As an entrepreneur myself -- worse, a serial entrepreneur --
I am fascinated by entrepreneurial activity, whether of the business
variety or of other sorts (which I personally prefer). A recent report by
the Global Entrepreneurship Monitor of the business start-ups in
different countries has some immense surprises, some of which are
baffling to me.
For example, I'm amazed to discover that Argentina, often considered to
be a basket case, is fourth on the list of 37 countries with 14% of the
population rated as entrepreneurs. India and Thailand at the top of the
list don't surprise me. I'm disappointed with my own country, halfway
down the list. Interestingly, both China and the US -- the two economies
which will overwhelmingly dominate the world completely within a decade
or two -- are both near the top at 12%. I'm not at all surprised to see
Russia at the bottom but incredibly surprised to see Japan and Hong Kong
there, too.
What can be said from this resarch study? Such are the anomalies and
surprises in this list that the only comment I can think of is that,
whatever governments may try to do, the deeper culture of a country is
far more important. Japan, for example, managed to get a rapid rate of
industrialisation going after the Meiji restoration at about 1880 and
this was very much top-down driven. Now that it is trying to encourage
enterprise from the bottom-up, then it is signally failing. Hong Kong and
Singapore seem to be similar in this regard. In these three cases, theiur
amazing rates of growth have been mainly based on a catching-up strategy,
producing goods which the western countries were already making.
A considerable part of China's industrial production in the last two
decades has been mainly that of catching-up. The intriguing thing about
China is whether, in restoring its mandarinate system of government in
recent years, it is also going to recreate its innovative ability. Almost
everything that the western European countries were producing up to about
1880 in the course of their industrial revolution was a repetition of
what China had done a long time previously -- starting with high-grade
steel production at about 500BC. It appears to have been innovative right
up to about the 15th and 16th centuries when trade was suddenly stopped
and economic decline set in. Will it become as innovative again? I tend
to think so. They launched their astronaut into space a few weeks ago on
a rocket that was originally based on a Russian design but a great many
improvements were made. In the field of genetics research, China appears
to have caught up with America and England already. Will it be as
innovative as America? We will have to see.
In my previous posting, Status goods and positional goods, I
suggested that we may be coming to the end of the cascade of consumer
goods production of the last 200 years and that, for reasons of status
and social inclusion we may have to retreat into more cohesive, smaller
social structures again. The paradox is that Japan, which may never
succeed in regaining its former rate of economic growth due to lack of
sufficient individual enterprise, may in fact lead the way into
this new social order because the Japanese seem never to have completely
adjusted to the industrial era even though they are brilliant in
producing many of its products. Some twenty years ago, when I was
discussing with someone from Nomura the special nature of the Japanese
'togetherness' which included both the bosses and the workers, she
pointed out that one of the reasons why the Japanese were so
group-orientated was that many rice-growing villages nestled in the
crooks of mountains and their irrigation systems had to be extremely
carefully controlled in order to avoid devastasting floods which could
wipe out the crops of all of the villagers from the lord of the manor
down to the lowest-ranking peasant widow. Co-ordination between then was
all. When industrialisation came along from the 1880s and onwards, the
whole village togetherness was bodily transferred into the factories
without the century-long bitter class struggles which characterised the
industrial revolution in England.
To repeat myself, culture seems to be all. Maybe cultures can change but
it's a centuries-long job in all nations. As we see Turkey, having had a
secular government for 80 years, in some danger today of reverting to
Islamic law, and Russia, communist for 70, falling back into Tsarism, the
quick-fixes that politicians repeatedly proclaim never seem to come
off.
Keith Hudson
<<<<
JAPAN SPURNS SMALL BUSINESS DESPITE TOKYO'S BEST EFFORTS
Although they can start a business for a symbolic single yen, few in
Japan aqre keen
David Ibson
Nine months ago the Japanese government made it possible to set up a new
company with just one yen -- less than the price of a stick of chewing
gum.
