By Schumpeter in The Economist September 29th 2012
" Édifiante analyse qui en dit long sur la lucidité de l'élite Américaine. Et nous dans tout cela que devons nous faire pour rendre notre machine économique efficiente ? âmes sensibles s'abstenir " ....
AMERICA has been
the world’s most important growth machine since the second world war. In the
1950s and 1960s its GDP grew by 3% a year despite the economy’s maturity. In
the 1970s it endured stagflation but the Reagan revolution revived the
entrepreneurial spirit and the growth rate returned to 3% in the 1990s. The
machine was good for the world as well as America—it helped spread the gospel
of capitalism and transform the American dream into a global dream.
Today the growth
machine is in trouble. It all but exploded in the financial crisis of 2007-08.
But even before then it had been juddering. Examine the machine’s three most
powerful pistons—capital markets, innovation and the knowledge economy—and you
discover that they had been malfunctioning for a decade.
The United
States once boasted the world’s most business-friendly capital markets. But in
recent years the boast has rung hollow, as Robert Litan and Carl Schramm point
out in a new book, “Better Capitalism”. Venture capitalists have slashed their
spending, dumping more adventurous companies in the process, not least because
around 90% of them failed to produce a positive return. The number of initial
public offerings is down from an average of 547 a year in the 1990s to 192
since then. This has dramatically cut the supply of new, high-growth companies.
Given that companies less than five years old may have provided almost all the
40m net jobs the American economy added between 1980 and the financial crisis,
that is dismal news for the unemployed.
America also
used to have one of the most business-friendly immigration policies. Fully 18%
of the Fortune 500 list as of 2010 were founded by immigrants (among them
AT&T, DuPont, eBay, Google, Kraft, Heinz and Procter & Gamble). Include
the children of immigrants and the figure is 40%. Immigrants founded a quarter
of successful high-tech and engineering companies between 1995 and 2005. They
obtain patents at twice the rate of American-born people with the same
educational credentials. But America’s immigration policies have tightened
dramatically over the past decade, a period in which some other rich countries,
such as Canada, have continued to woo skilled immigrants, while fabulous new
opportunities have opened up in emerging markets like China and India. Why
endure America’s visa obstacle course when other countries are laying out the
red carpet?
Finally, America
has long boasted the world’s most business-friendly universities. One-fifth of
American start-ups are linked to universities, and great institutions like
Stanford and MIT spawn businesses by the thousand. But the university-business
boom seems to be fading. Federal spending on health-related research increased
from $20 billion in 1993 to $30 billion in 2008, for example, but the number of
new drugs approved by the Food and Drug Administration fell from a peak of 50
in 1996 to just 15 in 2008. University technology offices, which legally have
first dibs at commercialising the faculty’s ideas, have evolved into clumsy
bureaucracies. The average age of researchers given grants by the National
Institutes of Health is 50 and rising.
These problems
all bear more heavily on entrepreneurs than established companies. Foreign-born
entrepreneurs are finding it harder to gain citizenship. Academics are finding it
harder to commercialise their ideas. All sorts of entrepreneurs are finding it
harder to obtain seed money and to take their companies public. American
capitalism is becoming like its European cousin: established firms with the
scale and scope to deal with a growing thicket of regulations are doing well,
but new companies are withering on the vine or selling themselves to
incumbents.
What can be done
to reverse this worrying trend? Messrs Litan and Schramm provide detailed
answers. They note that the recent JOBS act was a step in the right direction,
not least because it suggested that the political elite is beginning to realise
the seriousness of the problem. The act exempts new companies, for their first
five years, from the onerous Sarbanes-Oxley (SOX) regulations (passed in 2002,
in response to a spate of corporate scandals). The act quadruples the number of
shareholders that private companies can have (from 499 to 2,000) before they
have to go public. It removes barriers to crowdfunding. But Messrs Litan and
Schramm also have plenty of suggestions of their own.
Some of their
ideas are familiar. They suggest that the government should give green cards to
all foreigners who come to America to study science, technology, engineering or
maths. Some are more innovative. Exchange-traded investment funds, which have
gone from nothing a decade ago to a trillion-dollar industry today, leave
promising new companies vulnerable to the fickleness of high-frequency traders:
so why not let them exclude themselves from such funds’ baskets of shares? SOX
is reducing the supply of new companies in the name of protecting investors: so
why not let smaller firms opt out of SOX so long as shareholders are duly
warned? The authors also argue that university technology offices should lose
their monopolies, giving professors more freedom to exploit their innovations.
Will Romney and Obama read it?
These are all
admirable ideas. Messrs Litan and Schramm have resisted calling for federal
spending on grand projects: they regard the deficit as the most serious
long-term threat to American growth. They have also applied themselves to the
everyday problems of real-life entrepreneurs instead of drifting into academic
abstractions. But it is hard to read such a sensible book in the middle of the
presidential-election campaign without a sense of foreboding. With the
Republicans intent on forgetting Ronald Reagan’s enthusiasm for immigration and
the Democrats intent on demonising businesspeople, America’s entrepreneurs are
more endangered than ever.
