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European entrepreneurs: Les misérables (economist.com)
123 points by keiferski on Sept 29, 2012 | hide | past | favorite | 91 comments

Isn't talking about "European" entrepreneurs a bit generalizing? There are some similarities, but many more differences. The article itself even seems to hint at it, but not note it explicitly: in a graph labeled "life sentences", purporting to show how long it takes for "European" entrepreneurs to be free of debt, the bar for Denmark is so small that you can barely see it. Maybe they mean primarily French & German entrepreneurs?

As an American living in Denmark, I would personally prefer to bootstrap a business here rather than in the U.S., though it does depend on what kind of business. The main advantage to doing it here, imo, is that the healthcare story is solved, though maybe that'll be better in the U.S. after PPACA comes into effect in 2014. Another plus is better government support for small businesses: grants are available, and you can get some cheap early part-time employees by participating in subsidized internship programs intended to "upskill" people on unemployment. The main downside is high wages (though that matters less in tech, where wages are very high in the US, too), less access to venture capital if you're going the non-bootstrapping route, and some general problems from not being in the U.S. (less media visibility, problems with payment gateways, etc.).

> The article itself even seems to hint at it, but not note it explicitly: in a graph labeled "life sentences", purporting to show how long it takes for "European" entrepreneurs to be free of debt, the bar for Denmark is so small that you can barely see it. Maybe they mean primarily French & German entrepreneurs?

It says the average time to discharge debt in the US is less than a year, so that the vast majority of Europe (by number of countries and by population) takes much longer. The existence of a pocket of 5 million people in Denmark (basically a large city) where it is less hardly diminishes the generalization.

> The main advantage to doing it here, imo, is that the healthcare story is solved, though maybe that'll be better in the U.S. after PPACA comes into effect in 2014.

This comment sounds more motivated by politics than the actual business of start-ups. Healthcare is a significant cost for businesses in the US, but the difficulty of providing insurance for employees is hardly even discussed here around HN as an important consideration for start-ups, compared to, say, finding capital, good managers, compensation schemes, entrepreneurial spirit, government regulation, and so on.

> the difficulty of providing insurance for employees is hardly even discussed here around HN

That's not my impression of HN! It comes up fairly regularly, and is cited as a problem by a number of startup founders. Among others, tptacek has mentioned in a few threads that providing founders/employees with healthcare is a significant problem for early-stage, small companies, especially for bootstrappers, and for people trying to freelance (it becomes easier if you're large-ish, where you can negotiate a group plan).

I suppose it's a political comment in the sense that anything in this space is political, but my personal interest is just in somehow being able to work for myself while also having health coverage. I'd like to move back to the US at some point for cultural/family reasons, and the problems with the individual-insurance market are one of the things holding me back at the moment. I hardly care which kinds of politics fix that problem, as long as a fix of some kind appears...

Among others, tptacek has mentioned in a few threads that providing founders/employees with healthcare is a significant problem for early-stage, small companies, especially for bootstrappers, and for people trying to freelance (it becomes easier if you're large-ish, where you can negotiate a group plan).

Since this discussion is primarily about entrepreneurialism in Europe, I'll note that most, if not all, of the major economies in Europe have socialised healthcare systems. There are also, at least in the UK, various rules that apply to employers in general but have built-in limitations or outright exceptions for businesses with only a small number of people.

There certainly are hurdles to taking on new staff here, but often it's more about getting rid of employees rather than day-to-day overheads while they're employed. In particular, the difficulty of firing even someone who is severely underperforming is notorious in many of these economies, which makes the risk of taking someone on in the first place proportionately greater.

But don't you think my other examples (finding capital, good managers, compensation schemes, entrepreneurial spirit, government regulation) are all more discussed? Again, it's not a non-issue; it's just that if you cite this as your major concern, you're either an unusual case or just want to talk politics.

"grants are available, and you can get some cheap early part-time employees by participating in subsidized internship programs intended to "upskill" people on unemployment" => but be careful there; most government money is not handed as money but as less/no (income) taxes. For instance I can get E40k money from the government if I start up a company, but that E40k is money I don't have to pay as income tax. That's great, except if you don't have the money to pay income in the first place. There are money grants but, in my experience, most connected with tax which are worthless if you cannot or do not pay the money over which that tax has to be paid in the first place...

There are some cash grants available, though perhaps more in some areas than others. I'm thinking of smallish grants targeting bootstrapping companies, stuff in the €25,000-€100,000 range. A friend starting a videogame-development company has gotten grants from both the Danish Film Institute, and the Nordic Game Program, for example, just paid out in cash.

