by: Chris Rabb on October 31st, 2013 | No Comments »
Too often, capitalism is conflated with democracy, and entrepreneurship is conflated with high risk and profit-maximization. However, a much higher-risk proposition is for us to let these assumptions and vagaries persist; to let these memes continue undefined and unexplored, and to let those who benefit from this obscurity dominate the narratives about what is best, most just, and most feasible for a nation to thrive amid great systemic traumas.
American capitalism is not in crisis, but capitalism as we know it can only breed crisis as long as the financial wealth it creates is owned by fewer and fewer capitalists, dissolving the kinds of community wealth that all just and stable societies need the most.
The solution is not to diversify the ethnicities of those who are among the capitalists; rather, we must expand the very definition of capital itself to reflect a more humane interpretation of life, liberty and the pursuit of happiness.
The nineteenth-century political economist Henry George defined capital as “wealth used for a certain purpose.” That purpose is creating more wealth, where wealth is defined as one or more assets that have an exchange value that can be calculated in monetary terms. In other words, an asset is only considered wealth if others affix a financial value to it. But financial value should not be confused with values. Some social values can erode the breadth of value we assign to things we need in society whereas others can bolster such value.
The myths we currently trade in – knowingly and otherwise – validate prevailing beliefs. In the process, they undermine the sorts of beliefs that could instill entrepreneurship with the kind of enlightened approach that would make our economy and society more just.
Despite what corporate media say, entrepreneurship is nothing more than the merging of sustained economic activity with innovation – the creative pursuit of something new, different, and better. However, the question remains, better for whom?
When referenced on network or cable TV, in radio, online, and in print, entrepreneurship is used synonymously with business creation. But innovation need not be a factor in starting or growing a business. Entrepreneurial ventures are not the same as new or small-scale ventures. To be clear, entrepreneurship is a process (or more precisely, a series of processes), not a belief, political position, or set of activities connected to a singular economic outcome.
One erroneous assumption is that entrepreneurship is about maximizing profit for entrepreneurs. And the most dangerous myth associated with that assumption is that all people can achieve entrepreneurial success in this country as long as they work hard, have a great business idea, and have a good attitude. This set of underlying assumptions, which I see as the “unholy trinity of business success,” is a lie that too many even on the left of the political spectrum unthinkingly believe or reflexively accept.
Entrepreneurship is not the same as risk-taking. It is not the same as starting a business. And it is not, in fact, at the root of the worst of our current capitalist system.
The Predatory Nature of Our Economy
What makes our current economic system so predatory is that the entry points to traditional wealth creation within it are closed to most Americans due to income inequality and the growing wealth gap between the richest and poorest Americans.
The myths that cloak entrepreneurship cloud our individual and collective judgment and prevent us from perceiving more varied paths to shared prosperity. For instance, despite the radicalization of the Republican Party and the widening (rhetorical) gap between the GOP and the Democratic Party, politicians from both parties speak almost identically about how “small business” is the engine of our economy, and how everyone who wants to pursue their dream to start a business should have the capacity to do so.
At a time when, according to a survey conducted by the non-partisan Kauffman Foundation, it’s easier to get accepted to an Ivy League college than to start a business that earns $25,000 or more per year, survives at least four years, and hires at least one full-time (equivalent) worker, why do we still believe that it is reasonable (let alone responsible) to encourage people to max out their credit cards, get a second mortgage on their home, quit their job, or cash in their college fund to pursue this dream? Starting a business is far less likely to create wealth for people and their families than investing in the stock market or buying a home – the only two other ways the average American family builds household wealth in this era.
When roughly 40 percent of homeowners have mortgages larger than the value of their homes, and the majority of Americans do not own a single stock, bond, or stake in a mutual fund, nor have a pension, how can capitalism do anything for the majority of Americans who have so little financial capital to leverage?
If entrepreneurship is really about organized, self-sustaining economic activity combined with innovation, how can individuals, families, and whole communities leverage this path to wealth-creation in a way that promotes broad well-being – not by accident, but on purpose?
If we listen to mass media and the political pundits, we are to believe that “innovation” is at the root of change and prosperity. But prosperity for whom? If innovation involves the creation of something new, different, and better, we must first ask ourselves: what does better mean – and for whom is this better?
The cotton gin was a revolutionary invention that sparked great innovation in the cotton-producing industry during the nineteenth century. It was undoubtedly better for the plantation owners, but not for the enslaved workers, whose indefinite captivity was all but solidified by this profit-maximizing technology as the value of their uncompensated labor increased dramatically.
What is good for the economy is not necessarily good for society. And in the long run, an economic structure that excludes increasingly more sectors of our citizenry from becoming producers and beneficiaries of economic activities will fail our society.
We must not forget that value is not just that which can be monetized – it should be defined as that which gives our lives meaning. Thus, the most important kind of value for any society should be broad well-being or quality of life. Financial wealth is wealth expressed in terms of money. However, there are other forms of currency that matter at least as much as dollars and cents. Language is a form of currency. Our labor – what we do and what we create for and with each other – is another form of currency. All these forms of currency build value. When done in a context of economically self-sustaining activity, that is entrepreneurship – a phenomenon that long pre-dated Donald Trump, Thomas Edison, and Adam Smith’s eighteenth-century writings on capitalism.
We would do well to look beyond current conservatives’ celebration of Adam Smith and instead read what Smith actually wrote: he stated that he did not trust large-scale merchants, and that the marketplace could not be trusted to solve social ills or champion the public good. And while many tout his singular reference to the market’s “invisible hand,” few have heard a very different phrase from the same book: “Profit is always highest in the countries which are going fastest to ruin.”
But not all profit is created equal. Let’s turn away from the kind of profit that is based on exploitation and start prioritizing the kind of value whose ends are not monetary.
Blazing a New Trail
As we seek to build this new economy, we are forging the path as we walk it. Do we have the courage to sojourn toward a destination we do not truly know exists? It is a destination wheremarketsare not confused for people,populations are not confused for communities,economies are not confused for societies, diversity is not confused for equity, worker productivity is not confused for human progress, inclusion is not confused for impact, consumption is not confused for prosperity, and financial wealth is not confused for well-being.
If happiness is no longer related to material consumption and monetary gain, but to broad well-being and shared prosperity, the capitalism we know today will cease to exist, and the entrepreneurship that currently fuels growth for growth’s sake will morph into the kind of civic innovation that awaits our greatest collective efforts.
Imagine a society where access to shelter, green space, slow food, education, child care, elder care, health care, and even death care are considered a right. Imagine a society where collective civic innovation is poured into supporting everyone’s health and wellness, arts and self-expression, public safety, leisure and recreation, education, economic security, political and religious freedom, media democracy, and sense of connectedness with one another, the earth, and all other living things. Imagine a society where access to resources has become detached from unearned privilege and discrimination based on identity and heritage.
The more we protect and nurture community assets such as these, we can weaken conventional capitalists whose financial wealth is contingent on preventing the public’s shared prosperity from broadening and deepening.
These community assets are the cornerstones for any community that truly honors the pursuit of happiness. They are not the rarified fruits of the privileged class of a rich nation; rather, they are the bountiful riches of a just society that should be guaranteed for all.
Chris Rabb is a writer, consultant, and teacher focusing on the intersection of entrepreneurship, politics, media and social identity. He is the author of the book, Invisible Capital: How Unseen Forces Shape Entrepreneurial Opportunity.He lives in Philadelphia with his two sons.