Making Sense of State Incentives for Small Firms - Book Report/Review Example

Schoenberger, Chana R. "Making Sense of Incentives for Small Firms." The Wall Street Journal 27 Novermber Inhis article, Schoenberger attempts to determine the importance of state incentives particularly to small businesses in the country in an effort to stimulate economic growth. In his study of the trend, Schoenberger carried out an interview with Mr. Tuffile, a director at Bentley University in Waltham, Mass. Being a director of the entrepreneurial studies at the university, Mr. Tuffile is well vast in matters pertaining to management of businesses, both large scale and small scale enterprises. To begin with, Schoenberger acknowledges the role and economic importance of business incentives that the government offers in a bid to attract investments. In particular, he contends that most local governments tend to offer business incentives as sweeteners for attracting startups. In his view, some of the common ways of doing giving such incentives is through tax credits, payments for site construction and offering of bonuses for creation of jobs. The incentives may favor enterprises that wish to relocate from one region to another or looking to expand their business operations. According to Tuffile, most states have various business incentive programs that tend to be beneficial for businesses. These programs range from offering of training for employees by the state, provision of tax incentives, as well as the issuance of low-interest loans that can be of significant benefit for startups or for enterprises that are looking to diversify but are economically constrained. Every state in the country has at least one of such incentives. Tuffile considers accelerators and incubators as some of the important forms of incentives that the government has been offering for sometimes, which has gradually been of importance to small enterprises. As an advice for investors, Tuffile suggests that rather than merely establishing a business at a certain location because of personal reasons, investors should always seek to locate to areas that offer the most business sense. For instance, he argues that taking the U.S as an apt example; recently, there has been a gradual surge in the investment in the Silicon Valley area in California. This has majorly been as a result of the local government willingness to chip in and take the risks to fund businesses. As for the local governments, Tuffile offers that each state should seek to explore a certain opportunity and offer incentives accordingly in order to avoid inter-state competition. For example, in the U.S so far, Boston serves a biotech hub while Silicon Valley serves as a Social media or IT hub. Nevertheless, no matter how attractive an incentive may be, Tussle advices small enterprises to carry out an extensive research in the location and establish its suitability to the business prior to accepting the incentives. From the article, one can there deduce that one of the steps for attracting investors by either the federal or local governments is by offering incentives. Governments should be willing to take the risks and offer the right incentives for economically constrained startups. In addition, with the fact that nearly every state wants to attract investors, stiff competition among the states is bound to occur. One way of eliminating such competition while remaining relevant in matter pertaining to investment is by specialization in a given area of business, either in IT or biotechnology. The article is relevant for both students wiling to improve their knowledge on investment, as well as for young entrepreneurs willing to gain investment knowledge as they look forward to gain entry into business. Curren, Don. "Putting the Brakes on Household Borrowing Could Stall Canada Growth." The Wall Street Journal 11 November 2013. In her article, Curren provides an overview of some of the negative effects that may be attributed to a stall on the economic growth of a country in the event of a reduction I household borrowing. She establishes her case using Canada. Recently, after emerging from the recession, the Canadian governments urged her citizens to reduce their borrowing. This idea has been met with a lot of reactions form economists. To begin with, Curren argues that from an economical point of view, braking rather too hard on household borrowing may expose the country to a possible stall in the economy. Such a move would imply that the Central Bank of Canada would be in jeopardy. According to Curren, this may occur because the bank will be trying to balance the economic stability threat with the need to sustain a growing economy. This is scenario is particularly imminent when the government offers low interest rates on loans. The case of Canada being caught between balancing the need to sustain a growing economy and remaining firm amidst the threat stability is considered to be critical compared to other advanced countries of its level owing to the fact that it relatively highly dependent on exports. Curren explains that Canada’s main export markets continue to experience weak recovery from recession. This implies that the country’s exports are faltering which may have spillover effects on business investment. This is because, in addition to making a contribution to growth, stronger exports also serve as a stimulus for business investment. This further implies that with a reduction in business investment, households would play as the key source of growth. With such a scenario, according to Curren, discouraging household borrowing could have a negative impact on the gross domestic product (GDP) of the country. Subsequently, a reduction in consumer credits and residential mortgage credits will occur. With this trend gradually taking toll on the country, the government may be forced to start deleveraging which would reduce household spending that would in turn affect the economy as a whole. Improved borrowing conditions lead to increased demand for all types of goods and further house price appreciation. From a general understanding of household borrowing and consumption, one can agree with Curren that when there is a decline in household consumption and real GDP are substantially large, unemployment is likely to increase, whereas the reduction in economic activity is likely to persist. From this article, one can infer that reducing household borrowing, although important in reducing a fall back into recession, should be a gradual process. Subsequently, it also evident that for a country with a relatively high dependence on exports, cutting down on household borrowing can be disastrous. This is because fluctuations in the economy of the export markets may reduce the exports. This will in turn imply that the exporting country will have to seek for other alternative means of revenue to sustain the economy. Household spending is one of such sources that the central bank has at its disposal. Therefore, to ensure economic growth, countries should first determine their various sources of revenue and investment before embarking on cutting household borrowing. Deloitte. "Four IT Outsourcing Risks and How to Mitigate Them." The Wallstreet Journal 27 November 2013. According to