Entrepreneurship in America “Died” Under Obama
The Y 2008 financial crisis buried US entrepreneurship, and it’s having a hard time coming alive again.
A US economist at Bank of America Merrill Lynch (NYSE:BAC), recently said that the formation of new corporate firms and individual establishments has plunged since the financial crisis and remained low as the Obama Administration has stacked regulation upon regulation making small business ownership a hardship.
New businesses typically hire faster and produce higher levels of productivity than firms that have been around for a while. Such a decline in business formation can explain some of the labor market’s recent problems, and is at least part of the reason for the steep drop in productivity.
A recent paper from the US Fed, and referenced by Vice Chairman Fischer in his Jackson Hole Summit speech estimates that there is a persistent increase in both GDP and productivity as a result of changes in the number of start-ups. Specifically, they found that a 1-standard deviation shock to the number of start-ups led to an increase of real GDP culminating to 1-1.5% and lasting 10 years or longer. This suggests a notable and lasting impact on the economy from weak rate of business entry over the past decade.
There are many reason, but below are the 5 Key ones, as follows:
- Tighter credit conditions as loans became harder to secure.
- Uncertainty shock due to the recession and more recent political and economic battles.
- Technology disruptions as online shopping and downloadable products have discouraged physical products and locations.
- Aging economy and population, as most entrepreneurs are young people.
- The addition regulations that make starting a new business difficult.
The situation is volatile and the stalled new-business drive can eventually grow out of its funk, but: credit must get easier, society adapts to technology, another generation of self-starters is born and the current economic and political battles will be replaced by new ones.
There is additional evidence that political uncertainty is hurting small business.
Political dysfunction is holding back the strength of US competitiveness, according to a new report from Harvard Business School’s US Competitiveness Project.
Harvard Business School’s US Competitiveness Project released a report that said the government’s lack of action is holding the US economy back.
Professor Michael Porter said in a TV interview last week: “I think it is very disappointing. We are stalled in America. Our economic performance on many metrics is worse than we have seen in many generations.”
That’s because the US has not made progress on fixing the things that are holding us back, he said.
“We’re having a very bizarre political dialogue about a lot of things, but ultimately we’re not moving ahead on tax policy, on infrastructure, on all the things we know we need to do,” Professor Porter said.
Donald Trump says, that when he is elected President, among the 1st things he will do is reverse Mr. Obama’s executive order regulations that have stifled business development in the nation.
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