Tuesday, August 30, 2005

As much of Europe struggles with double-digit unemployment, the U.S. has created an average of 200,000 new jobs monthly. A great U.S. advantage is the relative ease with which we can start new businesses. Physical disability, the desire to stay home with young children, racial or religious discrimination — can all be obstacles to traditional employment but are less serious barriers to starting your own business.

Now, thanks to the Internet explosion, entrepreneurship barriers have fallen further. That is especially good news while Americans worry about competition from abroad for manufacturing and even many service jobs.

A remarkable new survey by ACNielsen International Research finds 724,000 Americans use eBay, the online auctioneer and general marketplace, for their primary or secondary income. That figure is up from 430,000 in a similar 2004 survey. In other words, about 300,000 people have started businesses on eBay in the past year. So eBay can properly be viewed as America’s No. 1 generator of, not just businesses, but jobs.

As David Faber of CNBC said recently, “If eBay employed the … people who earn an income selling on its site, it would be the nation’s No. 2 private employer, behind Wal-Mart.”

But eBay doesn’t employ them. They employ themselves. Their own cash and reputations are on the line. They innovate, they compete, they work hard. What eBay and other online sites provide is the platform: a storefront that’s electronic, not brick and mortar; a market of 157 million registered users worldwide; plus help in expediting payments, shipping packages and detecting fraud.

Marketplace sites — and eBay, with $83,000 worth of goods traded every minute, is the largest — offer a simple way, not just to sell the occasional used tie or baseball trading card, but to start and maintain a small business, allowing the entrepreneurs to focus on merchandizing and marketing.

Consider Sarah Davis of San Antonio, who graduated from the University of Maryland Law School and passed the Texas bar exam but then began having children (three now) and wanted to be with them. “I started selling on eBay about six years ago with one Louis Vuitton purse and a dream,” she says.

Her high-end purse sales were so successful she moved into an office and hired three employees.

Mrs. Davis is a typical American entrepreneur. An extensive government study, released by the Census Bureau in July and covering 2002 data, found small businesses owned by women rose 20 percent over five years while the number of all U.S. businesses rose 10 percent. Black-owned businesses were up 45 percent, Hispanic-owned up 31 percent.

Small businesses produce little more than half of all U.S. employment and sales of goods and services. More important, these businesses account for virtually all net new jobs created by the economy and, says the White House, “are most likely to generate jobs for young workers, older workers and women.”

The Disabled Businessman’s Association estimates 40 percent of home-based businesses are operators have disabilities.

These trends can only intensify with growth of the online marketplace and spread of Internet connections throughout the world. The Federal Reserve reports most small businesses are home-based. All you need is a desk, a computer, a connection to the greater wired world and a place to store inventory.

Online entrepreneurship is so attractive 14 percent of eBay sellers retired early or quit their jobs to sell full-time on eBay. Another 12 percent are considering doing so.

It makes sense for public policy to encourage more online business formation and job creation — or, more important, not to discourage it. Possible sales taxes on Internet transactions across state lines continues to lure states hungry for revenues. But Web taxes would require a new federal law, which Congress has so far been reluctant to enact, especially if it does not protect small business from new costs.

My advice is to leave well enough alone. The Internet is swiftly bringing American entrepreneurship into the 21st century and opening new markets around the world.

James K. Glassman is a nationally syndicated columnist and resident fellow at the American Enterprise Institute and host of the TechCentralStation.com Web site.

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