Dying American Entrepreneurship is a National Emergency

Dying American Entrepreneurship is a National Emergency

Dying American Entrepreneurship is a National Emergency

American entrepreneurship may well be dying a slow and undignified death.

John Dearie, EVP for Policy at the Financial Services Forum said recently that, “New businesses are disproportionately responsible for the innovation that drives productivity and economic growth, and they account for virtually all job creation….I would say, as a policy person, declining entrepreneurship is nothing short of a national emergency.”

A national emergency?

For the last 14 months of this Presidential electoral cycle I have not heard very much (if anything) about our increasingly troubled entrepreneurial sector.

This is serious stuff for everyone, our politicians included, not just entrepreneurs.

The Brooking Institution’s recently concluded that census data indicates more businesses are dying than are being born.

The US Census Bureau reports 400,000 new businesses being born annually, while 470,000 are dying. That is not good for the living/breathing core of American business. And it is alarming for our future.

Jim Clifton, Chairman & CEO of Gallup, said “Let’s get one thing clear: This economy is never truly coming back unless we reverse the birth and death trends of American business….I don’t want to sound like a doomsayer, but when small and medium-sized businesses are dying faster than they’re being born, so is free enterprise. And when free enterprise dies, America dies with it.”

Pretty grim words, yes?

And things are worse for millennial entrepreneurship.

Last year a WS-J small business column contained the following information: “Roughly 3.6% of households headed by adults younger than 30 owned stakes in private companies, according to an analysis by The Wall Street Journal of recently released Federal Reserve data from 2013. That compares with 10.6% in 1989–when the central bank began collecting standard data on Americans’ incomes and net worth–and 6.1% in 2010.”

Some of the explanations for the steep decline of millennial entrepreneurship include a lethargic recovery from the Y 2008 recession, lower savings rates, crushing student debt, and overly rigorous new bank lending standards.

Equally important is the massively increased level of regulation that militates or works against small business formation. Much of the regulation is directed at big business, who can easily absorb the extra cost.

Not so bootstrapping young entrepreneurs.

Niall Ferguson cites Clyde Wayne Crews of the Competitive Enterprise Institute, who notes that over-regulation costs are 36% higher/employee for small business than for big business. And the Federal Register, the official directory of regulation, today is 78,961 pgs. In Y 1986 it was 44,812 pgs and in Y 1936 it was 2,620.

Note this hypothetical from a LinkedIn Pulse essay of January, 2016 by Zachary Slayback.

“A few decades ago, Tina may have started a small salon out of her basement when she realized that she had a knack for designing nice and fun haircuts for her friends and family and also realized that this could earn her some extra money for her kids. She’d clear some space away in the basement, put up a sign advertising her service, and even have her nephew man the front desk as business picked up. Not so today. Today she’d have to pass a number of boards and certifying examinations saying that she is qualified to provide this service, get a commercial license from her local government, incorporate as a business, get a federal EIN for tax purposes, buy a regulation-friendly sign, and hire staff at a much higher price than her nephew was willing to do the work. And that’s just to get off the ground and get started….The problem isn’t that fewer people can’t start businesses but rather that people don’t want to start businesses.”

Plus, there is also a moral and spiritual problem for young entrepreneurs.

They lack encouragement and cultural support for creative risk-taking. The “everyone-gets-a-trophy” narrative of current teaching and educational philosophy creates the image of entitlement. It does not inspire and summon the animal spirits and competitive incentivization necessary for risky new business enterprise.

Caution and laziness become ingrained like a disease in the community.

Impassioned courage and individual vision are culturally muffled by the coverage.

One keen observer wrote, “The potential death of entrepreneurship is like a slowly boiling a frog. The frog never knows he’s in trouble till he is dead.”

So it is with the increasingly stressed, increasingly regulated small business climate for entrepreneurs.

Democrat Hillary Clinton gave some token “lip-service” to the problems of small business in her convention acceptance speech, but if you sneezed you missed it.

A superficial nod is not enough to cure the growing conundrums of the small business eco-sphere. Our whole economy depends on healthy small business for macro economic health. It merits direct attention from the political powers to encourage it to live and thrive.

Donald Trump will propose a temporary moratorium on new financial regulations in an economic speech Monday in Detroit in an effort to draw a stark contrast with the domestic policies of Democrat Hillary Clinton, who he says “punishes” the American economy. Stay tuned…

Have a terrific week.

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