John Maynard Keynes coined the phrase “animal spirits” in his 1936 book The General Theory of Employment, Interest and Money. He uses the term to describe emotions which influence human economic behavior. Healthy animal spirits create an ambience of trust and faith and are a necessary prerequisite for human actions, much more than quantitative logic. Keynes felt animal spirits were needed as a goad to economic action rather than inaction.
Entrepreneurs are different than other business people. They are optimistic risk-takers and people of passion and instinct. They are marchers to the beat of their own drummer. But they are also very much dependent creatures of their own animal spirits.
In a sense, entrepreneurs are much like the wild things of the forest. They are part of an economic and emotional ecosystem that molds them, that fertilizes them. They will not stay healthy without this ecosystem. Hence, the importance of a salubrious trope in the macroeconomy.
A very wet blanket has been thrown over the animal spirits of small business in the last three years. While excessive and growing regulation saps energy and time, it is ultimately only a wasteful annoyance. A growing tax burden excessively milking the small business community is a more serious discouragement to the entrepreneur, but also not fatal.
What is potentially fatal is the undermining of the spiritual reason for entrepreneurship. As much as profit is important, at base I believe most entrepreneurs are seeking a meaningful and free life.
While political philosophy can be argued one way or another, I personally feel the greatest and most unnecessary economic mistake of the current administration is its gratuitous and overwrought attack on the motives and values of business. It is very hard to continually pillory the businessman as venal, greedy, and selfish and not destroy the animal spirits and passion prerequisite for success within our group.
It is also unnecessary and wasteful to cast the businessman as a villain. It would cost nothing to hold up the virtue and value of our group rhetorically, rather than debunking and denigrating our community. The rewards in entrepreneurial optimism and response would be significant. And it would not cost a dime. Even within our depressed economy, the entrepreneur remains a risk taker. But who wants to take the risk of adding investment and new hires when the reward is a cacophony of governmental contempt and calumny?
The current government cannot create an emotional dead zone for the entrepreneur and expect him to be enthused and fierce. If our current recession must be remediated through the 65% of new hiring done by small businesses, why not lift us up with celebratory eloquence? It’s free to do so, so why not a little sunny celebration and support, rather than depracatory demonization?
As John Maynard Keynes puts it, “…if the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fail and die.”
Thank you, John Maynard.