What has fuelled the growth in living standards over recent times? Debt and technology, most certainly. But a significant, and overlooked, factor has been the increased variety of entrepreneurs who have created businesses, jobs and wealth.
It is clear to me that the diversity of those who work for themselves has changed beyond recognition in the past few decades. This broadening of the entrepreneurial gene pool has been of huge benefit to the British economy.
In 1980, when I took the plunge, very few women ever thought of starting a business. But in recent years they have been responsible for founding as many as a quarter of all new businesses, and that figure is climbing. I see no reason for the trend to reverse. And most of these female entrepreneurs are incremental: they are not displacing male entrepreneurs, but increasing the army of those who run a business. Because, as ever, capitalism is not a zero-sum game.
In past generations, university graduates rarely became entrepreneurs – now they represent an increasing proportion of all business owners. Thousands even originate companies while still undergraduates. Similarly, privately educated young men and women used to go into the professions. By contrast, in the 21st century, increasing numbers of them want the freedom and independence of working for themselves. There is no longer a bias towards individuals from certain socioeconomic backgrounds launching start-ups. In 2010, citizens of every class are up for the challenge.
Immigrants have always been more likely to be self-employed than the general population. Rising levels of immigration – especially from India and Asia – have led to many more successful entrepreneurs from different ethnic groups. And unlike in the past, nowadays immigrants – or their descendants – are involved in every type of trade, rather than sticking to a few obvious industries such as retailing, textiles and restaurants. Their confidence and ambition has grown enormously, and this has been a great boon.
Another group that is far more entrepreneurial than formerly is the 50-plus cohort. “Olderpreneurs” are launching companies for many reasons: they have been made redundant; pension provision is not what it was; or possibly because they want to carry on working and earning past retirement age.
All this is good news. But I worry that so much of this potential spirit of enterprise is squandered, thanks to the deadening hand of the state. Regulation and tax are lethal inhibitors that stunt growth and discourage risk taking. In the past decade, a rising tide of legislation in areas such as employment has virtually cancelled out all this extraordinary effort. If the government bureaucracy and costs borne disproportionately by small businesses were to be slashed, the impact on jobs and business creation would be dramatic.
Whoever wins the forthcoming general election must cut the legal and tax burden on small companies, despite the deficit. If the politicians do that, the irrepressible optimism of entrepreneurs will be fully unleashed, and genuine rebuilding from the downturn can begin. But I am not hopeful. Few of the key decision-makers have ever started a venture or met a payroll. As Benjamin Franklin said: “It is wonderful how preposterously the affairs of the world are managed . . . for regulating commerce an assembly of great men is the greatest fool on earth.”
Advocates say the proliferation of red tape has made society fairer, or safer, or some other imagined improvement. Instead, it deters initiative and reduces opportunities. Civil servants, European Union officials, union bosses, activists and other misguided characters who help set these agendas fail to realise that without these waves of hopeful entrepreneurs, prepared to give it a go, we shall slump into a mire of diminished life chances and relative decline. The danger is that their contribution will go the way of North Sea oil: a once-in-a-generation stimulant, swamped by state-sponsored social programmes and government morass.
