From the beginning of this decade, the process of new company creation has been under assault by legislators and regulators. …Congress, the SEC and the Financial Accounting Standards Board (FASB) have piled burdens onto the economy that put entrepreneurship at risk.
The new laws and regulations… have managed to kill the creation of new public companies in the U.S., cripple the venture capital business, and damage entrepreneurship. According to the National Venture Capital Association, in all of 2008 there have been just six companies that have gone public. Compare that with 269 IPOs in 1999, 272 in 1996, and 365 in 1986.
Faced with crushing reporting costs if they go public, new companies are instead selling themselves to big, existing corporations. …
For all of this, we can first thank Sarbanes-Oxley. Cooked up in the wake of accounting scandals earlier this decade, it has essentially killed the creation of new public companies in America… and cost U.S. industry more than $200 billion by some estimates.
So, while the modern economic mess was primarily caused by federal encouragement of risky loans, Congress has “helped” to destroy productivity in other ways as well. (For some additional examples, see Veronique de Rugy’s article for Reason.)
Notice also that, even as the federal government prevents sensible mergers that would take advantage of economies of scale and better management (as with Whole Foods), in other ways the federal government encourages uneconomic conglomeration.
America’s politicians may yet be able to push the nation into another Great Depression.