Sunday, 11 March 2012

'Free' market myths no.3: entrepreneurs create wealth

It seems that wherever you go these days you are subjected to neoliberal propaganda. The media is full of 'free' market pundits endlessly repeating the mantras of "red tape" and "privatisation", and no matter how bad things get, as a result of the economic crisis created by neoliberal 'free' market fundamentalists, we are told we need more and more of the same. As I've said before this is because the 'free' market fundamentalism of the neoliberalists is not just a mere ideology - its more a system of belief. The advocates of the market have more in common with the fanaticism of the Taliban than they do those who have historically been on the political and economic right.

Which brings me to the third post in my series about 'free' market mythology - entrepreneurship. In the mythology of the market, entrepreneurs, who start out with small businesses and end up with empires, have been elevated to the role of magicians, they are the Gandalfs and Harry Potters of capitalism, individuals possessed of exceptional powers, and without them, you would think that we would all still be living in caves. If you do an internet search on 'wealth creation' you will find many dozens of evangelical articles which extol the virtues of entrepreneurship, and the vital role of entrepreneurs as wealth creators.

The fact is that the magical powers of the entrepreneur have been greatly exaggerated because they are not responsible for wealth creation. But if not them, who is? Step forward the humble worker. All the wealth that has been created in the history of the world has been created by working people, and workers were creating wealth well before entrepreneurs were ever thought of. It is a fact that this iPad I am now using was made by workers not entrepreneurs. The iPad itself was made by Chinese workers in China and was designed by workers at Apple in the USA. No entrepreneurs were involved. The same is true not only of every other product you buy, but the house you live in and the food you put on your table each day. The problem with this reality is that it doesn't fit with the market belief system.

But is not just ecosocialists like me who think that very little if any real wealth is created by entrepreneurs. Even Scott Shane, Professor of Entrepreneurial studies at Case University in the USA, doesn't think entrepreneurs create wealth. He thinks that large established businesses can create more jobs in the USA than entrepreneurs. The fact is that the plucky entrepreneur who sets up a small business that becomes a successful corporation is actually the real myth. The chances of it happening are very small indeed. An article in the New York Times also debunks many of the myths about the small number of entrepreneurs who do make it. Far from being the plucky barrow boys of 'free' market mythology they are well educated individuals who come from middle-class or wealthy backgrounds. These people are usually older than the myth-makers would have you believe and have a track record which often includes business failure. In fact, co-operatives, which are run democratically by workers, have a far better track record of success than businesses set up by entrepreneurs.

'Free' market propaganda has penetrated so far into our media that statements such as "entrepreneurs create wealth" have become almost accepted as axiomatic. I was listening to Radio 4 recently and caught part of one of the business programs which are becoming all the more common these days. The format is that a presenter sycophantically 'interviews' 'successful' businessmen and women and gushes about how rich and talented they are. On this programme I heard one of the 'interviewees' say that poverty could be eliminated in India if there were more entrepreneurs. But this is arrant nonsense. There are already millions of people running their own small businesses in India and the Third World. They are all poor and will remain so. They run these businesses because they have no choice, because 'free' market capitalism has failed to find them a job or a decent living. If they could get a decent job as an employee, they would jump at the chance. This is explained by the economist Ha-joon Chang in this excellent post on poverty in the 'developing' world. And what's more as capitalism fails in the west, more and more people are having to create their own jobs. This isn't a success as some would have you believe, its a failure. A failure of capitalism create decent jobs that people want. In fact, as the 'free' market fundamentalists gain more influence, so the number of real, decent jobs that people would want to have, continues to decline.

The simple truth is the the myth of the entrepreneur is an important pillar of 'free' market fundamentalist belief and propaganda. It enables those who are successful capitalists, who bask in the glory of wealth, to promote an image of plucky success. Don't they richly deserve their vast riches? Didn't they do it on merit? Er....well actually no. Capitalists are overwhelmingly people who inherit wealth, they don't create it. Those that are successful like Gates and Murdoch usually rely on creating a monopoly for success, as Gates did with Windows, and Murdoch did with Sky, not brilliance and dynamism. But don't be fooled, capitalists get wealthy by exploiting the efforts of workers through the mechanism of 'surplus value' as Marx described in Capital. But for the purposes of the 'free' market fundamentalists it is essential that you think otherwise.


Anonymous said...

I was absolutely blown away by how convinced you are that capitalism is a bad thing, since you seem to know nothing about it. I feel sorry for people who lament on the fact that some people are simply more able, innovative, talented and resourceful than others, and ergo create greater value for society than others do or can.

Unknown said...

Having such myth over wealth creation cannot help us to be a success person. If we want to be successful in the future we must take some risk and try everything.