Capitalism Transcends the Best Efforts of the Universities to Kill It

Adam Smith, the Muir portrait at the Scottish National Gallery

by James C. Sherlock

We have chronicled here the broad and deep attacks on capitalism by the socialist and Marxist clerisy led by academics and their students in the media. The attacks are bitter and utterly relentless.

There is hopeful news.

PBS outlets all over the country yesterday published an article titled “The Unexpected Boom in Startups.”  After the election it apparently is safe to publish such news.

Separately, the Census Department found that Virginia, year-over-year, in a week-to-week comparison with 2019, saw increases in 2020 in business applications of 44.5% (week 44), 38.7% (week 43), 32.7% (week 42) and 36.3% (week 41). Week 44 of 2020 was Monday, October 26 – Sunday, November 1.

Entirely unsurprisingly, the same Census Department report, when interrogated for regional results, showed the bulk of these gains were in the politically reddest regions of the country. New York, Washington and Oregon were in the 20% range. California 33%.

States of the old South like South Carolina (68.2% ), Georgia (62.4% ) Mississippi (89.6% ) and Louisiana (73.3% ) as well as Pennsylvania (61.2% ), Ohio(60.9% ) and Montana (83.3% ) have led the charge.

Newly majoritarian Democrats haven’t had time to ruin the business climate in Virginia, but they’re working on it.

For the record, new business starts in the Obama Administration increased less that 2% a year in his first term and less than 3% per year in the second. The first three years under President Trump new starts averaged a 9% increase each year.

The obvious question is to whom was this outpouring of capitalist animal spirits “unexpected.”

Answer: that same band of brothers and sisters of the left wing clerisy.

From the PBS article linked above.

America is currently experiencing what some are calling a “startup boom.” That’s right — even with a raging pandemic and an ugly recession, America is seeing a boom in the creation of new businesses.

John Haltiwanger, an economist at the University of Maryland, has been working with the U.S. Census Bureau to measure new business creation for decades. Every new business that hires workers, he says, has to apply for an employer identification number with the government, and when the coronavirus pandemic began, the data showed what you might expect: “We saw a collapse in new business applications,” Haltiwanger says. But then, about six weeks into the pandemic, the numbers started rising. At first, he says, they had to double-check that the data were correct: “We were, like, what’s going on here?”

And then the new business applications just kept rising. “The third quarter of 2020 is the highest quarter of applications we’ve ever seen,” Haltiwanger says (their quarterly data go back to 2004).

The same article offers the left’s excuse for this capitalist surge.

The largest area for new business creation is online retail. Of course, at the same time, we’ve seen a massacre for brick-and-mortar retail — and we don’t know yet whether these new businesses will fill the job void. Moreover, many of the new businesses are just people who were laid off and were forced to strike out on their own.

Creative destruction. Who could imagine such a thing?

The “just people who were laid off” comment is telling. It means that the author cannot imagine any other reason for starting a business.

How about Germany, the left’s favorite example of state-controlled industrial policy, at least among nominally capitalist countries.

Germany achieved (slightly lower unemployment than the U.S.) using a century-old program called Kurzarbeit, in which the government comes in and helps businesses pay their workers in order to keep the workers employed. We wrote about the benefits of Kurzarbeit back in April.

But Germany doesn’t look as hot as America when it comes to the creation of new businesses. And Kurzarbeit and other efforts to prop up existing businesses and prevent creative destruction may be a reason for this. “It is true that Germany has done a better job than the US at protecting *existing* jobs,” says economist Jens Suedekum of Heinrich Heine University Düsseldorf. “But one problem that will be with us in Germany for quite a long time is the low rate of new jobs that are being created.” Suedekum says this especially hurts young Germans and those workers who get Kurzarbeit benefits during the crisis but are laid off after the crisis.

That is followed by much discussion by the left that “the jury is still out.”

So, in a directly related question, what do local business leaders in the National Capitol Region want from the new administration?

The Washington Business Journal interviewed several of them in “What tops your wish list for the next president? D.C.-area business leaders weigh in.”  The answers will prove an absolute mystery to the left:

Black business owner S. Kathryn Allen, co-president and owner, Answer Title: “Consistency and fairness in access to capital for minority-owned small businesses.”

