Is Entrepreneurship a Pathway to Greater Wealth Equality?

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by Don Macke

The Great Recession hit America hard. The recovery at times has seemed slow and weak. But household wealth formation has once again set new records and is growing faster when compared to the boom years of the 1990s. However, this good news is undermined with the reality that wealth inequality in the U.S. is also setting new records.

2014 Research from the World Inequality Database estimates American wealth was allocated as follows:

  • Top 1% of Households – 39% of all American Wealth
  • Next 9% of Households – 34% of all American Wealth
  • The Remaining 90% of Households – just 27% of all American Wealth

For too many Americans there has not been a recovery and they continue to have no or negative wealth undermining their economic choices and security. Much is required by Americans to change this unequal trend line as continued wealth concentration is not healthy for a democratic society and economy.

While entrepreneurship alone cannot solve the wealth inequality challenge facing America, it is one solution that communities can employ to make real differences over time.

Before I talk about how entrepreneurship can trigger a redistribution of wealth, the following history lesson provides some important context.

American wealth concentration peaked in the 1920s. During this period our nation and much of the world was moving towards nationalism, protectionist policies and eventually trade wars. The dam burst in 1929 with the start of the Great Depression and the story of the 1930s is well known for its pain and suffering. The 1930s were followed with extreme nationalism, World War II and using author Richard Florida’s term, a “great reset” in the 1940s. Part of the reset was the post-World War II period from the late 1940s into the early 1980s. This was in some ways a golden age in America with amazing entrepreneurship, innovation, massive wealth creation and expanding wealth equality. Changes in policies and increasing economic concentration beginning in the 1980s set in motion our current period with increased wealth concentration, the Great Recession and now rising nationalism, protectionism and potential trade wars.

While national and state policy solutions are required, local communities and regions can foster and support entrepreneurship – business, social and governmental – that can address wealth inequality and improve the well-being of more of our citizens. How?

I argue that entrepreneurs bring innovation to both our economy and society. This creativity and innovation leads to new market niches, something that Chris Gibbons with Economic Gardening argues is foundational to better economies and society. In turn, entrepreneurs also create greater economic competitiveness. These new market niches and competition generate more income and wealth that is redistributed to investors, employees and suppliers living within the community. Additionally, in communities where entrepreneurs are valued and supported, I find they are motivated to give back to their community through their employment taxes, civic engagement and philanthropy.

The power to create entrepreneurial behavior, more entrepreneurial ventures, rooted entrepreneurial ecosystems and ultimately entrepreneurial cultures is within the reach of our communities and regions. Finding the knowledge and the courage to commit community vision, energy and resources to fostering entrepreneurial behavior is a way to build healthier communities and ultimately increasing resident well-being and greater wealth equality.

I’d love to hear your comments! Contact Don at don@e2mail.org.