Kevin Drum wonders why the heck people are worried about the rate of formation of new businesses:
Over at Foreign Affairs, Robert Litan has a piece lamenting the decline in entrepreneurship in America. I’m not entirely persuaded that this is a major problem—a fair amount of it is just the result of big national retailers replacing local diners and small shops, which are hardly big engines of economic growth—but I’m still willing to accept that some of it is probably real and deserves attention.
I’m not particularly interested in “economic growth” in the abstract—I’m more concerned about jobs, so let’s take a look at the track record of the large companies that Kevin, presumably, believes are “big engines of economic growth”. Let’s start with General Motors:
A reasonable criticism is that the graph stops at 2009. Fair enough. Since 2009 GM’s total employment has decreased from 235,000 employees to 212,000, about three-quarters of whom are in the U. S. But that’s just the tip of the iceberg. GM’s first act when taken under the gentle wing of the federal government was to trim their roster of dealers. That resulted in a loss of 63,000 jobs.
How about Ford?
Oil companies have been doing pretty well in recent years. What’s ExxonMobil’s record on job creation?
or, in other words, among just these three companies, the total number of employees they employ has declined by about a quarter million workers over the period of the last fifteen years, 100,000 fewer in the U. S. alone. With the exception of a few retails, e.g. Wal-Mart, that’s what happened at all of the Fortune 500 companies. Their employment has dwindled even as their bottom lines have grown. And the situation looks even worse if you go back 30 years. Thirty years ago GM employed 600,000 people in the U. S. alone and those weren’t minimum wage jobs.
64% of all of the net job creation since 1993 has been by small businesses and since the Great Recession that number has been 67%.
Consequently, if you’re interested in employment rather than just “economic growth”, you should be concerned about the slowing rate of new business formation (Kevin has a nice graph of that in the linked post). I’ll have some thoughts on what might be done to turn the trend in business formation around in a later post.
Drum is part of the nation’s elite. As long as GDP grows & he prospers he doesn’t give a shit about the masses.
Just my perception, but it seems to be that a lot of startups don’t seek to grow, but want to get bought out by the Googles, Amazons and Microsofts.