Rev up the small-business engine
The G-20 must remember that credit is not the only fuel needed by this driver of economic recovery.
Next week, leaders of the Group of 20 nations will focus on big issues – more stimulus, more regulation, easier credit – to end a world recession. If they really want to create jobs, though, they need to think small, as in small business.
Small companies crank out jobs for workers and revenues for governments. They have produced 70 percent of net new American jobs over the last decade. Globally, 80 percent of governments take in a majority of their revenues from such enterprises.
"Economic recovery will be driven in large part by America's small businesses," the White House said in a statement last week – as it announced plans to increase access to government-backed loans to small businesses and reduce loan fees.
No doubt, the world's corner retailers and restaurateurs, suppliers and service companies depend on credit access to manage their cash flow and grow their businesses. Relieving the worldwide crunch on credit has to be a top priority for the G-20, which is made up of the world's leading industrialized and emerging markets.
But the G-20 must also be mindful that the road leading to start-ups and small-business recovery has to be paved with more than credit. Literally, it must consist of modern highways, rails, and ports that speed goods to market (the US has considerable catching up to do here). It must avoid the potholes of crime and corruption, which discourage business investment (ask Russia about this).
Investment in research and development encourages innovation that spawns new businesses. A G-20 country such as India is benefiting from this, though the US – with its geographic clusters of universities, businesses, and venture capital firms – is still the innovation leader. Meanwhile, flexibility in hiring and firing keeps small businesses nimble (France, take note).