The Rate of New Business Formation Has Fallen By Almost Half Since 1978

Historically in the U.S., about one new business has been formed every minute, while another shutters its doors every 80 seconds. This life cycle of birth and death – referred to as business dynamism – is a key driver of innovation and to overall economic growth, giving rise to the great “gales of creative destruction” that the economist Joseph Schumpeter identified as the motor of force of capitalism.

A growing chorus of economists suggests that this process of dynamism and innovation has slowed, becoming a key factor in our sluggish recovery and anemic job growth. George Mason’s Tyler Cowen has dubbed the decline in returns to innovation the “great stagnation," while former Treasury Secretary Larry Summers has proclaimed that the U.S. has entered a period of “secular stagnation,” comparable to that of the Great Depression, in which declining levels of investment, spending, consumption and growth are fated to become the “new normal.”