Entrepreneurship and Workaholism - Part IWritten by Sam Vaknin
The Dutch proudly point to their current rate of unemployment at less than 2%. Labour force participation is at a historically high 74% (although in potential man-hour terms it stands at 62%). France is as hubristic with its labour policies - 35 hours week and earlier reduction in employers' participation in social contributions. Employment is sharply up in a host of countries with liberalized labour markets - Britain, Spain, Ireland, Finland. The ECB brags that employment in euro zone has been rising faster than in USA since 1997.
This is a bit misleading. Euro zone unemployment is far higher and labour force participation far lower than America's. The young are especially disadvantaged. Only Britain is up to American standards. The European labour market is highly inefficient in matching demand and supply. Labour mobility among regions and countries is glacial and generous unemployment benefits are a disincentive to find a job.
Reforms are creeping into legislative agendas of countries as diverse as Italy and Germany. Labour laws are re-written to simplify hiring and firing practices and to expand role of private employment agencies. But militant unions - such as Germany's IG Metal - threaten to undo all recent gains in productivity and wage restraint.
The European Commission - a bastion of "social Europe" - has just equalized rights and benefits of temporary workers (with more than 6 weeks of tenure) and full-time ones. Yet another reformist adviser to Italian Minister of Labour was assassinated. This was followed by a million-workers strong demonstration in Rome's Circo Massimo against minor reforms in firing practices.
But most successful and efficient labour market in world, in States, is associated with a different ethos and an idiosyncratic sociology of work. The frame of mind of American employee and his employer is fundamentally at odds with European mentality. In Europe, one is entitled to be employed, it is a basic human right and a public good. Employers - firms and businessmen - are parties to a social treaty within a community of stakeholders with equipotent rights. Decisions are reached by consensus and consultation. Peer pressure and social oversight are strong.
Contrast this with two engines of American economic growth: entrepreneurship and workaholism.
The USA, according to "Global Entrepreneurship Monitor", is behind South Korea and Brazil in entrepreneurial activity prevalence index. But 7 percent of its population invested an average of $4000 per person in start-ups in 2000.
A 10-country study conducted in 1997-9 by Babson College, London School of Business, and Kauffman Center for Entrepreneurial Leadership found gaping disparities between countries. More than 8 percent of all Americans started a new business - compared to less than 1.5 percent in Finland. Entrepreneurship accounted for one third of difference in economic growth rates among surveyed countries.
Entrepreneurship is a national state of mind, a vestige of dominant culture, an ethos. While in Europe bankruptcy is a suicide-inducing disgrace bordering on criminal - in USA it is an integral and important part of learning curve. In USA, entrepreneurs are social role models, widely admired and imitated. In Europe they are regarded with suspicion as receptacles of avarice and non-conformity. It is common in States to choose entrepreneurship as a long-term career path. In Europe it is considered professional suicide.
In USA, entrepreneurs are supported by an evolved network of financial institutions and venues: venture capital (VC), Initial Public Offerings (IPO's) in a multitude of stock exchanges, angel investors, incubators, technological parks, favourable taxation of stock options, and so on. Venture capitalists invested $18 billion in start-ups in 1998, $48 in 1999, almost $100 billion in 2000.
Migration and Brain Drain - Part IIWritten by Sam Vaknin
Politicians in some countries decry this trend and deride those emigrating. In a famous interview on state TV, late prime minister of Israel, Yitzhak Rabin, described them as "a fallout of jaded". But in many impoverished countries, local kleptocracies welcome brain drain as it also drains country of potential political adversaries.
Emigration also tends to decrease competitiveness. It increase salaries at home by reducing supply in labour market (and reduces salaries at receiving end, especially for unskilled workers). Illegal migration has an even stronger downward effect on wages in recipient country - illegal aliens tend to earn less than their legal compatriots. The countries of origin, whose intellectual elites are depleted by brain drain, are often forced to resort to hiring (expensive) foreigners. African countries spend more than $4 billion annually on foreign experts, managers, scientists, programmers, and teachers.
Still, remittances by immigrants to their relatives back home constitute up to 10% of GDP of certain countries - and up to 40% of national foreign exchange revenues. The World Bank estimates that Latin American and Caribbean nationals received $15 billion in remittances in 2000 - ten times 1980 figure. This may well be a gross underestimate. Mexicans alone remitted $6.7 billion in first 9 months of 2001 (though job losses and reduced hours may have since adversely affected remittances). The IADB thinks that remittances will total $300 billion in next decade (Latin American immigrants send home c. 15% of their wages).
Official remittances (many go through unmonitored money transfer channels, such as Asian Hawala network) are larger than all foreign aid combined. "The Economist" calculates that workers' remittances in Latin America and Caribbean are three times as large as aggregate foreign aid and larger than export proceeds. Yet, this pecuniary flood is mostly used to finance consumption of basics: staple foods, shelter, maintenance, clothing. It is non-productive capital.
Only a tiny part of money ends up as investment. Countries - from Mexico to Israel, and from Macedonia to Guatemala - are trying to tap into considerable wealth of their diasporas by issuing remittance-bonds, by offering tax holidays, one-stop-shop facilities, business incubators, and direct access to decision makers - as well as matching investment funds.
Migrant associations are sprouting all over Western world, often at behest of municipal authorities back home. The UNDP, International Organization of Migration (IOM), as well as many governments (e.g., Israel, China, Venezuela, Uruguay, Ethiopia), encourage expatriates to share their skills with their counterparts in their country of origin. The thriving hi-tech industries in Israel, India, Ireland, Taiwan, and South Korea were founded by returning migrants who brought with them not only capital to invest and contacts - but also entrepreneurial skills and cutting edge technologies.