Policies for a new entrepreneurial economy

Emerging smaller scale, distributed production technology offers new growth prospects for the mature industrial economies, but also intensifies global competition, increases job separations and raises the risks for policy failure. The new global production organization and competition are enforcing a better match between the wide distributions of individual productivities and the still fairly flat distributions of wages within industrial economics. To prevent the extreme income and wealth distributions between the industrial and the developing economies from being established within the industrialized economies, it is necessary to achieve (1) more even skill distributions through effective education, (2) radically improved recycling of unemployed labor, (3) significantly raised entrepreneurial establishment and expansion of new firms and (4) radically lowered private income risks for self employed. Success of the old industrial nations in maintaining their welfare attributes, I furthermore conclude, will be played out in the three critical markets for labor, educational and insurance services, all currently dominated by public service providers in Europe. Private citizens’ accounts should, however, both help finance and improve incentives for self employment and private entrepreneurship and complement eroding public social insurance in high tax welfare economies. I study the prospects for instituting such incentives to facilitate self employment and new business creation in some European countries and in the USA. A stylized comparison of the industrial systems suggests that European economies are at a disadvantage compared to the U.S.