A couple of funny newspaper articles have crossed my inbox this weekend.
The first, “Sinkhole of bureaucracy”, is from the Washington Post decrying the fact that federal employee pensions are processed by hands on paper in an underground facility, rather than being computerized. This is ironic because it comes from a newspaper that has recently covered the cost overruns and quality problems with Obamacare web sites such as healthcare.gov. The underground facility costs only $56 million per year to operate, an amount that could be squandered on healthcare.gov-style IT very quickly. (Related: this History Channel story on the Ayalon Institute, an underground bullet factory in Israel.)
The second is a New York Times story about how French entrepreneurs are emigrating to avoid taxes and regulations handed down from their central government. It is funny because one of the tax havens is England, traditionally an example of a sclerotic permanently stagnant economy (see Mancur Olson). It is ironic because the same newspaper has spent the past six years cheerleading for more taxes and regulations to be handed down from our own central government, arguing that these new taxes and regulations will have no effect on Americans’ behavior or interest in work.
Entrepreneur emigration from France is a big deal because, as the Kauffman foundation research has shown, all net new jobs come from companies less than 5 years old. No entrepreneurs = no new companies = no new jobs.
http://www.kauffman.org/~/media/kauffman_org/research%20reports%20and%20covers/2009/11/where_will_the_jobs_come_from.pdf
“Warren”: As a small business guy myself I find it tough to believe that small employers are so critical. As the U.S. has become more regulated it is tougher for small companies to compete with big companies (since a small company has fewer people over whom to spread the cost of researching and complying with regulations). This is definitely true in aviation, which is more regulated than typical industries, and where every sector now is subject to “go big or go home” (flight schools were the last bastion of small business in aviation, but the government is now favoring large flight schools affiliated with 4-year colleges by showering them with VA money).
Maybe in a free market society small businesses could be important for new jobs but in a mixed market/planned/government economy like ours it doesn’t pass the common sense test.
From the Kauffman data: *new* businesses less than 5 years old are not necessarily *small* businesses; during its early years an enterprise grows rapidly and most of its jobs are created (S-curve?). Beyond that time frame, for every old business that hires X employees there are other old business shed X employees.