The United States is witnessing a remarkable increase in productivity, reminiscent of the 1990s, driven by a surge in new business creation post-2020 rather than artificial intelligence. Entrepreneurial support and diverse start-ups are vital in sustaining this growth, with lessons from programs like the Small Business Innovation Research initiative offering guidance for future economic progress.
The U.S. is currently experiencing a notable productivity boom, rivaling the surge last seen in the 1990s. Luke Pardue, policy director of the Aspen Economic Strategy Group, highlights that this increase is not due to artificial intelligence (AI). Despite the business sector’s optimism about AI’s productivity potential, only about 5% of businesses currently utilize AI for production. Economist Erik Brynjolfsson contends that AI’s growing adoption might even temporarily hinder productivity as companies invest in expanding their AI capabilities.
The surge in productivity is attributed to a significant rise in new business creation, particularly post-2020. The U.S. Census Bureau recorded nearly 5.5 million new business applications in 2023, marking the highest number since data tracking began two decades ago. This wave of entrepreneurship, also noted for its increasing diversity, has helped drive innovation and competition.
Productivity growth is essential for sustainable economic progress. While government spending and Federal Reserve policies can provide temporary boosts, the real driver of long-term growth is increased worker productivity. The 1990s boom, fueled by the internet, was marked by low unemployment and significant earnings growth.
Entrepreneurial support plays a critical role in sustaining this productivity surge. Programs like the Small Business Innovation Research initiative offer grants that help start-ups transition from ideas to market-ready products. This program’s success suggests a broader application could enhance current economic growth and address larger societal challenges, such as the energy crisis.
Lastly, many start-ups contributing to AI advancements today emerged from this entrepreneurial surge, exemplifying how innovation drives productivity. This trend underpins the hope for continued economic dynamism in the future.
