America Losing its Entrepreneurial Edge

With all the hoopla over the Gross Domestic Project (GDP expanding to 5% in the 3^rd quarter the U.S. economy is beginning to show signs of life, unfortunately this hasn’t reached the entrepreneurial community.

Last May, Brookings researcher Robert Litan and economist Ian Hathaway examined two measures of business dynamism—the entry of new firms to the marketplace in a given year and job reallocation—from 1978 to 2011. They discovered that entrepreneurship has been in long-term decline across a range of sectors and geographic regions, with a precipitous drop since 2006.

The biggest driver of this precipitous drop in small business was the recession of 2007-2009, but with the slowest economic recovery in the post-World War II era, there has been little rebound for entrepreneurs.

Robert Litan penned an article in Foreign Affairs, titled “Start-up Slowdown” on the challenges entrepreneurs and small business face in today’s economy.

He writes over the past 30 years, the rate of start-up formation in the United States has slowed markedly, and the technology industry has come to be dominated by older companies. This presents a risk to innovation, because the most transformative leaps forward tend to come not from established firms but from entrepreneurs with little to lose. Indeed, start-ups commercialized most of the seminal technologies of the past several centuries, including the car, the airplane, the telegraph, the telephone, the computer, and the Internet search engine. If the United States wishes to reclaim its status as an innovation hub, it must reform a wide swath of policies—including those covering immigration, business regulation, health care, and education—to support new businesses.

Litan mentions the challenges entrepreneurs and small business face and neither political party nor President Obama is addressing these key problems which should be the hallmark of U.S. economic policy.

Washington passes countless and often byzantine array of regulations that do nothing to spur the grown of small business or help entrepreneurs establish the next innovative business idea or company.

As the nation heads into the New Year many challenges face small business but both parties and President Obama have failed to address the challenges to small business and do nothing to spur the entrepreneurial spirt which has always been the linchpin of the American economy.

Currently the U.S. is facing an aging population and this is the same throughout businesses across America. The Brookings Institute report highlighted this very fact.   The share of firms aged 16 years or more was 23 percent in 1992, but leaped to 34 percent by 2011—an increase of 50 percent in two decades. The share of private-sector workers employed in these mature firms increased from 60 percent to 72 percent during the same period.

President Obama has focused on entrepreneurs and small businesses but has only given rhetorical support in this effort.  The President hasn’t slowed the pace of regulation and other aspects that only curb the expansion of entrepreneurs and small business.

This year the president’s signature issue the Affordable Care Act really begins to take hold, but its mandate on the business community will hurt small business more than it would corporate America.

Far too often entrepreneurs and small businesses face hurdles as policies enacted by Washington often have the opposite affect and often hurt small businesses then they do corporations they were intended to target.

Washington must and has to understand that 80% of all jobs in America are with small businesses and who have 50 or less employees.  They cannot move there operations overseas like corporations can, and many small businesses pay a disproportionate higher tax rate then there corporate brethren.

The regulatory environment also has a chilling effect on small business as often Washington tries and targets corporate companies but these companies have lobbyists, lawyers, and accountants often unavailable to small business.

Even the ability for entrepreneurs to start the latest new idea of new product is curtailed to the inability to find start-up capital and often is hampered by a governmental bureaucratic system.

The U.S. should make it easier for small businesses to thrive and the entrepreneurial environment to prosper, only then will the economy begin to be felt on main street America.

Until then we will only have a two tiered economy, the rich and the poor with the middle class squeezed out of existence, as this is where most small businesses reside.

I doubt Washington will listen!