A very bad sign for all but America’s biggest cities, by Jim Tankersley

Small town America used to be an entrepreneurial hotbed, but no more. From Jim Tankersley at washingtonpost.com:

Americans in small towns and rural communities are dramatically less likely to start new businesses than they have been in the past, an unprecedented trend that jeopardizes the economic future of vast swaths of the country.

The recovery from the Great Recession has seen a nationwide slowdown in the creation of new businesses, or start-ups. What growth has occurred has been largely confined to a handful of large and innovative areas, including Silicon Valley in California, New York City and parts of Texas, according to a new analysis of Census Bureau data by the Economic Innovation Group, a bipartisan research and advocacy organization that was founded by the Silicon Valley entrepreneur Sean Parker and small group of investors.

That concentration of start-up activity is unusual, economists say. In the early 1990s recovery, 125 counties combined to generate half the total new business establishments in the country. In this recovery, just 20 counties have generated half the growth.

The data suggest highly populated areas are not adding start-ups faster now than they did in the past; they appear simply to be treading water. But rural areas have seen their business formation fall off a cliff.

Economists say the divergence appears to reflect a combination of trends, all of which have harmed small businesses in rural America. Those include the rise of big-box retailers such as Walmart, the loss of millions of manufacturing and construction jobs across the country and a pullback in business lending that appears to have stung small-town and rural borrowers particularly hard.

The changes also reflect a fundamental shift over the past two decades in which workers and industries power the country’s economic growth. That shift advantages highly educated urbanites at the expense of everyone else. Polling suggests it is one of the driving forces in the political unrest among working-class Americans — particularly rural white men — who have flocked to Republican Donald Trump’s presidential campaign this year.

“Capital chases high-growth ideas, and high-growth ideas tend to be concentrated in areas of highly educated and highly skilled workforce,” said Manuel Adelino, an economist at the Fuqua School of Business at Duke University who has published several research papers on entrepreneurship patterns and credit availability. “This suggests that the lack of new business formation in rural America may lead to widening gaps in income and employment” between those areas and big cities.

Other experts warn that the trends could be self-perpetuating and endanger the very life of rural economies in the years to come.

“It’s going to get much much worse,” said John Lettieri, a former Republican congressional aide who is a co-founder of the Economic Innovation Group. “As bleak as these numbers are now, these may be the good years.”

To continue reading: A very bad sign for all but America’s biggest cities

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One response to “A very bad sign for all but America’s biggest cities, by Jim Tankersley

  1. Reblogged this on The Arts Mechanical and commented:
    Perhaps the Washington Post should actually talk to small business owners to figure out why this is happening rather than academics and government types. Of course they may find things they don’t like, like the real reason that Entrepreneurial activity has fallen off the cliff. The answer to that is one word: government.

    Like

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