How governments can ease the entry of ‘recovery entrepreneurs’

Crises bring creative destruction. It’s time to help new companies and job opportunities emerge, write Simeon Djankov and Frederic Meunier

 
The focus of Covid-19 economic responses so far has been on assisting existing businesses and their employees with weathering the crisis. In particular, the priority of governments has rightly been on saving existing jobs. Little is done yet to help new companies and employment opportunities emerge. Yet we know from Joseph Schumpeter that crises are a period of creative destruction, where new ideas and ways of doing things come to the fore.

This blog is about the new “recovery” entrepreneurs and how governments can ease their entry into business. The timing does not seem propitious yet. In France, the number of newly incorporated companies collapsed by 42% in April 2020 compared to March 2020, after a drop of 30% in March 2020 compared to February 2020. In Spain, the number of newly created companies fell by 28% in March 2020, compared to last year’s. With the gradual relaxation of lockdown rules, however, opportunities are sure to open up soon.

Some of the new opportunities are just a different – more technological – way to do the same business. For example, firms have invested in digital applications. Workers have learned how to use remote databases and reach their customers over social media. The office has become virtual and may remain so post-Covid-19 in some sectors of the economy. There is also the possibility that entirely new sectors may emerge after the crisis, or that new competitors may take market share from established firms in other sectors. Helping these transitions is one of politicians’ next tasks.

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Πηγή: blogs.lse.ac.uk