit of happiness sought by our founders was a pursuit of property. Just because rents are high in Hell's Kitchen doesn't mean you change that by destroying our economic system.
Make Everything Owned by Everybody. Rather than follow the Stalin model of turning an agrarian society of Russia into a state-owned industrial superpower like the USSR - killing millions of your own people in the process, incidentally - Myerson suggests that the government own all businesses by buying the stocks and bonds of all businesses as an "investment" in the private sector.
How would this work for entrepreneurs? (Spoiler alert: It can't. But read on anyway.) Someone invests his savings in her business, takes on appropriate risk based on her business plan, manages a business prudently and ethically, pays her employees well and then is told at the end that she doesn't actually own anything for her trouble? Actually, her fellow citizens, who did not lift a finger, own it and get dividends from it?
There would be a complete disincentive to actually create any business at all under that system. With the death of business creation comes a death of innovation. Again, our definition of an entrepreneur is someone who believes she can change the world with an idea scribbled on the back of a napkin. Our system allows for that innovation to happen. Rail all you want about Wal-Mart, but it started as a small business. Could Apple have been created if the government owned the company?
Plus, everyone can own a company. Through public stock, we can be shareholders in companies, and get dividends from those profits based on the risk we decide to take. As equity crowdfunding grows, we have the opportunity to invest in startups more. We can own what we choose. Best of all, we can choose to support which businesses reflect our values.
A Public Bank. Banking in this country is not without its flaws, but Myerson's suggestion that banking be run by the state forgets an important point: It was the government that encouraged some of the riskiest lending behaviors by banks, in the name of the same equality he is advocating.
Also, why can't entrepreneurs start banks or credit unions or manage new ways of lending? Take microlending. That whole area is driven by entrepreneurship - and it would be destroyed by Rolling Stone's Brave New World since the government would monopolize banking. The aforementioned crowdfunding model would never exist if everyone had a right to a loan. And, taking Myerson's plan to its conclusion, should any bank, public or private, offer loans to people who either don't work or have a guaranteed state job with caps on income?
In the end, entrepreneurship can and does offer the solutions to any or all the problems Myerson perceives. A freer market -- which already supports equal opportunity for all, provided you are willing to take a risk -- makes for economically free people. We should not be denied the opportunity to take a chance on ourselves, on our commitment to better our lives and share our passions. Any plan to deny those chances just seems cruel.
Ray Hennessey is the former editorial director of Entrepreneur.