The post-crisis world has been in part shaped by the growing presence of sovereign wealth funds, which have become an important source of funding with their $4 trillion assets, replacing private equity and hedge funds. But some people are wondering whether state capitalism really is the way forward, to boost the potential growth rate of the post-crisis world.
Robert Litan, senior fellow at the Brookings Institution, believes that in fact it’s entrepreneurs who would play a key role, and it’s important for policymakers to come up with a mechanism to help them.
Litan estimates that the United States needs 30-60 new “home-run” firms a year with annual sales of $1 billion to boost U.S. growth rate by one percentage point beyond its post-war average of 3 percent. This is double the past 150-year average of 15 firms a year.
“Enterpreneurial capitalism is the defining concept of 21st century economics. The state firm model might work for countries that are behind, but at some point we need entrepreneurship,” Litan told a briefing hosted by Legatum Institute, an independent public policy think tank.
Litan, who is also vice president for research and policy at Ewing Marion Kauffman Foundation, says “crowd funding” is one innovative way to help entrepreneurs.