They have some here for around E40k, but more in niches (maybe there too); for film/games you have specific grants while 'more boring' (however with a higher probability of success) companies have to fight harder. Maybe in Denmark it is a bit easier.

> As an American living in Denmark, I would personally prefer to bootstrap a business here rather than in the U.S., though it does depend on what kind of business. The main advantage to doing it here, imo, is that the healthcare story is solved

I'm finn and I would definitely want to start a business in US rather than in europe (or in finland), the advantages are enormous - much better access to funding and very large homogenous potential customer pool being the 2 most important issues.

As an American living in Denmark

How did that happen?

Also, would love to meet up.

same here. since I'm from Copenhagen.

May e-mail is in my profile in case you, or anyone else from the Copenhagen area, wants to have coffee.

i just moved to cph; i'm always up for grabbing coffee

He probably didn't swim there.

What a breath of fresh air after reading the same old simplistic crap: "Europe is too socialist".

Combined with lax immigration, it certainly is. I'm from Belgium, and I would never give up healthcare, education or basic benefits. But The pendulum has swung too far.

In the US, Denmark is often taken as the perfect example of socialism done right. But people leave out 2 very important factors:

- Denmark has an abundance of national oil reserves, and exploited them very cleverly. (This is a big advantage to less fortunate nations)

- Denmark is much stricter (smarter) when it comes to taking in immigrants than France/Benelux

I think you might be thinking of Norway on the oil part. Denmark produces some oil, but not a particularly large amount, and almost entirely in the past 10 years. Tax/royalty revenues to the state now amount to about 3% of the state budget, which is a nice cushion, but not really the main source of funds.

I agree with you the pendulum has swung a bit far. But I think these sort of articles are just way off. Yes, there are bureaucracy and labour laws that are unhelpful. However, they are not the main reason Europe does not produce more entrepreneurs.

The Economist is overly gloomy about the EU I feel; every week you get pounded by more and more 'this will end badly' stories about the EU.

That said, I do really feel the 'good enough' vibe here in the EU; most people I talk to who have companies (just started or older) have the 'it's good enough this way' attitude. 'We' generally don't want to be billionaires or even have billion Euro companies. Once you are making insane profit margins and have a fat company bank account, all employees are happy, growth is stopped and the goal becomes to sustain that situation. I know great entrepreneurs here who started out with crazy plans; once hitting that point (and that can be any revenue mind you; for some companies it's E10 million/year, for others it's E100 million/year, but rarely more than that) they find it good enough. I think a lot stems from that feeling of not actually wanting to be 'the biggest', just wanting a stable, sustainable company producing profit margins year after year to lick your fingers by.

Edit: read the comments; 500 biggest companies in the world, 132 US, 166 EU and France has more than the UK. Didn't check those things, just copying here for completeness.

I think the author makes the argument that while Europe once was able to produce huge companies, it produces significantly fewer after WWI. Many of the European companies on the Global Fortune 500 list were founded in late 19th century to early 20th century. Shell (#1) and BP (#4), for example, were founded in 1900 and 1909, respectively.

That said, I agree with the comment about many in Europe generally favoring the "good enough" way over the "home run" way of thinking.

It always bothers me when I see listings where Eurozone countries are seen as separate entities. We're not. Our economies and social structures are heavily interdependent on each other and that's only ever going to increase. Regarding Eurozone countries as completely separate states would be akin to thinking of California as a different country.

Unfortunately we are not quite there yet. If we were a more cohesive union, there wouldn't be such a thing as a European debt crisis. We will have Eurobonds, automatic states bailouts, a fiscal union, etc.

It might take another 50 years, but we, eventually, will become a single union. This are interesting times

Don't forget the languages; these are a far bigger barrier than everyone seems to think. Most countries now have mandatory English in schools, but taught by teachers from the country itself. When the average Spanish young person with years of English in school starts speaking to me in English it takes several minutes before I actually recognize it is English. Let alone understand what he/she is on about. I found the same in France. If English is taught by people who cannot possibly pronounce it themselves and when movies are still dubbed (recently it was again decided that movies in Spain will remain dubbed for instance), it will not 'come together'.

Now I don't want to say we all have to speak English, but it's, economically, the logical language to go for (http://www.andaman.org/BOOK/reprints/weber/rep-weber.htm) and entire EU youth are watching US movies + US tv shows and thus US culture 24/7. I hear Spanish kids making translated jokes (from dubbing) from American shows. Economy wise it would make sense to just make the union speak something which can be used in international business. And then of course the things you speak off as well to make it 1 union.

Well it seems to be the logical choice, but the UK is currently backing out of the EU, so we would not have any native speakers. And while some countries (spain probably included) are reasonable blasé about adopting other languages, forget about the french doing that.

