The fact of startup primacy in job creation is as profound as it is new to the political consciousness. For example, it undermines the traditional mission of local economic development offices to lure existing companies to relocate, a zero-sum game. And it raises questions about “saving” jobs when the natural process of productivity is for companies to constantly trim their workforces.
Economists have long suspected that the industrial planning mentality is a dead end. That hasn’t stopped Vice President Joe Biden from campaigning about keeping General Motors alive. In fact, the GM bailout was a triumph of special-interest economics that did nothing to help Michigan’s entrepreneurs. Did the White House’s focus on saving old companies come at the expense of startups?
Just last month, the Commerce Department released new data that allowed me to update my research on startup jobs through 2011. What I found is a U.S. startup scene even more troubled in 2011 than it was when the great recession ended in 2009. There were 170,000 fewer startup firms in 2010 than in 2009. As for the steady 3 million annual startup jobs created in previous years, that number fell to 2.5 million in 2009, then 2.3 million in 2010, and even lower in 2011 based on quarterly data.Continue reading →