Hillary Clinton as president will bombard the airwaves with new spending proposals. She has an unlimited list of these that she’s already putting out. She’ll make Obama look like a piker. She’ll rival LBJ. She’ll extend his Great Society thrust.
There is going to be a flood of proposals from Clinton. Call it Great Society II. And it will be all wrong. Below, I’ll argue that her proposals on entrepreneurs are an example of how wrong her ideas are; this, without even arguing on the basis of coercion as a wrong basis for effecting social change.
Great Society II is the same old anti-free market stuff. Only the jargon has changed. New lobbies for government handouts have sprung up, like STEM. They latch onto some popular scientific-sounding words, cite some statistics, mix in some PC rhetoric about diversity or helping suppressed minorities. Lo and behold, they’re ready for state edicts, subsidies, regulations that quash competition, standards that hassle competition and “intellectual property protections”. Today’s packaging looks different. The contents are the same: favoritism, privileges, waste, off-the-wall ideas.
Great Society II of Clinton will undermine society every bit as much as has Great Society I of LBJ. It will take knowledge, effort and ingenuity to escape this onslaught, privatize one’s life and insulate one’s family from the federal government. It will take organization to overturn the step-by-step death of America by Hillary’s thousand cuts.
Clinton loves this stuff as does her husband. It’s the new liberalism. It’s modernized. The proposals pick up academic frosting, bandying about terms like investment in human capital, entrepreneurial ecosystem, and smart transportation networks. Government progressive activism is thereby reinvented.
An example is “Hillary Clinton’s Initiative on Technology & Innovation“.
One extract will illustrate how wrong Clinton’s ideas are. In order to see that clearly, we look at fallacies concerning entrepreneurial ecosystems that Clinton has absorbed and that are the basis for her proposals. Professor Daniel Isenberg lists these fallacies for us in his article “What an Entrepreneurship Ecosystem Actually Is“. After comparing what Clinton has to say, we will see that she’s clueless on entrepreneurship; while she mistakenly thinks she’s applying cutting-edge knowledge.
1. Isenberg informs us that
“There is no evidence that increasing the number of startups per se or new businesses formation stimulates economic development. There is some evidence that it goes the other way around, that is, economic growth stimulates new business creation and startups.”
By contrast, Clinton says the opposite: “…job creation is often driven by smaller companies and start-ups—today, small businesses create two out of every three new jobs…”
Isenberg says that periods of growth produce the profit opportunities that cause the entrepreneurs to cause startups. The startups by themselves do not create the economic growth or the profit opportunities. Isenberg even says “In fact, encouraging startups may be bad policy.”
2. Isenberg writes “There are actually few, if any, good evaluations of the impact of near-ubiquitous angel tax credits…In fact, the majority of venture capital investments are in California, New York, Massachusetts, and Israel, with no direct financial incentives other than fully-taxable profits.”
Clinton wants to offer financial credits to underwrite prospective entrepreneurs. Isenberg says that the clearly successful ecosystems we observe didn’t have financial credits or federal government underwriting.
3. Isenberg writes “Job creation is not the primary objective of fostering an entrepreneurship ecosystem.”
Clinton narrowly emphasizes jobs created by entrepreneurs, but Isenberg takes a much broader view that’s more Misesian. It focuses on several different “actors” or players: public officials, banks, universities, entrepreneurs and investors. “Many stakeholders must benefit in order for an entrepreneurship ecosystem to be self-sustaining.” In other words, the federal government might create lots of startups and jobs, but they wouldn’t be profitable or sustainable; whereas a successful ecosystem benefits a variety of participants and is sustainable because of it.
4. Isenberg informs us: “Surprisingly, there is no reason to believe that formal education in entrepreneurship leads to more, or more successful, entrepreneurship; there is, however, some evidence that it is irrelevant.”
Clinton wants to educate people to become entrepreneurs: “She is committed to supporting incubators, accelerators, mentoring and training for 50,000 entrepreneurs in underserved areas.”
Isenberg says that such education doesn’t work. It’s beyond the scope of this blog to explain why it does not work.
5. Isenberg writes “…raising capital, finding talent, and overcoming bureaucracy are three of the top challenges entrepreneurs ascribe to their environments. As I have argued, this is such a ubiquitous phenomenon that it probably reflects something fundamental about the generic process of entrepreneurship, rather than a deficiency of the ecosystem. The process of entrepreneurship intrinsically generates a feeling that risk capital is difficult to raise and in short supply.”
Now, what does Clinton say? “…venture capital [VC] funding is highly clustered—with 70% of all VC funding going to three states, 40% going to one region, 7% going to firms with women founders, and a mere 1% directed to African-American women founders. The result is that too few Americans are benefiting from the opportunity to access capital and put their job-creating ideas to the test. Hillary will support entrepreneurship ecosystems in all parts of the country, with the federal government playing its part to increase access to capital for SMEs [jargon for small and medium-sized enterprises] and start-ups, especially for minority, women and young entrepreneurs.”
Clinton doesn’t understand how entrepreneurship ecosystems arise, why they are geographically limited, why venture capital funding concentrates upon specific local areas, and why so few women and African-American women do not hook up with venture capitalists and receive funding. She implicitly thinks something is wrong (such as discrimination) in all of this, and she proposes somehow to fund such ecosystems “in all parts of the country”. She understands nothing about the economics of location or space. Among the works of Thomas Sowell can be found cogent observations and explanations about locality and the economics of specialization, of peoples worldwide, that might enlighten Clinton.
Clinton thinks that discrimination is the source of statistical disparities. She’s wrong. That will not explain the successes and failures in certain fields of groups who have been the object of discrimination. The subject is much more subtle. Discrimination doesn’t explain the self-selection of females and males into various occupations or many other phenomena associated with sex.
Clinton also thinks that she can alter matters or somehow improve society or social outcomes by throwing money at certain kinds of people like “minority, women and young entrepreneurs.” The government has the power to induce people to apply for all sorts of handouts. It can create long lines of such applicants. Who pays for it? What opportunities are passed up because capital has been diverted and shifted? Does this process alter anything fundamental or does it merely produce a numbers game in which counting more women business startups is deemed some sort of success? Does this process have its own negatives? Is it even sustainable?
What sort of coercive vision is embodied in the process by which Hillary Clinton and Congress, in their massive ignorance, attempt to create the better, even the great, society? Can they look at a few statistics, spout some jargon, listen to a few intellectuals and know what’s wrong with society (and individuals) and come up with supposed remedies for their supposed ills? It’s preposterous to think that they can, and yet that is the basic assumption of the Great Society and Great Society II.
The proposals of Clinton are ignorance passing itself off as knowledge. This is as true in her domestic activism of her Great Society II, of which the futile attempt to subsidize entrepreneurship ecosystems is one example, as it is in her MENA foreign policies.
10:59 am on August 26, 2016
