The United States is not the nation of small businesses

http://www.guardian.co.uk/commentisfree/cifamerica/2009/aug/13/us-economy-healthcare-productivity

by gasull • 17 years ago

42 52 17 years ago

guardian.co.uk

adamhowell• 17 years ago

This quote is personally why I support health care reform:

"There are enough risks associated with choosing to start a business over being an employee, but the Europeans don't have to worry that they will go bankrupt for lack of health insurance."

And this is an interesting quote from a Krugman post a/b the study (http://krugman.blogs.nytimes.com/2009/08/04/big-business-ame...):

"Another possibility, more favorable to the United States, is that in some European countries (Italy comes to mind) firms stay small to escape onerous regulations."

jon_dahl2• 17 years ago

This quote is personally why I support health care reform:

Me too. I generally lean right on economic issues, but as a small business employer, I wish we had a system like Canada or most of Europe.

viggity2• 17 years ago

I support health care reforms, but the only reforms I support involve reducing the government's role, not massively increasing it. Things like policy portability, a greater ability to create risk pools, the ability to buy policies originating in a different state and the simplification of red tape and bureaucracy.

The currently proposed health care reforms try to ignore the laws of supply and demand because they don't seem fair. But as we found out in the 70's with gasoline price controls, it is better that 10% of people don't get a service because they can't afford it than 60% of people not getting a service because it isn't available.

david9275• 17 years ago

But that doesn't reflect the reality of health care throughout the western world. I'm an American who lives in Europe. The health care is not comparable. The Czech Republic, where I live now, has infinitely better health care and no one is denied "a service because it isn't available." Trust me.

This is one of the big problems America faces: it has been so successful for so long, that it thinks it can't learn from anyone else -- that it has all the answers. It's how big firms fail, and countries are no different.

ajg1977• 17 years ago

I'm confused. You say you support reforming healthcare by reducing the role of government, but what exactly do you mean by this? Reducing medicare? medicaid (although that is more of a state run program)?

Perhaps you could enlighten me by specifying what exactly you'd like to reduce, and what you hope to achieve? (Note: statements such as "reduce government involvement" are soundbites, not answers).

biohacker42• 17 years ago

If the US is truly not a nation of small business anymore that's bad. Small businesses are the true engine of the economy and tend to be more stable. A "top heavy" economy is more typical of developing nations.

jon_dahl2• 17 years ago

Printer-friendly version: http://www.guardian.co.uk/commentisfree/cifamerica/2009/aug/...

cwan2• 17 years ago

CEPR, the think tank that did the research, is a left-wing advocacy group: http://www.discoverthenetworks.org/groupProfile.asp?grpid=72...

That said, I would be curious as to how well their research stands up to scrutiny in the days to come as they've obviously made some provocative claims but I wouldn't accept their views immediately at face value.

update: http://www.examiner.com/x-14795-Page-One-Examiner~y2009m8d5-... - a debunking of the CEPR paper cited though with a wrinkle at the end that states that the OECD paper "is explaining something unique to the US: which could indeed be the lack of national health insurance" but a relationship is != causation which CEPR obviously attempts to argue.

DanielBMarkham4• 17 years ago

but a relationship is != causation which CEPR obviously attempts to argue.

I love the way they put it in their executive summary:

One plausible explanation for the consistently higher shares of self-employment and small-business employment in the rest of the world’s rich economies is that all have some form of universal access to health care.

Sure, and one plausible explanation could be the lack of the quality olives that the Greeks have (Greece heads the chart in small business whatevers that the study is measuring) Taking a look at the chart http://www.examiner.com/x-14795-Page-One-Examiner~y2009m8d5-... , does anybody seriously think this is an ordered list of countries with the best small business numbers?