Well... not enough labour mobility without a common language and without labour mobility no optimal currency area. Somebody should really have thought this through...

There's no need for anybody speaking English natively. Even without, English is the natural common language of the EU. A nice example is Pan-European university student networks such as IAESTE, AEGEE and BEST. English is the common language inside these organisations. The members do not even think twice about it. This is the case despite the fact that AEGEE is a French acronym and BEST has no member universities in English speaking countries.

Similarly, virtually any company in Europe that has more than one accepted work floor language, has $NATIONAL_LANGUAGE and English. And any company where the work floor language is not the national language, it's English.

Really, this battle has long ago been won. Only some archaic government institutions like the EU itself pretend that languages other than English still make a chance at becoming the lingua franca of Europe. Whether or not the UK currently is in a Euro-mood does not influence this at all.

Oh, and you forgot about Ireland.

There's no dubbing north of Germany, and most Norwegians, Danes and Swedes talks a decent english, but there's still a strong "anti-EU" sentiment. I'm personally more of a fan of a Kalmar Union, but if we can't have that, I'd rather suffer the EU than have renewed distrust across borders.

I see you didn't say Finland; I noticed in Finland English is not very good. They have dubbing?

No dubbing in Finland. I don't think English in Finland is any worse than in aforementioned Scandinavian countries, considering that quality of teaching is equal if not better. Of course, if someone simply just doesn't bother learning the language in school, it's probably much harder to pick it up later on by Finns due to completely differing native language.

Finnish isn't an Indo-European language so learning English is a bigger step for Finns.

I lived in Finland for a year 10 years ago, and my experience is the exact opposite.

They have a funny accent though.

I have long supported that the EU should adopt english as an official second language (Kind of like India). Translation services alone account for 1% of EC's budget

Well, it's a lot of factors (I am currently in an European country, YMMV between them)

- Lack of "drive". Young people mostly want to find a nice job and that's it. In my perception this is less in France, where people may want to "kick ass" more (historical pride maybe) and maybe in the UK or Germany

- People are 'naive', and by that I mean the sentiment "this is the way it is, don't bother changing". Since everything pretty much works, it's difficult to see faults (or maybe faults enough to motivate a change)

- People in Europe need more hand-holding. They are usually more theoretical as well instead of "go there and do it", something is much stronger in the American continent (which goes from Canada all the way to Uruguai/Argentina/Chile in the south)

- Labor laws, difficulty in getting talent outside of the EU (depends on the country really - still, usually easier than getting an H1B)

Also, every country has its quirks: French cannot speak english to save their lives (usually)

In the end, Europe has a lot of opportunities, they have only to think outside of the box. But don't be so quick to count them out, they have literally thousands of years of experience.

Lack of "drive". Young people mostly want to find a nice job and that's it.

what most people don't realize is that the time of uninterrupted careers and job security is over, and so even if you want to be just an employee, you're still essentially an entrepreneur. You'll still have to do constant R&D to keep your products (job skills) current, and do sales to get the next job.

This way you may not have to invest into things and get into debts beyond typical mortgages or car loans, but you'll also lack the potential upside of being in business for yourself.

I think part of the problem is that job security is still drilled into everyone's heads: older, educated European parents are quasi-unfireable at this point (having been hired on old-style contracts with ridiculously favourable terms), and even young teachers are typically state employees with exceptionally high job security and exceptionally low competition - my sister is studying to be a teacher in Austria, and she already knows what her salary will be when she starts work in 3 years' time. And these are the only adults with whom young people spend any significant amount of time.

Meanwhile, in industry, there are jobs available, but often not as actual employees. Companies will bend over backwards to hire young people on a "permanently temporary" basis, i.e. perpetual, full-time, single-client freelancers. Legally, this tends to be a very grey area, but if you complain they'll obviously just not renew your contract. So nobody does.

The decrease in job security is probably also contributing to the "brain drain": if salaries are higher elsewhere, and there's no longer a security advantage to staying at home, then why not move?

> even young teachers are typically state employees with exceptionally high job security and exceptionally low competition

This is definitely no longer true in Austria. For the first couple of years of their career, young teachers are usually hired on a contract basis. If they are not needed the following year, their contract is simply not renewed.

Together with the infamously bad ability by Austrian schools and school administration to estimate demand for the following years, I've heard horror stories of teacher who didn't know at the end of August whether or not they will have a job in September.

That said, at the moment there seems to be a shortage of teachers, caused by the attempts of the last decade or so to steer people away from becoming teachers (because we have too many ...). So with a decent choice of subjects it shouldn't be too hard to find a job.

