One of the more positive trends of the past few years has been the acknowledgement by at least some New York politicians, staring with Mayor Bloomberg and including Governor Cuomo and those in some cities upstate, that new businesses and new types of businesses are important. And that economic development involves acts of creation, rather than just being an excuse for the government to redistribute wealth to powerful existing interests through tax breaks and subsidies. A lesson not yet learned in New Jersey and Connecticut. At the same time, there has been a surge of new businesses in the Bay Area of California, and a cultural interest in early stage companies as a result of TV shows such as Shark Tank.
While there has been increasing interest in entrepreneurship, however, there is some evidence that there has been decreasing entrepreneurship. According to an article in the Wall Street Journal
Across the country, the rate of new-business formations has been trending down for decades. According to Census data, the number of new firms in 2012 was equal to just 8% of the total, slightly below the number that closed. While that “entry rate” was up from the 2010 trough, it remains well below the levels that prevailed until the recession hit in 2007.
We are heading, the article’s author fears, toward an oligopolistic economy with less creativity, less investment, a less good deal for consumers and lower returns for investors, as a business/political elite seeks wealth not by starting small businesses and growing them into large ones, but seizing control of large existing organizations and pillaging them. Is this true, and how do New York and New Jersey compare? Let’s look at some data.