As a side note, I initially didn't pick up the tidbit that the author is director of the institute that created this study. A list of his recent articles is interesting. http://www.guardian.co.uk/profile/markweisbrot

mercurio2• 17 years ago

It is hardly a debunking if the author writes in an update at the end of the same article that "My critique is thus wrong".

cwan2• 17 years ago

He's not saying that his entire critique was wrong - his attempt to show that healthcare wasn't the reason was "thus wrong". This isn't to say that the authors' attempt to show causation was true either. But, fortunately we do have better critiques here (and critiques where one of the authors of the CEPR attempts to respond to in the second and third links):

(1) http://ipeatunc.blogspot.com/2009/08/entrepreneurship-in-oec... (2) http://ipeatunc.blogspot.com/2009/08/entrepreneurship-and-he... (3) http://ipeatunc.blogspot.com/2009/08/entrepreneurship-and-he...

To summarize - Scott Shane of Case Western studies states as follows:

"If you compare health care’s portion of G.D.P., as measured by the World Bank, with the self-employment rate across the 21 O.E.C.D. countries in the C.E.P.R. study, you will find that the correlation is only -0.19, which statistically speaking, cannot be considered different from zero."

"I know that everyone is focused right now on the health care debate, which is great. But we can’t just say that the absence of universal health care influences the size of our small-business sector. It’s certainly possible that national differences in health care affect national differences in self-employment and small-business generation in some way."

"But we have to show some evidence of those effects."

lutorm• 17 years ago

I read about the lack of class mobility in the US in the Economist, hardly a left-wing advocacy group.

DanielBMarkham4• 17 years ago

There's something about this set of articles that strike me as fishy.

First, the study was measuring "self-employment" as reported on tax forms. Most small businesses start up and disappear without ever appearing on a government tax form somewhere. My neighbor goes to yard sales. My cousin sells rare books on Ebay. I was a stringer for a small paper for while receiving cash payments. These kinds of ephemeral efforts spring up and dissipate all of the time.

Secondly, in the executive summary we go immediately from small business numbers to health insurance issues, which seems like a bit of editorializing. One can debate health care all day long -- I think it needs to be fixed. But I know a lot of guys who have small businesses, and I've never, ever heard somebody say they didn't start a business due to health care costs.

This just doesn't smell right to me.

besquared• 17 years ago

I'd be more interested in looking at the overall income of businesses under 500 people compared across countries. According to the US Census Beaureau that category of employers plus all nonemployer firms account for about 42.19% of all annual receipts. What's it like for other countries?

thstart8• 17 years ago

Reading this article I wondered why it is published in UK by an American economist and what is the point of publishing such an article. If this academic economist lived a little bit in Europe he should know better.

I made some research. The bottom line - an American economist supporting Hugo Chávez.

Weisbrot has been cited as the architect of the Bank of the South.

The Bank of the South (Spanish: Banco del Sur, Portuguese: Banco do Sul); or BancoSur is a monetary fund and lending organization first proposed by Venezuelan President Hugo Chávez.

Some comments on the artice: "...being the only "no-vacation nation"..." I have been working in West Germany for 4 years and can tell - yes indeed Germans have up to 12 weeks in paid vacation. The question is who is paying for this? You can look at the taxes Germans pay and understand the German government is subsidizing it. In Germany grocery stores, etc. still close at 18:00 PM - the debate is still going on to remove this or not. Most probably not - because of the unions.

"...we have a broken healthcare system that costs about twice as much per capita as that of our peer nations and delivers worse outcomes..."

I agree here in US healthcare payment via insurance is not the best solution. From other side in Germany (I know Germany best) the government is subsidizing it. Guess who is paying this?

"...the French could not afford their welfare state..." Again - who is paying the bills. Somebody has to pay the bills.

"...half as much energy per capita as the US does. A big part of this difference is because Europeans, in recent decades, have taken much more of their productivity gains in the form of increased leisure time..."

Increased leisure time? So what is the point?

"...We estimated that the US would consume about 20% less energy if it had the work hours of the EU-15. This would have a significant impact on world carbon emissions..."

Carbon emissions - this was invented by Europeans academics to get more grants for research, then supported from interested leisure oriented parties as a way to extract money from big businesses - e.g. who has the money.

gasull• 17 years ago

I made some research. The bottom line - an American economist supporting Hugo Chávez.

