It’s hard to believe, but entrepreneurship may be slowly dying.
It’s hard to believe because it’s never been cooler to be an entrepreneur. There seem to be new young entrepreneurs under every rock. Their passion, optimism, and faith is palpable and unbounded. It seems like every serious young business person I meet eventually wants to be one. Americans view entrepreneurship as the road to wealth and success—the path to individual freedom and prosperity. Entrepreneurship is where it is at, baby.
Then why does the Brookings Institute report that American businesses are disappearing much faster than they are being created? (Wonkblog – 5/5/14) Overall, new business creation declined over 50% since 1978 and the trend is picking up steam in the last five years. And that is in the midst of a putative, albeit sickly, recovery. The observation of this ominous trend is confirmed by a series of recent Kauffman Foundation studies which report, “In 1980 ‘young firms’—those less that five years old—accounted for half of all going concerns. By 2010, their share of the total had collapsed to less than 35%.” The Kauffman Foundation concludes that new business formation in America continues to fall dramatically.
Some of my entrepreneurial friends think this is because of higher taxes. I don’t agree. It is mostly because of the mindless expansion of bureaucracy and overweening governmentalism. This threatens to make a desert of the fecund loam that has traditionally nurtured small business and entrepreneurship.
Philip K. Howard has recently written a book titled The Rule of Nobody: Saving America From Dead Laws and Broken Government. (W.W. Norton & Co., April, 2014) It is about the increasingly heedless phalanx of petty, needless harassment of the small business community that is increasingly baked into our governmental bureaucratic cake. Howard states, “Legal rigidity trumps everything now. Law has crowded out the ability to be practical and fair….[It has become] a government run by clerks and jerks.” Welcome to the brave new dystopia of the unaccountable and faceless governmental functionary.
Here are some examples:
- A lifeguard is fired for saving a drowning man outside his defined beach zone.
- A county health inspector in California threatens to shut a twenty year old farmers’ market because the nearest restroom is 220 feet away, rather than 200 feet.
- A soup kitchen is shut down because it served pre-cooked meals and had no kitchen to be inspected, per law.
- A bridge blocking New York’s harbor from the newest Supertankers can’t be elevated without 47 different permits from 19 government agencies, each subject to separate litigation.
Furthermore, though I’ve always tried to be a good environmentalist, the Sierra Club and the Environmental Defense Fund seem determined to return us to hunter-gatherer status by using endless litigation to stop any new energy, agricultural, or mining development. Michael Barone refers to this new environmental credo as BANANA (Build Absolutely Nothing Anywhere Near Anything) (NY Post, July 3, 2014)
Let’s not even talk about the bureaucratic horrors of the Affordable Care Act for small business. (Except this one egregious example: To be paid by the government, as of 1215, doctors have to report 18 different clinical measurements on their patients and certify these patients have been counseled on each. The regulators estimate this single report could take as long as 108 minutes per patient and consume an extra 5.4 million hours a year.)
So could this possibly be the end for disruptive, innovative business? I see neither Republicans nor Democrats tackling this creeping small business conundrum. For decades both parties have been in a pell-mell scramble to increase government power. The small business community needs to take notice. We are like a slowly boiling frog that never realizes he is being cooked till he is dead.
So how do you sunset impractical and inefficient law and arbitrary bureaucratic fiat? Got me. But we better figure it out. Steve Wynn, Bernie Marcus, and numerous other successful entrepreneurs have said publicly they could never have created their companies in the present environment.