Tags: Samuelson | entrepreneurship | economy | business

WaPo's Samuelson: Entrepreneurship Sags, and That's a Problem

By    |   Tuesday, 14 April 2015 07:40 AM EDT

The media is awash with stories about new technology companies hitting it big — think Facebook, Twitter and Uber.

But the overall picture for startups really isn't so hot, says Washington Post columnist Robert Samuelson.

"In our mind's eye, the economy is swarming with entrepreneurs. Competition is intense. Old-line firms adapt, or die," he writes. But, "evidence suggests that entrepreneurship is in decline and that U.S. firms are becoming older, more entrenched and less dynamic."

Studies show that companies less than a year old plummeted to 8 percent of all businesses in 2011 from 15 percent in 1978. At the same time, companies 16 years or older soared to 34 percent in 2011from 23 percent in 1992.

"What emerges is a portrait of business that, though strikingly at odds with conventional wisdom, is consistent with poor productivity growth," Samuelson explains.

Small businesses, after all, account for the bulk of our job growth and innovation. "The vigor of these new firms is essential for the economy to revitalize itself," he says.

"We don't know what explains their slide, though the sheer mass of government regulations is one candidate. Older firms have the lawyers and administrators to cope with the red-tape deluge; many small new firms drown."

Elsewhere on the economic front, if you thought the 2.2 percent GDP growth in the fourth quarter indicated a sluggish economy, wait until you see the first quarter number, which will be released April 29.

A survey of 62 economists by The Wall Street Journal produced a growth forecast of only 1.4 percent for the first quarter.

Much of the damage came from a strong dollar, the economists said. The Dollar Index, which measures the greenback against six major currencies, hit a 12-year high last month amid the global currency war.

A rising dollar hurts the economy by widening our trade gap, as it makes our exports more expensive in foreign currency terms and our imports cheaper in dollar terms.

The ascendant greenback also has taken a bite out of many U.S. companies' earnings by lowering the value of their foreign revenue when it's converted into dollars.

Many experts expect the dollar to continue rising. "I can't give a time, but I think the dollar will reach parity with the euro at some point," Kevin Swift, economist at the American Chemistry Council, told The Wall Street Journal.

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The media is awash with stories about new technology companies hitting it big — think Facebook, Twitter and Uber.
Samuelson, entrepreneurship, economy, business
Tuesday, 14 April 2015 07:40 AM
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