Ad Hominem. This doesn't make less true that the US has less self-employed people per habitant than other developed countries.

thstart8• 17 years ago

self-employment != small business. I believe we are talking about small business here.

psranga• 17 years ago

What is your point? Even sadder to see this thing upmodded so much. I would have thought this would be languishing at -2 or so.

mercurio2• 17 years ago

I can't believe a comment that essentially consists of irrelevant objections to the article is sitting at the top. Please don't upvote emotional rants masquerading as arguments.

The bottom line - an American economist supporting Hugo Chávez

The author's political views do not automatically make his arguments valid.

Yes indeed Germans have up to 12 weeks in paid vacation. The question is who is paying for this? You can look at the taxes Germans pay and understand the German government is subsidizing it.

First, while the German government might subsidize a lot of things, I doubt that it pays employers for the vacation time taken by employees (except in special cases like childbirth). Even if this were true, since the subsidies would come out of taxes, it would be economically the same as a person choosing to take a pay cut for working less hours.

I agree here in US healthcare payment via insurance is not the best solution. From other side in Germany (I know Germany best) the government is subsidizing it. Guess who is paying this?

I don't recall the author claiming anywhere that healthcare is magically paid for in Europe. His point was that per capita it costs half has much and provides better outcomes.

"...the French could not afford their welfare state..." Again - who is paying the bills. Somebody has to pay the bills.

I don't get this rhetorical technique of asking who is paying the bills. Not only is it a bad argument, it is poor rhetoric.

Increased leisure time? So what is the point?

May I point out that almost all art, science and human culture originally came out of leisure time.

Carbon emissions - this was invented by Europeans academics to get more grants for research

Carbon emissions are real. They are byproducts of combustion. It is their trading that was invented. Consuming less energy reduces real world emissions, and increases the tradable commodity.

thstart8• 17 years ago

I would add a comment about Europe (Germany in particular which I know best) - just try to start a small business in Germany. If you are foreigner - forget it. OK who can be a German citizen - 2 ways - 1) you a German by blood - it does not matter where are you born - blood comes first. 2) you are foreigner trying to get a German citizenships - even if you get it after 15 years or more stay in Germany you will be always 2nd class citizen. Reasons - a ton of reasons - too much to list it here. France - the same. Probably Netherland is better - but no much business opportunities there. England - forget it a closed class society - you have to be from inner circle.

In Germany - there are several big companies working with thousand subcontractors. Siemens for example. There is a saying in Germany - if something happens to Siemens - the same will happen to Germany. So basically to have a small business there practically you have to be a subcontractor to some of the big companies there AND better be a German citizen. Big companies there a heavily subsidized by the government. Besides Germany-Russia are so heavily interconnected so you can imagine the subsequences. The pact Molotov-Ribentrop is still not widely known but the European Union wants to make it official data of victims of fascism and socialism because again they are so close. Recently it was discovered German banks with filials in Luxemburg washing money for Iran government - this is a big theme - where the money come in Europe and why this leisure and welfare theme.

Here in US - you can register a business the next day you got your stamp in your passport if you come with a business visa. If you are born here - it is much easier of course, but not much different. I can comment about California where I came not so long time ago but enough to tell - once you understand the US specifics and have a drive you can have a success here no matter what. Opportunities are everywhere even in these hard times.

The financing possibilities - there is simply no comparison. Small business friendliness - beyond comparison. Business opportunities - beyond comparison.

stse• 17 years ago

Is this just upmodded because people here like to bash Europe? A simple google search shows that the poster is just wrong.

tokenadult3• 17 years ago

Please tell us in detail what he said that was wrong, and what sources show the correct facts.

jimmybot• 17 years ago

Contradictory things are being advocated. Health care reform at least intuitively looks pro-small business. But mandatory vacation days and high unemployment benefits? If they are paid out by the hiring company? I doubt that is helpful for small businesses, who can't shift around workers as easily and will be discouraged from hiring if the costs of firing are so high.

