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Policy Matters: Pull the Plug
a weekly column
What do you think the SBA could do for small businesses if it had $25 billion to work with?
That's how much the government loaned to the Big Three automakers — General Motors, Chrysler and Ford.
Presumably, it didn't work. They are back at the trough, looking for another $50 billion bailout and rumor has it that the incoming Obama Administration is inclined to give it to them.
The U.S. economy used to be famous for something called creative destruction. That's the process by which large marketplace incumbents that failed to adjust to changes in said marketplace eventually disappeared, to be replaced by a new set of businesses that eventually grew to become our current large marketplace incumbents.
But it's pretty hard for those feisty little upstarts to start up and get anywhere if the government steps in and refuses to let creative destruction clear the underbrush.
Read article
This week's news briefs
Baucus Health Care Plan Still A Loser
Among the many crises awaiting Barack Obama after January 20, 2009 is the issue of health care. In an effort to be helpful (or pushy, depending on your perspective), Senator Max Baucus has released a 98-page white paper outlining a comprehensive and ambitious plan to cover everybody, reduce costs, increase efficiency, reward good health care outcomes and improve the competitive position of U.S. firms in the global economy.
There's a lot here that is worth preserving, things like focusing on preventive care and expunging the waste, fraud and abuse that increase overall costs. However, this plan is much the same as all the others. The fundamental inefficiency of our system is that we spend our time trying to figure out how to pay for health insurance when what we all really need is health care . Along the same lines, the individual insurance mandate is a bad idea. Such a mandate may well force a family that had its medical care expenses well under control to suddenly find themselves struggling with much more costly premiums instead. In the end, this stuff could make health care less affordable for some individuals and businesses, regardless of what it does to premium costs.
Small Firms Remain Important Innovators
Now that the Bush Administration is a little over two months away from its swan song and objective science may once again become fashionable in the nation's capital, a particularly timely report reminds us that, high on the list of nice-things-small-firms-do is to develop the technologies that often solve our problems, make us money and generally make life better. The report in question, "An Analysis of Small Business Patents by Industry and Firm Size," was released last week by the SBA Office of Advocacy.
As has been found in previous research, small firms were found to produce more patents per employee than larger firms. Small firms had an average of 26.5 patents per employee, compared with 1.7 patents per employee for larger firms. Interestingly, that same trend holds for smaller slices of the database population as well. Firms with 15 employees had more patents per employee than those with 25 employees, and those with 25 employees had more patents per employee than those with 50 employees. Small firm patents were also found to outperform large firm patents in a number of impact metrics, which suggests that they are more technologically important. Given the number of challenges facing our nation that seem to call for technology solutions, it seems clear that small business technology support should be a high priority for the new Administration.
Report Finds Immigrant Firms Contribute Much To Economy
Far, far away from the increasingly xenophobic immigration debates that have peppered the political landscape in recent years, a simple factoid has intrigued economic researchers about the same group over the same period. Immigrants are 30 times more likely to start a business than native born citizens. In a new research report released last week by the SBA Office of Advocacy, Dr. Richard Fairlie develops a broad picture of these immigrant-owned firms in terms of business formation rates and performance.
Immigrants are about the only subgroup around that has roughly the same percentage of people in the workforce as they have members of the population of business owners, at 12.2% and 12.5%, respectively. In addition, they own 11.2% of all U.S. firms that make in excess of $100,000 in annual sales and represent almost 11% of all employer businesses. And yet, most of them are still microbusinesses: 93% of them have five or fewer employees, and almost 78% are nonemployers. And, while 19.7% of immigrant-owned firms earn more than $100,000 per year, 65.9% of them earn less than $50,000 per year. All of which reduces to the fact that perhaps immigrant owned firms are perhaps not so very different from the rest of us.
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