What happened to all the start-ups?

FiveThirtyEight had an interesting article this morning on “The Slow Death of American Entrepreneurship.”  Among other things, they cite a statistic from the US Census Bureau that Americans started 27% fewer businesses in 2011 than five years earlier.  I dug into those stats some more and found that the decline in North Carolina over that same period has been even worse, about 31%.  That’s corresponded to a drop in new jobs created by those start-ups – 32% fewer new jobs created by new businesses in 2011 than five years before.

It seems fairly certain fewer businesses are being started.  What’s less clear is why.  There’s plenty of speculation, and no one knows for sure, but some think it could be related to increases in occupational licensing requirements or corporate income taxes, two issues about which the John Locke Foundation has long been concerned.  They’re also both issues that can be addressed by state government.  The government can’t guarantee the success of new businesses, and they shouldn’t try to do so.  Such “economic development policy” tends to turn quickly into crony capitalism, with targeted incentives that attempt to protect particular politically favored business at the expense of all others.  But reducing barriers to entry, fees, and taxes for all businesses, so that North Carolina becomes a friendlier environment in which to be an entrepreneur, would be a good first step to addressing this “slow death.”

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