Dynamism in Retreat: Consequences for Regions, Markets and Workers
eig.org
eig.org
Now, by some accounts smaller banks are more heavily impacted by DF regulations even though there are less rules for small banks. Why? Some analysts say big banks are better able to leverage "economies of scale" in DF compliance. Others say it takes time for software vendors to small banks to implement DF-related features, and that over time the burden will decrease as the software glitches are worked out so machines can do more of the grunt work. Democrat legislators agree DF should be better tuned for some issues related to small banks, but point out we don't want to throw the baby out with the bathwater: bad loans hurt everybody. Due to political gridlock, some of the suggested small-bank-related changes are stuck in political molasses. You can blame both parties and voters for that.
Quick and messy statements, sorry. But I leave it there and move to Amazon. No doubt the (supply side) business environment for traditional goods and services has been greatly disrupted by Amazon at net increase to the average happiness of the (demand side) consumer. Then focus there and I have this to say: Consumers voted for amazon against traditional methods of purchase and consumption. To break-up amazon in favor of traditional competitors is a tax on consumers and a subsidy to inefficient, less-dynamic providers of those same goods. If amazon got big by doing something illegal then prosecute. If something specific needs to be made illegal then let's do so. But blanket persecution of companies just because they are large misses the consumer side point.
Back to supplier side stuff, small businesses thrive on the internet, providing all manner of goods. Much of this is facilitated and protected by the big 3 above. Let's pop some popcorn and see how net-neutrality-esque issues play out over the long haul. I say that to the extent that big players remain free from the shackles of Washington DC, the free internet stands a fighting chance. Net neutrality wouldn't even be an issue if the backbone of the internet was made of more companies like google, and zero companies like Comcast and AT&T. Sorry to mix in more issues but competitive behemoths compete to the benefit of the consumer. Government sponsored behemoths are free to be as terrible as they want. Don't believe me? Call your local provider and have a chat about internet speeds.
Banks are machines (one big mega machine anyone?) of wealth re-distribution from the relatively poor masses to the wealthy and connected few via the combination of inflationary disposition and fractional reserve banking. I would say that small banks will never be dynamic as long as they remain of the same ilk.
Considering US corporate tax rate is among the highest in the world, Apple, GM and Coca-Cola have to pay a higher repatriation tax than Samsung, Toyota or Nestle. This seems to give foreign companies a strategic advantage as far as having larger R&D budgets, flexibility to drop prices, etc.
Not that I'm a fan of playing games with the market cap rather than rewarding owners...
Edit: apparently the IRS did not take kindly to IBM doing exactly this: https://seekingalpha.com/article/893331-how-microsoft-can-fr...
Snapchat is my go to for my friends or just plain group text. Snapchat is nice because I can post freely in my groups and not be worried about random people seeing the posts like FB. I doubted Snapchat for years. Trying to do more Instagram next...
Though the article doesn't propose specific causes, since 2008 I suspect the causal changes in small US business to be:
1) domination of product sales and distribution by a handful of on-line mega-retailers (Amazon, Alibaba, Walmart) due to their high efficiency and ever broader and deeper market penetration and hyper-efficient distribution networks, and
2) increased mobility and adaptability to quickly fill newly created market niches from low labor cost foreign firms (still 2X-5X cheaper), and
3) the rising cost of US employees (esp. healthcare).
As such, the ability of the traditional ma and pa startup company to eke out a positive cash flow has become more difficult than than it was in 2008.
Quit your job to start a business and not only do you have to figure out your own insurance (at a vastly inflated rate), but you have to figure out how to play medical provider for anyone you hire. It's crazy that in the US, healthcare is so closely tied to employment. Single payer healthcare detached from the employer would vastly increase the opportunity for people to become entrepreneurs.
I think one problem is perception - when you don't see the health insurance premiums on your pay stub, you tend to think of them as $0, so going from $0 a month to $800 a month does seem outrageously expensive.
The other problem is the tax treatment of health insurance premiums - they're deductible for the employer, but not deductible for an individual. One of those inconsistencies needs to change, most likely deductibility on the corporate front, as that somewhat contributes to the rise of total costs ("who cares if it's 5% more expensive this year, it's a write-off") and is a corporate subsidy - the money that could've gone to the benefit of all citizens is funneled to large corporations to help those nice fellows cover their costs of doing business.
I also wonder if actual premiums paid by end users in the individual marketplaces (that is, prices after subsidies) are really vastly inflated compared to group plans (it's just the group plans hide a lot of the cost from the insured).
Small businesses make up:
99.7 percent of U.S. employer firms,
64 percent of net new private-sector jobs,
49.2 percent of private-sector employment,
42.9 percent of private-sector payroll,
46 percent of private-sector output,
43 percent of high-tech employment,
98 percent of firms exporting goods,
33 percent of exporting value.
Source: U.S. Census Bureau, SUSB, CPS; International Trade Administration; Bureau of Labor Statistics, BED; Advocacy-funded research, Small Business GDP: Update 2002- 2010, www.sba.gov/advocacy/7540/42371.
> 98 percent of firms exporting goods,
> 33 percent of exporting value.
In other words, 2 percent of firms exporting goods (the part that is not "small businesses") make the remaining 67 percent of exporting value.
