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Essay: Entrepreneurship – A Job for the Adventurous: The Importance of Entrepreneurs in the Global Economy

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  • Published: 1 February 2018*
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Entrepreneurship – A job for the adventurous.

In an increasingly global economy, it would be a mistake to deny the important role that entrepreneurs play. Entrepreneurship is formally defined as the activity of setting up a business and taking up financial risks in the hope of making a profit.

An invaluable factor of production
An obvious reason why entrepreneurs are deemed important to the growth of any economy is the butterfly effect they have on wealth and job creation. While setting up a business, their main aim might be individual profit but – with the help of Smith’s invaluable invisible hand – they end up starting a chain reaction. A business generates employment in the society which in turn leads to an increase in national income which theoretically has a direct positive effect on the standard of living of the masses.
However, this chain reaction isn’t just associated with the one business that was set up by the entrepreneur. No firm can function by itself; they will need other firms to provide complementary goods and services. In the simplest of terms, a bread-making factory will need a flour mill, a sugarcane processing unit, a factory that makes all the equipment required for baking bread, and several other services. So, if an entrepreneur was to set up a factory for baking bread, it’s only natural that other industries will automatically spring up. So, Entrepreneurship leads to an increase in demand not only in the consumer market but in the intermediate goods or the producer market as well.
Entrepreneurs are a creative breed and more often than not, they end up inspiring creativity as well. When a person acts on their idea to set up a business, they are either providing the society with a more convenient counterpart to an already existing good/service or they are introducing a completely new product. This makes our current life much simpler and in due course of time, inspires others to come up with even more innovative ideas.
While the benefits to total and individual wealth might be natural and obvious, a subtle advantage of entrepreneurial spirit is also the social change it creates. A lot of social revolutions have been made possible with the help of technologies that were the brainchildren of pioneering entrepreneurs. To take a recent example, imagine spreading necessary warnings and information regarding coronavirus without digital mediums. Thousands and thousands of lives saved because people were informed enough to take preventive measures. Don’t we owe this success at least a little bit to the ground-breaking individuals who invented these devices?
In the current context, when protectionist policies are gaining fervor, any developing country needs to migrate from being a country of job seekers to being a country of job providers. No longer are people running away to another country in search of better jobs. They need to nurture their entrepreneurial spirit and let new ideas foster in their minds. This seems to be the only way they can cope with the drastic changes that are taking the world markets by storm. As a result of this inherent satisfaction of people from developing countries settling for being job seekers, these countries also undergo the phenomena of brain drain. The best minds of a country studying in a foreign land, and helping someone else fulfill their dreams.

The other side of the coin
However, entrepreneurship like most other monetary setups functions most efficiently in a capitalist system, which means it inherently has all flaws of capitalism. In the next segment of this article the demerits of entrepreneurship have been discussed, both fundamental and logistical. For starters, let’s establish that a startup is nothing but a miniature design of a multinational company. The structure remains the same, in terms of economics and hierarchy, however, the proprietor of a start-up has greater liberty in exercising authority, than the founder (or director) of any MNC.
Therefore, in start-ups too, like MNCs, employees complain that their labor values aren’t fully paid off. In the local market, in tier two cities in India, the average salary that a salesperson (indoors) is paid is rupees 7 thousand with 1 casual leave, for a job of 10 hours. Start-ups have also been accused by left tending groups of stealing labor.
During the Lowell Mill strikes of the 19th century, the primary victims (daughters of the New England farmers) coined a term called ‘Wage Slave’, during the industrial revolution in the USA. Owing to a lot of laws now being in place, conditions have bettered, however, the effect remains. A wage slave is a person who lives end to end, only on wages. Someone who cannot afford to lose out on a day’s salary. Start-ups, that don’t necessarily make profits in the first few years of being active, hire employees without many employee-benefit programs. This makes the possibility of one being a wage slave greater.
In Marx’s Das Kapital, this is defined under the theory of surplus, wherein the value contributed (towards profit) by a worker is greater than the monetary remuneration that they are paid, therefore a person is underpaid for their contributions, which are seen in both small and large scale businesses.

The reality of being a ‘risk-taker’
On a logistical level, apart from the monetary risks involved, entrepreneurs involve efforts along the lines of economic implicit costs – in the form of risks. For example, an entrepreneur has the constant fear of the start-up getting a head start, because of the product (or service) being in fashion, but dying out with trend. A contemporary example of it was Pokemon Go, by Niantic. It came and stayed for a whole summer, but as its hype died, so did the game itself.
Secondly, empirically almost all startups face a negative profit period in the first few years of being operational, and only then they have hopes of breaking even. The mental strength required to face losses year after year is not an ability that should be underestimated.
Entrepreneurs have to constantly worry about the funding they could get from various investors. Their ideas need to be creative enough for the funding, as well as on a tangent so as to not receive any backlash from the government. MAGA, for example, had to go through a series of legal lawsuits after they released a parody game of “Trump’s wall”.

Parting thoughts
All in all, it is important to understand that entrepreneurship is a crucial part of economic prosperity but like all things, it has a cost. It’s not something that people should jump into solely because they are expecting to make a tremendous profit without actually putting in work. Entrepreneurship is an art fuelled by ideas to improve our way of life. We owe it to society to act on such ideas and persevere for their success. It is a risk, one riddled with difficulties but the payoff – if the idea gains traction – is almost always worth it.

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