New businesses are forming at a slower pace than before the recession. Some economists say the reason may be the rising power of the biggest corporations to swat away challengers — or else to swallow them before they become a serious threat.
Unemployment has fallen, and the stock market has soared. So why has the economic expansion since the recession been so tame, with sluggish productivity and, at least until recently, anemic wage growth?
Economists say the answer, to some degree, can be found in a startup slump — a decline in the creation of new businesses — and a growing understanding of what is behind it.
A total of 414,000 businesses were formed in 2015, the latest year surveyed, the Census Bureau reported Wednesday. It was a slight increase from the previous year, but well below the 558,000 companies given birth in 2006, the year before the recession set in.
“We’re still in a startup funk,” said Robert Litan, an economist and antitrust lawyer who has studied the issue. “Obviously the recession had a lot to do with it, but then you’re left with the conundrum: Why hasn’t there been any recovery?”
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Many economists say the answer could lie in the rising power of the biggest corporations, which they argue is stifling entrepreneurship by making it easier for incumbent businesses to swat away challengers — or else to swallow them before they become a serious threat.
“You’ve got rising market power,” said Marshall Steinbaum, an economist at the Roosevelt Institute, a liberal think tank. “In general, that makes it hard for new businesses to compete with incumbents. Market power is the story that explains everything.”
That argument comes at a potent political moment. Populists on the left and right have responded to growing public unease about the corporate giants that increasingly dominate their online and offline lives. Polling data from Gallup and other organizations show a long-running decline in confidence in banks and other big businesses — a concern not likely to abate after high-profile data breaches at Equifax and other companies.
The startup slump has far-reaching implications. Small businesses in general are often cited as an exemplar of economic dynamism. But it is startups — and particularly the small subset of companies that grow quickly — that are key drivers of job creation and innovation, and have…