The Economist September 17th 2021 |Leaders|Capitalism in America|”A dynamic do-over” “Rumours of the demise of American enterprise are exaggerated”
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Regardless of your political stripes there’s a sense “that American enterprise isn’t what it” once was being now “less dynamic and more monopolistic” and having to face what many consider unfair Asian and European competition. But The Economist reports that “on many measures American Inc. is alive and kicking.”
Declinism is a term that has been applied to the American economy for many years. The idea is supported by some key observations. First, new companies employed 4% of workers in 1980 but only 2% in the 2010s. Second, three-quarters of American workers “are employed by a company that is more than 16 years old” up from two-thirds 30 years ago. Third, in the last 50 years “ever fewer people have switched jobs or moved across state lines." Fourth, in the mid-1990s “newly founded firms outnumbered those which folded by around 80,000 a year." By the mid-2000s corporate births were barely keeping up with corporate deaths. Fifth, “cross-border” M&As as a fraction of all M&As fell from 19% in 2014 to 9% in 2019. Sixth, “Between 1997 and 2012 two-thirds of the 900-odd sectors tracked...became more concentrated, with the combined market shares of the top four firms rising from a quarter to a third.” Seventh, established companies reduced spending on factories, technologies and R&D.
Enter COVID-19, a global disruption unlike any other in recent history. Because of the pandemic that has ensued workers, companies and investors have been forced to re-evaluate “their priorities and prospects.” The result has been a surge in new firms up “60% more than in the same period in pre-pandemic 2019." Such a singular event has also caused workers in large numbers to reassess careers. Many workers have subsequently quit their jobs, “almost certainly because they believe they can find something better.” IPOs are up to a level similar to the “the dotcom era.” Further, “American companies have raised nearly $350bn since the start of 2020, more than in the previous seven years combined.” Even investments by large companies are higher than before by 20% with the trend expected to continue into 2022.
Of course lest we forget, America’s global presence hasn't really changed. It is still ”deep and wide." While worries about concentration continue it seems to have “plateaued since 2012.” The tech giants, like Apple, Amazon, Facebook, Microsoft and Google might be characterized as oligopolies but they are challenging each other.
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The Economist comments that “President Joe Biden seems not to have noticed [all the progress]. As he “wants to lavish subsidies on national champions, and reportedly levy fresh tariffs on their Chinese rivals” even though American Companies don’t seem to “need...such [a] leg-up.” They go on that Democratic senators are trying to meddle by taxing share buybacks to further incentivize more investment. A move The Economist believes is not needed. The Economist editorial board comments further that “Trustbusters are pursuing America’s tech giants without a clear idea of which markets their targets are competing in, and with an outdated view of how rival firms are adapting.”
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