Friday, June 17, 2011

Lemonade Stand

I just finished reading a completely aggravating news article about a kid's lemonade stand being shut down by officials for not having a licence. And they fined the parents $500. As if this wasn't irritating enough, the children were trying to raise money for cancer research.

There is so much wrong here I barely know where to begin. But one aspect of this story reinforced something I've been thinking about for a while, which is how our society has become rigidly attached to the concept of the full-time job, at the expense of entrepreneurship and self-employment. Things are even worse in the US compared to Canada, since people will cling to horrible jobs for no other reason than health benefits. I think Americans completely underestimate what a big deal this is, to be able to leave a job and not have to worry about medical bankruptcy. We also put a lot of importance on having a good job at a big company, while those who work for themselves are not thought of as highly (I have some personal experience with this as a newly self-employed worker trying to qualify for a mortgage).

We hear often that small business creates the most jobs in the economy, which feels true enough although I can't recall ever seeing any hard numbers on this. On the other hand, when the economy tanks I'm sure lots of small businesses go under but you always hear about the big corporations laying off tens of thousands of employees at a time. Think of big and small businesses as trees: the entrepreneurs are the tiny shoots and saplings, while the corporations are the gigantic douglas firs. There are some advantages to the tall trees - they're stronger and usually more stable - but they also don't adapt well to change. The seedlings may or may not survive past their first year or two, but if there are enough of them then many should grow and thrive. In a changing environment, I would rather have a thousand saplings than a few giant oaks.

But it seems like we're chopping down the little shoots to benefit the big trees. There are enormous barriers to start a small business, mainly in the form of regulations. Some of this has to do with our nanny-state mentality (citizens should not eat that street vendor's hot dog until the government has declared it safe). Some of it is simple bureaucracy, which over time naturally tends to get bigger and more complicated. And some of it is corporations trying to stay ahead of the game: they can lobby for advantages, they can spend a comparatively little amount of their budget complying with government taxes and regulations, and they can employ experts to find loopholes. General Electric made a profit but paid no tax last year - how many profitable small businesses (without an army of tax lawyers) do you think got to do that?

I for one would be just fine if the lemonade stand down the block didn't need anyone's permission to do business in the driveway, or need a health inspector to validate that the lemonade was made in a sterile kitchen. While I believe we should be giving small businesses a leg up to encourage entrepreneurs, a flat business tax with no loopholes would at least level the playing field. Think of how vibrant, responsive and resilient our economy would be if we had thousands upon thousands of people with new ideas starting small businesses constantly. And the unemployed would not be forced into weeks or months of printing resumes and hoping someone will give them a job; they would have the option and a reasonable opportunity to create a job for themselves.

Instead, we now have a couple more children who tried to take some initiative to make the world a better place, and learned that you're not allowed to do that.

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