[kayaeb]

There's a good book on this called "Why Nations Fail," [1] they posit that extractive economic policies (corrupted governments) essentially de-incentivize entrepreneurial businesses, while inclusive policies cause them to thrive.

They use this argument to counter "Guns, Germs, and Steel" [2] to explain dramatic economic differences across country borders in similar environments.

[1] https://www.goodreads.com/book/show/12158480-why-nations-fai...

[2] https://www.goodreads.com/book/show/1842.Guns_Germs_and_Stee...

[ido]

Interesting!

Anecdotally I'm an Israeli who moved to Europe (first Austria then Germany) and at least from my layman's perspective both of these countries seem both a lot less entrepreneurial than Israel and a lot less corrupt...

So I wonder if something unusual is going on or if one or more of my perceptions are wrong.

[protonfish]

I think there is a difference between "informal" corruption (where some officials need to be bribed) and the "institutionalized" corruption of a monolithic and completely unnecessary bureaucracy. At least in the first instance, there is a path to get things done. European bureaucracy is a tar pit where innovative business goes to die.

[danjac]

> European bureaucracy is a tar pit where innovative business goes to die.

There are 27/28 economies in the EU alone, ranging from Sweden to Greece, with very different cultures, laws and bureaucratic competencies, some of whom have successfully incubated very innovative businesses.

[jririi82zxn]

Yet they often have a higher quality of life, universal access to social services, and afford the general public longer periods of economic stability relative to the shitshow the US descends into every 4-8 yrs.

Perhaps innovative business (which I translate to “how to enrich myself via an ephemeral finance system without adding much new utility” these days”) isn’t a great target for governments to enable.

Social pressure downward to abide the desires of a minority of elites before the public used to be called authoritarianism, and it used to be reviled. Just because it lacks the overt violence of yesterday doesn’t mean it isn’t manipulative and damaging to society.

Profits are up. So is inequality.

[avip]

If Israel is "more entrepreneurial" than Germany (and it's probably not), it would be due to IDF tech leakage and the very supportive international Jewish community (that one is difficult to measure, but as this whole thread is anecdotal... I think the influx of Israeli-sympathetic money had a huge impact).

[armada651]

I think your perception that Germany is a lot less entrepreneurial is incorrect.

It's probably due to the fact Germany focuses a lot more on industry technology rather than consumer-facing tech.

[short_sells_poo]

Personal anecdote time (please correct me if I got it wrong): go to almost any backwater German village and there'll be small/mid sized industry on the outskirts. From semi-high tech (e.g. manufacturing precision instruments) to "simpler" stuff like carpentry shops or metalworkers. In Germany, the small-mid sized business that actually builds stuff (as opposed to just services) is still pretty big. Sure, most of it is invisible on the international scale, but it's there and underpins an economy of specialists.

Driving through similar places in France the difference was striking. There didn't seem to be any of this decentralized economy. Again, I don't mean to draw conclusions, just stating my very limited observation.

[Zeitgeschehen]

>Sure, most of it is invisible on the international scale, but it's there and underpins an economy of specialists.

Actually a not insignificant part of these backwater businesses are so called Hidden Champions[1]. Basically, small companies who are still leader in the world market for their very specialised product.

[1] https://en.wikipedia.org/wiki/Hidden_Champion

[bakuninsbart]

Yep, stuff like Nordischer Maschinenbau Rud. Baader. In the 1920s they were the first to produce a machine to automatically decapitate and debone fish, and they've been the world leader on this and related tech ever since,

[petra]

What does "small companies" mean in this context ?

Do they do engineering or manufacturing?

And how could they maintain an advantage over so many others and of course over large companies ? Where's the r&d budget coming from ? And what about marketing ?

[notfromhere]

They're businesses that hyper-specialize in one area and have done so over the long-term. The markets are too small for some giant conglomerate to come in and dominate, so it gives an opening for smaller firms to dominate the global market for said good - while it won't have your next unicorn, the markets are great enough to create prosperity for the owners and the local region. Germany has this spread over the country fairly uniformly, so it creates a wide platform for economic prosperity even in rural areas.

The companies themselves are usually under 50M Euro and have under 500 employees, and export-oriented. They've been a big target for Chinese acquisition, usually for companies that don't have any family to inherit the enterprise.

[hogFeast]

Look at the data. Even within the EU, Germany is behind the level you would expect based on every indicator (institutions, education, productivity, etc.).

And this is basically a function of Germany's economic development. Germany industrialised quickly by extracting from consumers. Forced savings, cheap loans to entrepreneurs, etc. The model isn't optimised for competition and new entry.

Germany hasn't really moved on from that point. Industry and banking is still heavily concentrated (the level of corporatism is far beyond anything outside of East Asia). Capital markets still don't really exist (amazingly, given current ECB policy). Consumers are still paying a massive surplus over to the corporate sector (through low wages and forced saving).

Rocket Internet is the kind of exception that proves the rule. They were successful but only by doing something totally inexplicable in any other context (i.e. their shareholding model is a function of the awful state of finance in Germany).

Definitely, the govt have trying very hard on this for a while. But with no real results because the model seems to produce what voters want. There are signs that things are coming apart (particularly in banking) but before that point, nothing will change. It just makes no sense to compare Germany to an entrepreneurial society, that has never been the goal.

[eternalban]

Typically, in a corrupt country, the 'take' of corrupt institutions and actors critically diminishes available (finite) Capital and distorts the distribution of what remains.

What is unusual is that Israel is the recipient of largess of the American tax payers and enjoys continual replenishment of available Capital. Enjoy it while it lasts.

[jasonvm]

Nope. Almost all US aid is in the form of military equipment, and , incidentally, 75% must be spent on US-made armaments. So it's more like aid to the US military-industrial complex.

