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WSJ Has No Respect For Entrepreneurial Businesses, Even When Reporting Their Success.

The Wall Street Journal (June 26, 2023) reported on its front page that “small companies have been responsible for all of the net job growth in the US since the onset of the Covid-19 pandemic and account for nearly 4 of 5 available job openings”. They’ve hired a net 3.67 million people, while larger establishments have cut a net 800,000 jobs during that same time period. “Small businesses are literally holding up the job market”, said Aneta Markowska, chief economist at Jefferies, who compiled the data.

Disregarding the size-shaming of referring to these powerhouse growth-producing businesses as “small”, this should be all good news, shouldn’t it? Well, not in the eyes of the Wall Street Journal. The surge of hiring by these businesses “can be bad news for markets” (by which they mean the casino stock trading markets of Wall Street). All this hiring is driving inflation, and may complicate the Federal Reserve’s efforts to cool that inflation, according to WSJ. The Fed wants to “slow down the labor market and weaken the economy” and small business job creation gets in their way. But don’t worry, say the WSJ reporters, “The Fed has said it plans to continue to increase rates this year ….to slow the economy” and hit these pesky small businesses with a downturn that will reverse their annoying optimism.

This is all typical of the financial establishment. The growth of the financial sector in the economy comes at the expense of the productive sector. A recent Bank of International Settlements (BIS) analysis shows a negative relationship between the rate of growth of the financial sector and the rate of growth of total factor productivity. The so-called small businesses highlighted in the WSJ report are, in spite of the expanding financial sector, bringing economic growth to the nation, and creating jobs for breadwinners and their families, reducing welfare dependence. They are producing new value, which is what entrepreneurs do, and generating new sales and revenues by pleasing customers. The financial establishment can’t stand it!

The growth of the financial sector, focused on stock trading and bond trading related to the few thousand companies in the quoted market indexes is detrimental to the productive economy and the 6+ million employer businesses that comprise it. The trading has nothing to do with financing productive investment in innovation. Once a company has completed an IPO, it generally never goes back to the stock market for equity financing. For example, the only money that Apple has ever raised from the public stock market in its history is the $97 million realized from its IPO in 1980. All of the stock splits and stock buybacks since then have been for the benefit of stock traders (don’t call them investors – they’re not) and incumbent management who grant themselves stock awards and stock options. There are accounting years when Apple has often spent a sum greater than its net income on stock buybacks. In other words, it is diverting resources away from productive investment and into stock market manipulation.

While “small” entrepreneurial businesses are innovating, creating new value and new jobs, the big corporations entangled in the financial sector are destroying jobs and extracting value through their manipulation of stock markets and stock prices. The Wall Street Journal reports admiringly.