Yes, that's very true. For most people at least. The previous generation here in the EU, had this notion of a 'permanent job', which was an iron-clad, for life, contract. State guaranteed. You could be folding paper planes all day and sit counting your pencils. Again. And still nothing happened. This was quite common. I know a lot of people, especially in PT/ES who are in trouble with their parents; they want to take risks while their parents tell them to get this cushy job for life (which doesn't exist anymore). It's a real pain to convince people that this was a crazy notion (and poisonous!) in the first place.

I agree, there are no more cushy jobs, or at least, not in the amount it existed once.

But the constant renewing of abilities is more a characteristic of IT. In the majority of professions this is much less pronounced

> Since everything pretty much works, it's difficult to see faults (or maybe faults enough to motivate a change)

This is an interesting angle.

Are less well developed countries better for entrepreneurs? More holes to fill? Anyone have anecdotal evidence either way?

European countries are as full of things that don't work as third world ones. I lived in switzerland, for instance, and found it astonishing how things that "simply worked" back home (a developing country) were still badly implemented there. Paying rent and tracking mail packages are two examples I still remember didn't work well/could be heavily improved...

There are holes to fill everywhere.

What is wrong with paying rent in Switzerland? I've lived in several countries and here (Geneva) they handle rent payments pretty well, it's just doing it online/taking one paper to the atm (with UBS), honestly I see no faults in that

This chart makes it clear how big the difference is: http://bit.ly/Qcrv3R

That chart is dramatic, but I'm not convinced that I know what it implies. There are few large young European companies right now; but this doesn't necessarily mean that European companies are less successful, or fewer of them are founded. It just means that they grow more slowly.

I'm sure the US has more people who decide to "roll the dice" and rapildly end up either spectacularly successful or spectacularly flaming out; I've seen far less evidence that there's anything wrong with a culture where slower but more consistent growth is rewarded.

The graph we really need is not "number of big companies founded at given dates" but rather "number of companies which will ultimately become big founded at given dates".

One immediate issue I see with slow-growth companies is that if all companies grow slowly, that puts a cap on the maximum growth of the overall economy.

The other thing we in the software world mustn't forget is that we have marginal costs of approximately zero (or should I say picodollars?), which makes smaller companies disproportionally more competitive. The only advantage of being big in software is bigger leverage (which is usually in direct competition with agility) whereas elsewhere economies of scale are pronounced.

And regarding "number of companies which will ultimately become big founded at given dates":

I'd love to see some numbers on companies that are big but got there slowly. I suspect it doesn't happen, leaving aside artificially competition-stifled markets such as state-blessed monopolies. Given the nature of exponential growth, I'd be surprised if any of those Global Fortune 500 had no period of fast growth.

Slow growth is also likely to be correlated to inability to react to disruption. So companies in <high-growth country> would necessarily out-compete companies in <steady-growth country> in a free, globalised market economy.

if all companies grow slowly, that puts a cap on the maximum growth of the overall economy.

Yes, but not a meaningful one. For the purposes of this discussion, "slow growth" is anything under 100% per year.

I'd love to see some numbers on companies that are big but got there slowly. I suspect it doesn't happen

Interesting. I don't have any data, and I'm failing at finding any right now, but I think of Coca-Cola as being a company which reached its current size primarily through steady growth. I'm sure there are large pharmaceutical and chemical companies which have had slow growth curves -- while any one product may have a sharp growth curve, the company as a whole won't. Insurance companies and banks also tend to grow slowly, and of course Berkshire Hathaway is an example, with a highest ever Y/Y growth rate of 59.3%.

I suspect there's a certain amount of observation bias: Companies which grow slowly are boring, so we don't think about them.

All good points. I tried to find some useful data online, but I was surprised how hard it is to find a graph of revenue of a publicly traded company. All sorts of other metrics are available, just not revenue and profit. (let alone inflation-adjusted)

As a European, that's a seriously depressing chart.

I guess I can try comforting myself by stating that it says "In Europe", not "by Europeans". :)

Well maybe europeans make good midsize companies?

Here in Germany that would be http://en.wikipedia.org/wiki/Mittelstand, SMEs that are the major backbone of German economy.

I'd argue that SMEs are the backbone of every successful economy.

If you look at big business, say the Fortune 500 for example, these organisations are typically much more high profile than their smaller brethren, but there are still... well, only 500 of them. And while the list includes giant individual employers like Walmart, those businesses collectively still only employ something like 20M-30M people depending on how you count. Similarly, while your revenues are probably $5B+ if you made the 500 this year, plenty of the businesses towards the lower end of the list only made perhaps $20M-30M in profit, and one or two didn't even land a profit at all.

