My column this week in Forbes is about the declining rate of entrepreneurship and startups in the US.
A recent study by the Beauru of Labor Statistics confirmed a potentially disturbing trend — that the number of new startup businesses in the United States has declined since 2006, and the number of jobs created by those startups has been in decline for over a decade.
This is not just a result of the recent recession. These declines pre-date the current recession, and besides, startup activity has always held up well in past recessions as unemployed workers try entrepreneurship as a path back to prosperity.
There are likely a myriad of economic and demographic reasons for this decline, but certainly the growth of government power in the economy must be seen as a major contributor. Government intervention in commerce nearly always favors large companies over small, even if that was not its specific intent, for a couple of reasons:
- Increasingly complex and pervasive regulations on everything from labor practices to salt content tend to add a compliance cost burden that is more easily born by larger companies
- Large, entrenched competitors are becoming more facile at manipulating government to create barriers to competition from upstart companies with different business models.
The role of government in throttling entrepreneurship has been evident for years, in the enormous differentials between US and European business startup rates. Historically, the US has had entrepeneurship rates 3-4 times higher than in the large European industrial countries, due in large part to the barriers these latter countries place in the way of business creation. But the US, with its current bi-partisan drive towards a corporate state, may soon be engaged in a race to the bottom with these other countries.
I go on to discuss each of these two points in more depth.