I saw this Kaufman Foundation article that argues that, by reducing the downside risks, an aggressive government-provided safety net promoted entrepreneurship, jobs, and economic growth.  If one follows the links, there is some empirical support for the argument.

So, I figured that if I looked at data across countries, high-support countries would dominate new-business data.  When I looked here, the story seems to be much more complicated:

VC data

There are some high-social-net countries in the top, but countries with very weak economies, suggesting that many business startups are of necessity.  That is, they reflect limited other options.  Maybe the data are telling us that people with nothing to lose start business.

People with nothing to lose generally don’t start businesses that generate the economic growth we’re after.  If they did, Mexico would be an economic powerhouse.

The problem is that we’re measuring the wrong thing.  We’re interested in economic growth, and we notice that new businesses create most new jobs.  So, we think we should measure new business starts?

Most new businesses don’t create many jobs or much in the way of economic activity. Their failure rates reflects that reality.  That’s why there appears to be little, if any, correlation between business startup rates and economic vitality in the above chart.

There is a better measure, and that’s venture capital investments.  These represent entrepreneurs with much to gain, not little to lose.

These data show that America dominates in venture capital investment.  The U.S. experiences about 17 times the venture capital investment of Japan, the second highest destination of venture capital investment:

Entrepreneurship at a Glance 2013 – © OECD 2013
Table 6.1 Venture capital investments
Millions US dollars, 2012
Estonia (2011) 1.8 Italy 91.7 Australia 331.3
Slovenia (2011) 2.5 Finland 101.6 Korea 606.9
Czech Republic 6.7 Denmark 101.7 Germany 706.2
Russian Federation (2011) 9.3 South Africa (2011) 109.6 France 710.5
Poland 11.7 Ireland 113.5 Israel 867.0
Greece (2011) 13.7 Belgium 115.9 United Kingdom 929.1
Luxembourg 14.2 Norway 143.4 Canada (2011) 1406.0
Portugal 20.4 Spain 148.1 Japan (2011) 1553.6
New Zealand (2011) 28.9 Switzerland 209.5 United States 26652.4
Austria 43.5 Netherlands 226.5
Hungary 82.6 Sweden 285.6

Within the United States, California dominates new venture capital investment in a manner similar to America’s domination in international data.  It explains why California, with a policy set seemingly designed to crush economic activity, has an economy that refuses to die.