Kevin Walsh, CFO, Century 21 New Millennium: “Strategic planning for our country’s next 50 years. Our deficit spending could cripple our positioning as the world’s No. 1 superpower. The Covid-19 $3 trillion economic rescue packages need to be paid for over time. Couple that with our unfunded long-term obligations as a nation and dark clouds are gathering. We need a leader with the foresight to start addressing these true system issues now.”

John Parker, president, Hutchinson Design Group: “Stabilization of our economy and reduction of the dependence and influence of big money.”

Black businessman Kevin Jennings, president and CEO, Millennium Corp.:“Bipartisan decisions between both houses and the White House to solve the many complex problems facing our country today. The national debt!”

Michelle Boggs, CEO, McKinley Marketing Partners: “Stimulus, maintaining existing tax structure and the continued dismantling of certain regulations.”

David M. Guernsey, president and CEO, Guernsey Inc.: “Control immigration. Don’t open the floodgates that would likely overwhelm our health care system, thus prolonging the effects of Covid-19.”

Debra Schiff, president and CEO, J Street Group LLC: “Stimulating the economy and jobs; providing financial assistance to those unemployed and Paycheck Protection Program to businesses suffering from the pandemic; tax cuts for the middle class; improving our existing health care policies; protecting women’s rights.”

David von Storch, president, Urban Adventure Cos. Inc.: “Helping those businesses that have been disproportionately affected by the pandemic — specifically restaurants, bars and clubs, travel and hospitality, fitness and local small retailers and entertainment.”

Ken Leiner, president, Ken Leiner Associates Inc.: “Health benefits for all Americans.”

Ryan A. Miller, executive vice president and market leader, Newmark Knight Frank: “Policies that directly support the growth of U.S. businesses, and our economy as a whole, which will restore confidence in the markets and spur innovation across industries.”

Mark Hottel, vice president, Harvey W. Hottel Inc.: “Keep the lower tax rates.”

Debbie Tang, partner, Bridge Partners: “I hope the next administration overturns the Executive Order on Combating Race and Sex Stereotyping. Hundreds of corporations and business groups have already encouraged President Trump to reverse this executive order. Diversity training is not ‘scapegoating.’ If corporations and their employees cannot have honest conversations about race, America will not progress.”

Note: Bridge Partners is a Diversity and Inclusion employee search firm.

The only “business leader” that the Washington Business Journal could find to offer a full throated endorsement of the left’s agenda was, unsurprisingly, a university President.

Patricia McGuire, president, Trinity Washington University: “We must restore DACA and improve the climate for immigration as a source of top intellectual talent and strength for our communities. We must also have a president who can address racial injustice, reject white supremacy and restore confidence in the president as the leader of all, and not just factions. The next president needs to fast-track real economic recovery through creation of jobs and restoring confidence in the federal government to be a strong and ethical partner in solving problems for communities. We need a president who works with governors rather than attacking them, who sees to it that benefits accrue equally across states rather than using federal funds as rewards for cronies.”

What now?

If there has ever been a clearer revelation of the difference between the cultural clerisy and those who try to make the businesses work for themselves, their families, their employees and their communities than the evidence deployed above, I have not seen it.

Now we get to see what a Biden administration will do with this good news. Another shutdown to teach these new small business owners a lesson? More regulations and higher taxes to strangle them?

Or will what’s left of the moderate in Mr. Biden recognize this as the main hope for the success of the economy and leave them alone either to prosper or to fail and be replaced by others with better ideas?

Or will Mr. Biden even have the personal bandwidth to notice?

We’ll see very soon.

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45 responses to “Capitalism Transcends the Best Efforts of the Universities to Kill It

  1. Good article. Restaurants may be going bankrupt left and right but peoples’ desire to eat out has not diminished. Once the vaccine is deployed and the restaurant shake out has occurred – there will be a flood of new eateries. I even have a germ of an idea – Regions. Everybody living in Northern Virginia is originally from somewhere else (except me, apparently). They drive around with their Buffalo Bills bumper stickers and speak with their Chicago accents. How about a restaurant / sports bar with a revolving menu of “pub food” from different localities around the country? Chicago dogs, wreak sandwiches, frogmere stew, Ipswitch clams, Arizona cheese crisps, Cincinnati chili, cowboy beans, fried cheese curds, meat pasty … you get the idea.

