[Viewpoint]A new day for small business

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[Viewpoint]A new day for small business

Small business owners often ask me what will happen if the economy does not turn around.

Most of them think they will go bankrupt and become the urban poor, and the rich will keep getting richer. After the financial crisis in 1998, the government instituted policies to help start-ups and small businesses. However, 10 years have passed and small business owners say not much has changed.

Countless baby boomers are in line to retire, and many attempt to go into the food service industry as a way to supplement their incomes. Small business owners try new markets when times are tough, but they lack a competitive edge and their efforts have a high likelihood of failure. Until the mid ’90s, many business owners had entrepreneurial spirits when they started. They were interested in new ideas and took risks to challenge the “blue ocean.” However, these days, even capable entrepreneurs opt for a narrow range of popular industries. Start-ups in the last decade have gone backward compared to the mid-’90s.

“The Janitor: How an Unexpected Friendship Transformed a CEO and his Company” presents six virtues on how to live wisely. One is, “Don’t spend. Invest!” Policy makers who want to boost small businesses should listen to this advice. Their impact will be limited if they approach the small business sector armed only with economic theories.

Politicians never fail to visit local markets during election season because small business owners are important voters. Politicians want to win their hearts regardless of what’s best for the economy.

However, nearsighted policies that benefit small business owners jeopardize the individuals they are meant to help. Since many policies uniformly apply to different businesses instead of offering tailored programs for different sectors, tax money is often wasted.

Today, small businesses and private markets have lost their growth engine thanks to the government, which has provided free handouts for the last 10 years.

As government-run companies get involved in markets the private sector can handle, private companies with high potential face a crisis.

Immediately after the financial crisis, the government indiscriminately encouraged start-ups, and universities and public organizations offered government-sponsored training. However, when the government’s aid stopped, all the training programs disappeared.

Start-up consulting traveled a similar road. Even though it was a market that could be nurtured by the private sector, the government offered free consulting. As a result, private consulting firms died away.

Also, the business assistance service industry failed to become competitive and is now waiting for government help.

The government needs to switch from spending-oriented policy to investment-oriented policy. This is the only way to revive small business owners and create jobs. You cannot create jobs by providing start-up funds and teaching interview skills. The government needs to look at future industries and nurture the promising ones. Changes in the job market should be studied, and vocational programs need to reflect changes in policy.

Promising wholesale and retail, Internet and service businesses need to be invented to divert the demand for start-ups. Competitiveness of small business owners can be enhanced by encouraging cooperation. The failure rate of start-ups can be reduced by cutting down insolvent franchises and reinforcing cooperative systems between large corporations and small merchants and industrialists. Start-up businesses should be diversified in order to offer tailored jobs for women, retired baby boomers, youth and those who wish to change careers.

The government should give up the idea that the small business issue can be solved through public policy. It cannot approach all small business owners from a social welfare perspective. If the private sector can compete, the government needs to let private entities play freely. If the government is busy listening to unrealistic demands, policy might end up killing small businesses instead of reviving them.

*The writer is the director of Korea Startup Strategy Research Institute. Translation by the JoongAng Daily staff.

by Lee Gyeong-hui
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