Luke Johnson celebrates entrepreneurial culture:
My sense is that the present cohort of graduates and twentysomethings is far braver than I was. The entrepreneurial culture has never been more lively, and I am confident that in the coming years there will be hundreds of brilliant new enterprises led by this generation of risk-takers, who opt to control their own destiny.
This runs into Rick's objection, that self-employment is nothing to celebrate, as it is a symptom of economic failure.
So, who's right - Rick or Luke? Four things make me side with Rick:
- Self-employment, especially now, is a form of under-employment; people sitting around waiting for the phone to ring.
- Micro-businesses suffer from financing constraints to a greater extent than large firms do. This can prevent them reaching optimal size.
- Many of the self-employed actually want to be relatively unproductive. They see self-employment as a better way of combining work with their commitments to children or the golf course.
There are good reasons, then, why economies of entrepreneurs are often low-productivity ones. Small businesses are very often not tomorrow's giants or job creators, but rather just mediocre plodders - if they survive at all.
So, is anything to be said for Luke's view? Two things:
1.Entrepreneurship is a way of escaping the "pinheaded weasels" - middle managers who stifle creativity and job satisfaction and who divert energy away from production and towards rent-seeking and productivity. Granted, good middle-managers are valuable (pdf), not least because they can channel corporate bullshit into useful work. But good managers are not necessarily the majority (pdf).
2.It could be that the costs of organizing production through market contracting has fallen relative to the costs of organizing internally. To this extent, it makes sense for the numbers of freelancers and subcontractors to rise relative to the numbers of employed. Now, this varies from business to business so generalizations are tricky. But one factor here is the decline of mass production. When firms needed routine workers to ensure that assembly lines kept running, it made sense to employ them directly and order them about; there's a reason why assembly line workers were rarely freelancers. But if firms now comprise bundles of discrete projects, market contracting - the hiring of specialists for occasional work - makes sense. This is especially true if their output can be easily measured, thus avoiding haggles over whether contracts have been fulfilled.
Sadly, though, it's not clear to me whether the drive towards subcontracting and freelancing, where it exists, is driven by pure Coasean (pdf) reasoning, or whether it is instead motivated by a desire to shift risk from firms to workers and suppliers.
However, the justification for entrepreneurial culture might not lie in narrow economics, but in other things. For example, the self-employed tend to be happier. And a society of independent(ish) entrepreneurs rather than corporate drones will be one of different values. As someone said, "The mode of production of material life conditions the general process of social, political and intellectual life."