For release: March. 30, 2004

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St. Louis Fed’s Poole Lauds
U.S.’ “Superb Entrepreneurial Environment”

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EVANSVILLE, Ind. — “I’m an optimist about the long-run economic performance of the United States because of the superb entrepreneurial environment in this country. I don’t think many appreciate how important it is that we build on our success in this regard.”

That was the central point of a speech by William Poole, president of the Federal Reserve Bank of St. Louis, in a speech today to the Evansville Rotary Club.

Americans seem much more willing to be entrepreneurs than citizens of other countries, said Poole. “A recent survey found that more than 70 percent of adult Americans would prefer being an entrepreneur to working for someone else. In contrast, the same survey showed that only 46 and 41 percent of adults in Western Europe and Japan, respectively, preferred being an entrepreneur. One explanation may be that, because the U.S. is an immigrant nation, we inherited our dynamism from past generations, who migrated halfway around the world in search of a better life.”

Poole said two factors contribute to today’s American entrepreneurial success: an “entrepreneurial spirit” prevalent in America and a public policy environment making it easier to start and maintain new businesses.

Poole said that policymakers in the European Union have been grappling with their perceived gap in entrepreneurial spirit. “What they have come to recognize from comparing their countries with us is that it is not enough to have appropriate laws and regulations,” he said. “In many respects, compared with the United States, some European countries have equivalent or superior institutional arrangements for allowing entrepreneurship.” He cited the Scandinavian countries among the latter group, but added that only about 30 percent of their citizens have a preference to be entrepreneurs.

In discussing the public policy environment, Poole said the United States stands out in a number of ways in balancing public requirements with the needs and incentives of entrepreneurs and other businesses. “First, the structures of our fundamental legal institutions tend to differ from those of other countries,” Poole said. “Second, our competitive financial system provides entrepreneurs with a ready source of funds. Third, in general we don’t overregulate our labor markets and fourth, we have generally lower tax rates.”

Poole said that the Federal Reserve played a key role in promoting growth by keeping inflation low and stable. “Inflation has been kept in check for more than two decades, and you can rest assured that the Fed remains vigilant on that front.”

Poole said that opening a business is much simpler in the United States than elsewhere. It typically takes about four days and approximately $210 to establish a business as a legal entity, he said. However, he added, establishing a business in Japan requires an entrepreneur to spend over $3,500 and 31 days following 11 different procedures. Comparable figures in other countries include 56 days and more than $2,600 in Belgium and $8,000 covering 16 different procedures in Greece.

Poole said that though entrepreneurship is doing well in the United States relative to other countries, “we should not rest on our laurels; there is still room for improvement.” For example, he said, “many environmental and other regulations place too much of a burden on the activities of entrepreneurs without generating correspondingly large benefits to society; the tax codes for individuals and businesses are, in many ways, needlessly complicated; and there are rumblings that we should impose new labor market restrictions to make it more costly for firms to move some of their operations overseas.”

Poole said the United States “should be careful we don’t needlessly restrict or suppress this entrepreneurial spirit. It is a precious resource, not be wasted or squandered.”

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