Depending on whose definition you take for the maximum number of employees, companies of up to 100-300 people might be considered SMEs. At that point, you could certainly be earning profits that compete with the lower end of the Fortune 500, and there are a lot more SMEs out there than industry giants.

And that's just the most basic, raw economic data about business performance and employment, without even considering cultural differences and efficiencies and innovation and numerous other factors that make smaller businesses important to the wider economy.


There are only 500 F500's because the F500 is the top 500 companies. It feels weird to have to point out that there is in fact a 501th company. You probably haven't heard of #500, but #499 --- second from the bottom of the list --- is KeyCorp, one of the country's largest regional bank chains.

Sorry, I'm not sure what point you're trying to make here.

I was just trying to demonstrate that although "big" businesses tend to get a lot of attention, they don't actually employ a large proportion of the working population, nor do they necessarily make much more profit than a large SME. In other words, really big business isn't the driver behind a successful economy, something else is. I contend that the "something else" is SMEs.

Hard to support that without torturing definitions:


Those charts are abysmally bad [1]; they also don't seem to agree with what other branches of the government are saying. From the SBA [2]:

"Small firms represent 99.7 percent of all employer firms; employ half of all private sector employees; pay 44 percent of total U.S. private payroll; create more than half of the non-farm private GDP; hire 43 percent of high tech workers..."

I think Silhouette has got the details pretty wrong, but if he had said that SMEs were as important to the U.S. economy as BigCos, and especially the Fortune 500, then it looks like the SBA agrees with him.

[1]: The data between businesses with no employees and businesses with less than 500 employees is mutually exclusive; you can't use those carts to make any points about the contributions to the economy of businesses with less than 500 employees, including those without employees, because that data is missing. "Annual Payroll" is a pretty bad data point to use for judgements about contributions to the economy; "sales or receipts" would be better, but that's only available for all employer firms, with no further breakdown, for some reason. All in all, pretty useless here.

[2]: http://web.sba.gov/faqs/faqIndexAll.cfm?areaid=24 -- seems to be down right now, try the Google cache: http://webcache.googleusercontent.com/search?q=cache:Wv_OfwD...

I think Silhouette has got the details pretty wrong

How so? All the specific figures I quoted were lifted directly from mainstream reporting of the Fortune 500 for 2012, starting with Fortune's own web site.

This doesn't make much difference to my argument anyway. Whoever's figures you take, it's clear that in raw numbers SMEs are a significant contributor, at least on par with big business. But if we're talking about what really drives an economy and keeps it developing, I would argue that a disproportionate amount of the innovation and a lot more flexibility is found in SMEs. BigCos are good at industrialising and achieving economies of scale, but they aren't particularly good at innovating or creating new markets. All I'm saying in this thread is that SMEs don't sacrifice their own direct contribution to the economy at the same time.

The only point I'm trying to make is that it's misleading to characterize the median or modal size of US employers by using the Fortune 500.

Census offers statistics on which employer size brackets employ how many people. ~41MM people in the US are employed by firms with fewer than 100 employees, ~72MM people are employed by those with more than 100 employees. In the smaller company bracket, more people are employed by companies with between 20 and 100 employees than at smaller companies.

All the Fortune 500 tells you is the size of the 500 most profitable companies. And my earlier point was simply this: the "501th company", which just missed being included on the F500, is presumably gigantic; KeyCorp just barely got onto the list.

exactly, what's wrong with midsize companies?

Looks counter cyclical - as US rises, Euro falls and vice versa. The Euro zone is in the same situation the US was during the 1900s. I wouldn't write off the europeans just yet.

Ok, this is my favourite rant subject (pace wonga.com).

It's the welfare state and related systems. But not a Ron Paul style get rid of the lot, we should recognise that unemployment and welfare payments make a huge amount of short term sense. We do not want a skilled worker made redundant to lose house and family becaause it takes three months to find a job.

But we should look carefully at long term welfare payments (long term unemployment, chronic disability and especially retirement). Just when we should change the expectation from how many jobs did you apply for, to how many customers did you advertise to is important not only for an entrepreneurial society, but a sane and fair one.

Look for work for three months, then look to create a company, and welfare will support you.

Most importantly I would change the focus for those under 24, whose first encounter with welfare (pretty much all school leavers and graduates in this climate it seems) should be a positive creative experience, not a dismal on the scrap heap one

There are some aspects of Denmark's system re: your last point that I think other European countries could benefit from. However, it's still quite poor when it comes to providing a way for starting a business to be recognized as an alternative exit from unemployment.

