The Decline of the Investor Class and Rise of Minority Entrepreneur

The Decline of the Investor Class and Rise of Minority Entrepreneur

Part 3: Forming an Alliance with the Minority Entrepreneur

Connie Evans’ solutions to grow businesses include:

“Investors, policymakers, and entrepreneurship organizations must also find ways to develop and fund vocational training for students and adults that assists with business start-up and continuing education credentialing, licensure, and degrees. New sustainable systems must be created to provide support and mentoring to Main Street businesses. Solutions like these can only serve to maximize the potential of Black-owned businesses not just for success but for exponential growth.” (1)

Today, 29% of jobs require a government license.  This is nearly three times 40 years ago.  These licensing requirements slow down business growth.  As a report in the Kauffman Foundation noticed:

“High rates of new business creation are a sign of a dynamic economy in which the barriers to entrepreneurship are low.  As entrepreneurs bring new ideas to market, they spur economic growth and create jobs.  In fact, companies less than five years old are the primary source of net new job creation in the United States…. Yet, in certain fields and professions, the path to opening a new business is marked with barriers that can slow or even block entrepreneurs.  These barriers often go unnoticed until the entrepreneur runs up against them.  Such is the case with one form of government regulation known as licensing, which has the effect of fencing out new entrants while protecting the licensed from competition.”(2)

Licensing often begins at the state level and creates labor market inefficiencies with regulations.  This does little to protect public safety.  Jobs requiring licensing in some states includes tour guides, selling caskets or braiding hair.  These licensing requirements restrict entry into these markets.  Fewer practitioners in these fields means more money for those already working but zero for those who aren’t permitted to join the market.

The main argument for this is the public is being protected with higher quality.  However, in one state, there is no difference in consumer complaints between licensed interior designers and certified interior designers.  Licensing boards restrict innovations in training, education and even in the delivery of services including preventing low-cost legal clinics or prepaid health care.  This raises prices for consumers while keeping out competition.

Another problem this causes is that many state licensing boards don’t allow reciprocation among states.  This restricts the ability of workers to move to different markets where their skills can be useful or there is a bigger market.  These licensing requirements can be a hurdle for those seeking upward economic mobility.  Minority businesses concentrate in service industries such as repairs, child care, hair salons and taxis.  Many of these businesses are negatively impacted by licensing.  Minority businesses are discovering that because of regulations and taxes, government is not their friend.  Instead, it provides obstacles which interfere with their mobility.

Americas Majority Foundation conducted national polls after both the 2014 congressional elections and the 2016 elections.  The polls included questions dealing with economic vision.  In our post –election national polls in 2014, 61% of White voters oppose increased government spending as being good for the economy along with 53% of Hispanic voters.  Only black voters’ support government spending as being good for the economy.  But, nearly 41% of Blacks joined the majority of White and Hispanic voters in opposing Keynesian economics.  (Subsequent polls show a majority of Black voters actually oppose the idea that increased spending does indeed help the economy).

In 2016 post-election polls, one national poll  of voters conducted by Voice Broadcasting continued to reject Keynesian economics on steroids.  Only 15.4% of voters believe additional government spending helps the economy.  Whereas 67.4% believe it hurts.  The remaining 16% are unsure.  Even Democrats question additional spending.  Only 23% support it along with 14% of independents and 7% of Republicans.  52% of Democrats, 83% of Republicans and 68% of independents view increased government spending as hurting the economy.  15% of Whites, 19% of Blacks and 21% of Asians and 11%  of Hispanic support the notion that additional government spending helps the economy.  Whereas 69% of white voters, 55% of blacks,  48% of Asians and 67% of Hispanics accept the notion that increased spending hurts.