    I’d even add half smokes to the menu for the DC originals.

    What could impede such an idea? Things like assuming that any employee who contracts COVID (or the next disease) contracted it at work. Restricted parking in some forlorn hope of achieving walkable urbanism. Etc.

  2. Do the anti-capitalists even know what they want to replace US capitalism? They don’t seem to have very crisp ideas. Instead, Capitalism has become another excuse for life being unfair. They ramble on about Denmark. Denmark has plenty of non-government companies owned by shareholders, called Aktieselskab. You can buy a share of MAERSK on the NASDAQ for $8.62 right now. Or a share of Danske Bank. There are plenty more. The Dutch and French governments each own 14.3% of the merged Air France / KLM airline. Is that what the anti-capitalists want – our government to own minority stakes in publicly traded companies. Would that resolve all of the inequities the left imagines to exist in America?

    • They obviously won’t acknowledge where their funding comes from (at least indirectly)

    • The Germans provided a great example of intimate cooperation between private corporations and the state – it nearly won two world wars for them.

      That is what I see happening on the large corporation front here.

      The large corporations spend whatever it takes to get the patronage of whomever is in power. They could generally care less what the political philosophy of that government is as long as it will protect or increase their market share.

      Many large for-profit corporations favored a market economy while they got large. Now that they are, they are classic rent seekers and buy as many politicians as necessary to get their way.

      The largest, at least officially, “not-for-profit” corporations, most of which are hospital systems, used government decisions to get large and continue to use government to protect and increase their market shares.

      Both for-profit and not-for-profit large businesses find paying politicians a very small cost of doing business.

      God knows that strategy has worked.

      Small businesses, however, eat what they kill. They depend upon government to stay out of their way. Republicans do. Democrats don’t.

    • “Do the anti-capitalists even know what they want to replace US capitalism?”

      Crony-socialism, perhaps?

  3. Sounds more like the Broken Window Theory than creative destruction.

    Since there was a collapse in TIN applications at the onset of the lock downs, seems to me that at at least part of the surge may be due to entrepreneurs delaying their already planned start-up. There are also likely a large number of entrepreneurs that shut-down, and now want to get back into business… maybe using the lock down as a convenient excuse to get out a failed business or bad lease.

    • The rebound in business starts began in the deep South in Week 17: April 19-25, 2020. It started in Virginia two weeks later.

      By week 20, 11 – 17 May, the long term Republican states were gaining business startups, the long term Democratic states were still losing them.

      Those are the only “business friendly” and “capitalist population” scorecards on economic growth one needs.

      • There was also a lot of cheap money handed out. While certain segments of the economy floundered, others boomed this summer. Cheap interest rates, free money, etc.

        That wouldn’t have necessarily have, in and of itself, driven growth in any particular regional area. But, certainly, those located in more business friendly areas would be in a better position to capitalize on it. Perhaps, combined with at least some anecdotal evidence of an urban flight to areas that happen to be more business friendly.

        Real estate, tourism has been very strong in our neck of woods. Plenty of North Virginians wishing to enlighten us on the more civilized lifestyles from which they’re trying to escape.

        And, to the degree that these start-ups are just side hustles? They’re lots a LLCs set-up to push Snake Oil or get rich quick with your own Youtube channel

  4. For the record, new business starts in the Obama Administration increased less that 2% a year in his first term and less than 3% per year in the second. The first three years under President Trump new starts averaged a 9% increase each year.

    I should have looked that up before the post, and I added this research to the post.

  5. The coin has a verso. https://www.national.biz/2019-small-business-failure-rate-startup-statistics-industry/

    But the good news is that failure is the first step to success.

    Prepandemic they said, “Healthcare and social services businesses saw the biggest growth and highest survival rates in 2019. Only 19.2% didn’t make it through the first year, and 60% were still going strong after five years of operation.”

    Hopefully the small reduction in customer base doesn’t have too much of an effect.

