20 June 2011

One Party Each For the Four Factors of Production

For decades, it has been enough to favor capital or labor in economic policy. It might be time for a new political party that favors entrepreneurship instead.

Every developed country has at least two parties that either give priority to capital or labor. In the UK, they have the decency to explicitly label one of the parties "Labor" (or, more precisely, "Labour"). Nobody names their capital party that, preferring to call it the conservative party. Or, in the US, it is Democrat and Republican. By any name, the "no, no, capital is more important party" and the "you have got to be kidding, labor is more important" parties have defined so much of the economic policies in all developed countries in the last century.

More recently, a party has emerged to protect the environment, to protect the nature that provides us with our natural resources. The Green Party is, unlike the various conservative and labor parties, actually a worldwide party.

It is not too much of a simplification to say that conservatives feel that all good things follow from treating capital right (for instance, by giving lower tax breaks to capital gains than to other forms of income) and labor party folks feel that economic progress comes from treating labor well (things like old age pension and minimum wage law). But what if neither of these any longer leads economic development? What if it is not enough to merely attract capital and educate workers? 

We have capital, labor, and resources parties. We have, that is, parties representing each of the four factors of production save one: entrepreneurship.

Why not an entrepreneurial party? One that doesn't subordinate labor to capital or vice versa but instead subordinates them all to the creation of the new? Labor has no place to work when we don't create new businesses. Capital moves from bubble to bubble when it is merely bidding up the price of existing assets and not creating something new. Labor and capital alike can be a part of entrepreneurship, and only this raises wages and returns to capital.

Entrepreneurship is not just about business. Charter schools and non-governmental agencies and foundations are examples of entrepreneurship in the public sector. More importantly, entrepreneurship done right is about creating new, sustainable systems. A business entrepreneur creates a system that can produce profit even when the entrepreneur has moved on.

Our modern world faces a crisis of systems. Systems as varied as financial and ecosystems, and fresh water and educational systems, health care and energy systems all flirt with collapse and degradation. One thing that it seems we can say with great confidence is that we need to learn more about systems and how to sustain, design, transform, and thrive within them. The difference between an employee and an entrepreneur is whether they take the system as a given or create a new one. Entrepreneurship as an act of system creation is something we need lots of.

What about a party that promoted the interests of entrepreneurs? Certainly the entrepreneurs who start businesses but more broadly, every kind of social entrepreneur? What if we had a party that sided with what was possible instead of spending all its energy on protecting what was? What about a new party that promotes the most recently acknowledged, most sophisticated, and most transformative of the four factors of production?

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