Our economy is in a transition the likes of which we have not seen since the late 1800s. During that time, the businesses that dominated our economy throughout the 20th century were created and grew to dominance. Virtually all of these businesses were formed by the leading entrepreneurs of that age. Over the past twenty years the Fortune 500 companies have had a net job loss, while almost 80% of all new jobs were being created by small businesses. New business formation has exploded from about 200,000 new businesses a year in the mid-twentieth century to over 3 million new business a year in the early 21st century.
We are entering a new period of potentially major entrepreneurial economic growth. If we don't get it right from a public policy stand point, this country will be in serious trouble within the next twenty years as entrepreneurial activity may not reach the levels we need to move the economy into its next period of long-term growth. The old base of our economy is well into its decline and cannot carry us forward.
Our future is being developed by a new generation of entrepreneurs. Not many will create companies that rival the old Fortune 500 in size, but that may not be necessary. Large public companies are not the only basis of growing an economy, and in fact, we may see a greater dominance of privately held businesses that create the foundation of the new economy. Wealth may be more broadly controlled. But unless we drastically change our approach to economic policy, the future may not be as vibrant and successful as the past 100 years.
Michael Barone has a column this week in US News and World Report that captures the negative fall-out of this transition:
"For much of the 20th century, Americans sought security in the form of guarantees from large organizations. The federal government would provide Social Security benefits for workers and their dependents. Large corporations would provide defined-benefit pension plans promising specific payments to retired employees. The assumption was that experts at the top of these big organizations could use scientifically obtained knowledge to take better care of us than we could take care of ourselves."
The old system is failing. Defined benefits pension plans and Social Security that were both set up by the iron triangle of large public companies, large labor unions, and a big federal government will not be sustainable into the 21st century. Demographic changes are making this failure even more dramatic and more sudden as the average life span has increased to about 80 years in America. The old system was set up when the average worker lived only two years beyond retirement.
These are perilous times. The current political movement of this country is headed toward a form of socialism that is based on the duplicitous iron triangle of old 20th century big businesses, large labor unions and an ever growing federal government. The Democrats want to take us there on a dead sprint, while the Republicans are content moving in that direction at more of a gentle stroll. But they are both taking us in the same direction.
This is not a direction that will sustain a transition to a new entrepreneurial economic age. The old way has created a cozy system in which large public companies, large unions and federal government work together to shape fundamental economic policy.
If the current entrepreneurial transition is to succeed, just as the last one did over 100 years ago, we need to free up the economy from policies that set market priorities and protect favored businesses and industries. But, the current system is highly entrenched politically and culturally. It has created a complex tax system designed to favor those with power. It has created regulations that favor the status quo and stymies entrepreneurs. It knows how to use the media to scare the public about any possible changes to the old system.
The public is really not aware of these issues, and that is how those in power like it. The current debate is over how to rearrange the chairs on the deck of the Titanic. But few realize that our economic ship is in peril. In the words of the late Harry Chapin:
"Dance band on the Titanic. Sing nearer my God to thee. The iceberg's on the starboard bow, won't you dance with me."
We heard the story of a creative small business idea that has come to the US from Australia, 
