Although my crypto-fascist friends rail against Federal regulation I am becoming more and more convinced that it is codes, ordinances rules and regs at the municipal, county and state level that really hinders new business formation.
Here the decidedly gauche-tilted authors seem to agree that it's all Washington's fault.
It's so rare when the kids can play nice with each other.
From Washington Monthly:
For all its current economic woes,” the Economist magazine recently asserted, “America remains a beacon of entrepreneurialism.” That idea is at the heart of America’s self-image. Both parties celebrate entrepreneurial small business as the fount of innovation and growth. Even if America no longer manufactures its own smartphones or computers, we cling to the idea that American entrepreneurs invent most of the new products and services that matter to the world.HT chain: WaMo's Political Animal blog < naked capitalism.
Americans also view entrepreneurialism as a vital route to upward mobility—a way for average people to build wealth, in the form of a business venture that can be passed on to one’s children or sold upon retirement. Whether it’s the family farm or the local diner, small businesses have traditionally provided citizens not only with income but also with a place to teach kids the value of responsibility and hard work.
Then there’s the role entrepreneurs play in creating jobs. One recent study by the Small Business Administration (SBA) showed that businesses with fewer than twenty employees were responsible for more than 97 percent of all new jobs between 1988 and 2004.
More broadly, Americans have traditionally seen entrepreneurship as a crucial measure of the nation’s political vibrancy and liberty. We hold that the more independent citizens we have, the more widely power, responsibility, and voice will be distributed, and hence the stronger our democracy will be. The basic thinking here was best expressed by James Madison more than 200 years ago, when he wrote that the “greater the proportion” of citizens who are their own masters, “the more free, the more independent, and the more happy must be society itself.”
Yet how much does this faith in the vigor of American entrepreneurialism stand up to scrutiny? To a casual news consumer, it might seem that it has never been easier to launch and grow a new venture. One highly publicized study claimed that the United States leads all major industrial economies in the percentage of the adult population engaged in entrepreneurial activity. “We are in the midst of the largest entrepreneurial surge this country has ever seen,” a CNNMoney article tells us. Or, as the Council on Competitiveness has observed, “One of the critical drivers of America’s economic dynamism and flexibility has been the strength of its entrepreneurial economy.”
Last summer, however, a report by the Ewing Marion Kauffman Foundation exposed a big crack at the base of this widely held belief. “Even before the overall economy started its most recent downturn,” the authors noted, the number of business births had already “peaked.” Worse, with the onset of the Great Recession these numbers began to “plummet,” with the number of new independent employers dropping 27 percent in only three years.
This spring Kauffman followed with a second report that was in many ways even more dire. Compared to a generation ago, the report said, it is now much harder to start a business in America and keep it running. In 1980 “young firms”—those less than five years old—accounted for almost half of all going concerns. By 2010, their share of the total had collapsed to less than 35 percent. And as the Kauffman authors made clear, this doesn’t only mean less opportunity for America’s entrepreneurs. It also means millions fewer jobs every year, and much less economic growth.
Inspired by Kauffman’s report last summer, we set out to examine for ourselves the health of America’s entrepreneurial economy. What we discovered is that the decline in entrepreneurship is even bigger and more systemic in nature than was clear from Kaufmann’s work. America really is undergoing a radical change in the structure of our political economy. And yet this revolutionary shift of power, control, and wealth has remained all but unrecognized and unstudied by the mainstream media, Capitol Hill, the White House, state legislatures, and both party machines.
A good way to begin getting a sense of the magnitude of the drop-off in entrepreneurship—and its potential significance—is to examine the number of new “employer businesses” created every year, as compiled by the Census Bureau. The Census defines employer businesses as proprietorships, partnerships, and corporations that have at least one paid employee. In other words, we’re not talking about the midlevel executive turned “consultant,” not the nanny who pays taxes, not the part-time potter puttering around Etsy.
According to the Census Bureau’s raw data, the total number of employer businesses has grown continuously over the last three decades. When we focus only on this one number, we get an image of slow and steady expansion in the ranks of entrepreneurs. Which is why this figure is used so often to buttress claims of the nation’s entrepreneurial health.
The problem with this picture, however, is that it does not account for the fact that between 1977 (the first year the Census captured this “employer business” data) and 2009 the working-age population in the United States increased by seventy-five million people. If we adjust for this expansion, a much darker picture emerges. New business formation in America is revealed to have actually fallen dramatically over the last generation....MUCH MORE