Global Economics

Europeans Must Embrace Entrepreneurship


Abandoning the “cliché of class warfare,” they will have to learn to court risk in order for the Continent's sluggish economies to prosper

Suddenly, politicians across Europe seem to be banking on entrepreneurs to solve the Continent's perennial problem of low growth and mass unemployment. Entrepreneurship has made a star debut at EU summits, in governmental funding, and, not least, in the “national reform programs” which are at the center of the Lisbon II reform process.

But what a shock when a recent survey of French students found that only a tiny number want to go the entrepreneurial route, while 75% percent fancy life-long civil servitude. Even in Scandinavia, the pride and joy of European economic reform, the most competitive businesses tend to be entrenched incumbents rather than innovative young startups. In fact, according to a recent Eurobarometer survey, only 2% of Europeans say they are in the process of setting up an enterprise, compared to 8% in the U. S.

The political class may be finally paying attention to the people who are the backbone of every successful economy. But the policies they have put in place aren't likely to close Europe's entrepreneurship deficit. Too many programs billed as pro-entrepreneurial are overly dependent on government subsidies—for instance €90 million earmarked for a European search engine to rival Google (GOOG).

A SIMPLE PLAN.

And they are excessively bureaucratic, with countless action committees, prize ceremonies, and consultative processes. Does anyone really believe that Bill Gates, Michael Dell, and Larry Ellison would have excelled in their businesses because they got a government handout or received an entrepreneurship award?

At the end of the day, entrepreneurship is quite simple. A startup has to have a fair chance of succeeding. If it does succeed, it has to pay off financially and, at a minimum, be accepted by society—or better yet, celebrated and admired.

For many Europeans, "job protection" is insurance against decline and failure. But for entrepreneurs the best—and in the long-run only— insurance is a healthy economy that rewards risk-taking, is based on meritocracy, and provides a level playing field in which growth and expansion are possible.

OVERLY RIGID.

Has it really become any easier to do business in Europe? Do entrepreneurs feel empowered to unleash their potential? Hardly, one must conclude. Product- and especially service-market liberalization have been slow. Europe's labor market remains overly rigid, and the countries with the most rigid job "protection" rules also have the highest levels of unemployment.

If only 50% of Europe's small- and medium-sized companies could employ one extra person, an additional 10 million jobs would be created—offering our 19 million unemployed the ray of hope they so urgently need.

But the key impediment to entrepreneurship is cultural, namely Europeans' continued preference for economic incumbents, big brands, linear career paths, and their unforgiving attitude towards failure. Too few parents advise their children to take the risk of entrepreneurship, and instead urge them towards "safe" careers in established companies or civil service.

NEED FOR PRAISE.

Too few customers turn to entrepreneurs for help, taking their business instead to familiar big companies. Too few banks and venture capitalists take the risk of servicing the financial needs of entrepreneurs.

Too few politicians and administrators reach out to entrepreneurs, lending a hand during the startup phase when it is most needed, and providing a legislative framework in which entrepreneurial failure does not amount to professional suicide. And too few public commentators praise the role of entrepreneurs, repeating instead the old 19th-century clichés of class warfare between ruthless employers and exploited workers.

If anything, these attitudes have hardened during the economic downturn of the past few years. As they watched businesses struggle and fail, many Europeans concluded that entrepreneurship was too hard, too risky, and too time-consuming—especially in comparison with the traditional European employment model, with its guaranteed pensions and health insurance, six weeks of paid vacation, and limited working hours.

FEW ROLE MODELS.

There are few role models to inspire our youngsters or empower people who ponder self-employment. Entrepreneurship education is in its infancy in Europe, and few organizations actively explain and defend the role of entrepreneurs. When the issue of entrepreneurship was discussed at a recent meeting of EU finance ministers, the invited expert was from the U.S.-based Kauffman Foundation.

Entrepreneurs are the lifeblood of our economies, our communities, our collective future. Without them, Europe's stuttering economy will not recover, our unemployed will not find jobs, our aging societies will be further drained of dynamism.

For too long, Europeans took childbearing for granted, with the devastating demographic results we experience today.We should not make the mistake of taking entrepreneurs for granted. In a global labor market, the most talented and determined entrepreneurs can easily move somewhere that is more receptive to risk-takers and more rewarding of hard work.

Cutting red tape and handing out entrepreneurship prizes is a start. But it doesn't address the more fundamental problems: Europeans' unease with the concept of competition, their reflex to protect incumbents, their distrust of self-initiative and risk-taking. These are the problems our leaders must tackle head-on if they hope to restore vigor and dynamism to Europe's economy.

Ann Mettler is executive director and co-founder of The Lisbon Council, an advocacy group and policy network committed to raising European competitiveness, encouraging economic growth, promoting structural reform, creating jobs, and working toward a better, more prosperous future.

The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus