Months of high inflation, both in the United States and globally, have fueled intense debates about both root causes and potential solutions. Here, Jason Furman of Harvard University and James K. Galbraith of the University of Texas, Austin, offer opposing perspectives on what has become the year’s biggest economic-policy challenge.
KAZAN – Americans are great believers in the value of entrepreneurs and small business. That faith underlies the JOBS (Jumpstart Our Business Startups) Act, a new law that will make it easier for small companies to raise money and bypass the regulatory “friction” that firms encounter when they go public. The law assumes that people who can't find jobs may be able to find investors instead, and that small companies will be able to get the financing they need to grow bigger and hire more people. Angel investors, friends, and family will boldly go where banks may fear to tread.
The JOBS Act is an extreme example of Americans’ belief in people’s essential goodness, and everyone’s right to self-fulfillment. Every entrepreneur should be entitled to raise funding from willing investors. It is a uniquely American approach, and capitalistic in the best sense of the word, for it encourages (and democratizes) investment, rather than fueling consumption.
Small (under $1 billion) companies can raise money directly from small investors in a formalization of the “crowdfunding” approach, whereby a project’s principals post their plans on a Web site and ask for money, essentially opening up the initial public offering (IPO) market. The theory underlying the law is that a new set of accredited third-party marketplaces, rather than the overburdened Securities and Exchange Commission (which missed Bernie Madoff’s monster Ponzi scheme), will ensure that entrepreneurs tell the truth, and that investors know what they are buying. (Of course, that begs the question of how thoroughly vetted and reliable those third-party marketplaces and their vetting systems will be.)
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