a person who sets up a business or businesses, taking on financial risks in the hope of profit.
From the dictionary definition above, it is made clear that entrepreneurs take on financial risk in the hope of making profit. In a free market, the only way for entrepreneurs to make a profit and succeed is to improve the lives of others. This could be through the innovation of a completely new product that they see a need for. Or it could be by providing a service in a more efficient and better way than their competition. They may find a way to reduce the costs of a product or service so that they can provide better prices than others. Whatever they do, they must find a way to make other people’s lives better.
Of course almost nowhere in the world operates in a true Laissez-faire way. Wherever you go, you will find government intervention. Some places are more free than others, such as here in Australia. However we still have a massive amount of government regulations, taxation and general bureaucracy. Despite this, many entrepreneurs are still able to find a way to improve the lives of the general public and therefore turning a profit for themselves. I would however like to list just some of the challenges in place which make life harder for entrepreneurs and decrease the standard of living for all:
- Income Tax – An obvious but big one. When you decrease the potential reward for entrepreneurs, it is no wonder that you have less people wanting to take the risks involved in being self-employed and starting small businesses.
- Minimum Wage Laws – Many entrepreneurs may start up on their own and put in long hours to avoid the overheads of employing staff. However if they are hoping to grow then they will inevitably need to plan for staff employment in the future. Knowing that they will have to pay a minimum amount decided by a central bureaucracy, even for staff that have very little skills & experience is no doubt going to dampen the aspirations of some potential entrepreneurs.
- Barriers To Entry – Federal and state governments love to mandate licenses for almost every sector along with countless regulations. This is great for the big established companies since it makes it hard for the little guys to get involved and compete. However it is the consumers who lose out (through higher prices) as well as the small guys looking to get involved and provide a better service, product or price.
Despite the various barriers, there are still many new entrepreneurs and companies starting up each day and improving the lives of consumers. One such company is Uber which has faced, and continues to face, constant opposition from government due to heavy lobbying by the established taxi industry. Uber makes life for the general consumer far better. They can easily book the exact type of vehicle they require (or prefer) while viewing ratings and feedback of potential drivers. It is also often cheaper than a taxi. Drivers earn more than traditional taxi drivers while passengers pay less. Everyone is happy right? Everyone except for the taxi industry and this is why Uber must be stopped. In many cities around the world, it costs massive amounts of money to gain a taxi license. Not to mention the mountains of paperwork to appease the regulatory requirements. However the taxi industry quite likes this because it was keeping potential competitors out of the game. That was until companies like Uber came along. Surely the taxi industry must work at improving their service, lowering their costs or coming up with an innovative way to compete with Uber? No. It is of course far easier to spend big on lobbying government for tighter regulations to close any “loopholes” that are allowing Uber and similar companies to compete.
This is why you will often hear politicians, unions & the media badmouthing Uber and warning of how dangerous and risky it is. However demonising innovative companies such as Uber for improving the lives of the general public is nothing new. In fact, some of the greatest entrepreneurs in history are now looked down upon by the history books as if they were criminals. One such case is Cornelius Vanderbilt, the great nineteenth century businessman. He truly did face an uphill battle. He was not born into massive wealth and he chose to compete in industries that heavily favoured his competition through crony capitalism. He entered the steamboat industry against government favoured monopolies. In doing so, he managed to overcome the opposition and bring passenger fares down drastically while creating many new routes and services. He then entered the railway industry and done the same thing. While his competition were benefitting from government contracts, he went alone and prospered. HIs competition were being rewarded for waste by being paid for each mile of railway line they laid down. This gave them incentive to increase the length of routes, plant their routes to go over mountains and through rugged territory, etc. Despite all their government assistance and favouritism, many of these competitors went broke and had to beg for government bailouts or go bankrupt. Yet Vanderbilt was able to lay down new routes and bring passenger & freight fares down dramatically. It is therefore ironic that many history books will claim that Vanderbilt was a monopolist who is to be frowned upon. Many will claim he and others like him are the reason why we need government intervention to prevent monopolies.
Western society has prospered and flourished immensely through strong private property laws and relative free trade. It is also the culture of society which has in the past valued entrepreneurs, small businesses and others who trade, produce and innovate. Yet it is this culture which seems to be under threat in much of western society. Instead of valuing those who produce and create jobs, we are looking at ways to tax them more or burden them with even more regulations. Many people are envious of those with wealth and use this envy to downplay or even attack their roles in society.
Often people will hold “public servants” in higher esteem than private entrepreneurs. Yet in reality it is the entrepreneurs that serve the public. Entrepreneurs and business owners are meeting the demands and wants of people. They can only profit if they provide the market with something they want. This is not the case with “public servants”. Their wages come from taxation. People do not decide that they want public servants creating something or doing some service in a voluntary way. Should we then attack, abuse or belittle “public servants”? Of course not. However we should hold the private sector up higher and value it’s importance. We should be voting to decrease the size of government and allow the market to provide more. Continuing on our path of praising big government and chastising private enterprise is not going to produce a society where we can prosper and live as well as otherwise.
I will finish this post with an excellent video explaining why cronyism (or crony capitalism) is such a problem:
David works at a weighbridge company full-time while enjoying writing here in his spare time. Please leave a comment if you have any thoughts or questions.