[eternalban]

All nations spend substantial sums of money on defense. If you don't need to spend n% of your GDP on defense (because someone else is paying for it) that is money in the pocket.

[mullen]

Israel's GDP is $380B, so $3B-$4B is just a drop in the bucket. As other posters mentioned, that $3B-$4B is earmarked for Defense purchases which means they have to spend that money in the US.

[simonh]

Iraq gets about the same nowadays. The US also provides $1.2bn aid to Egypt and recently committed to providing a total of $6bn to Jordan through 2022. So yes Israel gets a decent slice, but it's only incrementally more than other individual nations in the region. It's a lot smaller than overall US military and development aid to the other nations across the middle east.

[petra]

Israel is an extremely entrepeurial society due to many reasons , both historical and current.

But beside that, there's a simple explanation: it's quite hard to earn a decent salary in Israel, without being either an Entrepreneur , or by working in a startup company.

Germany(and maybe Austria) probably don't suffer from that problem.

[tinyhouse]

One possibility is that in rich countries with less corruption where people can have high-paying jobs that are not stressful and can still have plenty of personal time, the incentive of looking for alternatives (like starting you own business) is not that high. Another way to put it is that in Israel it's more of a survival culture and many people see entrepreneurship as a path out. There are many countries similar to Israel that are less innovative; this can be explained by the fact that Israel is still an advanced country with good universities and military that always needs to improve.

On the other hand, entrepreneurs are usually independent people who really value freedom and don't like to work for others. Regardless if they can find a good job or not. So I'm not sure if my first theory holds. Maybe Israelis are just more independent then the average European (which can be explained by the culture and environment too).

[amelius]

Investment climate is also important.

Perhaps in Europe, people are less inclined to borrow large sums of money?

[thepangolino]

That’s also conditioned by how hard it is to escape debt. In my country if you can’t pay back what you owe you turn into an indentured servant for life. No matter where you hide and what job you pick, the state will come and take most of your pay leaving you with just enough to get by.

[johnisgood]

> with just enough to get by.

I would like to say that it is not necessarily true either. I do not have to go far, I could just take a look at my mother. Funny thing is that it was not even her who asked for a loan, it was my father, but they were married. They divorced, and fought the "bank" for years to no end. My mother is still the one who is suffering from the actions of my father. She will, to her last day. It makes me sad, her pension probably will be negligible.

Regardless, my mother would not get by at all on her own. :/ She works hard physical labor which affected her health A LOT. She is working hard just so a huge percentage of her salary can be taken away for something she did not do.

[bluedino]

If you own a store or restaurant, you might not make any money but at least your family won't starve.

[shadowprofile77]

Damn.. What country is this? Have you no bankruptcy protection laws?

[fauigerzigerk]

I don't think there is a country without any sort of limited liability company. But many startup entrepreneurs will only be able to borrow money from the banks if they accept personal liability and provide collateral, guarantors, etc.

Bankruptcy protection for individuals is not available everywhere and it often comes with very onerous conditions.

[adim86]

Well if those are the two measures then this paper would be wrong. 5 out of the top 10 most entrepreneurial countries according to this paper is in Sub Saharan Africa where government corruption is very high and there the inclusive policies are hit or miss...mostly miss while the US is number 46 on the list. As someone that has worked in both regions, the USA is waaaay easier to do business than Sub Saharan Africa but I have seen first hand that there is more entrepreneurship in sub-Saharan Africa than the US. I feel the people just do not expect the government to provide anything, so they just do it themselves. Most people have two jobs. One for the Govt or a Cooperation and they have their own on the side

[novaleaf]

having started by-the-book (software) businesses in both Thailand and the USA I agree.

In both countries it's very easy to build/run unofficial businesses. But running a legal business is very different. In Thailand, I needed to hire a full time bookkeeper plus 3 weeks/year of an accountant just to run a 5 person business, and still needed to suffer through 2 weeks/year of government audits. In the USA, I can do everything myself (about 2 weeks/year of tax/bureaucracy overhead)

[bsanr2]

Are there any failed nations without a relatively recent (<100 years) history of economic or political exploitation by a contemporary superpower?

[rayiner]

A more helpful way to look at it is how countries like South Korea, Vietnam, and Japan grew so rapidly in the 20th century despite active intervention by superpowers.

South Korea in 1960 was poorer than Congo, Ivory Coast, Senegal, etc. About the same as Bangladesh. Today South Korea is as rich as France.

[magduf]

Also Germany. At the end of WWII, Germany was bombed out, whole cities were flattened. 20 years later (according to my mom who lived there in the early 60s), you couldn't even tell a massive war had ever taken place there. Some of that was the Marshall Plan providing funding, but the rest was a society that actually pulled together and got stuff done instead of being mired in corruption or infighting. Japan was largely the same way. Meanwhile, 80 years later, America can't even keep its bridges from falling down.

[tridentboy]

There is a big difference in the intervention made by US in east asian countries, and the interventions made by superpowers in other countries.

I'm not saying that South Korea and Japan didn't make good use of this intervention, but while the intervention in those countries was more akin to a financing/investment, which was in line with US' Marshall Plan during the Cold War.

In other countries such as those from Africa/South America, it was direct exploration of people and resources without really giving something back.

[rayiner]

There was not that sort of investment in South Korea, and of course in Vietnam the opposite happened since the communists won the war there.

[bsanr2]

Intervention without exploitation would seem to be a simple-yet-fulfilling answer. South Korea received investment instead of being ransacked for resources.

[selimthegrim]

One might say because as opposed to despite?

[oblio]

It's far from failed, but Argentina used to be a top 10 country in the world. Most of their woes are self-inflicted.

[eeZah7Ux]

Shuss, don't wake up HN.