The latest issue of Manufacturing News has an interesting, albeit disturbing, article on how fewer startup companies are being created.
Entrepreneurial activity in the United States is in a trough. In previous economic slowdowns, a large number of laid off white-collar managers have usually started new companies. But that isn’t happening now, due to the difficulty of raising money in tight credit markets and inflation, according to Challenger, Gray & Christmas, Inc. the outplacement firm.
“The percentage of jobless managers and executives starting their own businesses fell to its lowest level since the onset of the dot.com collapse,” says the firm. The start-up rate among unemployed managers and executives fell to only 4.3 percent in the second quarter of the year, down from 7.2 percent in the first quarter and 6 percent for the same quarter in 2007. The second quarter figure was the lowest since 2000 when only 3.5 percent of job seekers started their own firms.
Still, the fact that one out of twenty jobless executives has the guts to go out on their own is pretty amazing. Tight credit is one reason for the slowdown.
“It is unlikely that we will see a resurgence in entrepreneurial activity in this period of heavy job cutting due to the fact that credit is so hard to come by and those who qualify are facing much higher interest rates. Many of those who might have funded a start-up through a home equity loan five years ago simply do not have that option today.” [said Challenger]
That’s something many people, especially the
bozos guys inside the Beltway, don’t realize: new businesses are created with personal assets and loans tied to those assets. The same personal assets whacked by the death tax or by higher income taxes, which are already skewed toward the individuals most capable of creating businesses. But the truly entrepreneurial won’t be stopped. Ideas are too powerful. Companies will be created, if not here, then somewhere. An ex- coworker of mine just started his latest company in Switzerland instead of the United States… hmmm…