The good parts are a general vibe that the unemployment system is less about welfare, and more about matchmaking. One structural help is that it's run quasi-independently by several non-governmental (though state-subsidized) organizations. Each of these organizations, an "a-kasse", focuses on different areas. For example, I'm a member of one that focuses on researchers. This means they can provide more specific advice to my situation, and also means they develop relationships with both sides of the unemployment puzzle: companies in relevant areas will come to them looking for talent, and the a-kasse will try to connect unemployed people with seeking companies. So they see themselves not only as an unemployment agency, but also as a recruiter to some extent. If you can't find a researcher specializing in data mining, for example, you might go to the researcher "a-kasse" and ask them if they can hook you up with one. This also makes the a-kasse much more informed about what the job market in their area looks like, which in turn guides their educational programs.

Initially it's fairly self-serve, with an assumption of good faith that you're just temporarily unemployed and doing your best to fix the problem; there are offices where you can get assistance, or you can get it online, with things like resumes or job listings. Then, if you're still unemployed after some time, it becomes more mandatory, where you have to go in regularly, so they can try to debug why you're still unemployed, and what could be done to fix the problem. That might include assistance finding/applying for jobs, taking training courses, or other things.

Past that, if the problem is lack of demonstrable skills or work experience, there's a quasi-paid internship program: a company will "hire" you for 3-6 months, but you remain on unemployment, so are almost free to the company, but they do have to pay your pension contribution (this gives the intern a modest financial benefit, but mostly serves to make sure the company takes it at least a little seriously, since the intern isn't 100% free). The hope is that that will turn into a regular job, or at least gain you enough skills/experience to get a similar job elsewhere.

If all that fails, after some years, then it becomes more like a regular welfare system, but this up-to-2-years "a-kasse" system is much more geared towards assistance/adaptation/upskilling.

There are indications that is where UK system is trying to go, but there is a huge weight of baggage - everything from pointless stories about 14 children families living in million pound mansions and sponging off the state to reluctance to deal with structural geographic issues (frankly if you are under 25 move to London to get a job, there is nothing anywhere else for a certain value of nothing)

Sounds interesting approach though.

In DK you also have the Kontanthjælp, that used to be the last line of the welfare system.

2011 growth rates for the US: 1.5% UK: 1.1% EU: 1.6%.[1] Now the EU is more than the eurozone, but with the UK dragging down the non eurozone component, I can only imagine that euro-nations averaged above the 1.6% EU wide average and so outperformed the UK and US by a large margin (more than the 0.2%ppt margin of error anyway).

[1] http://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_g...

Subtract the population growth rate and EU looks even better. Population growth rate EU 0.212% vs. US 0.97%.

Economic growth per person US = .5%, EU 1.4%.

The averages can hide all sorts of things. Without the mighty German industrial powerhouse, how do things stand?

Without the coastal states, how does the US stand?


Germany real GDP growth per capita is very close to that average, so without the German industrial powerhouse, it would be pretty much the same.

In the Eurozone real GDP has contracted since the crisis according to this graph:


So a lot of the "growth" is just the economy recovering from the austerity/crisis-related policies. The Eurozone's real GDP contracted 5%, so even if we then outgrow the US by 0.5% every year it will still take us ages to catch up.

On a slight tangent, but the Economist ought to know better than to lump spotify, Skype and wonga.com together. Wonga lends short-term cash to desperate families at an APR of 4,500 % (yes, four thousand).

Come on Economist, money lending at rates the Kray twins used to do is not an indicator of a functioning entrepreneurial society

Other than that usual Economist quality

Not that I am defending predatory practices, but you have to put things in perspective. Firstly check out Wonga's advertising - they're an iPhone app. People who can afford luxury smartphones are not "desperate families". That is why it makes sense to lump them in with other dotcommy companies.

Secondly, if a week before payday I lend you fifty quid, and you pay me back and buy me a pint to say thanks when you get paid, that's a higher "APR" than Wonga charges, because APR is meaningless for any loan of less than a year.

Website, iPhone app does not matter - desperate does not mean low income, desperate means insufficient income.

A quick look at their site - if I borrow 400 quid today and pay it back in one month (seems short term to me) I pay back 159 quid extra ontop of 400!!

And with all due respect I borrow 50 and pay it back a week later costs 9.50, so if you don't mind I am not going drinking at your pub. :-)

I don't know about all this Euro bashing. I believe America is dominant in entrepreneurship mainly because of the language. Other factors are the huge home market and the few public sector jobs.

