Home / Economic Conditions / America Is Losing Its Entrepreneurial Edge
Print Friendly and PDF

America Is Losing Its Entrepreneurial Edge

Posted on January 21, 2015

By Tony Sagami

I’ve been self-employed since 1998, and let me tell you, the life of a business owner isn’t easy. It’s filled with long hours, a relentless amount of paperwork, and uncertainty over where your next paycheck will come from. If you’ve ever owned a business, you know exactly what I’m talking about.

Difficult or not, self-employment is extremely rewarding, and I wouldn’t have it any other way. Nor would the other 6 million business owners in the United States. Of those 6 million businesses, the vast majority are small “Mom and Pop” businesses. Here are more statistics on businesses in the US:

• 3.8 million have four or fewer employees. That’s me!

• 1 million with 5-9 employees;

• 600,000 with 10-19 employees;

• 500,000 with 20-99 employees;

• 90,000 with 100-499 employees;

• 18,000 with 500 employees or more; and

• 1,000 companies with 10,000 employees or more.

Those small businesses are the backbone of our economy and responsible for employing roughly half of all Americans. Moreover, while estimates vary, small business create roughly two-thirds of all new jobs in our country.

For those reasons, the health (or lack thereof) of small business is the single most important long-term indicator of America’s economic health. Warning: new data suggest that small businesses are in deep trouble.

For the first time in 35 years, the number of business deaths outnumbers the number of business births.

The US Census Bureau reported that the birth and death rates of American businesses crossed for the first time ever! 400,000 new businesses were born last year, but 470,000 died.

Yup, business deaths now outnumber business births.

Pay attention, because this part is important.

The problem isn’t so much that businesses are failing, but that American entrepreneurs are simply not starting as many new businesses as they used to.

We like to think of America has the hotbed of capitalism, but the US actually is number 12 among developed nations for new business startups.

Number 12!

You know what countries are ahead of us? Hungary, Denmark, Finland, New Zealand, Sweden, Israel, and even financially troubled Italy are creating new businesses faster than us!

The reasons for the capitalist pessimism are many, but my guess is that the root of the problem comes down to three issues: (1) difficulty of accessing capital (loans); (2) excessive and burdensome government regulations; and (3) an overall malaise about our economic future.

Business owners are permanently smitten with an entrepreneurial bug, and the only thing that prevents them from seeking business success is the expectation that they’ll lose money.

Sadly, the lack of new business startups is confirmation that American’s free enterprise system is broken.

“When small and medium-sized businesses are dying faster than they’re being born, so is free enterprise. And when free enterprise dies, America dies with it,” warns Gallup CEO Jim Clifton.

I don’t believe for a second that America’s free-enterprise system is permanently broken. The pendulum will eventually swing the other way, but our economy will not enjoy boom times until the birth/death trends are reversed.

That won’t happen next week or next month. It will take serious, fundamental changes in tax, regulatory, and judicial rules, and I sadly fear that it will take several years for that to happen.

Until then, our economy is going to struggle and will pull our high-flying stock market down with it. Are you prepared?

Continue Reading on www.mauldineconomics.com

Print Friendly and PDF

Posting Policy:
We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse. Read more.

Comments are closed.