Public Radio International’s America Abroad interviewed me this week for a segment called Attracting Global Talent to Ireland and Chile (listen here). The program focuses on what the US can learn about foreign programs that are attracting immigrant entrepreneurs. The first part is about an Irish program called High Potential Startup Funding which gives entrepreneurs investment to create their business, while the second part is where I come in, talking about Startup Chile. My parts starts at about 9:15 of the program and my favorite quote is at 17:00.
In about minute 14, the program interviews Professor Veronique De Rugy from George Mason University who says government should stay out of entrepreneurship because they pick winners and create an uneven playing field. She cites examples like politicly connected Solyndra to pan programs like Ireland and Chile’s programs. I agree governments shouldn’t pick winners, but her examples are actually supporting Startup Chile.
Solyndra got $535m in guaranteed loans. The whole goal of Startup Chile is to not invest billons in loan guarantees, research parks and other investments that as De Rugy put it are “crappy investments,” but rather to invest in thousands of companies, change the ecosystem and attract smart foreigners to Chile.
For the Solyndra money, the US could have run Startup Chile for 130 years! Imagine empowering individual small entrepreneurs instead of big politicly connected companies. That’s not picking winners. As I said in the interview, “its one of the cheapest and most cost effective government programs out there” because nearly all of the money gets recycled into the Chilean economy.
De Rugy’s point is that the Solyndra loans and the Start-Up Chile program are centrally planned government programs where functionaries pick winners and losers. Salaries for programmers in Chile have increased 50% since SUC started, an artificial demand, clearly creating winners who are now dependent on government for continued prosperity. The losers are every other industry in Chile, including the nearshoring industry that counted on cheap programmers to give them a competitive advantage. Other losers are the banking and mining industries that must pay more for programmers, too.
I agree, that’s her point. But it’s wrong. Solyndra and Startup Chile are not comparable. Giving $550m to one company is picking a winner. Not awarding a company $550m is picking a loser. Giving $40k to hundreds of companies is not.
Programmers have increased in price not just because of startup chile, but because more people are getting into startups and everything in chile is raising in price. Property prices and rents have risen at least 50% in three years. Correlation is not causation. Chilean tech talent is still very underpriced compared to the rest of the world.
And banking and mining as the losers? In Chile they never lose.