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The Honolulu Advertiser

Posted on: Friday, January 3, 2003

Island Voices
Here's how to create jobs

Darryl Mleynek is state director of the Hawai'i Small Business Development Center Network, a partnership program between the University of Hawai'i at Hilo and the U.S. Small Business Administration.

In his Dec. 23 column, Cliff Slater argues that government cannot create jobs in the private sector and new construction is only a short-term stimulus. While he is basically correct, he is wrong to assume that government has no activist role to play in building a vibrant, sustainable economy except to reduce taxes.

As governments increasingly recognize, the business community creates new wealth through profit and jobs, which pay the taxes that support government programs.

To pay for better education, crime reduction, road maintenance or protecting the environment requires a thriving business community. Government should foster the conditions under which businesses thrive, and its citizens should hold it accountable for doing this. There are five such conditions:

• Increase entrepreneurial understanding. If a business community is to thrive, then it must understand the principles of entrepreneurship. The definition of entrepreneurship makes market opportunity the central event, which in turn places the needs and desires of the client as the driver of business activity.

This understanding is premised on the notion that risk is the essence of doing business. Without an in-depth understanding of these ideas, businesses do not expand well and far too easily succumb to competition.

• Provide greater access for small businesses to capital, both debt and equity. Banks reduce risk primarily by basing loans on collateral, established cash flow and sometimes on government-based guarantees.

Where risks are too high for the private sector, government needs to develop programs using a different set of risk-reduction methods, such as intensive consulting.

No small business starting up should fail for the sole reason of lack of capital.

• Provide easy access to critical information. Small-business owners must understand their market and industry and the rapid changes occurring within them. Much of this information is only available on subscriber-based databases that are too costly for small businesses or come from sources that require more expertise to access than business owners customarily possess.

This need can be satisfied only through the use of professional researchers. Hawai'i does have one library that does customized research for small businesses — the Hawai'i Business Research Library — but it needs to be more strongly supported by the state government.

• Increase the understanding of the concepts of continuous quality improvement. Individuals newly in business frequently have only a rudimentary knowledge of the importance of quality or how to maintain and improve quality.

• Eliminate all unnecessary governmental burdens placed upon businesses, whether taxation or regulation. This is one factor that nearly all agree must take place.

The cost for the state to foster these conditions, with the sole exception of tax reduction, is minimal. Economic impact studies demonstrate that the cost for the implementing three of the five conditions is returned almost immediately through the payment of taxes generated by the development of new wealth and jobs.