How to Fail in Stimulating Business Without Really Trying

CAMBRIDGE: Debates about supply side reform often come down to slogans: flexible labor markets, deregulation, and more competition. Even when everyone agrees about what to do, however, nothing much usually happens.

Suppose you are an economics minister serious about improving the supply side of your economy but short on specific ideas about what to do. One interesting answer comes from a research group at Harvard University organized by Andrei Shleifer, a distinguished economist who focuses on how governments make economic life harder than it need be.

Shleifer’s research looks at 75 countries and asks how many formal steps it takes to establish (legally and without bribes) a new company, how long it takes to do so, and what is the cost. For if a country makes it hard to create companies, don’t be surprised if new companies are few and far between. And if companies are not created, where will growth and employment come from?

The table (see at the bottom of the text) gives a flavor of the odyssey involved in setting up a business: an average for 75 countries shows more than 10 separate steps of getting various certificates and a cumulative time of 63 days spent in getting the paperwork done (assuming no bureaucratic delays) and total payments to government as high as one third of a year’s income.