A lack of business innovation has long been recognised as one of the
structural weaknesses behind the lacklustre economic performance of one
of the world's most expensive countries. Research by the Global
Entrepreneurship Monitor, a 37-country study of start-up business
activity and economic growth, put Japan at the bottom of the league. Just
2 per cent of the population were involved in starting a new business or
owning a business less than 42 months old. In China the figure was 12 per
cent, in Korea 14 per cent and in Thailand 18 per cent.
Total entrepreneurial activity by country
(Entrepreneurs per 100 adults, 18-64 years old, 2002
Thailand -- 18%
India -- 17%
South Korea -- 14%
Argentina -- 14%
Brazil -- 13%
China -- 12%
US -- 12%
Canada -- 8%
Australia --8%
Switzerland -- 7%
South Africa -- 6%
Singapore -- 6%
UK -- 5%
Germany -- 5%
Spain -- 4%
Holland -- 4%
Finland -- 4%
Taiwan -- 4%
Hong Kong -- 3%
France -- 3%
Russia -- 2%
Japan -- 2%
Hence the one-yen initiative, which is part of a drive to foster
entrepreneurial activity under which the Japanese government has
committed itself to doubling the number of enterprises established each
year to 360,000 by 2006. However, since February only 268 applications
have been received under the new rules and just 178 one-yen companies
have actually been set up. While new business formation has risen by 8
per cent year-on-year in 2003 after two years of decline, according to
the Ministry of Justice, which monitors legal incorporations, it is still
well below the levels previously seen in Japan and stands significantly
below international averages.
Instead, the country remains trapped in the worst of all
possible worlds -- not only does it not have very many entrepreneurs in
the first place, but those few it does possess are being stunted by a
lack of financing channels and a cultural aversion to risk-taking. Part
of the reason for this state of affairs is that Japanese attitudes
towards entrepreneurs seem different from those elsewhere. When, for
example, a sample, of US citizens was asked if entrepreneurs were
socially valuable, 91 per cent said yes. Just 8 per cent of Japanese
respondents agreed with them.
Figures from the Ministry of Public Management, Home Affairs, Posts and
Telecommunications reflect this trend. Over the last 20 years
the number of would-be entrepreneurs in Japan has been over 1
million annually, but the number of successful start-ups out of that
1million has declined from an average of 66 per cent to 31 per cent over
the same period. The numbers tell a depressing strory. Despite the
government's moves to foster young companies, the country's efforts to
create an environment that encourages new businesses are being outpaced
by its Asian regional rivals.
Japan's apparent lack of capitalist endeavour also has much to do with
the lack of a mature financing market. The most dramatic illustration of
this is the fact that there are around 400,000 "angel"
investors prepared to finance start-up companies in the US compared with
just 1,500 in Japan, according to the Ministry of the Economy, Trade and
Investment. Venture capital investment in Japan in 2001 on a stock basis
was around Y l,020 billion ($9.34 bn) -- 30 times less than in the US --
according to the US Venture Enterprise Centre. An economy ministry survey
of creative entrepreneurial activity revealed that 62 per cent of
enterprises said raising funds was the main challenge when trying to
start up a business, and 80 per cent were forced to use their own
capital.
Start-up costs are also high. A survey of new companies by National Life
Finance Corporation -- a government agency that supports small and
medium-sized businesses -- revealed that 58 per cent of start-ups in the
US used $20,000 or less, while in Japan only 25 per cent started with
less than Y45.000. At the same time, according to the Bank of Japan,
lending by financial institutions to small and medium enterprises has
been falling since 1994 at large banks, regional banks, credit
associations and government financial institutions, mainly as a result of
their non-performing loan problems.
In response, the government has taken action to try to fill the gap
created by the financial institutions, but the numbers are small. The
Japan Finance, Corporation for Small Business -- which was established in
2000 - has provided 802 loans which amount to $300m, and the Shoko Chukin
bank has offered zero collateral loans to 310 start-ups totalling $28m.
The Japanese government has recognised that the country's lack of
entrepreneurial activity is a significant problem and has taken action to
try to solve it.
But as the great British economist John Maynard Keynes put it: "The
difficulty lies not in the new ideas but in escaping from the old
ones."
Financial Times -- 21 November 2003
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