You all know the nursery story about the Golden Goose. Well, as we head into “Recovery Summer V” with no real recovery in sight, subject to false unemployment numbers and pitiful quarterly GDP earnings, it might be useful to look at something else that is likely a factor in all of this:
Business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.
And all of that is a function of what?
That evil thing called “capitalism”. Yup, evil capitalism encourages entrepreneurship and through that cycle, we see the market at work – creating profit, which creates jobs, which expands businesses and creates more of them and more jobs and more wealth and … etc., etc., etc. It is that repeating cycle that has, at least till recently, gotten us where we are in terms of wealth and power as a nation.
Not government. Government is a net leech. It sucks the blood out of productivity in the form of taxes. But government also plays another role – as a regulator. Most look at that as a necessary evil. But most governments always go overboard with their regulatory regimes and end up making it harder and harder for entrepreneurs to do what they do best. The Brookings institute has taken a look at this and found that over the past few decades, the entreprenurerial role has declined and, as a result, we have, for the first time, seen more businesses exiting the economy than entering it:
Now Brookings tries to stay claim this can be reversed, even though it is such a widespread trend it should alarm us all.
In fact, we show that dynamism has declined in all fifty states and in all but a handful of the more than three hundred and sixty U.S. metropolitan areas during the last three decades. Moreover, the performance of business dynamism across the states and metros has become increasingly similar over time. In other words, the national decline in business dynamism has been a widely shared experience.
While the reasons explaining this decline are still unknown, if it persists, it implies a continuation of slow growth for the indefinite future, unless for equally unknown reasons or by virtue of entrepreneurship enhancing policies (such as liberalized entry of high-skilled immigrants), these trends are reversed.
Note the oblique way Brookings points to government, but nevertheless identifies the problem. The phrase is “entrepreneurship enhancing policies”. And what would that look like? Well Brookings thinks liberalizing entry of high-skilled immigrants might to the trick. I, on the other hand, think a thorough review of the regulatory regime and revocation of all unnecessary regulations along with those found to punish or hinder entrepreneurship would have a much speedier and positive effect than the Brookings suggestion.
Certainly, we know why there was a precipitous drop in 2008, but again, what has the government, in terms of policy, done to ease the situation? Nada. Nothing. Except play a little crony capitalism (i.e. pick winners and losers) in the green energy game. And, of course, most of their “winners” have gone belly up.
As a consequence of this refusal to consider steps concerning rolling back regulations (and, instead heaping even more on the books), we see the trend get worse on both the entry and exit levels.
Entrepreneurship IS the “Golden Goose” of capitalism. One of the big reasons our economy continues to lag badly can be found in the chart above. And what has this administration done in 5 plus years to address this problem? Well, to be honest, it’s done more to exacerbate it that help it. Thus the Golden Goose on life support.
All hands prepare for “Recovery Summer VI”. And VII. And VIII …
A very interesting poll is out which measures Arab public opinion on a number of questions. Two of them give a damning review of the results of the Obama initiatives in the area.
One question asks: “How would you describe your views of President Barack Obama and the United States”. In 2009, soon after Obama took office among all his promises and in the wake of the Cairo speech, Arab public opinion, as measured by this poll, found 45% to be positive about him and the US, 28% neutral and only 23% negative.
Oh what a difference a year and actually having to do something makes. Now 62% have a negative view, 16% are neutral and only 20% are positive.
On the question of, “How would you describe your attitudes toward the Obama Administration policy in the Middle East?”, a majority of 51% said they were “hopeful” in 2009, while 28% were neither encouraged or discouraged and only 15% were discouraged. Now? 63% say they’re discouraged while only 16% say they’re hopeful.
In 2008, when the evil Bush regime was still in power, 83% of those polled said their general attitude toward the US was somewhat unfavorable or very unfavorable. That number is now 85%.
Probably the most telling of all as to the effectiveness of the administration’s foreign policy in the area is the change in attitude about a nuclear armed Iran.
In 2008, most Arabs believed that Iran was pursuing nuclear power for peaceful purposes. Now most believe it is pursuing it for nuclear weapons. When asked in 2008, “If Iran acquires nuclear weapons, which of the following is the likely outcome for the Middle East region?”, those polled replied 44% “more positive”, 12% “wouldn’t matter” and 29% “more negative”. After a year of Obama’s policies toward Iran, Arab public opinion has shifted. Now 57% say it would be “more positive”, 20% “wouldn’t matter” and a mere 21% say “more negative”.
Viewing the results, given the trumpeting by the incoming administration as to how their new approach would improve our image in the area and yield results with Iran, one would have to objectively say it’s been an utter failure.