Is America Losing Its Startup Edge?

from the not-good dept

We've talked, in the past, about the paradox of job creation by the government. Too often the government acts as if "job creation" is about propping up or subsidizing big companies, hoping that they'll hire lots of people. And, intuitively, you can see the appeal there for two reasons. First, it's much easier to think that Giant Telco A will likely hire another 5,000 workers to dig ditches if the government gives them a bunch of money, than it is to think that random startup A will hire 5,000 people. Second, often the disruptive innovations that actually do create economic growth and jobs comes at the expense of legacy companies in older industries. And the fear there is always job losses. So, some new startup comes along with a technology that makes life more efficient and makes stodgy old legacy company obsolete... and upfront you're going to see job cuts at the legacy company, even if the end result is many more jobs (and greater economic efficiency).

But the truth is that if the government wants to really create new jobs, it needs to support the startup ecosystem. Research from the National Bureau of Economic Research (NBER) and the US Census Bureau last year found that startups really are the key to both gross and net job growth. So if the government really wants to encourage economic growth and new jobs it should be focused on making sure the startup ecosystem is strong and vibrant. Unfortunately, that doesn't appear to be the case. When we see proposals like SOPA, which will hinder startups by placing tremendous liability on them and scaring off investors, we get worried.

Already, the situation isn't great. While the US certainly has the reputation for being friendly to startups, Aaron DeOliveira, points us to a report that shows that the US is actually 23rd on a list of startups per working-age population within countries that are members of the OECD. Even France is ahead of us.

This does not bode well for the US economy or for job growth. For innovation to thrive, we need the creative destruction and economic and job growth brought about by startups and entrepreneurs. We don't get that when the government is "captured" by the large legacy players who are only focused on "protecting" and defending their turf, rather than fostering innovation, growing the economy and creating jobs.

Filed Under: america, innovation, jobs, startups


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  1. identicon
    AJBarnes, 11 Jan 2012 @ 7:55am

    No longer have a chance

    Back in the day, you could set up your business quickly, easily and go about trying to compete. Entrenched companies didn't like the competition, so they paid off politicians to create all sorts of licensing bureaus to impede new startups. It's a HUGE deal today to start a small business... license fees, inspections, tax fees, health inspections, etc etc etc.

    Look at kids trying to learn free enterprise with lemonade stands... how many of these over zealous idiots shut them down because they don't have health permits? TOO MANY.

    I seem to remember that 80% of employees are employed by small businesses. If you want to increase employment, they need to make it much easier to start a business, reduce this stupid competition-killing paperwork and let the market do its job.

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