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(Photo: Miller Center / Flickr)
After describing Musk’s extraordinary career and lifestyle, Brooks tells readers:
Today, grandiosity is out of style. We’ve just been through a financial crisis fueled by people who got too big for their britches. We’ve got an online and media culture that specializes in ridiculing grand people.
Caution rules. The number of jobs created by business start-ups under President Obama is much lower than under the three previous presidents. The World Economic Forum ranks the competitiveness of nations, and the
U.S. has lost ground in each of the last four years.But, if growth is ever going to rebound, the U.S. will need a grandiosity rebound and the policies that encourage rich people with brass: immigration policies that attract people like Musk, tax rates that encourage risk and government policies that boost them along (SpaceX has benefited greatly from NASA, and Tesla received a big government loan).
Most of all, there has to be a culture that gives two cheers to grandiosity.
These comments raise several important points. First, Brooks obviously missed the collapse of the housing bubble. Otherwise he would not have killed trees to tell us:
The number of jobs created by business start-ups under President Obama is much lower than under the three previous presidents.
Yes, and agricultural yields fall in a drought. We had a collapse in demand that preceded President Obama coming into office. News for Brooks: businesses expand less in downturns than in upturns. If Brooks wants to tell us that even when we adjust for the collapse of the housing bubble that business start-ups have created fewer jobs under President Obama than prior president, let’s see the evidence.
The second question is whether Brooks hero, Elon Musk, is really the sort of meek pathetic character that Brooks seems to be describing when he worries that we are discouraging entrepreneurialism. After all he tells us that:
We’ve got an online and media culture that specializes in ridiculing grand people.
Does this mean that we shouldn’t expect to see Musk and his fellow ambitious creative types start new businesses because someone might make fun of them on the web? Are these folks really that sensitive? Should we have a national fund that awards gold stars to bold entrepreneurs that they can wear on their foreheads? Brooks seems to think so. He could be right, I don’t know many (any?) of these people, but it would be a bit scary if our bold entrepreneurial types are really this sensitive.
The other point to raise about Brooks paean to Musk is that some of his ideas seem pretty crazy. Brooks tells us:
Musk also told Businessweek about two other project designs he is working on. The first is something called the Hyperloop, a tube capable of taking people from downtown Los Angeles to downtown San Francisco in 30 minutes. The second is a vertical lift-off supersonic passenger jet that would surpass Boeing. He also hopes to open up a space colony on Mars within 10 or 15 years.
I don’t know the details of any of these plans and these certainly are not my areas of expertise, but on the surface they don’t sound like viable enterprises. This point is important. Many entrepreneurs, big and small, come up with business plans that don’t make sense. In a well-working economy, they don’t get funding for these plans.
If entrepreneurs do get funding for nutty ideas, as was the case at the peak of the stock bubble in 1998-2000, then this is wasting resources that could have otherwise been used productively. It has the same effect on the economy as creating a department of waste, fraud and abuse that pays people to write up documents that get passed back and forth to each other and then thrown into the garbage. This creates jobs (people are getting paid to write up documents) but it is a net drain on the economy.
The idea that more entrepreneurship is always better than less entrepreneurship is ridiculous on its face. More good entrepreneurship is always better, but much entrepreneurship is not good.
In fact, the story is somewhat worse than just wasting resources as an abstract economic issue. Many people are persuaded to leave secure stable jobs to pursue ill-considered business ventures. The vast majority of new businesses fail. These failed entrepreneurs can find themselves mid-career unemployed, with no savings and few good job prospects. (In other words, they could become part of the 47 percent.) That is not a happy situation. It would not be a good thing if we had more people in this situation.
Brooks and many other entrepreneur worshippers don’t seem to appreciate the way business works. They seem to have a naive view that having more entrepreneurs or that allowing entrepreneurs to have greater access to capital is always good. This is obviously not true. A well-working economy allows entrepreneurs to get capital when they have good ideas, but it prevents them from raising capital when they are off the mark. If the economy doesn’t do the latter, then resources will be wasted, lives will be ruined, and the economy will not maintain good growth rates.
Dean Baker is co-director of the Center for Economy and Policy Research. He also writes a regular blog, Beat the Press, where this post originally appeared
4 Comments
Per Brooks:
… otherwise Atlas just might shrug.
Hear, hear! Thank you, Dean Baker, for calling out this astonishing BS.
I could not believe the cluelessness of the Brooks article when I saw it this a.m. Does he not know that it was impossible to get financing after the crash, beginning in the fall of 2008? My husband’s small business, an auto repair shop, had its existing lines of credit temporarily “frozen” for “evaluation” in December 2008 (with no advance notice). We had only been in business for a year at that time. It could have been the end. We ended up paying his parts suppliers with our personal credit cards, which we did until the credit card companies got wise to it, slashed our credit limits — my AmEx limit was cut from $25K to $3K — and doubled our interest rates.
Multiply this kind of thing by businesses all over the country, and you have some idea of why the “credit crisis,” which Brooks seems to have forgotten EVER HAPPENED, was such a phenomenal disaster for the economy. I guess he does not understand (or maybe he has forgotten?) that many, many businesses who had been happily employing people and paying vendors promptly and otherwise going along nicely and being good entrepreneurial citizens saw their credit lines and limits suddenly and drastically reduced while the interest rates skyrocketed, and that a lot of businesses even lost their credit altogether when accounts and lines were abruptly closed.
Since a LOT of businesses (of all sizes) use lines of credit rather than cash to pay their vendors and make their payrolls, the freezing, reduction, and loss of credit is a MAJOR reason why there were so many job losses as a result of the mortgage crash even in industries that have nothing to do with mortgages or real estate.
Another result was, of course, that financing and credit for start-ups became virtually nonexistent. Where in the hell does Brooks think the financing for all this entrepreneurship he is encouraging was supposed to come from during a presidential administration that started right after all this happened and has yet to recover completely?
For my husband’s shop, it was literally not until this year that things have really started to get back to (somewhat) normal credit-wise. Part of the reason that it finally has gotten better is that, thankfully, the shop has done very well (auto repair is about as close to recession-proof as you can get, I guess), and part of the reason is that he has established a good relationship with our local bank, whose financing has only recently become available to us but is doing a lot to offset the more expensive (and far less available) credit that became realities for businesses from fall 2008 on.
If Brooks wants to try to blame that on President Obama, rather than on the greedy wrecking ball that is the banking and investment industry in this country, then I don’t know what universe he is living in, but it is clearly not the same one we are living in.
Again, thank you for calling BS on that column, which Brooks must have intended as an apology for his column earlier this week (rightly) slamming Mitt Romney for being heartless, greedy, and cruel. Guess he’s trying to reclaim some free-market cred.
“Grandiosity”, which Brooks expresses such desire for is the noun form of “grandiose”. Which means “affectedly grand or important; pompous”. We have plenty of grandiose people; that has very little to do with having grand designs.
Illiterate buffoon.
What in earth would anyone as numbingly mediocre as Republican talking point regurgitator Brooks know about grand people?
That Brooks is published by the New York Times and gets to bloviate on PBS is one of the most telling and saddest comments on these pitiful times.