Economies around the world face a twin threat: record levels of unemployment and colossal public debt. Over the past two years, the response of many Western governments to one has come at the expense of the other; furlough schemes and stimulus checks have left government balance sheets in an ominous red.
It’s time to take a more aggressive approach. Only one activity generates tax revenue while creating jobs: entrepreneurship. Yet the task of nurturing talent and spotting business potential shouldn’t be left to a handful of venture capitalists (VCs) and angel investors. Unemployment and skyrocketing debt is a government problem; therefore, a government solution is needed.
Governments can foster entrepreneurship; I know it because I already helped them do it. I helped run the UK-based Start-Up Loans initiative, a project that provided loans, advice and mentorship to UK entrepreneurs. The program created 28,000 businesses and provided 100,000 jobs. The program’s success proved one thing: merging the machinery of government with the innovative impulse of entrepreneurs can be a powerful formula for economic growth.
The post-COVID employment figures around the world are startling. UK, 660,000 people in the hospitality sector lost their jobs in 2020and nearly two-thirds of people who lost their jobs in the pandemic were under 25 years old. Figures from around the world further show that young people have been hardest hit; youth employment has fallen 8.7% over the past year, compared to 3.7% for older people.
This should worry us; idle hands are the devil’s playthings. Unemployment is not just a social problem, it is the root from which many grow. Alcohol and drug abuse uprising, civil unrest and extremism becomes more likely, while tax revenues fall.
And yet, most of our government-backed programs to deal with pandemic unemployment have not focused on creating more jobs and businesses, they have simply supported those that already exist.
diets such as leave and stimulus are entirely defensive. At the start of the pandemic, the logic of the government was to batten down the hatches until the whole pandemic exploded. It has become clear that the pandemic is not going away; our economic band-aids will not heal our wounds.
The creation of businesses and jobs is our best buffer against future waves and variations. That is why governments should actively encourage entrepreneurship. There is clearly a public appetite for this.
Indeed, the popularity of characters like Elon MuskElon Reeve MuskCanadian Prime Minister Calls Truckers Protesting COVID-19 Vaccine Mandate ‘Occupation’ Why Is Putin So Confident These Days? Federal officials review Tesla PLUS drivers’ ‘phantom braking’ complaints shows that entrepreneurs are the new rockstars. The phenomena of Big resignation was combined with a record number of new business registrations. In the United States, a record number of more than 4.4 million new businesses were created in 2020and a similar theme was registered throughout Europe.
When nurtured, startups can become the backbone of any modern economy. Take Singapore; we can wonder how a country with few natural resources has the fourth highest GDP per capita in the world. The answer is entrepreneurship; In Singapore, S$11.2 billion was generated in the first nine months of 2021, more than double the amount of the previous year.
Perhaps this success is due to the forces behind this encouragement; discover the members of Enterprise Singapore Board of Directors (the government agency created to support new businesses). Instead of a slew of bureaucrats, you’ll see a selection of people with their own business and corporate experience.
Governments often try to become their own start-up incubators. However, they often fail for a reason: bureaucrats are inherently slow and risk averse. Indeed, the reason Britain was able to lead the world on vaccinations was because it was led by someone who understood risk, agility and distributed investment: capital- risky Kate Bingham.
Nesting real business experience within the framework of government can undermine the nepotism that plagues the world of angel investors. Entrepreneurs can access grants based on their business fundamentals, not the depth of their network or their PowerPoint presentation skills.
A bit like home Start-up loan program, we should place entrepreneurs within the framework of the government to manage these programs. Those of us with experience and an eye for a good bet can channel the best government impulses, while limiting the worst.
Yet we must remember that COVID will not be the only job killer of our generation. the World Economic Forum predicts that automation could supplant 85 million jobs by 2025.
Entrepreneurship not only creates jobs, it redistributes jobs. For example, tech start-ups not only create new jobs, they create long-term jobs in the industries of the future.
Some might argue that a period of economic instability is not the best time for venture capital. I argue the opposite; it’s a opportunity. Think of some great successes in times of financial turmoil. Companies such as Airbnb and Uber – now big names – were created during the 2008 financial crisis.
Baron Rothschild said “the time to buy is when there is blood in the streets”. He is right, and governments should take note.
We cannot rely solely on angel investors and venture capital funds rattled by Omicron to solve our unemployment and debt crisis. It should be up to governments to create not dozens, but thousands of new jobs and businesses as we move towards 2022.
James Caan is a serial entrepreneur and TV personality, having been one of the investors on the BBC reality show ‘Dragon’s Den’.