Madsen's right about regulation and small business

Well, I mean of course Madsen's right about regulation and small business. But I have more evidence to back me up on this than just the usual desire to agree with my boss. Here's John Robertson at the Atlanta Fed.

The situation in the US is the same as it is in the UK. It just isn't big business which produces the growth in jobs: in fact, big business usually sheds jobs in any one year. The engine of job growth, as well as the engine of innovation, in the economy is not even small business: it's new business. New people trying out things in new ways, that's really what drives the whole system forward.

And in the US at least we can see that there's been a decline in the rate of new business formation. There's also been a decline in the size (ie, the number of jobs created by those new businesses) of the new businesses created.

This is not a macroeconomic problem, not one to be explained by boom and bust, lack of aggregate demand nor even the rate of taxation or of government spending. This is purely a microeconomic problem: something is wrong with the basic job creation and innovation engine of the economy. And microeconomic problems have microeconomic solutions.

Now I have set up businesses: in several different countries at various times. Like most who do so I've never had a big hit, I'm not some multi-millionaire, but I do have real experience of the hoops and loopholes that you've got to get through to get a business up off the ground. In some respects the UK is just great: it's £20 to register an LLP for example and registering for VAT is simplicity itself. In others, in the regulations around the employment of staff (as Madsen points out) we're burdening the weary entrepreneur and thus dissuading them from doing so. This might shock some but I've great sympathy for many who operate their businesses entirely illegally: I've worked in a country where that was the only way it was in fact possible to run a business, simply by entirely ignoring the State and its rules.

No, I don't desire that for the UK: not yet at least. But if we want to get the Great Jobs Engine moving again then we do really need to cut the regulations on new business. That bonfire of the red tape which we've been promised but which still hasn't arrived. In essence, we need a bit more of that capitalism, red in tooth and claw, rather than the endless paperwork of social democracy.

Previous
Previous

Welcome to Lootersville

Next
Next

Is now the time for a Castle Law?