I read this very very interesting article in the Economist which made me go Hmm. The article was talking about Innovation and referred to this graph.
The Economist graph was simplified but the original graph shown below is much better as it provides more information.
Based upon the curve fitting line, you will see that as countries grow and become richer, their rate of entrepreneurship reduces, and that too pretty steeply. Now why would this happen? I can hazard some guesses but no certainty. The first would be that as and how you get richer or the welfare safety net becomes better and better, the hunger for creating value progressively diminishes. The second would be that it would be easier to get jobs rather than worry about raising capital and push for a difficult enterprise. The third factor which I could think of is that as a country becomes richer, it makes it progressively difficult for entrepreneurs to be entrepreneurs, by making it more difficult to fire people, putting in more and more onerous conditions such as Health and Safety, etc. All these combine to make entrepreneurship a losing proposition.
Also, at a particular point in time, they seem to either get stuck or struggle with the next stage which seems to be more difficult. This seems to be the natural trough and despite quite a lot of efforts, the hunger is simply not there. Or it would take superhuman efforts to break through the thicket of regulations. I can well agree to this, while starting up a company is simple in European Countries, the other rules and regulations simply make it way too difficult for a person to embark on entrepreneurship.
But then there are some countries which do make a breakthrough, which is the curious aspect. To what do you ascribe the success of USA and Australia in pushing to develop entrepreneurs? Is it the national ethos? Or the innate hunger? Or their financial system? Or their education system? Why are they so much more risk taking? Or perhaps their time limited welfare system forces them to go about generating value themselves if they do not have a job?
Entrepreneurship is good, it is generating value, creating jobs and ensuring that assets are churned and made use of. Some percentage figures of population engaged in entrepreneurial activity: Indonesia has 19% of its population between 15 and 64 years as entrepreneurs, China 16% and Thailand 15%. India, Malaysia, Australia, USA, Argentina at 10-12% and then Czech, UK, Canada, Denmark, France, Germany, Japan at about 5% or below.
So Mr. Gordon Brown of the UK, what do you have to say about the fact that UK is only showing 5% of its population as entrepreneurs? What is stopping you from doing the same as Australia, USA, India (they are your ex-colonies, my friend - the child excelling over the father?)
As for Mr. Manmohan Singh of India, you need to think deeply, because you are below and behind the curve. You need to make it easier for people to start their own business. Others are leaving you to lag behind!
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