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It's the Economy
GOP: Party of Small Business?

As our struggling economy fails to revive, the GOP could reverse the country’s fortunes (and its own) by clearing the way for small businesses, argues Derek Khanna in The American Conservative:

[The] revelation […] that new small businesses primarily create jobs and economic growth […] demands a complete rethinking of economic policy for the United States. If Republicans understand this and thereby embrace the mantle of innovation, not only will they be expediting a new wave of ingenuity, but they will also share credit with entrepreneurs for the next tech boom.

This requires creating a regulatory and legal climate that fosters “permission-less innovation.” True innovators often can’t afford—either in terms of money or mental energy—to hire lobbyists and change the law. Entrepreneurs should not be wasting their start-up capital on lawyers, consultants, and PAC donations. […]

A few basic precepts must guide a party of innovation. At the state level, rolling back rules that limit access to markets—thus allowing new market models such as those of Uber and Tesla Motors to compete against the old ways of doing business—while scaling back licensing requirements will open markets in scores of industries to fresh competition. At the federal level, reforming copyright and patent law—restoring it to the explicit purpose for which the Founding Fathers intended it—will stop established industries from abusing copyright and patents to crush innovative competitors.

Khanna provides a raft of policy suggestions for regulatory and patent reform. (We suggest you read the whole thing.) His article is especially well timed, coinciding with a dire report from Brookings on declining “business dynamism” in the United States. The paper’s authors (one of whom, Robert E. Litan, is a TAI contributor) conclude:

Business dynamism and entrepreneurship are experiencing a troubling secular decline in the United States. Existing research and a cursory review of broad data aggregates show that the decline in dynamism hasn’t been isolated to particular industrial sectors and firm sizes. Here we demonstrated that the decline in entrepreneurship and business dynamism has been nearly universal geographically the last three decades—reaching all fifty states and all but a few metropolitan areas. […]

[…] it is clear that these trends fit into a larger narrative of business consolidation occurring in the U.S. economy—whatever the reason, older and larger businesses are doing better relative to younger and smaller ones. Firms and individuals appear to be more risk averse too—businesses are hanging on to cash, fewer people are launching firms, and workers are less likely to switch jobs or move.

The GOP should pay attention, and make the revival of American entrepreneurship its highest priority. Republicans talk a good game about their commitment to small business interests, and the time is ripe for them to prove that it’s more than just campaign trail rhetoric.

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  • Andrew Allison

    The reason that older and larger businesses are doing better relative to younger and smaller ones is, as the Uber, Airbnb and Tesla examples illustrate, large businesses strangle innovation. This is a virtually inescapable characteristic, and the reason that, like other empires, they ultimately fail.

  • Corlyss

    Coals to Newcastle. The GOP has been onto this issue for decades.

    • stan

      True. The GOP gets a bigger percentage of the small business vote than any other group and has for decades. Lefties are addicted to bloviating that the GOP is the party of big business. Sad when people who pretend to do serious analysis take that canard as true.

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