In a second national poll conducted by Cyngal we saw similar data concerning Keynesian economics on steroids.  17% of the voters believe additional government spending aids the economy.  Whereas 66% view additional government spending as a negative.  The rest are unsure.  8.5% of Republicans, 26.5% of Democrats and 17% of independents believe government spending helps the economy.  Whereas, 80% of Republicans, 51% of Democrats and 66% of independent oppose the idea.  The remaining are.  17% of whites, 21% of blacks, 15% of Asians and 20% of Hispanics support the idea of increased government spending as a was of helping the economy grow.  However, 67% of  whites, 56% of blacks, 57% of Hispanics and 67% of Asians view increased government spending as harming the economy.  The rest are unsure. (3)

Across the board, voters state they prefer policies that encourage economic growth and increased economic opportunities as a way of dealing with inequality.  Regardless of gender or race, three out of four Americans prefer economic opportunities and job creation to solve the problem.  Other pollsters see this as well.  Rasmussen found voters prefer growth over “fairness” by a 53% to 38% margin.  Democratic Pollsters have similar data.  Global Strategy Group, a Democratic polling group concluded:

“More than three quarter of voters (78%) believe promoting agenda of economic growth that benefits all Americans should be a very important priority for Congress, and a majority (53%) believes such an agenda is extremely important.”

John Judis warned his fellow Democrats about pursuing an inequality strategy which can fail at forming a majority:

“Unless they can shape their campaign for economic equality so that voters- fearful of big government, worried about new taxes, skeptical about programs they think are intended to aid someone else- are willing to sign on.”

Growth trumps redistribution even among Democrats who polls favored growth by a 63% to 37% margin prior to the 2014 election.  With growth comes expansion of the private sector.  The majority of voters agree that when the private sector grows so does the opportunity to succeed.

In a Voice Broadcasting national poll, 70% of voters favor job creation over reducing inequality.  87% of Republicans, and even 57% of Democrats favor increased economic opportunities over worrying about inequality.  However, 21% favor dealing with inequality.  71% of white and black voters along with 70% of Hispanics and 59% of Asians favor job creation as the end result of economic policies.

In our Cyngal national poll, 67% of voters favor job creation.  However, 26% view inequality as the primary endpoint of economic policies.  84% of Republicans, 64% of independents and 54% of Democrats want economic policies to favor job creation.  However, only 9% of Republicans, 31% of independents and 41% of Democrats view inequality as the end points of economic policies.  67% of whites, 68% of blacks and Hispanics and 75% of Asians favor job creation as the endpoint of economic policies. This was seen in our battleground states surveys as voters want economic policies to focus on job opportunities. (4)

Both Black and Hispanics in both polls reject Keynesian economics and the politics of envy.  They want economic growth over dealing with inequality.  For Republicans and conservatives, it is time to design policies which aid economic growth among minorities.

During the early part of this century, one method was to encourage home ownership.  However, government policies encouraged loans to many minorities who were not qualified.  Accordingly, many minorities not only lost their homes but their wealth.  After the Recession, 35% of Black and 31% of Hispanic households had zero or negative growth.  This represents a significant increase from four years earlier.  Home equity of Hispanics went from slightly under 100,000 dollars in 2005 to 49,000 dollars in 2009.  Black households saw their home equity drop from 77,000 dollars in 2005 to 59,000 dollar in 2009.  Additionally, a percentage of homeowners dropped.(5)

The housing crisis helped significantly reduce the wealth of many minorities.  This led to the reduction of the investor class among minorities.  Many minority were forced to use their 401 k to bail out their drop in income while becoming unable to save and replenish savings.  The initial goal is to encourage entrepreneurship and later, revising the investor class strategy with the ideal of creating capitalists throughout America and in minority communities

Going into this century, many Americans owned part of America.  The data showed that investors were more likely to vote Republican and support free market ideas.  However, the housing crisis reduced the wealth of many Americans.  Many middle class and minorities saw their wealth disappear.  The housing crisis saw many moving up the economic ladder slip back down.

