Monopoly Capital and Entrepreneurism: Whither Small Business?

There has been a growing literature over the last several years on a possible decline in US entrepreneurship and the reasons for it. US small business formation and the jobs created by small businesses are supposed to be key elements in US economic growth. Many claim that without growth in small businesses and the jobs they provide that the US economy will either not grow at all or only very slowly. Therefore, small business formation is a possible key to understanding capitalism in the 21st century since under monopoly capital there is claimed to be a tendency toward economic stagnation. Some of the general causes mentioned for less US entrepreneurism include high levels of personal debt (mortgages, student loans, credit cards, etc.) among the US populace and the increasing challenges that small businesses face against larger ones. Another concern is the amount of increasing business regulation and government presence in the US economy with which small businesses struggle more than larger ones. If entrepreneurism requires risk taking, then high levels of household debt and large, well-financed potential competitors may be hindering prospective entrepreneurs. This exploratory paper finds that high levels of household debt, the increasing size of existing businesses, and government size are highly correlated with the slowdown in the entry rates of new firms into the US economy since the late 1970s as well as with a slowdown in the job creation rate of these firms.