Entrepreneurs protect the economy; governments should invest in them

Economies across the globe face a double-headed threat: record levels of unemployment and towering public debt. Over the past two years, many western governments’ response to one has come at the cost of the other; furlough schemes and stimulus cheques have left government balance sheets looking worryingly red.

It’s time to take a more aggressive approach. Only one activity raises tax revenue whilst also providing jobs: entrepreneurship. Yet the job of nurturing talent and spotting business potential shouldn’t be left to a handful of venture capitalists (VCs) and angel investors. Unemployment and sky-rocketing debt is a government problem; it therefore requires a government solution.

Governments can foster entrepreneurship; I know this because I’ve helped them do it before. I helped to lead the UK-based Start-Up Loans initiative, a project that provided loans, advice and mentorship to British entrepreneurs. The program created 28,000 businesses and provided 100,000 jobs. The success of the program proved one thing: Fusing the machinery of government with the innovative impulse of entrepreneurs can be a potent formula for economic growth.

Post-COVID employment figures across the world are stark. In the UK, 660,000 people in the hospitality sector lost their jobs in 2020, and almost two-thirds of people who lost their jobs in the pandemic were under 25. Figures from across the globe further show that it is the young who have been hit the hardest; employment for young people has fallen by 8.7 percent over the last year, compared to 3.7 percent for those older.

This should worry us; idle hands are devil’s playthings. Unemployment is not just one social problem, it’s the root from which many grow. Alcohol and drug abuse rise, civil unrest and extremism become more likely, whilst tax revenues plummet.

And yet, most of our government-backed schemes to cope with pandemic unemployment have not focused on creating more jobs and businesses, they’ve merely sustained existing ones.

Schemes such as furloughing and stimulus are wholly defensive. In the early days of the pandemic, government logic was to batten down the hatches until the whole pandemic blows over. It’s become obvious that the pandemic isn’t going away; our economic plasters won’t heal our wounds.

Business and job creation is our best buffer against future waves and variants. That’s why governments should be actively encouraging entrepreneurship. There is clearly a public appetite for this.

Indeed, the popularity of figures like Elon Musk shows that entrepreneurs are the new rockstars. The phenomena of the Great Resignation has been combined with record numbers of new business registrations. In the U.S., a record number of more than 4.4 million new businesses were created during 2020, and a similar theme has been recorded across Europe.

When encouraged, startups can become the backbone of any modern economy. Take Singapore; we may ask how a country with few natural resources has the fourth-highest GDP per capita in the world. The answer is entrepreneurship; In Singapore, 11.2 billion Singaporean dollars were generated in the first nine months of 2021, more than doubling the amount of the previous year.

Perhaps this success is due to the forces behind this encouragement; take a look at the members of the board of Enterprise Singapore (the government agency created to support new companies). Instead of a slew of bureaucrats, you’ll see a selection of people with their own business and enterprise experience.

Governments do frequently try to become their own start-up incubators. However, they often fail for one reason: bureaucrats are, by nature, slow and risk-averse. Indeed, the reason that Britain was able to lead the world in vaccinations was that it was spearheaded by someone who understood risk, agility and spread investing: the venture capitalist Kate Bingham.

Nestling real-world business experience within the framework of government can undercut the nepotism that is rife in the angel investor world. Entrepreneurs can access grants based on their business fundamentals, not the depth of their network or their PowerPoint presentation skills.

Much like in my own Start Up Loans program, we should place entrepreneurs in the framework of government to run these programs. Those of us with experience and an eye for a good gamble can channel the best impulses of government, whilst 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 may supplant 85 million jobs by 2025.

Entrepreneurship is not only a job creator, it’s a job redistributor. For example, tech start-ups don’t only make new jobs, they make long-term jobs in the industries of the future.

Some might argue that a time of economic instability is not the best time for venture capitalism. I argue the opposite; this is an opportunity. Just think of some great success stories from times of financial turbulence. Companies such as Airbnb and Uber — now huge names — were created during the financial crisis of 2008.

Baron Rothschild famously said that “The time to buy is when there’s blood in the streets.” He’s right, and governments should take note.

We cannot rely on Omicron-rattled angel investors and VC funds alone to solve our unemployment and debt crisis. It should be the responsibility of governments to create not dozens, but thousands of new jobs and businesses as we step forward into 2022.

James Caan is a serial entrepreneur and TV personality, having been one of the investors on the BBC reality TV show “Dragon’s Den.”