Week in Review
This is the worst economic recovery since that following the Great Depression. And it’s not George W. Bush’s fault. Despite what he did to increase the size of government. No. The anemic recovery is due to President Obama. And his anti-business policies (see Not open for business posted 10/12/2013 on The Economist).
America is not producing as many start-ups as it did a decade ago and those that have been created are providing fewer jobs—less than five each, compared with an historical average of about seven. Start-ups created 2.7m new jobs in the 2012 financial year compared with 4.7m in 1999.
The financial crisis clearly bears a lot of the blame for reducing America’s stock of capital and animal spirits. But it is only a partial explanation. The decline in the number of firms going public began in 2001. And these problems are continuing to delay the recovery despite the federal government pump-priming the economy and keeping interest rates near zero.
So there you have it. Federal government pump-priming and near zero interest rates do NOT stimulate economic activity. As these are the bedrock of Keynesian economics then Keynesian Economics does NOT work. This is a problem for America. Because President Obama and the liberal left are dyed-in-the-wool Keynesians. And why are they Keynesian extremists despite the historical record of Keynesian failure? Because Keynesian economics empowers Big Government. That is, Keynesian economics favors those in power. Not the people.
Three years ago John Dearie and Courtney Geduldig, who both worked for the Financial Services Forum, which represents America’s biggest financial institutions, came up with an inspired idea. Why not ask entrepreneurs themselves what is going wrong? Both big multinationals and established small firms have lots of representatives in Washington, DC. Entrepreneurs are too busy inventing their companies to spend time lobbying. The pair organised meetings and conducted lots of polls. Across a vast and diverse country they heard the same message from everyone they asked: entrepreneurship is in a parlous state. And everyone pointed to the same problems. The result is a new book, “Where the Jobs Are”, which should be dropped onto the heads of America’s squabbling politicians.
The first worry is over human capital. Entrepreneurs repeatedly complain that they cannot hire the right people because universities are failing to keep pace with a fast-changing job market. Small firms lack the resources to provide training and are consequently making do with fewer people working longer hours.
The problem with our educational system is that it teaches our young to become Democrat voters. Not prepare them for a high-tech economy. Our public schools teach our children about the evils and unfairness of capitalism while lauding the goodness and fairness of government. Turning them from their parents who are selfishly destroying the planet with their global warming to the government. Who is expanding further and further into the private sector to save the polar bears. And when our kids get to college our system of higher education takes it up a notch. Attacking the history and the culture that made America the greatest country in the world. So our college graduates can tell you every bad thing America has ever done but they lack the math and science skills that our high-tech economy so desperately needs. Forcing businesses to turn to immigrants for those skills.
Immigrants are responsible for launching about half the country’s most successful start-ups and producing a striking number of its patents. But the authorities do their best to drive them out of the country once they have been educated or to break their spirits on the visa treadmill…
The second problem is the complexity and cost of government. Entrepreneurs the world over complain about regulations and taxes. But America’s have lots to gripe about: in 2009-11 the Obama administration issued 106 new regulations each expected to have an economic impact of at least $100m a year. Besides this business founders suffer from the constant political uncertainty generated by a combination of ambitious new legislation, such as Obamacare, and ideological trench warfare. The Vanguard Group, an asset-management firm, calculates that since 2011 Washington’s bickering politicians have imposed, in effect, a $261 billion uncertainty tax that has cost up to 1m new jobs.
Any administration that raises taxes and issues 106 new regulations is no friend of small business, jobs or the middle class. Therefore President Obama is no friend of small business, jobs or the middle class. No matter how much he says that he is. If you want to know why this is the worst economic recovery since that following the Great Depression it’s because of the Keynesian in the White House. And the Keynesians in Congress. That are waging a war on small business, jobs and the middle class.
The financial crisis has worsened the third problem: raising money. Over 70% of new businesses are launched using savings or assets—particularly houses. The crisis reduced the average net wealth of American households by about 40%. Business founders repeatedly mention other problems too. Venture capitalists are increasingly risk-averse. The Sarbanes-Oxley act imposes additional costs of $1m a year on public companies. Investors no longer bother with “growth stocks” because there is more money to be made in making lots of big trades in established firms. The dramatic decline in the number of firms going public since 2001 is worrying because, over the past four decades, more than 90% of jobs created by start-ups came into being after they went public…
Fixing the small-business problem should be at the top of the political agenda. Some 22m workers are either unemployed or underemployed, or have given up looking for work. If it continues to generate new jobs at its current anaemic rate, America will not return to pre-recession employment levels until 2020. The country is lucky that entrepreneurship is part of its DNA. It seems perverse to put unnecessary obstacles in the path of people whose ambition is to found businesses and hire new workers.
Yes, we should put fixing the small-business problem at the top of the political agenda. Which the Republicans recently tried by defunding Obamacare. And reining in out of control spending. But as this would be a check on the growth of government the Democrats shut down the government before letting that happen. For they will have their taxes, regulations and spending. And the middle class be damned. For theirs is a government of the ruling elite, by the ruling elite and for the ruling elite.
Tags: anti-business policies, capitalism, college, Democrat, entrepreneur, financial crisis, George W. Bush, Great Depression, high-tech economy, human capital, immigrants, jobs, Keynesian, Keynesian economics, middle class, Obamacare, political agenda, President Obama, regulations, ruling elite, small business, taxes, worst economic recovery