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December 21, 2014

Is There a ‘Death of American Entrepreneurship’?

Jordan Weissman at Slate: “Last week the Brookings Institution released a much-talked-about-report reminding the world that Americans don’t start businesses at the same pace they used to.”

“There are also some good, not especially frightening reasons that might explain why businesses aren’t multiplying like they used to.

“Though it’s hard to say for sure, the startup rate has likely declined in large part thanks to the victory of giant, national chains over smaller, local businesses … Look at the speed of growth of completely new businesses compared with the growth of ‘establishments.’”

“Beginning at least in the 1980s, the number of new establishments opening each year grew faster than the number of new firms, as shown in the graph below from the Ewing Marion Kauffman Foundation. In short, Walmart and its cohorts took over.”

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“While the number of smaller new companies might be in decline, there hasn’t been a noticeable change in the number of startups transforming into large enterprises.”

  • jumperpin

    Who’s surprised?

    We tax entrepreneurship (mostly Main St.) at about twice the rate of speculation (mostly Wall St.).

    • embo66

      It’s not just taxation. It’s also capitalization. Currently, the Great Recession is still having an effect on credit tightness, more stringent loan requirements, and soft demand.

      But banks have also been exiting the small business market, period. Since 1995, loans of $1 million and under have dropped nationwide by 24 percentage points. Bigger loans to bigger businesses are easier and much more profitable.

      So, once again, money trumps all else. Wealth continues to accrue to the ones who already have it — and the economy overall continues to suffer.

  • pbrower2a

    We now have an effective flat tax on business income so that a family that owns and operates a restaurant that generates $200K in income can easily pay as high a proportion of income tax as some corporate giant.

    Know well: Big Business has economies of scale for advertising and especially lobbying.

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