    • That article is an excellent reminder of the risks involved in a small business startup. People do it anyway. It is the American dream. Without it, what a dull, stale and declining country we would be.

      • “The coin has a verso”

        That’s true. There is another side of the coin.

        If Biden prevails, the country will experience going from an administration that appreciates, actively encourages and supports businesses, to one the diminishes and discourages them.

        “If you’ve got a business — you didn’t build that. Somebody else made that happen.”
        President Barack Obama on July 13, 2012, in Roanoke, Virginia

        Bernie Sanders said on Wednesday that, if asked, he would accept the position of Labor secretary in Joe Biden’s administration. That would indeed represent the other side of the coin – an administration that believes no good deed should go unpunished.

        • Intelligent people know that the “you didn’t build that” was referring to the available infrastructure that allowed the business to succeed.

          A lot of Democrats think Obama was an orator. He sucked at it. Compared to Trump, Obama sucked at the sound bites.

      • “There are a lot of reasons people (insiders) sell a stock, but only one reason they buy it.” — one of those things people say.

        The same is sort of true about Business Applications. One reason they don’t apply is that they are employed. One of the reasons they apply is survival.

        Yes, business applications went up in Trump’s administration, but look at 2020’s. They went through the roof. That’s not because conditions are ripe. It’s every guy with a pickup and a mower trying to survive. Look at South Carolina. Look at unemployment and business applications. Then you’ll see why they had that 62% increase over the Obama Administration, and now, between 2019 and 2020, it’s more like 162%.

  6. Captain Jim,
    You are on to something here but I think the reason for the big rise in small business startups is more complex than you suggest. First, the (liberal?) Guardian credits Trump’s policies with encouraging startups:

    https://www.theguardian.com/business/2020/feb/27/small-business-owners-donald-trump-second-term
    But a more recent piece in Inc. magazine gives a more balanced account and a more accurate one. It says that startups are increasing because people have been laid off during the pandemic and want more control over their lives.

    https://www.inc.com/jeff-haden/new-data-reveals-a-record-breaking-increase-in-small-business-startups-why-that-matters-to-you.html

    While Trump may have helped with cutting taxes and regs, he’s also hurt small and large business with his incomprehensible foreign trade tariff policies that change all the time. I also don’ think that Republicans should get all the credit for helping small businesses. Democrat Mark Warner have long proposed better benefits protection for people in the “gig” economy.
    Also, I don’t think that defining a so-called “leftist” position on startups is very helpful. It’s more complicated. Inc. is not a socialist rag.

    • What he said. Thanks for the links. I had been looking at South Carolina (since it is highlighted as being great) early this AM, and the employment situation there since 2017 might explain why Lindsey was almost in tears in September.

    • Great example.

      “Better benefits protection for people in the gig economy” sounds compassionate and benign, but in truth it means higher costs for the businesses that hire them and a real downside for many gig workers.

      To fund those benefits, every proposed Democratic law, see the one just defeated in California, has a “feature” that raises costs for businesses and for many wipes out their business models.

      For the gig workers themselves, it also means a minimum number of hours worked and more company control of their work hours, eliminating the reason many of them choose gig work in the first place.

    • Right. Things were so bad under President Trump that the jobless rate dropped to 3.5%, its lowest reading in 50 years. Minority employment was never better.

      “And I just think that COVID is God’s gift to the Left.”
      Jane Fonda

      Democratic hopes relied heavily on blaming President Trump for a worldwide pandemic. Under Trump, the federal government accomplished what was thought impossible in providing states with the resources they need.

      I believe history will be much kinder to him than you, or our highly partisan news media.

      “Tom Inglesby, the director of the Johns Hopkins Center for Health Security, with whom STAT shared the organizational chart, agreed that the initiative appears well-positioned to achieve its ambitious goals — and under a tight timeline.”

      https://www.statnews.com/2020/09/28/operation-warp-speed-vast-military-involvement/

      NAFTA has been renegotiated and many other trade issues have been settled. China and some others has been playing the waiting game, hoping that Biden will become President and cave to them as the Obama/Biden administration did for 8 years. Our adversaries are celebrating now. That’s not a good thing.

      If Trump were to stay for another term I doubt they could hold out 4 more years. They would likely negotiate and settle.

