We’re number 40!

The latest sign that the Legislature and Gov. Scott Walker haven’t done enough for the state’s business climate comes from the Kauffman Foundation and its annual index of entrepreneurial activity.

Wisconsin ranked 40th among the states in entrepreneurial activity in 2011, with 28% less entrepreneurial activity per 100,000 adult residents than the U.S. as a whole. According to Kauffman’s methodology, in 2011, 230 Wisconsinites per 100,000 adult population counted as “entrepreneurs,” whereas 320 Americans per 100,000 population counted as “entrepreneurs.”

That, believe it or not, is a substantial improvement from 2010, when Wisconsin ranked only above West Virginia, with almost half the entrepreneurial rate of the U.S. as a whole. Growing to 40th put Wisconsin near the Midwestern average for entrepreneurship, but Wisconsin (and most of the Midwest) pales in entrepreneurial activity compared with states like Arizona (520 per 100,000 adults), Texas (440 per 100,000 adults), California (440 per 100,000 adults), and Colorado (420 per 100,000 adults).

All this is important because, the report begins …

The Kauffman Index of Entrepreneurial Activity is a leading indicator of new business creation in the United States. Capturing new business owners in their first month of significant business activity, this measure provides the earliest documentation of new business development across the country. … The Kauffman Index reveals important shifts in the national level of entrepreneurial activity and shifts in the demographic and geographic composition of new entrepreneurs across the country.

It is an economic development given that new businesses are where the largest number of new jobs are created. In Wisconsin, according to the Tax Foundation, the business tax climate is much more conducive to new businesses than to established businesses.

The Midwest doesn’t appear to be an entrepreneurial hotbed when measured by metropolitan areas either. Of the 15 largest Metropolitan Statistical Areas, Chicago (including southeast Wisconsin) and Detroit had the worst entrepreneurship rates, one-third as much as Atlanta, Phoenix, and Los Angeles.

Wisconsin has not always been an entrepreneurial laggard. In the 1999-2001 period, Wisconsin had a slightly higher entrepreneurial rate than the U.S. as a whole. Wisconsin’s oldest and most established companies started as entrepreneurial concerns – someone with an idea he could develop, or an employee who thought he could do something better than his employer – and this state has a long list of business innovations in its history.

And yet, the decade of the 2000s appears to have been an entrepreneurial bummer in Wisconsin, with both parties having controlled the Legislature, but one having been in the Executive Residence most of that time. That would be the administration of Gov. James Doyle, which raised taxes by $2.1 billion, yet made state finances some of the worst in the nation. The executive branch, not the legislative branch, creates regulations and hires the regulators, an important reason why taxes never say the whole story about a state’s business climate. And Wisconsin has the Department of Neverending Regulations, formerly known as Damn Near Russia, the state equivalent of the U.S. Employment Prevention Agency (EPA).

Proving that some people don’t get it, the Milwaukee Journal Sentinel has one of the Doyle (mis)administration’s economic marketers, Zach Brandon, now of the Wisconsin Angel Network:

In Wisconsin, however, a vibrant angel investing environment has helped fuel start-up growth, said Zach Brandon, director of the Wisconsin Angel Network.

“Year after year of record angel investing growth has fueled Wisconsin entrepreneurial activity, but the inability to pass comprehensive growth capital legislation at the state level puts this momentum at risk,” Brandon said.

That would be a “vibrant” environment only if you’re comparing it to no angel investment at all. Every business climate study conducted before the 2010 election concluded that Wisconsin’s angel investing environment was somewhere between below average and abysmal. Brandon’s boss, Doyle, could have insisted the Legislature pass “comprehensive growth capital legislation” at any point during Doyle’s eight years in office. Apparently Doyle was too busy figuring out how to increase taxes and generate billions of dollars in deficits to figure out how to create “comprehensive growth capital legislation.”

Of course, one should not expect any of those who want to be the next Democratic governor to do better than Gov. Scott Walker. At a forum of Democratic gubernatorial recall candidates Thursday, only one, Sen. Kathleen Vinehout (D-Alma), said something that could be considered less than lockstep anti-business: “We must stop pitting business against labor and driving a wedge between the public and private sectors.” When the headline of the story reads “Democrats in recall race zero in on wealthy,” and we all know that those evil “wealthy” are those who start businesses, create jobs, and serve their customers, you can rest assured the Democratic Party should change its name to the We Hate Business Party.

Meanwhile, I eagerly await the Walker administration’s plans to really improve – that is, from mediocre at best to the best in the nation – the state’s business climate, which will benefit not just entrepreneurs, but, most importantly, business’ employees. It hasn’t happened yet, and it’s not happening right now.

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