Gallup
CEO Blasts US Leadership "The Economy Is Not Coming Back" Submitted by Tyler Durden on 01/14/2015
The U.S. now ranks not first, not second, not third, but 12th
among developed nations in terms of business startup activity. Countries such as Hungary, Denmark,
Finland, New Zealand, Sweden, Israel and Italy all have higher startup rates
than America does.
We are behind
in starting new firms per capita, and this is our single most serious economic
problem. Yet it seems like a secret. You never see it mentioned in the media,
nor hear from a politician that, for the first time in 35 years, American business deaths now outnumber business births.
The U.S. Census Bureau reports that the
total number of new business startups and business closures per year -- the
birth and death rates of American companies -- have crossed for the first time
since the measurement began. I am referring to employer businesses, those with
one or more employees, the real engines of economic growth. Four hundred thousand new businesses are
being born annually nationwide, while 470,000 per year are dying.
You may not have seen this graph
before.
Until 2008,
startups outpaced business failures by about 100,000 per year. But in the past
six years, that number suddenly turned upside down. There has been an underground
earthquake. As you read this, we are at minus 70,000 in terms of business
survival. The data are very slow coming out of the U.S. Department of Census,
via the Small Business Administration, so it lags real time by two years.
Net Number of
New U.S. Firms Plummets
Business startups outpaced business
failures by about 100,000 per year until 2008. But in the past six years, that
number suddenly reversed, and the net number of U.S. startups versus closures
is minus 70,000.
My hunch is that no one talks about the
birth and death rates of American business because Wall Street and the White
House, no matter which party occupies the latter, are two gigantic institutions
of persuasion. The White House needs to keep you in the game because their
political party needs your vote. Wall
Street needs the stock market to boom, even if that boom is fueled by illusion.
So both tell us, "The economy is coming back."
Let's get one
thing clear: This economy is never truly coming back unless we reverse the
birth and death trends of American businesses.
Dead-Wrong
Thinking
It is
catastrophic to be dead wrong on the biggest issue of the last 50 years -- the
issue of where jobs come from. Our leadership keeps thinking that the answer to
economic growth and ultimately job creation is more innovation, and we continue
to invest billions in it. But an innovation is worthless until an entrepreneur
creates a business model for it and turns that innovative idea in something
customers will buy. Yet current thinking tells us we're on the right track and don't need
different strategies, so we continue marching down the path of national
decline, believing innovation will save
us.
I don't want
to sound like a doomsayer, but 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.
Let's run some numbers. You will often
hear from otherwise credible sources that there are 26 million businesses in
America. This is misleading; 20 million of these reported
"businesses" are inactive companies that have no sales, profits,
customers or workers. The only number that is useful and instructive is the
number of current operating businesses with one or more employees.
There are only 6 million businesses in
the United States with one or more employees. Of those, 3.8 million have four
or fewer employees -- mom and pop shops owned by people who aren't building a
business as much as they are building a life. And God bless them all. That is
what America is for. We need every single one of them.
Next, there are about a million
companies with five to nine employees, 600,000 businesses with 10 to 19
employees, and 500,000 companies with 20 to 99 employees. There are 90,000
businesses with 100 to 499 employees. And there are just 18,000 with 500
employees or more, and that figure includes about a thousand companies with
10,000 employees or more. Altogether, that is America, Inc.
Let me be
very clear. America, Inc. is far more important to America's security than our
military. Because
without the former prospering -- and solvent -- there is no latter. We have
enormous military power only because of a growing economy that has, so far,
made it possible for the government to pay its bills. When former Chairman of
the Joint Chiefs of Staff, Adm. Mike Mullen, was asked in a Senate hearing on
June 28, 2011, to name the biggest current threat to the security of the United
States, he didn't say al-Qaida. He didn't say Iran's nuclear capabilities. He
answered, "I believe our debt is the greatest threat to our national
security."
Declining
Businesses Mean Declining Revenues for Social Spending
Keep in mind that these 6 million
businesses, especially small and medium-sized ones, provide jobs for more than
100 million Americans and much of the tax base for everything. These small,
medium and big businesses have generated the biggest economy in the world,
which has allowed the country to afford lavish military and social spending and
entitlements. And we've been able to afford all of this because, until now, we've
dominated the world economy.
When new
businesses aren't being born, the free enterprise system and jobs decline. And without a growing free enterprise
system, without a growing entrepreneurial economy, there are no new good jobs.
That means declining revenues and smaller salaries to tax, followed by
declining aid for the elderly and poor and declining funding for the military,
for education, for infrastructure -- declining revenues for everything.
America has maintained the biggest tax
coffers in the world because its 300+ million citizens have produced and owned
one-quarter of virtually all global wealth. The United States clobbered
everyone in the battle of free enterprise, in the battle of business building,
and in the battle of inventing the future. Until recently, America had blown
the world away in terms of economic success. We are now quickly losing that edge, and everything we're trying to do to
fix the problem is dead wrong.
Here's why:
Entrepreneurship is not systematically built into our culture the way
innovation or intellectual development is. You might say, "Well, I see a
lot of entrepreneurial activity in the country." Yes, that's true, but
entrepreneurship is now in decline for the first time since the U.S. government
started measuring it.
The whole
country and subsequently the world are having their own dead-wrong moment, and
it is causing America and the whole world to make everything worse. And people know it, though they may not
know why. When Gallup asked Americans to rate how much they personally worry
about particular problems
facing the country, the top three issues that respondents worry about a "great
deal" were the economy (59%), federal spending and the budget deficit
(58%), and the availability and affordability of healthcare (57%).
The more we
execute on our leadership's erroneous belief in innovation, the more our engine
stalls out -- and the more people rightly worry about economic issues.
Because we have misdiagnosed the cause
and effect of economic growth, we have misdiagnosed the cause and effect of job
creation. To get back on track, we need to quit pinning everything on
innovation, and we need to start focusing on the almighty entrepreneurs and
business builders. And that means we have to find them.
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