      • What happened to mfg jobs? What happened to wages?

        • NN asked: “What happened to mfg jobs?”

          “The fall in manufacturing employment was the highest during the period 2000-2017… stats show that between 1980-2000, roughly two million jobs were lost in this sector. However, this data is heavily eclipsed by the fact that during the period 2000-2017, some 5.5 million people were released from this industry as well, making the estimated loss for less than 40 years some 7.5 million people of prime-age (21 to 55).”

          Now you tell me. What happened in 2017?

          You should also ask – Why are manufacturing jobs being lost?

          “It is a fact that China is the synonym for the world’s manufacturing force. However, another fact is that China exploits extremely cheap and oftentimes illegal labor, unfair trade, and differing environmental standards, eventually limiting the growth of what the US used to export to other countries.”

          “The 50 states, of which the most emphasized are Oregon, Minnesota, California, Massachusetts, and Wisconsin, suffered a 2.57 to 3.55% of total state manufacturing jobs lost to China.”

          “Overall, throughout the trade war, roughly 2.4 million jobs in several manufacturing industries were lost just to China on the American soil, not to mention other places across the world, according to Reliable Plant.”

          “China’s currency manipulation and cheap labor do irreversible damage to the world’s economy, making everyone else incompetent for manufacture. Since 2008, America’s yearly deficit from trading with China is about $26 billion per year.”

          https://whattobecome.com/blog/loss-of-manufacturing-jobs/

          That’s why President Trump has been insisting that China change its behavior. If Biden gets in and caves to them, it will all be for naught.

          And the more important question – What will happen to manufacturing under a Biden Administration? If Biden becomes president, the only thing manufactured will be social justice warriors.

          NN asked: “What happened to wages?”

          “The United States’ lowest-paid workers are seeing their paychecks rise at the fastest pace in more than a decade.”
          – Washington Post Jan. 2, 2020

          Ever heard of supply and demand? What will happen to wages, particularly for the lowest-paid workers if restrictions on immigration are loosened or non-existent? That’s what Democrats advocate.

    • “It’s more complicated.”

      Many things are complicated for leftists. I’m sure there are “complex” reasons why they vigorously support higher taxes for us, then do everything humanly possible to avoid paying the higher taxes themselves, including renouncing their U.S. citizenship.

      “Ex-Google CEO Eric Schmidt is reportedly becoming a citizen in the European island nation of Cyprus, which could cost him $2.5 million and give him tax breaks”

      https://www.businessinsider.com/eric-schmidt-google-cyprus-citizen-passport-for-sale-2020-11

      Eduardo Saverin, one of Facebook’s four co-founders also renounced his U.S. citizenship.

      • Very few people have given up US citizenship. Last time I looked at the possible benefit of doing so was in 2017 (wonder why?) and the number was maybe a couple of 1000, but 5% of those were in the top 1%.

        Btw, it’s not a bad deal tax-wise. Some countries get rather draconian when it comes to taking money off the game board. The US government basically cashes you out and taxes your total estate using Long Term Capital Gains rates, which oddly makes perfect sense. You came in with nothing, so everything you have is a gain. I suppose that if you did immigrate to here, they probably even allow you to establish a base for the gain based on what you brought with you.

  7. “Many things are complicated for leftists. I’m sure there are “complex” reasons why they vigorously support higher taxes for us, then do everything humanly possible to avoid paying the higher taxes themselves, including renouncing their U.S. citizenship.”

    What does this have to do with my comment? I am saying that the growth in starts isn’t simply that Trump cut taxes and regulations. The Inc. article says that the COVID-19 pandemic crisis (which Trump has greatly mismanaged) led to layoffs at traditional companies. So, people want to have more control over their lives. I really fail to see how this is “leftist.” After all, I have been running my tiny LLC for 17 years and prefer it to dealing with corporationsthat won’t protect you. I did work for a really beneficial large firm for 18 years but that is all over.

    What does renouncing citizenship have to do with startups?

    • Mr. Galuszka – You seem to acknowledge that lower taxes and less burdensome regulations have had at least some positive effect, so I should have recognized that.

