Fewer Americans Self-Employed Today Than In 1990: The Death Of Entrepreneurship

local businesses are being destroyed by international trade agreements, high taxes, and excessive regulations

Fewer Americans Are Self-Employed Today Than In 1990

In 1990 8.7 million Americans were self-employed.

Today, only 8.4 million Americans are self-employed.

This happened despite the fact that the US population has grown from 249 million to 321 million.

When you look at the drop relative to population, it’s much larger than it seems at first.

Of course, this drop is part of a larger systemic issue that dates back to the 1970s (when America began to embrace the scourge that is economic globalism).

One study found that the percentage of “new entrepreneurs and business owners” declined by some 53% between 1977 and 2010 alone.

These findings are likewise reflected in the falling number of new businesses created in America.  They have been dropping for decades, and reached their smallest levels in history during President Obama’s tenure.

The facts show that the situation’s bad.  But whats causing it?

Why aren’t Americans starting businesses like they used to?

Why Aren’t Americans Starting New Businesses?

Ask ten different people and you’ll get ten different answers.

Nevertheless, here are the top 3 common sense reasons that Americans aren’t creating businesses like they used to.

1. Free Trade Agreements Favor Multinationals

Big companies are able to take advantage of international suppliers.  Small companies generally cannot.  This ensures the playing field is permanently tilted against local startups.

This one’s counter-intuitive for many people who’ve been force-fed classical economic theories that argue something along the lines of “free trade is always good”.

That’s not really true.  Free trade is a domain-specific theory—sometimes it applies, sometimes it doesn’t.  It all depends on the conditions precedent.

Either way, modern economists who are familiar with the Lindy Effect and behavioral psychology, realize that global free trade has winners and losers.

In America’s case, the losers tend to be workers and local businesses.

Why?

Think about it for a moment.  The loosening of market protections allows American companies to offshore their production to foreign countries—particularly China.

This offshoring gives them a massive cost advantage over their domestic rivals.  Soon anyone who’s not offshoring is eradicated—firms operating exclusively out of America cannot compete because labor is too expensive.

This applies not only to factories, but customer service centers, technology design etc.  Offshoring affects both goods and service industries.

Sounds good right?

Sure, it’s great if your company is large enough to do business in China—has enough money to bribe the right local officials, has the language skills to negotiate with foreign suppliers, has the managerial staff to oversee operations in foreign countries etc.

In other words, it’s great if your a Fortune 500 company.

But if you’re a local company, you’re screwed.

Everyone knows this, and it’s why fewer people than ever before are creating businesses—how can you compete with a rival who gets (almost) free foreign labor?

You can’t.

Economic globalization protects massive established interests, and locks out local entrepreneurs.  It concentrates power and wealth with people who already have power and wealth.

2.  Taxes Are Too High & Complex

First, taxes are too high.  In fact, the basic corporate tax rate is the highest in the Western world.

Not only do high taxes hurt businesses (a dollar paid in tax means a dollar less to invest or spend), but they implicitly favor multinationals—surprise, surprise.

Why?

Because they’re too complex.

Large companies are able to leverage offshore banking to shelter earnings from Uncle Sam.  In fact, over $2 trillion in corporate earnings are currently held abroad.

Guess who doesn’t have an offshore account?  Your local barber (unless he’s also a mob boss).

The complex tax system favors big companies who can afford armies of accountants and tax lawyers to “restructure” their finances.  Small businesses don’t have this option, and are therefore further disadvantaged.

3.  Regulatory Complexity Stifles New Businesses

obamacare regulations were over 10,000 pages, and are just a small portion of the regulations stifling America's economy
Obamacare regulations printed in full.

Most people aren’t lawyers (thank God).

And yet, the legal system is written exclusively for people who’ve been practicing law for decades.

For example, the Obamacare regulations are over 10,000 pages long, and hopelessly complex.

How are small business owners supposed to know what the law is?  And of course, if they break it, there are penalties imposed.

And remember, Obamacare is only the tip of the iceberg: America has so many laws that it would be impossible for any individual to read them all in a lifetime—multiple lifetimes—much less understand how they work.

Lots of people would like to start up a business, but just don’t have the legal expertise to do it in a way that mitigates their liability.

America’s Economy Is Failing Ordinary People

America used to be the land of opportunity.

It used to be a place where all sorts of people could set up a business and make it rich.

This is no longer the case.

America’s legal framework is geared towards protecting established interests and big players—it’s increasingly difficult for entrepreneurs to get a fair kick at the can.

As a result, many just give up and get a job.

Thankfully, the economy can be fixed—and it’s not as hard to do as you might think.

Let’s get cracking.

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About Spencer P Morrison 82 Articles
JD candidate, writer, and independent intellectual with a focus on applied philosophy, empirical history, and practical economics.Author of "America Betrayed" and Editor-In-Chief of the National Economics Editorial.

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