Bringing It All Back Home

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These programs reflect a new sensitivity on the part of state officials to small business and entrepreneurship. This sensitivity is not merely political; it reflects official awareness of the new data underscoring the critical role of new and small firms in creating jobs.

The 1980 White House Conference on Small Business also sparked new state interest in encouraging smaller firms. The nation's governors, meeting after the conference in August 1980, adopted a resolution urging the states to put the expansion of small business at the center of their economic development plans.

The governors and other state officials are increasingly aware that economic planning does not have to begin and end in Washington. Indeed, they're realizing that state governments had better learn how to cushion the blows of inevitable federal failures or setbacks in the national economy.

All 50 of our states are big enough -- in area, or population, or both -- to be nations; each is unique in the mix of its natural resources, industries, and skills. Clearly, each must tailor programs to meet its own needs.

Nonetheless, the states can have a common economic strategy that is nationally significant. At their 1980 conference, the governors united in the pledge to expand small and mid-sized businesses. They can similarly unite in a partnership with entrepreneurs and small businesspeople throughout the country. This relationship would balance the ongoing (if sometimes troubled) partnership between the federal government and large companies.

Such a relationship between small businesses and the states is indispensable to long-term American prosperity and productivity. Neither Washington nor Wall Street, alone or together, can take us through the major revolution in technology and economic restructuring we now face. We simply have too much to do, too little time to do it, and too much that can and should be done at the grass roots.

Here are some of the items that should be on every governor's and state legislator's agenda:

* Skill expansion and modernization. How soon can most of the state's labor force -- both blue- and white-collar -- become computer literate? How soon can workers become competent in using the newer technologies? What special steps are being taken to retrain older workers, including retired people who want to work part-time?

* Education. Is education at each school level relevant to future needs? In addition to the normal school curricula, are there readily available extension programs to provide on-the-job, part-time, and full-time training in managerial skills? Do educational or apprenticeship programs exist for future entrepreneurs?

* Contingency economic development plans. Is the state prepared to anticipate shifting markets and other nationwide trends?

* Research and development. Are links being formed between basic academic science programs and small applied high-technology firms, paralleling the National Science Foundation and Defense Department small business innovation research programs? Is someone in state government responsible for identifying emerging industries and potentially crucial areas for future training?

* Credit supply. Is a community banking structure firmly in place to ensure that money remains at the grass-roots level? Are there tough regulations to prevent large regional or national banking institutions from draining savings from the states?

* State procurement. Does the government provide set-asides for in-state businesses that have proven they can be competitive? In order to encourage newer firms, is preference in state buying given to new cost-cutting technologies with general market applicability?

* Regulations. Is there a continuing war on paperwork, an effort to simplify and combine state, local, and federal reporting requirements? Has the state enacted regulatory flexibility and equal-access-to-justice laws? Does it insist on continuing cost-benefit reviews of all regulations?

* Taxes. Does the tax structure reward risk taking by newer firms? Are tax rates keyed to the size of a business? Are job tax credits at least equal to equipment depreciation benefits?

* Capital. Has the government made specific institutional efforts to create visible pools of seed capital for new businesses? Is expansion capital available for smaller companies that would not be attractive to venture capitalists?

* Commitment. Is there a constitutional and/or legal commitment on the part of the state to seek economic diversity, limit concentration in the private sector, and reduce the size of the government? Has the government legally protected the individual's right to self-employment?

* Accountability. Is the governor required to give an annual "state of small business" report, paralleling the President's new national report? Does an adequate state data base exist to measure the growth of the new and small business sector?

INC.'s second Report Card on the States will evaluate how well each state is performing in these and other areas. One thing is certain. Until the states pay continuing attention to the needs of their small businesses, their economies, as well as the national economy, will remain stagnant. It's true that many states will face tough times ahead. That fact is more, rather than less, reason to move in the directions we suggest. The future, as always, will go to those who anticipate it, and work for it.

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