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Thursday, February 02, 2017

60% Of US Metro Areas See More Businesses Close Than Open

Conventional wisdom seems to accept the idea that too much churn and destruction now plague wide swaths of the American economy. The latest economic data, however, turns this conclusion on its head. The United States actually suffers from a problem of too little creation—not too much destruction—perhaps for the first time in its history. Our economic and job creation engine is rapidly slowing down.
America’s economic engine is losing steam.

Consider this: In spite of massive changes throughout the global economy, the rate at which businesses close has remained fairly steady in the United States over the past 40 years. In contrast, the rate of new business formation has plummeted, falling by half since the late 1970s—including a severe decline during the Great Recession. From small mom and pop storefronts to high tech startups, new businesses are simply scarcer than ever.

Why does this matter? New firms are the “creative” part of creative destruction. They help keep the economy in a constant state of rebirth, serving to replace dying industries, foster competition with incumbent companies, and produce new, higher wage jobs. When they disappear, the cycle of creative destruction falls out of balance. That is the core economic problem America faces today.



Anonymous said...

No surprise here politicians hiking taxes and adding regs as fast as they can.

Anonymous said...

Only someone who has tried to start and run a new business can appreciate how desperately we need to eliminate all the onerous state and federal regulations that have been imposed by our "representatives". Small business is the lifeblood of America and needs to be nourished, not destroyed. Thank goodness we now have a President who understands and will take action !!!