I've been starting businesses in two very different European countries, and lived in a third, just like I've been living in America. And I certainly don't believe America is equipped with better laws for entrepreneurs or with a more risk encouraging mentality.

I get the impression that America's public sector is anything but small. Sure, the spending is distributed differently, but it's still colossal.

And I certainly don't believe America is equipped with [...] with a more risk encouraging mentality.

While this is certainly not true for all of Europe, I grew up in Austria, and when I visit, I'm struck by the total apathy towards entrepreneurialism, especially amongst the younger generation. There are of course exceptions, and they tend to congregate, so you notice them more. But the vast masses still seem to believe in the "cushy job for life", despite most of my classmates from school not having found it, 10 years after finishing high school. They find it completely unfathomable why you could possibly want to start a company.

Europe provides more of a safety net for poor and lower middle-class people than more dynamic economies.

It's all a matter of choice: do you want REALLY good conditions for the top 10% or decent conditions for everyone?

Economies like China, the USA or Canada favor the former, lots of European countries the latter.

The article makes the mistake of talking about France and Germany and maybe Spain and then of generalizing it to mean "Europe". There are in fact lots of other countries in Europe, 30+ or so in the EU alone where the reality can be very different than France and Germany. Many European countries have flat taxes (Russia, Bulgaria, Romania, Macedonia, etc), hiring and firing is at will like in the US, low to no capital gains taxes, etc. Some provide lots of government incentives, loans and capital, Denmanrk and some of the other Scandinavian countries come to mind here.

Europe is a big continent and taking Germany and France and extrapolating it to the rest of Europe doesn't always work.

Interesting article, especially the part about the maximum time it takes for bankruptees to be freed from debt (makes you feel sorry for entrepreneurs in France who have to go into debt to start their business).

I think a lot of this stuff is due to the attitude of the general population towards entrepreneurs. If the only question that matters to people is "Have you made any revenue yet?" there's probably not much hope for Europe ever catching up with the US in terms of new fast-growing tech businesses.

(I'm hoping the UK is something of an exception, but I'm not really sure. Lots of people here are still very sceptical or pessimistic about new tech companies, especially very small, innovative ones.)

I'm not sure that bankruptcy is not an exception rather than rule. The cases I have seen in the EU where 'done' after the court case. Which didn't take long at all. But it is true that it is a stigma; to US entrepreneurs if you tell you have a bankruptcy it means you tried, in the EU it means you failed.

I don't know about the UK or the US, but in France, Bankruptcy don't always mean paying your company's debts. Small business often start as "limited responsability companies", where you can only loss your capital.

I think that's what the economist refers to as well; otherwise the owners will have to pay the debt or personally go bankrupt (and that IS a bad thing). I think the economist refers to limited liability companies which are liable to the starting capital and the bad thing is, they say, that even those, where you know the outcome, are taking so long.

This is because every party involved who wants money from that bankrupt company stands to gain if they can show that there was malpractice going on. If this can be shown, the shareholders (if they have more than 4.9%) become liable personally and then there is something to get (while usually, after the taxes visited the carcass, there is nothing left). This is why sometimes it takes a long time to resolve.

We have limited liability in the UK however a small business won't get a loan from a bank without a director personally guaranteeing it. The reality is a failing business can often mean the founders bankruptcy.

Yes, that probably means you are done, the rest of your life. It takes away your spirit to try again and the bank (at least here) forces you to get a job to be able to regularly pay back the agreed amount. You are in prison without the bars when that happens.

USD:EUR = 1:1,2859 (today)

I laugh at the media-fabricated 'Euro crisis' and the 'Economist'.

Wasn't euro always higher rated than dolar? Anyway overall I don't think the crisis is over yet, some sources (can't remember which ones) indicate that there is a slight chance of the economic crisis entering a second cycle devastating US/Euro again.

> Wasn't euro always higher rated than dolar?


BTW, sorry but "There Is No 'Euro Crisis'" http://online.wsj.com/article/SB1000087239639044446430457753...

Agreed. Also, look to China. I can't see how they can keep up their "economic miracle" for much longer.

You can only build so many empty cities. Or one would think.

It's not stressed enough but regulations of markets are one great, if not the major factor. Companies like Airbnb or Uber wouldn't even get a start in Europe or their owners would be arrested.

1.) The Economist is always going to be anti-regulation. They're a neoliberal magazine: repealing laws is the point of the paper.

2.) Even if the EU abolished their unemployment insurance programs and made labor unions illegal, you'd still see startups moving to SF, just for the network effects. The legal system isn't the only factor in producing startups. PG wrote a essay about this.

"For the €1.5m-4m that firms need to work an idea up into a real business model, though, money is in desperately short supply."

