A Happy Note on Energy

OK, the economy stinks. It’s easy to get depressed. Too easy.

So, while cruising around the Internet, I found optimism in a Financial Post column by Lawrence Solomon from July 12, 2008. It’s titled “Abundant energy will power future growth.”

Solomon puts the supply of energy resources in proper perspective, and at least on this point, there is nothing to be down about. This is a MUST read.

Solomon noted, for example:

Never before in human history has energy been accessible in greater abundance and in more regions, never before has mankind had more energy options and faced a brighter energy future.

Take oil, the scarcest of the major energy commodities. In the Americas, proven oil reserves have increased from 170 billion barrels to 180 billion barrels over the last two decades, according to the 2008 Statistical World Review from British Petroleum. In Europe and Eurasia, proven oil reserves almost doubled, from 76 billion barrels to 144. Africa's proven oil reserves did double, from 58 billion barrels to 117. Even the Asia Pacific region, where China and India are reputed to be sucking up everything in sight, has increased its proven reserves. And the Middle East, the gas tank of the world, shows no sign of slowing down -- its reserves soared by almost 200 billion barrels, from a whopping 567 billion barrels to a super-whopping 756…

Most of the oil we know about lies in the well travelled portions of the globe. But most of the world remains unexplored -- the interiors of Africa, Asia and South America have seen relatively little oil exploration. Oil exploration in the oceans, too, is in its infancy. For all practical purposes, mankind has limitless oil supplies available to it. The story is similar for natural gas and coal, the other major nonrenewable sources of energy.

Thanks, Lawrence, I needed that.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

Politicians vs. Economists

What’s the difference between a politician and an economist?

Too many politicians deal in a fantasy-like land, while economists (well, at least, a good number of economists) deal with reality.

Economist Thomas Sowell pointed this out in a recent column. He was focused on politicians who love to give things away, noting that in order not to take responsibility for the costs involved, often push those costs onto the backs of business owners.

Sowell wrote:

The most politically painless way to hand out goodies, without taking responsibility for their costs, is to pass a law saying that somebody else must provide those goodies at their expense, while the politicians take credit for generosity and compassion.



Employers are ideal targets for such mandates, since there are always more employees than employers, and that is what counts on Election Day. Whether it is health insurance, time off with pay or whatever, these mandates on employers can be washed down with a little rhetoric about business’ “social responsibilities.” …

While you are enjoying all the goodies that politicians are sending your way, you may notice that your taxes are going up or that the money you earn or the money you have saved won’t buy as much as it used to…

If you are someone looking for a job — maybe a young person entering the labor force or a woman coming back into the labor force after spending a few years taking care of a small child- — you may find that there aren’t as many jobs available as there used to be before employers had to pay for “social responsibilities,” in addition to paying for the value of an employee’s work.

Sowell points that informing people that there are no free lunches makes economists less popular than politicians.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

The Entrepreneur: Creator of Wealth, and Social Justice

The first World Entrepreneurship Forum was held November 13-15 in Evian, France. As a member of the first global think tank dedicated to entrepreneurship, I am excited about this new initiative. After all, if political leaders and larger corporations can have their annual global gatherings, why shouldn’t entrepreneurs? On a global basis, we are responsible for the bulk of wealth creation, new jobs, innovation, and remain the best hope for easing the world out of its current economic woes.

It seems that excessive time and resources are being spent on cleaning up the messes of larger companies and institutions. While work and reforms are certainly needed to bring stability to our financial systems, markets and economy, politicians and existing institutions seem to be overly focused on the wrong targets. At the World Entrepreneurship Forum, there was no bitterness or whining about this current state of affairs – only optimism and solutions. Our job was to develop a common agenda – an actionable list of recommendations – to accelerate global entrepreneurship. And that we did.

While we are fine-tuning the wording of this list of twelve recommendations, the general themes focus on building a more enabling environment – from education to government policies; improving support institutions, and increasing a cultural appreciation for entrepreneurs; and creating an inclusive framework to expose entrepreneurship as an option to more women, minorities and disadvantage groups.

Indeed, enabling business start-ups and entrepreneurship is critical to the economic future of our globe. But the entrepreneur, quite naturally, is a creator of social justice. Their innovations have greatly improved the lives of people around the world; their wealth-building capacity has lead to a better way of life and economic opportunity for untold millions; and their passion is unmatched for giving back to their communities, their causes and their countries.

Upon return from the forum, I stumbled upon an “open letter” on the business wires written by Philip Verges, Founder and CEO, NewMarket Technology Inc. While the letter was directed to “Fellow Shareholders and Small Equity Investors” its message certainly is one that needs to be read by political, social, education and business leaders.