It shouldn’t be surprising that support for free market ideas has slipped while many Americans lost their wealth and  homes, while selling a portion of their 401 K to survive the downturn.  Many in the middle class including many minorities in the emerging middle class not only have seen stagnant income but their overall wealth declined.  It is no coincidence that when America declines in economic freedom and increase government interventionist policies, the average America sees their income decline.  The Heritage Foundation index of economic freedoms tells the story of the century.  America went from free to mostly free.  Now America ranks number 17 on the economic freedom scale.  This corresponds with the weakest recovery.  We saw the Obama Administration go through an entire eight years without one year of 3% growth.  Thsi is something not seen since the Hoover Administration. (6)

Under the Obama years, the number of Americans needing food stamps or slipping back into poverty increased!  The Reagan recovery during the 1980’s proved stronger and longer lasting than what Obama proved to be.  The Obama recovery has left many behind. (7)Ronald Reagan

Lee Edwards noted, “Perhaps most important of all, he (Reagan) created IRAs (individual retirement accounts) and 401(k) programs, giving birth to what has been called ‘the investor class.’  New industries arose in computing, software, communications, and the Internet that streamlined and transformed the American economy.” (8)  Reagan created the investor class and Obama created the dependency class.

ALEC ratings of state competitiveness show the majority of states in the top ten come from Red States.  Whereas, many major blue states such as California, Illinois and New York populate the bottom of the lists. (9)  States with lower taxes, less burdensome regulations and with spending in line produce better economic growth and more opportunity.  Many minority entrepreneurs suffer from government regulation.  This reduces their entry into various businesses.  Higher taxes takes profits needed to grow the economy.  Dodd-Frank has reduced lending to many small businesses.  This hurts the growth of entrepreneurship.  American Enterprise Institute Peter Wallison noted in a speech:

“New community banks are not being formed.  We used to have about 100 new banks starting every year; now we have about three, and in some years we’ve had one.  Thus, there is a huge disparity now between the health of the small-bank sector before the financial crisis and today.”(10)  Another American Enterprise Institute scholar Paul Kupiec added this data, “Regulatory data indicates that, in 2008, the 8,345 banks with less than $10 billion in assets supplied $388.8 billion in small business loans.  By 2016, only 5,954 of these banks remained, providing $308.4 billion in small business credit. The demise of nearly 2,400 small banks, along with the regulatory burden of Dodd-Frank on surviving small institutions, coincides with a 21 percent decline in community bank small business lending.” (11)

Government regulation denies entry into the market place and reduces lending to many small businesses including minority businesses.  Reducing both entry regulations, including licensing requirements and overturning Dodd-Frank will enhance entrepreneurship among minorities.  This creates both jobs and opportunities for upward mobility.  Additionally, it creates wealth and allows wealth to expand throughout the community.  Conservatives and Republicans must encourage the formation of the investor class to ensure that wealth is not only created but that Americans will have something for their retirement.  This puts less pressure on social security in the future while allowing increased investment in America.

With the rise of Populism, Republicans are concentrating less on the investor class and entrepreneurs.  However, by emphasizing the investor class and improving the climate for entrepreneurs, Populism becomes less about increasing government services for Middle Class and more on developing growth.  Final words for Republicans and conservatives, create capitalists and you create support capitalism.

Endnotes

  1. Black entrepreneurs are the key to reducing wealth by Connie Evans, Huffington Post May 4, 2017
  2. http://www.kauffman.org/what-we-do/resources/entrepreneurship-policy-digest/occupational-licensing-a-barrier-to-entrepreneurship
  3. Americas Majority Foundation report Winning in 2016 and Moving Forward toward 2018 by Tom Donelson
  4. Americas Majority Foundation Report Winning in 2016 and Moving Forward toward 2018 by Tom Donelson
  5. Wealth Gaps Rise to Record Highs Between Whites, Blacks and Hispanics July 26, 2011 Pew Research Group.
  6. 2017 Index of Economic Freedom Index Heritage Foundation.
  7. 7.Hey President Obama, The economy is Still Weak for most America Heritage Foundation by Stephen Moore February 25, 2016
  8. Dismantling Liberal Myths, Refreshing Course on Ronald Reagan by Lee Edwards June 5th 2014.
  9. Rich States Poor State 2017 ALEC.
  10. How Dodd-Frank Damaged Community Banks and Hurt Small Businesses by Peter Wallison speech Center For American Experiment May 5, 2016
  11. Why We Must Base Banking Regulations on Real Data by Paul Kuepic.

Share This Post

Post Comment