I stopped reading there. I must be living on another planet entirely from whoever wrote this article.

/rant on

I don't agree that the various EU governments are starting to "get it". It's the entire contrary for a lot of countries.

There are very, very few, say, EU success software stories (SAP! Yeah. German. Not french). And it's not just software and that is for a very good reason.

In some countries like France and all the other socialo-communist EU countries people are not just looking with a very bad eye entrepreneurs who failed: they're also and, most importantly, developing a hatred of people who work hard and a hatred for the fruit of hardwork (they hate both success and money, success and money being related but not identical).

So there's this entire mindset which is ruining, for example, the France economy and it's ruining it fast. Rich people are leaving the country (Belgium, Switzerland and the U.S. all being destinations now seeing more and more rich french persons coming).

The unions here are way too strong and SMEs and independents are seen as people you should milk as much as you can.

And for those who "succeed", don't you dare to buy a Porsche because you'll then be seen as an "ennemy of the (socialo-communist) state".

Honestly it is sad but France is deserving what it is getting now: recession, SMEs going bankrupt, big companies delocalizing, rich people fleeing, they're debt skyrocketing (91% of the GDP), the GDP that shall fall (0% Q2 growth and now a recession that shall start), the loss of its status as the world's fifth biggest power (should be in 6th place by the end of Hollande's mandate).

Socialo-communist countries spreading the hate of succesful people can only go one way: mediocrity.

France and it's crazy wellfare system is going the way Greece and Spain went. This is only the beginning of the eurocrisis and it shall get uglier by the day. Unemployment is going to skyrocket. In the end debt shall need to be monetized and we'll see a massive drop in the value of the euro.

Because what we're seeing now is a joke compared to what is coming: how is France going to save its sinking economy without investors, without entrepreneurs and without people willing to work?

Want an example as to how crazy the socialo-communists are in a lot of European countries? In Spain in 5 years 210 000 SMEs went bankrupt. Unemployment is sky-high and Spain is probably going to default (it's debt is "low" compared to its GDP but its GDP is falling and its debt is taking +9% per year... It's only a matter of time before Spain becomes the new Greece). So 210 000 SMEs bankrupt: can you imagine how many people previously unemployed are now without a job? And you know what the public servants do? Public servants who have a friggin' job working for the state do protest in the street because they had a 3% cut on their salary.

A 3% cut and they protest in the street. While a lot of people who previously had job working in the private sector don't even have a job anymore.

That is why all these socialo-communist state are fcked. It's over for them. The "sense of entitlement" of the people working for the state is way too important and the part of the state in the economy of these socialo-communist countries is way too important too. There is no way out.

And that is just today... What about tomorrow?

Well, entrepreneurs are way less prone to create a gig in France (or in Spain). They're moving to greener pasture. I've got friends who created companies in the U.S. (SoCal) and in Asia (Tokyo). Why would they stay here in France?

Why would I* stay? You see, now I may be pitching soon: I'm frequenting the local "startup" scene but I already have contacts outside Europe. I'm (of course) willing to move: should I succeed in France I'd be not only milked like a cow to pay for the 56% of the french economy that is directly directed by the state (that number only went up and up: France shall soon default, just like Greece, it's only a matter of time) but I'd also be regarded as a greedy rich bastard responsible for some perceived slavery (which, ironically, is of course the fault of the socialo-communist state and the way-too-greedy state system).

If you live in the U.S. I'd seriously have you consider to not vote for Obama: the public debt of your country never exploded as much than after five years of Obama. That wellfare system and the sense of entitlement it creates shall lead to a socialist country. This has always been the plan of leftists: create a gigantic number of state jobs and promise more and more wellfare, to make sure to get reelected. Once you're too entrenched into socialism the only way out is default.

And then once the nany state defaults you'll get tyranny.

Oh, sure, for a few years your shiny healthcare system shall look nice. And then the discfonctional system shall be hidden under more and more debt.

And then you'll default, just like Greece. Just like Spain is going to. Just like France is going to.

It's not that I'm not a good person. It's not that I wouldn't want everybody to get a good healthcare system. But the only thing socialism leads to is poverty for everyone, besides the leaders. Don't forget where you're coming from and what made your country so great.

F*ck socialism.

/rant off

No matter how often you call western European countries "socialo-communist", they have never been anywhere close to communist, and lately have been reducing all kinds of social benefits, going more towards the "totally free market" (with questionable outcomes...).

But I'm sure you'll find a "socio-communist" reason for e.g. the Spanish real estate bubble. Silly communists and their real estate speculation!

France and all the other socialo-communist EU countries

FYI, this is where you lost me.

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