The Pathology of Incubator Fever

Michigan is incubating incubators. They're proliferating to the point of a fad. But their rationale is defective both on moral and practical grounds.

Economic incubators are facilities intended to foster new businesses. Entrepreneurs receive subsidies, such as cheap rent and equipment, while they attempt to develop their enterprises into something viable.

Government-operated incubators inherently deal in unfairness because only some entrepreneurs get to avail themselves of the subsidies. Government grants a special privilege to some while denying others. Administrators may defend such favoritism as moral because they assign incubator privileges based on criteria, but the only valid criterion should be future success. And that cannot be predicted by central planners.

Private supporters, called investors, of new ventures make calculated guesses and pay private consequences if their guesses are wrong. Government incubator administrators gamble with other people's money and suffer no personal ill effects when they blunder.

One of the critical roles of government is to mete out justice. When government hands out public money to some but not to others, it becomes a counterforce engaging in injustice.  

The theory that government should be limited to administering justice and providing for defense against foreign threats and domestic miscreants recognizes the nature of human venality. The less money the government commands, the less it has to dispense to recipients for other than direct services rendered. The more money it has for the purposes of favoritism, the greater the corrupting influence of that "free" money. Today this attitude is epidemic:  "All those other people are going after it. Let's get our share."

Thus the magnet of the incubators. Unfortunately, although they purportedly attract entrepreneurs, the actual case may be otherwise.

Within the broad category of "entrepreneur" exist subsets such as "pseudo-entrepreneur" and "would-like-to-be entrepreneur" and "dilettante entrepreneur." These sentiments are common: "I want to be my own boss," or "Someday I'd like to own my own business," or "I've got an idea that I bet I could turn into a business."

It is highly unlikely people in those categories will make it. They don't have the mentality of the true entrepreneur, who must have the drive to succeed no matter what. The entrepreneurial obsession is on action, on setting clear goals, on gaining customers forthwith and developing a revenue stream. A search for government favors is a deadly distraction. Finding refuge in a government incubator could be a detour into failure.

Government incubators are welfare programs. Like other welfare programs, they insidiously undermine the resolve and will of the recipient. The occupant of an incubator who upon hitting a setback thinks, "Well, at least I have low rent to help tide me over," has already lost the battle.

The major function of government incubators is that they serve the modern need for governmental self-congratulation. Politicians have discovered that employment cannot exist without employers and are falling in love with entrepreneurship. The political class is barging in to claim ownership: "See what we are doing." The occasional triumph gets trumpeted while the blunders are blithely buried.

That's not the way to turn around an economy. Michigan's once-formidable wealth was the product of the undaunted and undistracted pursuit of defined goals by the true entrepreneurs of the past. Today's generation can do the same.

The role of government to foster an environment that lets entrepreneur's succeed is really very simple — establish sound taxation and regulation policies, then just step aside and let the good things happen.

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Daniel Hager is an adjunct scholar with the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.