Starbucks Jobs Fund: A Smart Model for Entrepreneurial Solutions?

In the last few years, we’ve seen a morality play of sorts unfold on the national stage. The taxpayer funded bailout of big Wall Street firms – who ironically were rewarded for taking excessive risks – led the pendulum to swing in the other direction:quixotic hullabaloo in favor of higher corporate taxes and more business regulation to punish greedy firms and create jobs.

But pigeon holing businesses as the archetypal Big Bad Wolf hasn’t got us very far, evidently. The writing on the wall is clear and has been so since Adam Smith’s time – it is the entrepreneur, not the politician, who best knows where capital should be invested.

Toward that end – despite its bad and overpriced coffee – I like Starbucks Corp.’s “Create Jobs for USA” fund. It’s a pretty smart idea from both an economic and community perspective. An initiative that also cleverly softens some of the greedy image and bad rap that big businesses are getting these days. 

Starting from November of this year, Starbucks, in partnership with Opportunity Finance Network, is poised to enable Americans to help fellow Americans by harnessing the power of the community. Individuals can help create and sustain jobs by donating online at www.createjobsforusa.org or at any local Starbucks store. Donors who contribute $5 or more will get a flag-colored wristband inscribed with the message “Indivisible,” as a symbol of national unity.

Contributions will fund capital grants to Community Development Financial Institutions (CDFIs) that provide loans to small businesses and microenterprises as a stimulus for job creation.

“We’ve got to thaw the channels of credit so that community businesses can start hiring again,” Howard Schultz, Starbucks chairman and CEO said in a public statement released yesterday, Oct. 3. The company will provide initial funding of $5 million.

Schultz chose to trust entrepreneurs to put the economy back on track. And that’s the right way to go. Without entrepreneurship, better education, sustained innovation, and higher capital investments – there is just no way we can possibly reverse this economic downturn.

Keeping in line with the tone of this column that welcomes other perspectives, I asked two University of Connecticut economists to share their point of view with readers.

Dr. Fred V. Carstensen said while the Starbucks initiative will deliver some modest benefit by improving access to financing for its target firms, as long as the public sector continues to work against economic recovery, the American economy and job creation will continue to sputter.

“The major drag on the American economy has been the shrinking public sector,” he said.

Dr. Steven P. Lanza believed that the fund, in a small way, could be a useful complement to public initiatives at job creation, especially if it helps build business confidence in the private sector.

“I think its aim, stimulating small businesses, is a good one as small companies are good sources of new jobs and yet they are invariably short on funding,” he said.

While one such fund is a pebble in the ocean compared to the government’s efforts to create jobs, I agree that it’s a step in the right direction in rebuilding faith in free enterprise.

But beyond that, I think it reinforces the purpose of the private sector. Entrepreneurs are the ones who have what it takes to create wealth, and therefore create jobs.

Every effort by the government to increase employment levels can at best result in a multiplier effect that stems from its size and scope alone. It’s a fallacy to believe that the government exists to provide jobs. Instead of exploring ways to expand employment through the public sector, we’d be putting resources to better use by trying to see how the private sector can be empowered to create jobs, innovate and expand.

One fund by one company will of course have no impact on the economy – but it’s a small start and a good model for others to emulate.