09 February, 2020

The Age of Decadence

Cut the drama. The real story of the West in the 21st century is one of stalemate and stagnation.

The decadent economy is not an impoverished one. The United States is an extraordinarily wealthy country, its middle class prosperous beyond the dreams of centuries past, its welfare state effective at easing the pain of recessions, and the last decade of growth has (slowly) raised our living standard to a new high after the losses from the Great Recession.

But slowly compounding growth is not the same as dynamism. American entrepreneurship has been declining since the 1970s: Early in the Jimmy Carter presidency, 17 percent of all United States businesses had been founded in the previous year; by the start of Barack Obama’s second term, that rate was about 10 percent. In the late 1980s, almost half of United States companies were “young,” meaning less than five years old; by the Great Recession, that share was down to only 39 percent, and the share of “old” firms (founded more than 15 years ago) rose from 22 percent to 34 percent over a similar period. And those companies increasingly sit on cash or pass it back to shareholders rather than investing in new enterprises. From World War II through the 1980s, according to a recent report from Senator Marco Rubio’s office, private domestic investment often approached 10 percent of G.D.P.; in 2019, despite a corporate tax cut intended to get money off the sidelines, the investment-to-G.D.P. ratio was less than half of that.