From The Economist

Here is an extensive extract from an article in the business section of the latest issue (Sept 29- Oct 5, pg 72) of The Economist about the new book "Better Capitalism" by Robert Litan and Carl Schramm:

The United States once boasted the world’s most business-friendly capital markets. But in recent years the boast has rung hollow, as Robert Litan and Carl Schramm point out in a new book, “Better Capitalism”. Venture capitalists have slashed their spending, dumping more adventurous companies in the process, not least because around 90% of them failed to produce a positive return. The number of initial public offerings is down from an average of 547 a year in the 1990s to 192 since then. This has dramatically cut the supply of new, high-growth companies. Given that companies less than five years old may have provided almost all the 40m net jobs the American economy added between 1980 and the financial crisis, that is dismal news for the unemployed.

America also used to have one of the most business-friendly immigration policies. Fully 18% of the Fortune 500 list as of 2010 were founded by immigrants (among them AT&T, DuPont, eBay, Google, Kraft, Heinz and Procter & Gamble). Include the children of immigrants and the figure is 40%. Immigrants founded a quarter of successful high-tech and engineering companies between 1995 and 2005. They obtain patents at twice the rate of American-born people with the same educational credentials. But America’s immigration policies have tightened dramatically over the past decade, a period in which some other rich countries, such as Canada, have continued to woo skilled immigrants, while fabulous new opportunities have opened up in emerging markets like China and India. Why endure America’s visa obstacle course when other countries are laying out the red carpet?

Finally, America has long boasted the world’s most business-friendly universities. One-fifth of American start-ups are linked to universities, and great institutions like Stanford and MIT spawn businesses by the thousand. But the university-business boom seems to be fading. Federal spending on health-related research increased from $20 billion in 1993 to $30 billion in 2008, for example, but the number of new drugs approved by the Food and Drug Administration fell from a peak of 50 in 1996 to just 15 in 2008. University technology offices, which legally have first dibs at commercialising the faculty’s ideas, have evolved into clumsy bureaucracies. The average age of researchers given grants by the National Institutes of Health is 50 and rising.

I have this book on order at my local library, and will review it when I have read it.  But it does point up some of the critical policy problems we face today.