IN ITS USUAL distemper brush rhetorical approach, the Scottish Government claims it wants to “promote a culture of entrepreneurship that will help to grow and diversify Scotland’s business base”.
It’s clearly a struggle; the most recent Global Entrepreneurship Monitor report from Strathclyde University reports, as it has for some years, Scotland’s low rate of entrepreneurship and company formations.
Sreevas Sahasranamam, associate professor at the Hunter Centre for Entrepreneurship, the co-author of the report says: “We are seeing emerging gaps in the entrepreneurial pipeline with a drop in youth entrepreneurship, a drop in nascent entrepreneurial activity and reduction in interest for entrepreneurship as a career option among the non-entrepreneurially active” (my emphasis). This is acutely so amongst female entrepreneurs.
Dissecting the underlying reasons for this is none too easy. Scotland has always feted an apparent ability of its enterprising folk to do business. I am more than jaundiced about this. James Watt needed Matthew Boulton and Manchester to make his hay, Carnegie made his fortune in iron, coal, rail and steel from Pittsburgh, Bell had his telephone in New York, Fleming and Baird lived in London and didn’t make any money.
A Scottish-based entrepreneur has a few troubling hurdles to surmount. A scattered and small population is not an easy grounding. Along with the UK, we also have a high tax burden, a bureaucracy that has half gone home and has become both an IT-driven mindless interferer and an information-demanding overhead that does not count the cost of its presence to a business – and of course a quasi-communist central state intent on vote-buying through “social” redistributions and an over-weening “green” bias.
Does any of the above really explain the low rate of entrepreneurship? To some extent, it is easier to depart Scottish shores, find large markets and build trading activity; but Scots love their home, and true entrepreneurs are serially involved in doing new things for the love of finding things out. (Full disclosure, I am owner of my sixth company and have never had a job in my life).
The interesting thing for me about the distemper brush business-boosting quoted above is how it reflects a genuine belief in something that is demonstrably impossible to do. Central state politicians are constantly engaged this way; spouting platitudes in concert with the public communications media and so developing a false consensus that “something has to be done” (at taxpayer expense) despite it being ill-defined, tainted with special interests, incentivised by the election cycle, and in reality empty of content.
Why do I say this? Because there is no such thing as “business”. Business does not exist as a singular entity. In fact, its key characteristic is the exact opposite; businesses come in many guises and are shape-shifting constantly. Entrepreneurialism is buried across this venturing.
Businesses come in a spectrum of success related to their sales momentum in their marketplace. That momentum creates a modus operandi and culture as to how each business is run. At the micro-level there are freelancers, sole-trader service companies, mom and pop operators, and small owner-managed companies. Direction is dictated by entrepreneurial individuals, who usually also have a good grasp of where money is being made or lost. Pace all socialists, the focus is largely on avoiding losses, profits tend to be re-invested.
A turning point comes when the momentum of sales means that internal processes in sales, finance and production become less amenable to individual or family oversight. The small corporate is born, wherein actions by individuals become more rote, with documented processes and a more mathematical enumerated approach to margins and losses. Entrepreneurial talents adjust to suit; more managerialism than directorship is required.
Now the rub. In Scotland 98.3% (354,910 in 2022) of all private businesses have less than 50 employees, while around 95% (so approximately 335,000) of these have less than ten employees. Only 1.1% (3,835 in 2022) are left as SMEs within the formal definition; turnovers of less than £45 million and fewer than 250 employees. (Given the cascade above, that’s one of the less meaningful definitions in the political policy lexicon).
Crucially, no-one has a clue as to how entrepreneurial these companies may be. The state knows little about what they actually do, or what their entrepreneurs would like to do. That knowledge is highly dispersed. So, anything a politician spouts about “supporting growing businesses” is almost certainly 98.3% based on guff, with an especially loud alarm bell for any initative that uses the word “partnership” in it.
It is in this context that we have to view any failure of Scots’ entrepreneurship and ask how best to support the desire by the central state for Scots to be more entrepreneurial. Adam Smith’s Theory of Moral Sentiments gives us a clue, he told us that moral ideas and actions drive our social behaviour. Entrepreneurs are driven by two ideas; that supporting yourself is the right thing to do, and learning how to do this in a way that benefits both others and yourself is a joy. It’s also necessary for success; markets guide actions through the invisible hand.
Entrepreneurialism is a lonely activity; it demands a determined focus on avoiding loss and finding out where margins can be made and it demands a high level of self-belief and optimism about tomorrow. The central state can have no place in this enterprise where knowledge about what to do and how to do it is lodged within the individual entrepreneur and burgeons or collapses due to their dedication to continue against a constant tide of cash-gobbling overheads.
Place those sentiments into the context of a Scotland where “making profits” is somehow a wrong, where cash earned through hard work and talent is taxed more and more, where everything has to be seen through the lens of its environmental impact, where so many in the public sector gripe about their terms and conditions while early entrepreneurs earn a fraction as much and sometimes sleep under their desk so that they can start early and produce things rather than report their actions and earnings to the local council, HMRC or the Environmental Protection Agency.
The rot is deep in our socialised state, inhabited as it is by actors determined to foster uncertainty and pessimistic grievance, sentiments opposite to any entrepreneurial stance. I fear the ideas above have been inculcated into our young, blocking them from entrepreneurship. The Global Entrepreneurship Monitor report cites fear or failure as being a key reason for Scotland’s low level of entrepreneurship; is it any wonder? The false comfort of collectivism crowds out the adventurousness required from the entrepreneur.
The Scottish Government is not helping when it declares an aspiration for a Scotland being “A place where growth and innovation go hand-in-hand with wider benefits to all of society”.
They’ve invented something called “Scotland CAN DO” through which they “work with public, private and third sector partners towards the goal of becoming a world-leading entrepreneurial and innovative nation”.
A trawl of what Scotland CAN DO has in what it calls its diverse community of partners introduces a cabal of self-interested and often tax-funded entities, along with the outrageous claim that “there has never been a better time to start, lead and grow your enterprise in Scotland”. Oh dear.
The initiative says: “there is a real desire to effect positive change across all parts of our society, economy and environment, using business as a force for good”. Is there a hidden implication here that most business is seen as a force for bad because it does not serve the collective?
The false underlying idea here is that business is some sort of monolithic being, dedicated to exploitation through nefarious, wildly selfish, environmentally corrupting, money-grabbing transfers from the poor to make business owners rich. That’s a great way to chase entrepreneurs away from their dreams and take a public sector non-profit job or leave the country and make money elsewhere.
The ScotsBorg collective rules, ok? No, it doesn’t, and it mustn’t; let entrepreneurs flourish through their diverse individualism and keep the central state away from them. It only helps instil a fear of failure.
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