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The Changing Role of Government and Entrepreneurship in America

November 3, 2021

Timothy G. Nash, Ph.D., is Director of the McNair Center for the Advancement of Free-Enterprise and Entrepreneurship at Northwood University. Nash earned a Bachelor of Business Administration degree from Northwood, a Master of Arts in Economics from Central Michigan University, and a doctorate from Wayne State University. He is a long-time member of the Northwood faculty and co-author and editor of “When We Are Free,” the multi-edition book that contextualizes The Northwood Idea. His essay “The Changing Role of Government and Entrepreneurship in America” was first published Oct. 10, 2021, on the website of Townhall, which identifies itself as “the leading source for conservative news and political commentary and analysis.”

On April 23, 1910, at the Sorbonne in Paris, America’s 26th President, Theodore Roosevelt, delivered his celebrated speech entitled “Citizenship in a Republic.” A famous passage of Roosevelt’s address is known as “The Man in the Arena.” That favorite section speaks to those who take risks. People who put their time, money, effort, and reputation on the line, knowing they may fail, yet nevertheless, commit to improving themselves and helping to move others to a better place. Roughly halfway through his remarks, Roosevelt declared:

“It is not the critic who counts; not the man who points out how the strong man stumbles or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows, in the end, the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

In our opinion, Roosevelt’s speech at the Sorbonne, a place he called an “ancient institution of learning,” is as relevant today as it was when he delivered it over a century ago. We believe “The Man in the Arena” should serve as the informal entrepreneur’s credo.

The Role of the Entrepreneur in America

Currently, the U.S. is about 4% of the world’s population yet produces around 24% of the world’s Gross Domestic Product (GDP). Our economic prowess and standard of living, the envy of the world, is made possible by the American competitive free enterprise system – an economic system woven around the U.S. Constitution, our rule of law, and individual freedom. It is unique in the history of the world!

America’s economic success does not take place by chance. It is driven by the actions of risk-taking individuals – men and women who perceive the world differently. The economy grows, and our prosperity increases because entrepreneurs see opportunities and take the risk, accumulate capital, and bring to fruition solutions to unmet needs. Entrepreneurs think big. They chase their dream, take risks and often place others’ needs in front of their own. They understand entrepreneurship is not always about making money; rather, they appreciate it is usually about doing good. At the end of a long week, if fortunate, they earn a profit in the process.

The economic and social benefits from entrepreneurs have not always been as evident as they are today. For thousands of years, economic growth was linear and mostly limited to population growth. As a result of increased political and economic freedom, invention, and technological innovation, the greatest level of human progress has been realized over the past 250 years. When we explore the reasons for this progress, most often, technology coupled with mass production is at the root. Given the above, what is often forgotten is that these inventions and innovations did not transpire because of government decree and central planners. Rather, they emerged from the minds and the actions of free, risk-taking entrepreneurs, with a disproportionately high number here in the United States.

America was not the epicenter for entrepreneurship from its inception. We can credit Governor William Bradford for the success we witness today. Bradford changed the failing socialistic governing agreement that was in place with the financiers of the Plymouth Colony in England. Bradford’s changes were the precursor for free enterprise in America. They divided farmland equally among the colonists, thereby creating a private property system and positioning free enterprise and hard work as the backbone to agricultural production in the early days of the Colony. Once property rights were established and free enterprise flourished, the colonists never missed a payment. The early colonists paid their financiers off early, and the rest is history.

Just like the changes in the Plymouth Colony, we know the bold actions of risk-taking entrepreneurs are essential to bringing new ideas and positive differences to our economy today. History has clearly shown when humankind is most free, we accrue the highest invention, innovation, and human progress. Conversely, a decline in freedom directly correlates to a decrease in human progress. While America is not as free as she once was, the Statue of Liberty in New York Harbor reminds us that America remains the land of freedom and opportunity compared to most countries worldwide. America’s story represents the hallmarks of invention, innovation, and risk-taking of entrepreneurs necessary to take us from the Plymouth Colony to the greatest economy in the history of the world and something we still fondly call “The American Dream.”

Since the American Revolution, nearly all goods and services created in the United States have been produced by private, profit-seeking entrepreneurs with little involvement from the government. We can thank our private sector and its tolerance to take risks for everything from the light bulb, air conditioning, the X-ray, and the airplane to transistors, semiconductors, the personal computer, and CAT scan machines. Let’s remember and celebrate the private sector that invented the television, the automobile, mapped the human genome, and commercialized the internet. Most recently, when it was unburdened from heavy government oversight, it was the private sector that stood tall to develop multiple vaccines for COVID-19 in less than one year.

The Size and Scope of Family, Women, and Minority-Owned Businesses in America

This month, we mark Small Business Saturday, an occasion for more than just shopping at local retailers (although we should all do that, for sure). It is a time to appreciate how much of our country’s success directly results from people being willing to take risks to build an enterprise.

The backbone of American business has from inception been the family business. According to Inc. Magazine and the U.S. Census Bureau, roughly 90% of American companies are family-owned or controlled. They range in size from as small as a two-person partnership to Forbes 500 firms. These businesses generate about half of the nation’s employment and 50% of the nation’s GDP. Unfortunately, few Americans understand how difficult it is to lead a family business, with few currently reaching the third generation of ownership and control. With proposed new taxes on income, inheritance, and capital gains being debated in Washington, D.C., the future longevity of family-owned businesses will almost certainly be shortened.

The private sector is inclusive and entrepreneurs diverse. Over the past two decades, tremendous progress has been made by women, Hispanics, and African Americans. According to Ernst and Young, in 2020, Black-owned and Latino-owned companies contributed greatly to the U.S. economy, producing 4.7 million jobs and annual revenue of more than $700 billion, with even greater opportunities moving forward. According to the Metro Independent Business Alliance of Minneapolis/St. Paul, women-owned businesses represent a significant portion of the U.S. economy. There were nearly 13 million women-owned businesses in the U.S., employing about 9 million people and generating $1.9 trillion in revenue in 2020.

The Role and Size of Government in the History of the United States

Most Americans may find it difficult to believe that we had little or no federal income tax from the founding of the United States to the early 1900s. During this time, government at all levels (local, state, and federal) consumed less than 5% of GDP. In fact, in 1900, according to the U.S. Congressional Budget Office, the U.S. government consumed less than 8% of U.S. GDP at all levels. Today, the government consumes roughly 45% of U.S. GDP at all levels, with interest on the national debt being one of the ten largest items in the federal budget in 2021; it was not in the top 100 in 1900. Now, our national debt is almost 126% of U.S. GDP, with the government taking a greater role in the economy, thwarting our entrepreneurial spirit, history, and traditions.

Unlike Governor Bradford, in less than a year, President Biden has already tightened the regulatory grasp on the American economy in the energy, medical, and motor vehicle sectors, with plans for greater surveillance of banking and enhanced control of education. Today, the government is making it more difficult for entrepreneurs and innovative companies to exist, progress, and create opportunities for the economy and its citizens to prosper.

Our Future

Our historically healthy economy has led to a healthier nation, with U.S. life expectancy doubling since the 1890s. However, threats to our economic and societal achievements are many. Inflation is picking up, costing Americans more every day (gas prices alone are up over 40% year-over-year). The promise of a better future is dimming as we align more closely with big-government socialism that will weaken an increasingly fragile work ethic, productivity, and the ambition of risk-taking entrepreneurs. To restore prosperity, we first must tell Congress “enough” with the spending, then return to our powerful and unrivaled economic roots and unleash the power of the women and men who dare to choose the bold, courageous, and challenging path of the arena.

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