      “The Inc. article says that the COVID-19 pandemic crisis (which Trump has greatly mismanaged) led to layoffs at traditional companies.”

      Adversity sparks innovation. That’s not new.

      The idea that President Trump is somehow responsible for a worldwide pandemic also springs from adversity – that of running a campaign against a President who has been very successful with the economy.

      Democrats have been all over the map on what President Trump should have done. Throwing spit balls is easy. Most of Biden’s “ideas” are things already being done. Others would cause more economic hardship than we have already experienced, with little to nothing to show for it.

      “What does renouncing citizenship have to do with startups?”

      Good question. Thanks for asking.

      Business startups are greatly impeded by taxes and regulation. For example, tech giants who now have dominant market shares, are not run by the benevolent and compassionate humanitarians that they portray themselves to be. They now seek to protect their dominance in part by making it increasingly difficult for smaller startups. The giants can more effectively deal with burdensome and complex regulation and tax policies because they have the recourses to do so. Small startups do not.

      It may seem counterintuitive for wealthy tech giants to support more candidates who will impose more taxes and more regulation, but in many ways it is self serving. And then after making it exceedingly difficult for their competition, (and those of us who pay taxes) they find ways to avoid the taxes they have imposed on the rest of us.

  8. BTW, guess who now owns the part of that Company I used to work for? Michael Bloomberg. He pays fairly well but is tough to work for, I hear. I still do contract work from time to time.

  9. Pingback: New Business Starts in Virginia by Jurisdiction 2019 | Bacon's Rebellion

  10. Speaking of Trump, given his self-reported method of greeting women, I finally figured out why his complexion is orange…

    • Did you know that you posted a link to a members only article?

    • The author of that article has a podcast called Deep State Radio. One of his latest is:
      “Among All the Traitors in US History, Where Does Donald Trump Rank?”

      Glad to see you are keeping abreast of the best of American thinking, Peter.

    • It’s right at the top; “How long is Blue America going to have to carry Red America? Forever, basically.”

      Yes, because while Democrats realize the virtues of “rugged individualism”, they also believe that the failure to succeed at such should not result in death or permanent disability. It’s an effort at the cost minimization of overconfidence and a failure to progress.

      Which pun?

  11. Damn. I should have double checked on the firewall. I’ll look again.

  12. One problem. The headline reeks of hyperbole. Are universities really trying to kill capitalism? Or are they just reviewing it? What kind of capitalism are you talking about? It’s too bad so many conservatives keep using dog whistles. People must stand up to them and call them out

    • The purpose of a dog whistle is that they think we cool cats can’t hear them.

    • Peter Galuszka asked: “Are universities really trying to kill capitalism?”

      You tell me. If they aren’t attacking capitalism, then why are professors spouting all the vitriol against capitalism?

      They talk a lot about supporting black businesses. Are we to “segregate” our buying as well?

      Below from Newsweek – 11/28/17

      Activist group Black Lives Matter of Los Angeles (BLM) is calling for holiday shoppers to spend their money at black-owned businesses in a push for a “black Christmas” that aims to resist white supremacy through capitalism.

      Group leaders say it’s time for people to “resist white capitalism” and divest from businesses that contribute to racial inequality. Melina Abdullah, a BLM leader who is a professor at California State University, Los Angeles (CSU-LA), is encouraging shoppers to use their money to support economic empowerment for minorities.

      “We say ‘white capitalism’ because it’s important that we understand that the economic system and the racial structures are connected,” said Abdullah during her weekly radio show, Beautiful Struggle. “We have to not only disrupt the systems of policing that literally kill our people, but we have to disrupt the white supremacist, capitalistic, patriarchal, heteronormative system that is really the root cause of these police killings.”

      Anthony Ratcliff, another BLM leader and CSU-LA professor, was also on the radio show to explain the purpose of “black Christmas.”

      “Black Lives Matter and other organizations build a strong critique and understanding of racism and white supremacy and sexism and homophobia, transphobia, but we have to have as much hatred or vitriol against capitalism,” said Ratcliff.

      https://www.newsweek.com/black-lives-matter-black-christmas-capitalism-724309

    • “It’s too bad so many conservatives keep using dog whistles.”

      So who specifically are you suggesting is a racist?

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