A report from the center-left Brookings Institution shows that not only is busines dynamism – the pace of new business openings and old business closings – the slowest it’s been, but during the Obama “Recovery” the pace of closings has far outrun the pace of new business creation, for the first time in post-Great-Depression history:
Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.But recent research shows that dynamism is slowing down. Business churning and new firm formations have been on a persistent decline during the last few decades, and the pace of net job creation has been subdued. This decline has been documented across a broad range of sectors in the U.S. economy, even in high-tech. …
While the reasons explaining this decline are still unknown, if it persists, it implies a continuation of slow growth for the indefinite future, unless for equally unknown reasons or by virtue of entrepreneurship enhancing policies (such as liberalized entry of high-skilled immigrants), these trends are reversed.
Why has America become less entrepreneurial?
I’m going to suggest it’s two things; the constant accretion of new regulations atop old regulations, which continually make new businesses harder and harder to launch, and a culture – especially a school system – that is slowly leaching the desire independence out of the citizenry.