Deloitte insights, outsourcing is deemed as one of the main tools that entrepreneurs use to cut on the costs. Nevertheless, the increase in the product markets across the globe has also come with an increase in risk associated with the need to outsource. Deloitte affirms that nearly more than a decade ago, making decision on matter pertaining to outsourcing was fairly and straightforward. However, the decision to outsource has become a complicated. In particularly, outsourcing in information technology has been marred by various risks and challenges. Deloitte affirms that enterprises intending to outsource their IT business have been subjected to increased regulations that also scrutinize the company’s relationship with their main partners such as service provides. Deloitte develops that in information technology, the major risks that comes with outsourcing are those that tend to influence operations, information confidentiality and compliance. When these risks are well-managed, IT outsourcing can be an importance source of economic growth because of the major revenue accrued to the sector. Deloitte advances that one of the ways of mitigating risks associated with operations and transactions entails understanding the process flow. This involves taking into account, all the steps that are required to complete a transaction such as the application process of the transaction and the submission of the application. Following the understanding of these steps, a firm should then seek to determine where the flow of the process may go wrong and the role that the various suppliers may play that could be associated to the failure. Following the identification of such points and failures that are likely to occur, a firm can then put in more effort to prevent the occurrence of the situation. In mitigating the risks associated with confidentiality of information, the article offers that enterprises should identify the amount of information of that their service providers hold or transmit. This should provide a means for future evaluation of the volume or the type of data that the third parties should be provided to handle and the frequency with which to handle the data. By so doing, this would reduce the risk of providing sensitive data and information to a third party which may jeopardize proper functioning of a firm. Furthermore, Deloitte advances that for an IT firm outsource to have a positive impact on the economy and to thrive well, there is a need to evaluate its long-term goals and business continuity plans. Strong and good business plans confers a company with a sense of continuity even in the event of disasters either natural calamities of economic constraints. Talley, Ian. "Failure to Raise the Debt Ceiling Would Be ‘Catastrophic’." The Wall Street Journal 26 September 2013. Based on the recent economic trend in the U.S, Talley’s article focuses on the issue of the raising the Debt Ceiling of the U.S. he examines some of the catastrophes that are likely arise as a result of the failure to raise the debt ceiling. He begins by asserting that the U.S plays a major role in determining the pace of development nearly across the globe. As a result, Talley posits that the International Monetary Fund (IMF) has reported that a failure of the U.S to pay its bills, whether permanent or temporary, is likely the global economy as whole. This is true considering that most economies have pegged their currencies on the dollar. He describes the debt ceiling as the maximum amount of money that a country can borrow. Talley observes that the government a failure by the law makers to agree on raising the debt ceiling of the U.S, could eventually result in a state where the government will be unable to pay for the various social security and military commitments. According to Talley, despite the mightiness of the U.S economy over countries across the globe, IMF has warned that the shock associated with this failure of the U.S government to provide the citizens with various social and security needs, may be catastrophic in myriad ways. To begin with, the IMF estimates that this could lead to almost 50% reduction of growth around the globe, which may put the global economy at a rather fragile state. Talley further elaborates that the decision for congress to shun the decision to support the debate about raising the debt ceiling can be that based on a recent IMF review of the U.S economy. The IMF projects that the debacle concerning the debt ceiling is likely to pass away because of a looming threat of a national economic disaster. Moreover, the fund also projects that by 2014, the growth in the U.S economy will realize a rise of 2.7%, which would further deter the Congress from considering the need to raise the debt ceiling. Nevertheless, Talley indicates that the fund also agrees that there is a potential catastrophe in the event that the law makers fail to raise the ceiling. For instance, he cites a similar case in 2011 when Congress made the decision to raise the debt ceiling at the last gasp. At that time, the U.S had already begun realizing a dent in the economy. For instance, the delay spooked investors causing a temporary decrease in the investment and production output in other regions across the globe. This was considered as a spillover effect of the persistent delay to raise the debt ceiling. The same case is likely to occur once again if the law makers fail to realize the potential impacts in time. Furthermore, Talley indicates that U.S policy uncertainty shocks also provisionally led to a decrease in the GDP growth in various countries across the globe. Consequently, Talley reports that although the IMF has not quantified the probable impacts of the failure to raise the debt ceiling, figures from economists indicate a worrying drift. For example, some economists estimate that if the persistent uncertainty of the U.S policy becomes similar to the case in 2011, the U.S would experience a significant reduction in current U.S output. This would occur at a relatively high rate of nearly 2.3% per year. Consequently, according to the economists’ estimations, the cut private investment would also reduce by approximately 14% after the third quarter. Jobs would not be spared either, the economists warn that between 1.5 million and 3 million individuals will lose their jobs. From this article, it is evident, that the debt ceiling policy can be deemed as a ticking time bomb that requires wide consultations and evaluations prior to the implementation. From the article, one can also deduce that major world economies such as the U.S have a great role to play in terms of ensuring global economic stability. This is perhaps tied to the fact that many economies in various regions have pegged their finances on the U. S currency. Works cited Curren, Don. "Putting the Brakes on Household Borrowing Could Stall Canada Growth." The Wall Street Journal 11 November 2013. Deloitte. "Four IT Outsourcing Risks and How to Mitigate Them." The Wallstreet Journal 27 November 2013. Schoenberger, Chana R. "Making Sense of State Incentives for Small Firms." The Wall Street Journal 27 Novermber 2013. Talley, Ian. "Failure to Raise the Debt Ceiling Would Be ‘Catastrophic’." The Wall Street Journal. 26 September 2013. Read More