Sunday, July 20, 2014

A Tribute to the Everyday Entrepreneur

Peter Gordon recently asserted that - given the state of politics in the present - the best we could hope for was to "pray for gridlock". Certainly I can see the reasoning, and yet I reject it just the same. Interestingly enough in that post, he referenced the book "Good Capitalism, Bad Capitalism" (2007) which I agree is a good primer for the subject. However, something about entrepreneurship seemed missing in the book's portrayal of capitalism, which perhaps had some bearing on Gordon's conclusion. Is gridlock really a "best response" to crony capitalism and politics?

Gordon's remarks about gridlock also reminded me of a recent post from Peter Boettke who claimed that crony capitalism was at least "better than crony socialism". For me, that is too broad a conjecture. To what extent does the marketplace actually function, for those who seek to become entrepreneurs? Under gridlock conditions, any attempt to simply participate may appear as though an attempt to disrupt. Simple descriptions of capitalism versus socialism may not hold the answer.

"Good Capitalism, Bad Capitalism" did not explore the alternatives of the present as thoroughly as I would have liked. For one thing - even though he was a co author - William Baumol's earlier contributions regarding present day service formations, were missing. Also, the role of the everyday entrepreneur was discounted. Granted, the more obvious aspects of economic growth are from disruptive innovation and the noted entrepreneurs who foster them. Before governments took on a major role in economic activity, however, everyday entrepreneurs were in many ways the center of economic activity in the U.S.

Much about the disruption we do get (gridlock notwithstanding) is somewhat misunderstood. How is the marketplace ultimately shaped by the disruptive innovation which is allowed to proceed? Which disruption is not fostered, and why? Are we getting the kinds of disruptive innovation which are so vitally needed for broad progress? Does the disruption which takes place, make the marketplace more substantive in overall context...or less? And most important for this post: is there any room left at local levels, for the everyday entrepreneur? Because if not, how are we to think about the outposts which remain? Every one of them needs to become something a lot more substantial than flyover zones.

Questions such as these matter. At the very least, Wikipedia's approach to entrepreneurship felt more evenhanded than usual, given the reluctance of some to consider "mere" business owners as entrepreneurial. And yet, entrepreneurs routinely work with, rearrange and arbitrage the elements that happen to be within the reach of their own environments. In some sense, this is what has always transpired, between human and resource. Whether a coordination of such in one's garden, management of resources in one's home environment, or ultimately, the arrangement of the broader marketplace. The crucial element in all this is that each individual remains producer, coordinator and consumer from a vast wealth of resource potential.

While the everyday entrepreneur is temporarily forgotten in the present, these individuals were once the workhorses of capitalism, at local levels of the economy. Many a baby boomer sought to remain engaged in these earlier roles, in communities which also longed to maintain the "connecting points" they were once able to provide to the larger economy.  It's still easy to assume away the demise of the everyday entrepreneur in local economies, and chalk it up to the more efficient workings of the big players.

For services which rely on time use, better "efficiency" elsewhere is an illusion, just the same. For the movement of product separate from time, some centralized locations make sense...at least up to a point. For decades, local stores have closed their doors, while those who were once entrepreneurs either retired or perhaps moved to where work can still be found. It's easy to rationalize that the once available good is now only a long trip from home, or perhaps an internet purchase away. Still, these more distant forms of product availability, are somewhat lost to local resource coordination patterns which local entrepreneurs and their (nearby) customers were able to utilize for common experiences.

With little economic activity held in common, those who live in close proximity in "forgotten" areas, tend to lose the purpose of living close to one another. What's more, costs of accessing (locally) missing marketplaces - whenever one has this option, include externalities which are difficult to ascertain. The shift of economic life to the cities may appear benign or even desirable in some contexts. However, that shift circumvents local economic capacity - hence social and cultural factors - in unexpected ways. There's too little of real substance to replace lost economic activity in many areas. As it turns out, more may be at stake, than whether product formations remain locally available.

Unfortunately, what existed prior to the earlier economic enthusiasm of towns all over the U.S.,  is no longer part of the memory of many who are alive now. Rural areas have often been left behind, which makes it harder for them to support further growth they suspect will not find its way to their communities. They cannot help but express their disappointment towards Washington, especially when the most capable among their populations are compelled to leave for entrepreneurial opportunities elsewhere.

Even as many areas have declined, Washington gains considerable advantage from the places which still thrive. Still, it does little good to put all the blame on Washington. Local economies also need to look inward, to consider the NIMBY practices which ultimately excluded many among their own friends and family as well. When communities decide to exclude by rule and regulation, governments are quick to assent. With every compromise and favor for the select, fewer resources remain, to coordinate and arbitrage among the many.

Today's entrepreneurial arbitrage has little to do with coordination of local potential, as frameworks of possibility have shifted ever outward. As a result, it is the uncommon breed of entrepreneur, who breaks through the many barriers to gain economic entry at this level. Whereas, the everyday entrepreneurs who defined the landscape before income patterns diverged, made claims to the marketplace in ways which left plenty of room for local "others".

The earlier breed did not always need to gain entry through disruption - yet when disruption did occur, it tended to do so in ways which included innovation for the masses. As a result, everyday entrepreneurs often succeeded by expanding the marketplace from its earlier definition. Importantly, this is the same strategy which is utilized by start ups in developing countries today. They are not disrupting in every instance, so much as they are adding new growth. Whereas, creative destruction in developed nations isn't necessarily "creative", so much as it is simply market displacement by dominant parties.

Innovative disruption is still very much needed. However, this would be a unique kind of disruption, which would make possible what is still a missing marketplace. Hidden within that marketplace is a wealth of possibility for the everyday entrepreneur, in terms of both innovation for the environment, and innovation in services offerings as well. This disruption would form a new template in which it would once again be possible for numerous entrepreneurs to participate locally. Yet it would not be the kind of disruption that continually displaces others.

Hopefully I did not depress readers with a post written in lots of past tense! By no means am I resigned to the idea of everyday entrepreneurs as belonging in the past. Rather, I wanted to illustrate what has happened to local economies, so that the problems of economic exclusion might be overcome. There's still time, and there are more than ample resources to do so. Let's just do it.

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