Entrepreneurs See Economy Headed In The Wrong Direction

The summary of a new survey by the Kauffman Foundation is copied below:

(KANSAS CITY, Mo.) Sept. 22, 2009 – The Ewing Marion Kauffman Foundation today announced the results of a new survey of American entrepreneurs showing that entrepreneurs and small businesses continue to struggle despite increasing optimism on Wall Street. One week before Federal Reserve Chairman Ben Bernanke made the statement that the recession is “very likely over,” two-thirds of entrepreneurs reported that the economy is heading in the wrong direction.

In the past year, more than one-third of the entrepreneurs surveyed have shed jobs while only five percent of entrepreneurs have added employees. A majority of entrepreneurs believe that the stimulus package has hurt entrepreneurial activity, and entrepreneurs want government to pursue a fundamentally different approach to encourage entrepreneurship.

“In America, entrepreneurial activity is a leading force in the health and growth of our economy,” said Carl J. Schramm, president and CEO of the Kauffman Foundation. “These results confirm that we’ve got a long way to go before we’re in the clear.”

Later this week the Kauffman Foundation will release details of a new initiative designed to enable entrepreneurs to have more influence on decisions that impact small business growth and job creation.

Kauffman Foundation studies have shown that entrepreneurs have historically been key drivers of economic recovery in past recessionary periods. Since 1980, companies less than five years old have accounted for virtually all net new job creation in the United States.

“Pessimism and revenue loss among entrepreneurs on the front lines of the economy indicate that the fruits of economic recovery have yet to hit Main Street,” Schramm said.

Other key findings include:

  • 69 percent of entrepreneurs believe the recession will last one to two years longer
  • 75 percent think the United States cannot have a sustained economic recovery without another burst of entrepreneurial activity

Pollster Doug Schoen surveyed more than 250 entrepreneurs and 150 “would-be” entrepreneurs from Sept. 8 to Sept. 12, 2009. An entrepreneur was defined as someone who has started a business and is currently running it. A would-be entrepreneur was defined as someone who would like to start a business.

As a serial entrepreneur myself, my sense is that the key here is that those who really create a growing economy are extremely discouraged by government policy of all sorts that is destroying real economic opportunity. Misguided stimulus spending wildly distorting markets, along with government bail outs of failing corporate dinosaurs, and government undermining the rule of law and contracts which are essential for entrepreneurs to succeed, together make it nearly impossible to plan for the future and access business risks. When the fundamental rules of the economic game are in such upheaval, banks stop lending and economic success appears to now come from who you know with political power or chasing government grants, its hard to build the foundations of a real business or to be willing to take the essential risks to try.

Despite the rhetoric to the contrary, the corporate cronyism engendered by both Bush and Obama economic policies is making entrepreneurial endeavors increasingly hard to rationalize.

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