The Death-Spiral of American Entrepreneurism
February 22nd, 2016
in Business, Money and Banking
by Charles Hugh Smith, Of Two Minds
If American Entrepreneurism is in a death spiral, then so too is the U.S. economy and the state that lives off the surplus generated by American Entrepreneurism.
Follow up:The self-congratulatory rah-rah about American entrepreneurism rings hollow, as the evidence is conclusive: entrepreneurship, new businesses and the source of new businesses, self-employment, are all declining.
Two recent articles describe the trend: American Entrepreneurship Is Actually Vanishing. Here's Why (Inc)
The Inc.com piece is a nuanced look at entrepreneurship that tries to find a silver lining in the abysmal data: perhaps we're simply not looking at the right metrics. Perhaps entrepreneurship is best measured by self-employment rather than by only counting businesses with employees (which, by the way, includes incorporated self-employed).
This is very sensible, as self-employment is the ground floor of entrepreneurship. If your one-person business takes off, then you hire employees and scale up from there.
Alas, the feedstock of small business--self-employment--has been in structural decline for decades. I've covered self-employment in depth for years: Endangered Species: The Self-Employed Middle Class
The Decline of Self-Employment and Small Business (April 22, 2013)
Financial Independence via Self-Employment: How Do We Do It? (September 23, 2015)
The chart of self-employment is unambiguous:
The Gallup article and chart are also unambiguous: Entrepreneurship is in structural decline, and the health of the economy and the state that depends on tax revenues is at stake:
Here is a chart of the number of new enterprises and those that have closed: much is being made of that tiny uptick in new businesses; now that the birth of new enterprises exceeds the death of existing enterprises by a wafer-thin margin, victory is being declared:
Not so fast, rah-rah cheerleaders. Look at the chart with the expansion of the U.S. population as a baseline. While population rose 42%, the number of new firms actually dropped precipitously.
While the financial media focuses on the handful of multi-billion dollar success stories, in the trenches of the U.S. economy the story is quite different: American Entrepreneurism is in a death spiral. On a per capita (per person) basis, American Entrepreneurism is in a free-fall.
And if American Entrepreneurism is in a death spiral, then so too is the U.S. economy and the state that lives off the surplus generated by American Entrepreneurism.
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