It seems to me that we've been constantly performing short-term hacks on the economy, and the bill is coming due.
A few months back, Matt Bruenig nailed it: "The unwritten story of the Juicero debacle is that high income inequality causes capital to be misallocated towards luxury production."
In my experience, losing employer provided healthcare has been the number one thing preventing people from starting a small business.
In any case, the article shows that dynamism was higher in the 70s when there was more regulation.
I don't know what you mean by "this" in "something about this" because I don't understand what sort of regulations the OP is talking about, and I don't know what you mean by "the people got conned."
Just as Walmart put small retailers in a bind, Amazon is going to put Walmart in a difficult spot. IMHO.
http://www.cnbc.com/2017/05/18/walmart-reports-first-quarter...
What does Amazon have that Walmart can't buy?
http://sbecouncil.org/about-us/facts-and-data/
"In 2012, according to U.S. Census Bureau data, there were 5.73 million employer firms in the U.S. Firms with fewer than 500 workers accounted for 99.7 percent of those businesses, and businesses with less than 20 workers made up 89.6 percent. Add in the number of nonemployer businesses – there were 23.0 million in 2013 – then the share of U.S. businesses with less than 20 workers increases to 97.9 percent."
The majority was 23 Million sole proprietorships, or people working for themselves, in 2013.
What if the answer is the obvious one? What if the incumbents in the big cities are full of more efficient, better educated, richer, and smarter people?
A lot of big companies suck. But the ones that have concentrated wealth in the past decade or two -- Google, Facebook, Apple, Amazon -- are remarkably good at what they do. And the people I know who work at those places are, on balance, remarkably smart/educated/efficient. There are equally good or even better people at smaller shops in smaller cities, to be sure, but the sheer number of great engineers at Microsoft and Google alone is mind-boggling. And even among small shops there's an enormous geographical concentration of talent.
I don't know a lot about other industries, but maybe this is true elsewhere in the economy as well.
If that's true -- that incumbents aren't just big but also better -- then I fear our only hope for increased dynamism is access to new markets or new technologies. Both of which are identified in the report as contributors to decreasing dynamism. Hm.
(In fact, I imagine they tend to counter the specific trend, attracting people to high paying jobs)
I know this, but I wonder if the same thing is happening in other industries. E.g. is Monsanto doing something similar to small seed distributors/providers? Are large banks doing something similar to small credit unions? Are large construction firms doing something similar to smaller ones?
> In fact, I imagine they tend to counter the specific trend, attracting people to high paying jobs
Maybe. But what if these firms are really so efficient that they're replacing 100 migrants to regional hubs with 10 or even 1 migrant to a national/global hub?
Again, I'm just asking questions :)
You are probably looking at minimum 5k in legal fees to do it "right". You have incorporation paperwork, post-incorporation, trademarks, copyrights, patents, foreign qualifications, a lawyer to draft out founders agreement and employee agreements etc.
That's not chump change. Maybe to some HN developers, but to the average joe starting a company is very expensive. Especially if you go by the new age motto of trying a bunch of shit and failing and trying again.
After those legal costs you have to consider the costs of the average business, and the fact the financing is not avail. for the average joe. VC capital is not based off of merit, or much aside from connections and friendships. It's basically "bros funding bros".
There are opps. to get govt. funding, but not enough to support almost any business today. A 20k grant means nothing when you can't even afford a 280sqft studio on that
Online and "big-box" stores have almost certainly reduced mom-and-pop retail, at least physical stores. Does this account for the entire drop, or just a part of it?
As far as blaming "regulations", I'd like to see some specific examples. Many times they are state or local regulations. Don't focus only on Federal regs.
But as I understand the theory, job growth mainly comes from smaller companies. Of those, startups are the fast-growth ones. (Mom-and-pop businesses aren't where the growth is.) The number of people employed by startups can therefore be regarded as an approximation of the first derivative of the economy (or, perhaps, of employment).
IMHO, this is a reflection of the stagnant of fundamental new technology breakthrough since the internet era started. Internet itself hardly brings anything new, it merely make things marginally more efficient.
Maybe AI is the true innovation we have been waiting for. But I doubt it plays nice with startups either.
More money goes to a handful few = less money for everyone else to buy stuff = weaker economy = fewer companies that can be successful.
http://www.oecd.org/newsroom/inequality-hurts-economic-growt...
Such hoards of corporate cash are easy to find, there's trillions of it collectively across American corporate accounts [1]. There just aren't many start-ups for them to invest in. From an access-to-capital point of view, there's never been a better time to start a company.
[1] https://www.nytimes.com/2016/01/24/magazine/why-are-corporat...
Also, the vast majority of startups aren't funded by VCs or angel investors, but through personal economies and loans - again, an issue that depends on the strength of the middle class.
I mean, really, having a certain word in your name precludes you from having an unbiased position on it?
> having a certain word in your name precludes you from having an unbiased position on it?
Of course not. But I'll bet EIG doesn't have an unbiased opinion on innovation :-) In the same sense that NRA can publish a study about crime in states with open carry.
Otherwise you might as well say the CDC saying something about Disease is invalid.
"Innovation" is a bit more nebulous, and the EIG appears to be quasi-non-profit, but is a private company.
Also, parent comment said "skeptical", not "invalid".