And France isn't a nation of small businesses. Their best industries seem to be those really complicated infrastructure ones that require a lot of state intervention (bullet trains, nuclear reactors) and luxury goods (LV). It may have been nice to have that welfare cushion during the financial crisis, but that's a separate and potentially contradictory goal to encouraging small businesses.

And then there's Taiwan. It has always been a country of small and medium sized businesses, and to my knowledge, there was no uptick in this when national healthcare was implemented in the 90s. It could be high at a percentage for other reasons, though, and that it was so prevalent made it difficult for there to be any additional uptick.

thstart8• 17 years ago

"...But mandatory vacation days and high unemployment benefits?...

This is a problem in Germany. One of the reasons only big companies can exist there. Some people there are having 3 month vacation.

"...the costs of firing are so high..." It is very hard to fire there because of the Unions.

"...And France isn't a nation of small businesses. Their best industries seem to be those really complicated infrastructure ones that require a lot of state intervention (bullet trains, nuclear reactors) and luxury goods (LV)..."

Absolutely right. You can extend this statement to other countries in Europe as well.

eru• 17 years ago

> This is a problem in Germany. One of the reasons only big companies can exist there.

There are plenty of small and medium sized business in Germany. Ever heard of the Mittelstand? (Not to deny that those regulations can be a problem. On the other hand, Germany does not (in most sectors, yet) have a minimum wage.)

tokenadult3• 17 years ago

And then there's Taiwan. It has always been a country of small and medium sized businesses

Yes. This was one of the most striking differences between Taiwan and the Republic of Korea during the 1980s, as each country was "graduating" from the Third World into the First World as newly industrialized countries. Taiwan had many small businesses, many of them family businesses employing family members, while Korea had a smallish number of huge conglomerates, employing tens of thousands. There were exceptions to the general pattern in each country, of course, but that was the systematic difference between Taiwan and Korea. Each country thrived with its own economic pattern. Each democratized, even more peacefully in Taiwan than in Korea, over the same period.

In Taiwan, an ancient Chinese proverb is often quoted, sometimes in somewhat modernized form: 寧為雞頭，不為牛後 "better to be the head of a chicken than the rear of a buffalo." A lot of Taiwanese people cherish being business managers rather than employees, and indeed my wife (from Taiwan) has been a small business owner most of her life. She wouldn't want to be someone else's employee just to have more secure employment--she likes making her own business decisions.

davidw• 17 years ago

Aside from the fact that this article is very political and I flagged it, any economic ranking where Greece, Portugal and Italy are leading is probably not indicative of good things.

tybris• 17 years ago

Looking at the comparison in the report I see no correlations between the health care system and the amount of self-employment.

There does seem to be a strong inverse correlation between self-employment and GDP-per-capita, with Norway Luxembourg and US being at the bottom and Spain, Italy and Greece on top. The only thing this report suggests is that a strong economy has relatively large businesses.

joubert• 17 years ago

The US is a nation of free individuals. Big and Small.

thstart8• 17 years ago

I would say "the only nation".

sho2• 17 years ago

And that would be a pretty silly thing to say, wouldn't it?

wmeredith• 17 years ago

I call bullshit. Someone is spinning the statistics. The latest census data from the US SBA says that 36% of all business in the US have fewer than 5 employees.

tokenadult3• 17 years ago

That statistic can be true without showing that most United States workers work in small businesses.

kingkongrevenge2• 17 years ago

You guys realize Europe has all kinds of laws against large retailers and in favor of mom & pop shops, right? This is basically about the inefficient "shopkeeper lobby" that makes it difficult to buy various things outside of weekday business hours.

Small businesses are not inherently better than large businesses. In general, employees of large businesses make more money. Larger firms tend to be more economically efficient.

I am not at all surprised that Europe has more [antiquated] small businesses. I'm a bit surprised someone is trying to present this as a boasting point.

known2• 17 years ago

"A country is not made of land; a country is made of its people." -- Unknown

known2• 17 years ago

Internet and Globalization have profound impact on cultural and socio-economic issues across the world due to the non-proliferation of http://en.wikipedia.org/wiki/Information_asymmetry

The United States is not the nation of small businesses

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