The action today, unlike that of the previous decade, is not found so much among finance-backed IPOs, which are suffering their biggest decline in two decades. Instead, small grassroots businesses are seizing new niches, even in service industries, that could transform our economy. “Lots of good things happened during Covid,” suggests Shaheen Sadeghi, founder of California-based LAB Holdings, which builds “anti-malls” hosting local businesses. “The mediocrities went under, but the people who survived are doing better than ever before. They created new ways of doing business that fit the new realities.”
This grassroots growth is very different from what happened after the last serious recession in 2008. Once the financial engineers of the City and Wall Street finished demolishing the economy, governments moved to bless more consolidation.
The big banks recovered gloriously as inequality soared and incomes, particularly for minorities like African Americans, sank. As one conservative economist put it in 2018, “The economic legacy of the last decade is excessive corporate consolidation and a massive transfer of wealth to the top 1 percent from the middle class.” Fortunately, entrepreneurialism remains embedded in our national DNA. In more managed societies — like Germany, Japan or France — the leading companies tend to remain the same over time; even those historically connected to fascism, such as Mercedes, Krupp and Mitsubishi, survived their ignominy and remain dominant. But in the United States disruptive change has been the norm: only fifty-three of the current Fortune 500 companies were here in 1955.
This emerging new economy is also reshaping our economic geography. Sadeghi’s LAB (“Little American Business”) has developed nearly fifty projects for small, independent firms, predominantly in suburban settings, places not usually thought of as sources of cultural and business innovation. By contrast, the massive bailouts standard for the last three years have not slowed the movement of people and companies away from dense, often hyperprogressive urban locales, dispersing people and work to their periphery.
This is a marked change from the last recession. The great financial crisis of 2008, precipitated by the bursting of a housing bubble, led to much speculation that Sun Belt suburbia would become what the Atlantic predicted would be “the next slums,” and that city living would make a comeback. To be sure, the oligarchic nature of the recovery was somewhat less damaging to cities like New York, San Francisco and Boston, where financial and tech firms are concentrated and key managerial talent remained, despite its previous malfeasance.
Yet the ongoing exodus from big urban centers started before Covid, with over 90 percent of all metropolitan growth between 2010 and 2020 in the suburbs and exurbs. The 2020 census notes that four of the five US counties gaining at least 300,000 people were in Texas, Arizona or Nevada. Houston and Dallas added far more people than New York, Chicago, Los Angeles or the Bay Area.
The pandemic, and the rise of online work, seem likely to accelerate this movement. The big blue coastal cities have all experienced meager growth and, since 2020, serious population losses. In the last year, the biggest migration losses took place in three key states: New York, New Jersey and Illinois. In the post-pandemic economy where some 30 percent of the employed expect to work mostly remotely, this turns even small towns into new centers of economic dynamism.
Overall, notes demographer Wendell Cox, offices on the fringe have recovered far faster than those in the largest urban cores. According to Jay Gardner, president of Site Selectors Guild, leading companies are looking increasingly at opportunities in smaller cities and even rural locations. The biggest upsurge in new business formation took place in the Deep South, Texas and the southwest while New York and the West Coast lagged. This year, Zen Business found that the best places for small businesses — in terms of taxes, survivability and regulation — were overwhelmingly in the south, parts of the Great Plains, Utah and the Midwest.
One surprising aspect of the emerging economy reflects tentative steps by corporations to return production to the United States.