In essence, Mr. Verges believes that the current global economic situation is an opportunity to “bring attention to a long overlooked business sector – a business sector that happens to account for the majority of economic activity around the world with historically little attention from Wall Street.” Of course, this would be the small business and entrepreneurial sector.

In his letter, Mr. Verges writes that he is optimistic that “this previously overlooked business sector will finally get the attention it deserves as institutions search for strength in the market.”

The letter is quite deep and thoughtful. (I hope he puts it on his company’s website as I only have a printed copy.) He concludes that “a new Wall Street” that emerges from the financial crises will do so “with a new appreciation for investment in the small businesses filling the gaps in the continuing market segmentation and the ongoing production fragmentation.”

According to Mr. Verges, “all of us share a vested interest in an improved investment environment surrounding the small business community.” He is confident that small firms will benefit in the new era.

Entrepreneurs are the solution to the global economic crises. This is the message from members of the World Entrepreneurship Forum. It certainly is the belief of thoughtful CEOs such as Philip Verges.

Karen Kerrigan
President & CEO

Obama’s Opportunity on Immigration

When you look at his campaign positions and record in the U.S. Senate, it’s pretty easy to get down on President-elect Barack Obama in terms of his policies impacting the economy. His proposals on taxes, regulation, trade, government spending, energy – little of this boosts confidence.

However, there is at least one area where the President-elect has the opportunity to make a positive impact on the long-run health of the economy.

In an article just published by Dolan Media Company and Long Island Business News, I wrote:

When it comes to public policy and the economy, there’s at least one area where President-elect Barack Obama seems to get it. That is, immigration.

Make no mistake; immigrants have been the lifeblood of the U.S. labor force in recent times…

Finish reading the column here.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council

SEC Forum: "Small Business Capital Formation and the Credit Crises," Nov. 20 -- LIVE WEBCAST and Q&A Opportunity

The Securities and Exchange Commission (SEC) will hold its annual forum on small business capital formation on Nov. 20, 2008. SBE Council President & CEO Karen Kerrigan will co-moderate the opening roundtable panel: “Small Business Capital Formation and the Credit Crises,” 9:15 a.m. ET. Panel participants will provide an update on access to credit and capital with regards to bank lending, venture capital, alternative forms of financing, the SBA loan program and other issues.

You can view the agenda, register for the event, or tune into the webcast live at www.sec.gov. Webcast participants can send questions in real time.

The SEC forum will focus on the impact of recent capital market events on small business capital formation in the United States. In particular, the participants at the forum will consider the small business impact of the Emergency Economic Stabilization Act of 2008, ways to eliminate or reduce impediments in the capital-raising process for smaller companies, and the effects of mark-to-market accounting on small businesses.

The full forum includes roundtable discussions and breakout group sessions where participants will work together to formulate specific policy recommendations. The recommendations will be considered by the Commission and also will be sent to Congress and referred to other government agencies if they involve matters other than the federal securities laws.

This is an opportunity to ask questions of practitioners such as venture capitalists, bank lenders, and business finance experts as well as government officials from the SBA, Treasury Department and Federal Reserve. The event is a public forum so please participate! The webcast makes it easy for you to do so. Again tune in live at 9:00 a.m. ET at www.sec.gov.

Karen Kerrigan
President & CEO

Lawsuits Jack Up Health Care Costs

Small business owners understand the costs of a runaway legal system. They have experienced, or fear that they will experience, a frivolous, costly lawsuit that damages or even sinks their business.

However, lawsuit costs affect small businesses, their employees and the economy in other ways as well. For example, there is the matter of health care costs. Again, small business owners understand the high costs of health care coverage. But a chunk of those costs are driven by lawsuits.

On November 18, the Boston Globe reported the following about medical practices in the state of Massachusetts:

A vast majority of physicians in Massachusetts say the fear of being sued is driving them to order unnecessary tests, procedures, referrals, and even hospitalizations, a phenomenon that is adding at least $1.4 billion to annual healthcare costs in the Bay State, according to a study released yesterday.

The Massachusetts Medical Society reported that 83 percent of physicians surveyed said they have practiced so-called defensive medicine and that an average of 18 to 28 percent of tests, procedures, referrals, and consultations, and 13 percent of hospitalizations, were ordered to avoid lawsuits.

The society said its findings, the first it has compiled on the issue, probably underestimate the cost of the problem because the 900 physicians surveyed, including family doctors, obstetricians, gynecologists, and general surgeons, accounted for only about 46 percent of the doctors in the state…

The medical society's study found that 28 percent of physicians surveyed said that liability concerns affected the care they provided "a lot," with emergency room physicians, obstetricians, and gynecologists leading the pack. From X-rays to ultrasounds, it found that roughly one in four doctors said they ordered excessive tests because they were worried about missing something and being sued.

Those are real costs that get passed on to individuals and businesses, making health care less affordable.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council