Does entrepreneurship really promote inequality?

by Ashvini on March 11, 2014 · 3 comments

in Entrepreneurship

ID-10058335

In a recent article on Entrepreneurship on inequality, the author of the article argued that entrepreneurship actually promotes inequality.

Does entrepreneurship really is about inequality?

If one looks within a narrow angle and conclude that successful entrepreneurs make billions while those working under hardship s of employment hardly make any money, yes entrepreneurship promotes inequality.

But then one should know the facts that

  • Not all entrepreneurs make money
  • But all of them take risks often leaving their jobs and then working extremely hard

So while among thousands of entrepreneurs, four or five may get hugely success, others get moderate to low success. Is that inequality or just the way life is stacked? Success in a free market is neither guaranteed nor it is permanent. So inequality of today might become equality of tomorrow because of arrival of better product/service/business model.

Myth: Entrepreneurship increases hardship for others

It is true that successful companies give their employees high salaries which causes price rise in most aspects locally. However the rich folks also spend on shopping for goods and payments for cleaners,painters, car repair mechanics and so many others. This leads to a massive trickle down of wealth which is not possible if they were not getting such salaries in the first place.

Nor would it be possible if salaries were controlled by governments. Most of the socialist economies have failed to survive while those that are market driven continue to work because of principles of entrepreneurship are appreciated there.

In India, my generation, in a decade,  has seen movement from a single telephone line per house, to more than one mobile for each person in the house. The impact is large. A farmer can now know, the latest information about crop prices on his mobile, a businessmen can connect better with his clients and entrepreneurs can build their apps on existing network.

Because of a few enterprising individuals who took risks, children from lower middle now go to school and are aspirational. They now wants jobs, access to internet and better living conditions. Was this all possible if the sole focus was on controlling price rise by reducing the money distributed?

The success of WhatsApp owners happened, because they found an environment where they could practice and hone their skills ,to produce  a billion membership app. The rags to riches story is well documented here . Free market allowed them to operate and become successful.

Business is never organic

Success eludes a business for years. In a free market, there will be twists and turns before one is  successful. Even after that , there will be constant threat of competition. That is free market. Protectionism only delays the onslaught. The onslaught may be more troublesome after years of protection because businesses become lazy and refuse to change with time.

What is the solution?

None. Why are we even looking at a solution? Allow people to make money,pay taxes and build wealth.

All we need to do is to

  • allow people access to free market,
  • break up monopolies that hinder innovation and
  • create situations that promote entrepreneurship

To me entrepreneurship help remove inequality rather than add to it. It is best system that we can imagine( provided we keep the checks and balances ) .

Image courtesy of [basketman] / FreeDigitalPhotos.net

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{ 3 comments }

Daria Steigman March 17, 2014 at 11:56 pm

Hi Ashvini,

Ha! I had just read the Harvard Business Review post when I turned to your blog. Timing is everything.

A good rebuke of a silly post. To suggest that because a few people hit correlates to broad income equality is dumb. Gross income equality may be a problem (I actually think it’s a very big one right now), but suggesting that the business world should stop innovation and experimentation — really?

I love your example of mobile. Having spent much time in West Africa growing up where even we didn’t always have 1 working phone, it is an example near to my heart and one I use often to make the point that this simple technology has leveled the playing field for so many.

Adrienne March 11, 2014 at 9:09 pm

Hey Ashvini,

To me, entrepreneurship gives people the opportunity to build something for themselves instead of always working to make someone else rich.

Is everyone successful? Absolutely not but is everyone who works for someone else always secure in their jobs? Absolutely not. I think this just affords others to step outside their comfort zones and build something truly amazing. It’s up to each individual as to what they want to achieve.

We’ve come a long way in this world with all the inventions and technology so embrace it and if you have a great idea, go for it. That’s how this world will continue to change, grow and evolve into something wonderful.

~Adrienne

Ashvini Kumar Saxena March 13, 2014 at 2:10 pm

Hi Adrienne,

100% yes. I do not for a moment believe that entrepreneurship promotes inequality. In fact prosperity has thrived where entrepreneurship has been allowed to thrive ( like in USA ). Bureaucratic hurdles only disrupt change and create more inefficiency.
I do believe that if one has a potential to go for a new idea, they should. If they succeed it brings not only riches but also a kind of reputation that is hard to get if one is stifled in anyway.
Thanks for your comment Adrienne :). Have a great day.

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