Margaret Hodge is keen to kick-start the spirit of enterprise among Britain's young people. Jyoti Banerjee asks if this is wise.
Let me place my cards on the table right at the outset. Fewer than one in eight start-ups make it to their third year in Britain. In other words, seven out of eight are doomed to fail. Do we really want to get people out of jobs and employment, give them some government grants and then sit back and watch them fail?
Margaret Hodge, minister of state for the Department of Trade and Industry, will vehemently disagree with me on this but that, ladies and gentlemen, is her recommended course of action. OK, I grant you that she would not sit back and watch, but whatever she, or anybody else from government does, the rate of failure of business start-ups has been pretty steady for nigh on three decades.
This constancy of failure rate reminds me of an under-graduate economics classroom in Delhi where I first heard of the concept commonly referred to as the Hindu rate of growth. For the first three decades of its independence, whatever India's policy-makers did at the economic tiller, the end-result used to be about 3.5 percent annual growth. Indians used to ponder the fabled growth rates in the Asian tigers like Korea, Thailand and Malaysia - all much smaller countries - and wonder if the Hindu rate of growth was all that was possible in a country the scale of India.
Of course, today, China blows away the Hindu rate of growth, and so does a resurgent India. So maybe Mrs Hodge harbours a not unreasonable hope that Britain's enterprise culture will show new fruit. For now, the evidence is not, well, evident.
Mrs Hodge would be better served placing her enterprise focus on those organisations that have already survived the terrible early cuts and are on a steady upward growth path. These organisations are more likely to be medium enterprises, rather than small or start-up ones. To my mind, there is nothing wrong with enhancing the enterprise culture among those who are already practicing enterprise. They are more likely to benefit from assistance in this regard, and any tide that raises their boats is more likely to show fruit in the rest of the economy, particularly with respect to jobs and output.
Last week, the CBI brought out its most recent research study on enterprise, an occasion at which Margaret Hodge, who spoke at the CBI reception, renewed her commitment to supporting enterprise in Britain.
I asked Mrs Hodge why she didn't concentrate on medium enterprise, which is much more likely, willing and able to produce the growth rates that would fund our collective need for better pensions, improved health services, etc, etc. She dodged the question by saying that the government only concentrates on those situations where there is evidence of market failure. I think she meant that medium enterprises don't need government attention as there is no evidence of market failure. I suggest she reads the recent M Institute report, Empowering Medium Enterprise, to read about market failure in access to finance, to name just one area.
Let us not settle for repeated failure of British enterprises. We don't want the now-obsolete Hindu rate of growth to be supplanted by a British rate of enterprise failure.
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