The Slow, Methodological Death of Entrepreneurship in America
Kimo Gandall, Fiscal Policy Associate Editor
The definition of entrepreneur is as follows: one who organizes, manages, and assumes the risks of a business or enterprise. But most significantly is the last criteria; indeed, an entrepreneurship is not just a manager, but the individual who takes the risks. Empirical studies can confirm this difference. Entrepreneurs, for lack of a better word, are the agents of change, increasing productivity, and innovating new devices to help in everyday life by moving resources out of unproductive areas, and into high yielding ones. And, as many of us could agree, entrepreneurship emboldens the notion of the American dream. After all, is the United States not a country predicated on liberty?
And while liberty remains a founding principle, it is important to note the tangible impacts of entrepreneurship on the economy. There’s a common sense notion that entrepreneurship provides jobs, creates business, and develops local communities. More empirical studies confirm these premises, with a broad range of evidence suggesting a positive correlation between innovative entrepreneurship and economic growth. There is additional evidence that has proven that there is a relationship between asset development and the prevalence of small to medium sized enterprises. Most of this evidence isn’t surprising; after all, the advent of the small business is a part of the traditional model of the ‘American dream.’
But this liberty is indeed at risk. In 2011 Americans opened 27% less businesses than they had in the past 5 years, and the number of new start ups was reported to be at a 40 year low. Most significantly, the dynamism of the US economy has gradually shrunk A 2014 Brookings Institute article further explained that the gradual decline of growing small business was having a significant effect on the dynamic performance of the US economy. And after the tech bubble burst in the 1990s, we have gradually seen a decline in tech start ups. These declines have empirical impacts on the American economy and lifestyle; not only has the decline in new business been correlated a collapse of productivity, but corporate jobs have done nothing but serve as an ‘endless hole’ for American workers. Simply put, the average American has longer workdays, less innovative experience, a miserable lifestyle, and as a result, the originality and productivity that drove America before the 1970s has slowly begun to creep away. This isn’t to say, however, that this notion of corporations or centralized power structures are necessarily to blame --- after all, a job still beats no job. But it is reflecting the cultural shifts that we as Americans are beginning to face; instead of risk taking, instead of financing a new enterprise or pursuing an innovative idea, the middle class of America has resolved to clock in and clock out. And much like the folly of socialism, the incentive to do more, to succeed and climb the ladder, is slowly receding to nothing more than filing paperwork.
These shifts shouldn’t be surprising--empirical studies show that regulation deters the growth of new businesses, and Americans now spend over 8.9 billion hours per year complying with tax regulations alone. This doesn’t include the necessity of acquiring a DBA, maintain proper standing with the Business Bureau, obtaining necessary local, state and federal licenses, or appeasing building regulators. Plus, to this day, there are over 1.43 million pages of the Federal Register published that require compliance to federal agencies. As a result, Americans, outside of the elitists dominating Silicon Valley, have begun to abandon en masse the idea of starting a new business.
All things considered, there is a clear necessity for a shift in policy in government tin order to lessen regulatory burdens on business. The Trump administration, while promising to cut regulations by 75%, has also promised to institute new regulations and tariffs against foreign countries, something that could indeed make start ups struggle to compete with larger companies. The plea, then, remains in single form: we must, despite the temptation to resign to the power structures above by clocking in and out on a daily basis, resist by reminding ourselves what the American dream originally meant to those people who came to this great country for opportunity’s sake: that any person, no matter race, creed, or class, can, with enough work, build for themselves, and secure life, liberty and property.
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