America's businesses are getting older and fatter, while many new businesses are dying in infancy. Regulations, bailouts and crony capitalism are choking off our economic promise.
A study last month by the Brookings Institution found that the proportion of older firms has grown steadily over several decades, just as the survival rate of new companies has fallen. In addition, and in spite of popular perception, young people are starting companies at a sharply lower rate than in the past. American businesses, in the words of the study authors, are "old and fat."
A new report from the National Association of Manufacturers shows a major cause: The cost of complying with government regulations has risen to more than $2 trillion annually, or 12 percent of the GDP, and this cost falls disproportionately on smaller, newer businesses.
It's risky, difficult and expensive to start a business, and getting more so. Governments are imposing onerous new rules on a seemingly daily basis: health insurance, minimum wage hikes and, most recently in California, mandatory paid sick days for even hourly employees. These mandates shift substantial social welfare costs directly onto often-struggling small businesses, while being proportionally much less costly for larger companies.
This is partly an unintended issue of resources ― established companies can cope with new compliance costs more easily ― but it's also deliberate. For instance, big insurance companies got a seat at the table to help write Obamacare, but less politically powerful firms ― like medical device manufacturers ― got crushed.
Mature, successful corporations can hire lobbyists, employ ex-lawmakers with connections, dispense campaign contributions and even write regulations for themselves. They are also more likely to want to protect steady revenue streams than revolutionize their industry.
We also live in the age of the bailout. Major companies that have been so ill-managed they would otherwise collapse ― airlines, car companies and banks ― stagger on because politicians ride to the rescue with bags of taxpayer money.
The genius of our unique system of government is the determination to protect and defend the rights of the individual over the rights of the nation. As such, the rise of a well-connected oligarchy that protects big business at the expense of small business, and the established over the new, is antithetical to American ideals.
It also makes the arguments of socialism distressingly more attractive to those who don't understand that free markets are our best chance for prosperity for all. Income inequality ― which is directly caused by flawed government policy ― is being touted as the reason to impose more of that bad policy. But let's be perfectly clear, we do not have a free market. We have a market where government picks winners and losers through regulations and handouts.
Politics is, and always has been, about balancing competing interests seeking to benefit themselves, and that's as it should be, but the force of government should never be used to crush competition, kill innovation or support and extend artificial monopolies to the detriment of the consumer, the taxpayer and the economy. Policy must incubate our new and small businesses or see the as-yet undreamed of innovations that could be our bright future die in infancy.
This article was published and distributed by MCT Information Services.