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  • Is American Entrepreneurship in Decline?

    Posted by David Foster on January 19th, 2015 (All posts by )

    Jim Clifton, who is Chairman & CEO of Gallup, presents data showing that creation of new businesses has fallen considerably over a long-term trend running from 1977 to the present, and that for the last several years, the number of firms created has actually fallen below the number of firms closing.


    And furthermore:

    The U.S. now ranks not first, not second, not third, but 12th among developed nations in terms of business startup activity. Countries such as Hungary, Denmark, Finland, New Zealand, Sweden, Israel and Italy all have higher startup rates than America does.

    Read the whole thing.

    These numbers and trends seem somewhat counterintuitive to me. I see a lot of startups looking for angel funding, and quite a few of them getting it. There is a lot of public interest in entrepreneurship, as evidenced by the success of TV programs such as “Shark Tank”, and even universities are attempting to capitalize on the interest in entrepreneurship by offering courses and programs on the topic.

    I suspect that much of the decline in business creation is among people who don’t have a lot of formal education–many of them immigrants–and who in former years would have started businesses but are now inhibited by inability to navigate the dense thicket of regulations and pay the substantial costs involved in doing so. OTOH, I also suspect that quite a few of these people have actually created businesses, in fields such as home maintenance or home day-care, and are doing so off-the-books in ways that don’t get counted in the formal statistics.

    Among those who do have college degrees–and especially among those who have spent six, eight, or more years in college classrooms–student loan debt, much of it incurred on behalf of degrees having little or no economic or serious intellectual value, surely also acts as an inhibitor to business creation.


    5 Responses to “Is American Entrepreneurship in Decline?”

    1. Michael Hiteshew Says:

      >>and that for the last several years, the number of firms created has actually fallen below the number of firms closing.

      That can’t be true. We were told more taxes and regulation would have no effect on the economy. We’ve also been told the economy is in full recovery. It’s practically a boom town out there. Anyway, that’s what I’ve been hearing.

    2. Bill Brandt Says:

      I think restaurants are a traditional start up activity for immigrants. I’d imagine it depends on the nature of the start up – trying to start even a small factory in California would be a huge uphill battle.

      Software? It is as strong as ever. Look at these web billionaires in their 20s.

    3. Subotai Bahadur Says:

      Our Lord and Emperor, Buraq Hussein Obama, is expected to lay out a series of new taxes in his State of the Union speech. Early look at the new taxes:

      Note #3. The new principle of taxing not only income, but also a corporation’s liabilities. If you are a bank and a loan goes bad, it will not only be a loss of the loan and the foregone interest, but it will be a new tax liability. How likely are you to make any risky loans? Any new business is a risky loan. Even for operating cash after they have been around a year or two. Or for agricultural operations which run on yearly loans.

      And look at the definitions of balance sheet liabilities:

      Corporate bonds, pension plans, accounts payable [imagine the amount of accounts payable Walmart has every month for vendors], contracted lease payments to be made. There are a lot more, all subject to new taxation.

      Doing business in this country at all is getting to be impossible, let alone starting a new business.

    4. Michael Hiteshew Says:

      >>Doing business in this country at all is getting to be impossible, let alone starting a new business.

      It’s getting so you need face time with a politician in order to cut the red tape and maybe cut you a special tax exemption. You’d probably need to make a nice campaign contribution to get that face time. I wonder who would benefit from arrangements like that?

    5. Bill Brandt Says:

      One of the problems is that few of these politicians have ever had business. George McGovern’s experience in running a B & B is a classic. Politicians should have to show some aptitude in running a business before allowing to run (If I were Emperor).