Rumors of the demise of the American company are exaggerated


SSOMETHING IS Rotten with the state of American capitalism. At least that’s the feeling in Washington, CC. Democrats and Republicans are fighting over the causes of the rot. Progressives blame the big cats in business. From thoughtless regulators to conservatives. But the whole ideological spectrum seems to agree that the American company is not what it used to be: less dynamic and more monopolistic at home, and its lunch unfairly nibbled by the Chinese and other rivals at home. ‘foreigner.

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Not so fast. As our analysis this week shows, on many measures America Inc is alive and well (see Business section). All is not perfect, of course. But a misunderstanding of the reality of business risks inaugurating policies based on myths that end up doing more harm than good.

The decline in US business is nothing new. In some ways, American businesses have indeed been less vigorous lately. The share of new business employment has increased from 4% in 1980 to about 2% in the 2010s. Three in four American workers are employed by a company over 16 years old, compared to two in three 30 years ago. years. Over the past half century, fewer and fewer people have changed jobs or crossed state borders. In the mid-1990s, new businesses outnumbered those closing their doors by around 80,000 a year. In the mid-2010s, business start-ups barely followed business deaths. Since new businesses play an important role in job creation, this meant fewer opportunities for American workers and investors.

Cross-border mergers and acquisitions by US companies as a percentage of M&A activity increased from 16% in 2014 to 9% in 2019. American products were seen as the losers against their foreign competitors, from Toyota to Tencent video games. With us, the growing market shares of the large incumbent operators risked lulling them into complacency, or worse, allowing oligopolistic abuses. Between 1997 and 2012, two thirds of the 900 or so sectors identified by the quinquennial economic census became more concentrated, with the combined market shares of the first four companies dropping from one quarter to one third.

Compliant or not, spending by established companies on new factories, technology, and research and development has stagnated. Computing and the internet apparently lacked the transformative power of earlier breakthroughs such as the airplane or the telephone. The saying that “you can see the computer age everywhere except in productivity statistics” seemed almost as relevant in 2017 as it had been when Robert Solow, a Nobel Prize-winning economist, uttered it in 1987 .

The disruption caused by covid-19 could have made matters worse. Instead, workers, businesses and investors reassessed their priorities and perspectives. Many American companies that have emerged have a spring in their approach.

Between January and June, entrepreneurs created 2.8 million new businesses, 60% more than in the same period before the 2019 pandemic. More and more people are leaving their jobs, almost certainly because of they think they can find better. A wave of initial public offerings rivals that of the dotcom era. U.S. companies have raised nearly $ 350 billion since the start of 2020, more than in the previous seven years combined. And they invest as if there is no tomorrow or rather, as if tomorrow was to be taken. Investments by large companies in the S&P The 500 index is expected to reach $ 1.2 billion this year, 20% more than in the recent past, and exceed that level in 2022.

America Inc’s global footprint remains deep and broad, with companies earning roughly the same share of their revenue overseas and outsourcing about as much manufacturing as they did in the last five. recent years, although most companies are slowly adjusting their plans to reflect Sino-US tensions. . Despite all the talk about technology monopolies, Apple is attacking Amazon, Facebook, Google and Microsoft in some of their businesses, and vice versa. The overall market concentration in all industries appears to have plateaued since 2012. And although managers may wonder if THIS-enabled remote working is as productive as desktop type, it is undoubtedly more productive than no work at all which would have been the case in the midst of blockages without broadband, zoom and other digital wonders.

President Joe Biden doesn’t seem to have noticed. He wants to pay subsidies to the national champions and impose new tariffs on their Chinese rivals, with the aim of helping American companies which do not need such a boost. Two Democratic senators have proposed a tax on share buybacks aimed at encouraging companies to reinvest more of their profits, which they gladly do as it is. The Trustbusters are chasing the US tech giants without having a clear idea of ​​the markets in which their targets compete and with an outdated view of how rival companies are adapting.

Elements of American capitalism remain less competitive than in the past. But before taking the plunge, politicians and regulators should recognize that it has rediscovered some of its dynamism.

This article appeared in the Leaders section of the print edition under the headline “A Dynamic Resume”

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