By Derek Yonai, Special for USDR
Across the nation, a growing number of hard-working Americans continue to fall victim to an epidemic.
The symptoms of this epidemic – otherwise known as government regulation – stifle, burden, and impose financial hardships on privately-owned small businesses. It restricts competition and creates higher prices and fewer services for consumers.
While the nation that once relished its entrepreneurial spirit now sits buried under mounds of red tape, many have been left to question just how free the “land of the free” really is.
Alarmingly, numerous reports conducted by world-renowned economists draw the same conclusion time after time: among economically free nations, America has been on the decline for more than a decade – under both Republican and Democratic administrations.
Dr. Yonai on the Price of Business, sister radio program of US Daily Review. USDR Publisher/Editor and Chief, Kevin Price hosts:
As a result, we create a society that resides in a poisoned ecosystem that stifles human flourishing, while disappearing entrepreneurship remains a clear sign of the damage already done.
A recent Gallup poll highlights a decline in American entrepreneurship, ranking the U.S. at 12th in business startup activity among developed nations. Currently, it is estimated that business deaths outnumber business births by 70,000. According to the data, since 2008, net business creation stats have been in the red and still haven’t broken even. That’s not much of an economic recovery.
Economic experts point to different factors to the reasoning behind this stagnant economic growth, ranging from generational issues to shrinking population growth. However, Gallup CEO Jim Clifton hit the nail on the head when suggesting that when “new businesses aren’t being born, the free enterprise system and jobs decline.”
As we make it more difficult for Americans to create opportunities due to these increased regulatory burdens, we snuff out the incentive to create jobs. At a time when the Small Business Administration estimates it costs $10,585 per employee for small businesses to comply with regulatory laws, is it any surprise that the entrepreneurial spirit is dying?
When cities significantly raise the minimum wage for unskilled labor, what incentive do people have, then, to create jobs for low-income workers?
In Seattle, a Z Pizza franchise announced it would close its doors in the next four months due to the city’s minimum wage increase. The franchise owner, Ritu Shah Burnham, says she can’t keep the doors open due to higher costs of operating. Instead of contributing to society and earning money for their families, the12 employees of the Z Pizza location will instead be jobless.
In San Francisco, Borderlands Books also announced a closure on its website due to the city’s minimum wage increase. Only through exceptional circumstances – a newsworthy article in The New Yorker as well as the start of a crowdfunding campaign – has the business been saved. At least temporarily, Borderlands Books will continue to survive, while other businesses have not been so fortunate.
As we continue to destroy what is left of our economically free environment, we lose more than just entrepreneurs. We lose increased job creation, higher property values, tax revenue to pay for debt, and opportunities to improve our lives.
According to recent data, nations that experience higher levels of economic freedom enjoy flourishing environments for entrepreneurs and higher levels of income, earning between eight to nine times more than nations with significantly less economic freedom.
On average, the income of the poorest 10 percent of a nation is 10 times more in the most economically free nations than in the least. Only 2.7 percent live on a $1.20 a day in the most economically free nations as opposed to 41.5 percent in the least free. Economic freedom is not about the rich; it’s about attempting to eliminate poverty by improving the lives of all people.
Like the canary in a coal mine concept, the vanishing entrepreneur embodies what happens when we begin to destroy its habitat. The idea of an economically free society – where the rule of law, stable property rights, good governance, and competitive markets overlap – is designed to create an environment where entrepreneurs can generate opportunities for themselves and others.
If we continue down the path of economic destruction, we will destroy any ability to create opportunities that pull all of us, especially the most at-risk members of society, up.
If we can push back against the current tide, we can again enjoy an environment where entrepreneurs advance and improve societal well-being, and create a more flourishing future for ourselves and our children.
Derek K. Yonai is the Director of the Center for Free Enterprise and an Associate Professor of Economics at Florida Southern College.