A Start-Up Slump Is a Drag on the Economy. Big Business May Be to Blame.
“Obviously the recession had a lot to do with it, but then you’re left with the conundrum: Why hasn’t there been any recovery?”
Many economists say the answer could lie in the rising power of the biggest corporations, which they argue is stifling entrepreneurship
by making it easier for incumbent businesses to swat away challengers — or else to swallow them before they become a serious threat.
Economists say the answer, to some degree, can be found in a start-up slump — a decline
in the creation of new businesses — and a growing understanding of what’s behind it.
A recent working paper from economists at Princeton and University College London found
that American companies are increasingly able to demand prices well above their costs — which according to standard economic theory would lead new companies to enter the market.
That decline has coincided with a period of weak productivity growth in the United States as a whole, a trend
that has in turn been implicated in the patterns of fitful wage gains and sluggish economic growth since the recession.
“We’ve got lots of pieces now that say dynamism has gone down a lot since 2000,” said John Haltiwanger,
a University of Maryland economist who has done much of the pioneering work in the field.
Polling data from Gallup and other organizations shows a long-running decline in confidence in banks
and other big businesses — a concern not likely to abate after high-profile data breaches at Equifax and other companies.
