Riddle me this. A Google News search for this week’s alarming study from the Brookings Institution on the decline of business dynamism in the U.S. yields a mere half-dozen results, making it like the proverbial tree falling in the forest. The study is a big deal. It should make a huge amount of noise. Its economic implications are staggering. But no one appears to be listening.
Just for comparison and a bit of cynicism, I will note that a Google News search for Monica Lewinsky’s name within the past week brings up results in the hundreds. I’m just saying.
I can appreciate that the topic of “dynamism” might appear to be less than scintillating, but once you get past the economist-lingo of the Brookings study, you really can’t miss the fact that its conclusion is shockingly bad: American entrepreneurship is at its lowest point in 30 years, and the decline since 2009 has been precipitous.
I don’t think you need to be an economist to find the study’s chart overlaying the trend lines of business start-ups and business closures (with the "good" news going down and the "bad" news going up, to the point where they actually, gasp, pass each other in opposite directions) to be grab-your-chest scary. I think you only need to be an American who appreciates the fact that this nation has been, historically, economically strong because of vibrant entrepreneurship.
Brookings explains in its executive summary that “business dynamism is the process by which firms continually are born, fail, expand, and contract, as some jobs are created, others are destroyed, and others still are turned over. Research has firmly established that this dynamic process is vital to productivity and sustained economic growth. Entrepreneurs play a critical role in this process, and in net job creation.” This factual, dispassionate language is a good definition. It also happens to mean that a decline in business dynamism – or, in this case, something that is starting to look like a death spiral – is very, very bad news for the U.S. economy.
I am fearful that this critically important study is not being noticed because it’s not about Wall Street. The political class only really cares that the Dow hit a record high last week. But, wait, the same day the Dow hit that high, GDP was reported to have decelerated dramatically in the first quarter. The headlines, which appeared in the same day, just last week, roughly translated to: Dow Rocks! GDP Stinks! These headlines were, literally, hours apart.
The headlines, even without my irreverent interpretation, were pretty stunning next to each other. But comment on that fact was, like the Brookings study’s coverage, barely a whisper.
Each should, instead, be a roar. Policymakers must bring their heads out of the sand. The GDP report was not an anomaly. Our sluggish recovery is not a mystery. When business dynamism is spiraling, when small firms are not creating jobs, economic recovery cannot be complete.
The Brookings study is shedding pure light on the other half of the economy – its entrepreneurs. I respect what Brookings has done, not just in conducting this research, but in presenting it in a calm, academically sound manner.
But that doesn’t mean someone shouldn’t be yelling and waving their arms about it. It’s time for the economic equivalent of yelling “FIRE!”