RealClearPolicy Newsletters: Original Articles
Entrepreneurship From the Bottom Up
Dear Reader —
Two apparently unrelated trends that have perplexed pundits and experts over the past decade are the decline of entrepreneurship and the coming apart of the social fabric that once held together the American middle class. While both were doubtless made worse by the Great Recession, they seem also to have predated it and continue to persist, despite an ongoing recovery.
The disaffection of working Americans is often taken to be the driving force behind 2016 and the rise of populism. This continues to color our politics, especially in the form of a clash between coastal “elites” and Middle America. Meanwhile, business formation is still on the decline, leading some pundits to proclaim that American entrepreneurship is “vanishing.” Indeed, “entrepreneurship rates are half of what they were a generation ago,” said Wendy Guillies, president and CEO of the Kauffman Foundation, at the 9th Annual State of Entrepreneurship Address that took place on Wednesday here in Washington, D.C. This long-term trend may help explain the low productivity, slow wage growth, and weak labor market characteristic of our otherwise healthy economy.
The question for policymakers is therefore twofold: how to repair our frayed social fabric; and how to recapture the entrepreneurial dynamism that has long been the hallmark of the American economy. One might think that by spurring the latter we will achieve the former. But what if healthy and flourishing communities are prerequisites for entrepreneurship?
This is a key insight of the Kauffman Foundation’s survey, “Breaking Barriers: The Voice of Entrepreneurs,” highlighted at Wednesday’s event. The survey found that while American entrepreneurs express characteristic optimism about the future, structural problems remain. In particular, evidence suggests that most successful entrepreneurs start out with robust “networks” of families and friends they can depend on. For instance, 90 percent of business owners say they got their first 10 customers through their network, according to Janice Omadeke, an entrepreneur who spoke at the event. The problem is that this “social capital” is not evenly distributed, socioeconomically, racially, demographically, or geographically.
Hence Kauffman proposes a new model for spurring entrepreneurship. Rather than using economic incentives to attract successful companies to particular cities or states, lawmakers should strive to cultivate, from the bottom up, communities in which individuals can take risks, innovate, and start new companies. The goal is to create or strengthen such “ecosystems” across the country — not just in Silicon Valley and its satellites — in the hopes of expanding opportunities to a more diverse array of Americans. That means “removing barriers” (e.g., by “repairing infrastructure and streamlining taxes and regulations on business”) that prevent particular places from becoming crucibles of entrepreneurship.
It’s a refreshing proposal, especially in our age of insecurity when the tired tropes of “disruption” and “creative destruction” may be more apt to spook than inspire. It may also make more economic sense, when you consider that many entrepreneurs are not “wearing a hoody” and “working in a dark room coding all day,” as Omadeke put it — nor denizens of the gilded coasts.
These are some of the many issues lately taken up at RealClearPolicy. Below you will find just a few highlights.
— M. Anthony Mills, editor | RealClearPolicy
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Five Facts About Buying Guns in the United States. The bipartisan group No Labels offers an overview.
Housing Regulations Put Walkability Out of Reach. Emily Hamilton spotlights research suggesting that the high cost of urban living is driven by regulations, not the market.
Electric Vehicle Subsidies Hurt the Poor and Help the Rich. In RealClearEnergy, Silvestre Reyes urges lawmakers to focus on improving public transportation instead.
The DeVos Doctrine. Andy Smarick considers whether the education secretary’s emerging platform squares with traditional American conservatism.
Trump’s Infrastructure Plan Is Robin Hood in Reverse. Rebecca Vallas interviews Kevin DeGood about the potential effects of the administration’s plan for cities, states, and low-income residents.
Time to Modernize How We Pay for Infrastructure. Robert D. Atkinson outlines a plan for financing the administration's new proposal.
Who Should Decide the Fate of Net Neutrality? Johnny Kampis calls on Congress to adopt a legislative fix.
Don’t Weep for the Appropriators. James C. Capretta contends that government reform is the most effective way to bring more cost discipline to domestic appropriations.
Foreign Subsidies Hurt American Farmers. Michael W. Thompson urges Congress not to pass the Sugar Policy Modernization Act without taking steps to counter foreign subsidies for sugar.
“Adultism” Fad Prevents Kids From Growing Up. In RealClearEducation, Robert Holland takes issue with a new trend in teaching.
