The entrepreneur is the dead elephant in the living room.

From 1977 t0 2005, business startups accounted for almost all economic growth and all net job creation. Established firms shrank and new firms grew. After the Great Recession of 2008, the opposite occurred: established firms accounted for all the recovery in employment, and startups contributed nothing to net employment growth. Under the Obama administration, America changed from the world’s most innovative economy to the most static and cartelized.

This is the single most depressing fact about the American economy. The single most depressing fact about American politics is that no-one wants to talk about it. Both these facts bear some scrutiny.

No-one doubts that new businesses drove employment growth during the three decades prior to the 2008 crash. Economists from the US Census Bureau and the University of Maryland showed in a 2014 study that startup firms created an average of 2.9 million jobs a year between 1980 and 2010–twice the 1.4 million average increase in employment. In other words, startups created 2.9 million jobs a year while established firms lost 1.5 million jobs a year.

Fast forward to the post-recession US economy. Virtually all of the change in employment since June 2007 came from the S&P 1000 companies. The numbers don’t match exactly because the S&P data includes overseas employment, but they are quite close.

What happened to entrepreneurs? They became an endangered species. For the first time since the Census Bureau gathered data, more businesses closed than opened during the Obama years. Below is a graph produced by the Gallup Organization using Census Bureau data, showing a net decline in the number of new businesses.

Economists offer as many reasons for the decline of the American entrepreneur as historians offer for the fall of the Roman Empire. Regulatory strangulation is probably the most important: Obamacare, environmental regulations, Dodd-Frank disclosures and other encroachment on entrepreneurs’ time, energy and capital are killers. The Congressional Budget Office estimates that Obamacare alone will stifle the creation of 2.3 million new jobs by 2021. What used to be a disruptive, innovative technology sector has turned into a small number of monopolies run by patent trolls rather than engineers. That kills investment in startups. A decline in federal support for cutting-edge research and development has also reduced the backlog of prospective inventions, as Dr. Henry Kressel and I wrote in The American Interest three years ago.

There are a couple of big entrepreneurial success stories, to be sure, in social media and related ventures. Facebook is sucking advertising revenue out of the coffers of traditional media. Uber and its competitors draw on a vast number of part-time drivers with their own cars willing to work an extra 10 or 20 hours a week for not much money after the cost of operating a vehicle factors in. These software innovations are clever, but they don’t move the needle for labor productivity. America’s one big success story was the shale oil boom, now a fading memory in a world of $30/barrel oil.

Whatever the cause of the decline in entrepreneurship, this is America’s biggest problem. Why don’t any of the presidential candidates talk about it? I think the answer is simple: Americans under the age of 40 haven’t seen much benefit from entrepreneurs. The last three waves of entrepreneurs–the bubblers of the 1990s, the mortgage subprimers of the 2000s, and the shale oil drillers of the past five years–all were carried out in body bags. The one innovation that affected daily life in the past ten years was the smartphone, and that came from an established monopoly, namely Apple.

Mitt Romney tried to: he dragged former Staples CEO Tom Stemberg in front of the 2012 Republican convention as the poster-boy for entrepreneurial job creation. That was a bad idea, because Staples pays its Sales Associates $16,000 to $19,000 a year, roughly minimum wage.

Americans don’t believe in entrepreneurship any more. It’s easier to get children to clap their hands to revive Tinkerbell than it is to get voters to believe in entrepreneurship. Illegal aliens are a minor economic problem, and a shrinking one (according to the Pew Institute, a shrinking one), but the problem is visible and seemingly subject to a simple solution. It’s easier to rouse emotions about illegal immigrants than it is to explain the role of economic agents who have become something of an abstraction.

If America doesn’t innovate, its economy will decay, like Britain’s before it. And there’s no innovation without innovators, the disruptive, obnoxious, driven visionaries who take the risks that transform economic life. America is on the wrong track, and it’s disturbing that none of its would-be leaders will talk about getting back onto the right one.


David Paul Goldman (born September 27, 1951) is an American economist, music critic, and author, best known for his series of online essays in the Asia Times under the pseudonym Spengler. Goldman sits on the board of Asia Times Holdings.

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