What many people don’t realise is that entrepreneurism is a vehicle which society needs to sustain itself. Entrepreneurial ventures are integral to society if it wants to keep growing. So this week I wanted to press the case for why entrepreneurialism is a key factor for economic growth.
If you’ve had the fortune to read an economics section in the past six months, you’ll most likely have heard the news; The world is in sustained economic recovery. However this recovery didn’t come from thin air, it came from growing business.
The economy thrives on business, that’s no secret. However what some people may not realise is that entrepreneurial ventures specifically are a key driver of recovery in times of economic hardship. That’s because only through the creation of new opportunities is there room for growth. Entrepreneurial ventures provide new opportunities.
You have to look at it this way. A market crashes when demand falls. Take the Great Depression, for example. The twenties saw such robust economic growth because new technology drove consumers to spend. Once the market had been saturated, it crashed because nobody was spending. Only the politically volatile nature of the late 30’s saw the market recover because need meant that new avenues opened up for spending.
So now we know that market recovery is linked to spending; so how do entrepreneurial ventures specifically encourage spending. Firstly, when a new company is founded, new job opportunities open up. This gives people more cash to spend which they then feed back into the economy.
It also introduces a new product or service for people to spend their money on. Look at the tech boom for example. The companies that thrived then were selling things that people wanted and had never had before. Therefore people were buying and putting money into the economy.
This demand also contributes to the growth of other sectors. Again, take the tech boom. You need companies to make the products in question and you need the materials to make them, both of which cost money. So higher demand means that several sectors all see increased profit margins.
There is a reason that governments across the world (particularly America) encourage entrepreneurialism; it benefits everyone. It injects much needed cash into the economy which then means that everyone feels the benefits. Entrepreneurialism is a lynchpin of modern economics.