Startups are good for all of us

By Tom Purcell

Cagle Cartoons

Here’s some great news: The American entrepreneur is flourishing again.

From 1980 until 2017, “the number of new startups formed each year ... plummeted by half – from almost 15 percent of all business 35 years ago to barely 8 percent,” according to Forbes contributor David Pridham.

In 2015, regrettably, America experienced more business deaths than new business startups – the first time that had happened since the sluggish economy of 1980.

Just a few years ago, U.S. Census Bureau data showed the U.S. ranked “12th among developed nations in terms of business startup activity,” according to Jim Clifton, chairman and CEO of Gallup.

When you consider that small business is the engine of economic vitality, these stats were extremely sobering.

“In his seminal 1958 work ‘The Sources of Invention,’ the late British economist Jonathan Jewkes reviewed the histories of all the major job-creating inventions of the twentieth century,” Pridham writes. “He found, to the surprise of many, that they all were the work of entrepreneurs and startups.”

Pridham lists just some of the ingenious ideas, created by entrepreneurs and startups, that have powered American prosperity: “The sewing machine, electric power, automobiles, acrylics, the zipper, the aircraft industry, the jet engine, the radio industry, the television industry, power steering, the helicopter, rocketry, cellophane, neoprene, air conditioning, the electron microscope, instant cameras, magnetic recording, fluorescent lighting, radar, the safety razor, stainless steel” and so on.

Good-paying jobs

Not only have such small-business inventions improved our lives, they’ve produced millions of good-paying jobs.

“In fact,” writes Pridham, “startups have been responsible for literally 100 percent of all net job growth in the United States over the last 40 years. If you took startups out of the picture and looked only at big businesses, job growth in the U.S. since 1977 would actually be negative.”

The importance of entrepreneurs and small-business startups is illustrated by another powerful statistic. Entrepreneur magazine reports that “80 to 90 percent of U.S. businesses are family-owned and that such companies contribute 64 percent of the GDP, according to Kennesaw State University research.”

So why were our small businesses languishing?

A broken patent system was a key factor – and efforts to make it easier and faster for inventors to patent their ideas are still not where they need to be.

Declining American freedom was another. Local, state and federal rules and regulations make it harder and costlier to start a new company. A few years ago, small businesses were drowning in government’s red tape.

The sixth edition of the Legatum Institute’s Prosperity Index, released in 2014, ranked America 21st among the top 25 countries for personal freedom.

But times are looking much better for the American entrepreneur – in particular, for minority-owned small businesses, which in 2017 accounted for 40 percent of new businesses formed, according to the Kauffman Foundation.

Whatever you think of President Donald Trump, small-business owners have welcomed his administration’s tax-reduction and regulatory-simplification policies.

Tom Purcell is a Pittsburgh Tribune-Review humor columnist.