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As Ronald Reagan famously said, “the nine most terrifying words in the English language are ‘I'm from the government, and I'm here to help.’” While champions of limited government are in favor of entrepreneurship, do we really want the federal government to decide on which companies to invest in? After President Obama’s announcement that the White House plans to invest in entrepreneurs in the United States and abroad, what should we expect? The Spark Global Entrepreneurship coalition plans to raise $1 billion in private funding for entrepreneurs in the United States and abroad by 2017. At face value, this may seem like a fine idea – but this is actually very bad news.
Our government should not be in the position of picking winners and losers. Politicization inevitably plagues everything touched by government and political elites. The White House press release on the initiative states, “The United States is making empowering women and youth a central objective of its global entrepreneurship programs,” and at the White House event in which these initiatives were announced, President Obama stated, “At a time that we’re facing challenges that no country can meet by itself — lifting people out of poverty, combating climate change, preventing the spread of disease — helping social entrepreneurs mobilize and organize brings more people together to find solutions.” By these two statements alone, we can glimpse the political agendas this $1 billion in investments will be funding. Companies that promise to combat climate change will receive priority despite being the least promising in the marketplace (think: Solyndra), and preferential treatment will be given to women entrepreneurs even if their ideas and execution are significantly less valuable than those of their male competitors.
This kind of government interference in venture capital distorts the efficiency of the marketplace. Money that could be invested to fund another entrepreneurial project will now go where the government wants it – something we’ve seen wreak havoc in the past, like during the housing bubble or the current student loan crisis. Venture capital should go towards funding things that there is, or could be, a market demand for, not towards what politicians think will further their agenda. The government taking money that could otherwise be used as individuals and firms see fit and giving it to those who they decide deserve it is the kind of central planning that leads to economic bubbles and crashes, not innovation and progress.
The White House’s interest in entrepreneurship is troubling on a greater ideological and cultural level as well. The President’s impulse to become involved in entrepreneurship is evidence of a pervasive “you didn’t build that” mentality. Entrepreneurs have long been the most individualist of the American population, taking risks on their own visions in order to change the landscape of American life, and the government wants to stake a claim on those successes. The current administration would like to look at entrepreneurs, brave enough to forge their own path, and say, “where would they be without us?”
This attitude was recently exemplified by White House Chief Technology Officer Megan Smith, who said that more entrepreneurs in Silicon Valley need to work for the federal government, which, translated into reality, means she wants to turn innovators into bureaucrats. What Smith doesn’t understand is that entrepreneurs in private markets create positive change in the world – but put them in government, or involve the government in their work, and the best they can do is change nothing. The government becoming involved in entrepreneurship will not help bring about more entrepreneurship, but rather, manipulate entrepreneurs into doing what the government wants them to do.