Free movement makes the free market work

American immigrants create new businesses at almost double the rate of the native-born. In terms of ethnicity, Latinos have the highest entrepreneurship rate of all.

I went into this data set expecting something else. I was trying to point out that startup founders needed to be white and male, and that doesn’t seem to be true. That’s still who’s getting funded by VCs, but only 0.6% of new businesses raise VC. The state of startups, in general, is very different.

According to this report, startups have already become much more diverse and are growing fastest among immigrants. Latinos start 25% of new businesses but receive less than 1% of VC funding. Less than 2% goes to women, which is also shocking.

Also, American politics doesn’t seem to reflect this reality. Latinos and immigrants are cast as a drain on public resources and criminal or subhuman. In fact, they are the biggest business creators, and have lower crime rates than the native-born. Republicans claim to be the part of business, but they’re not the party of statistics. The statistics are clear.

Zooming out, there is nothing special about these categories or ethnicities. Movement is momentum. America is an immigrant nation and everything in it has always been started by immigrants. British, then Irish, Italian and now Latino and Indian and Chinese. Even internationally, migration is the greatest engine of economic growth. Internal migration to cities has driven the growth of China and India and leaving the EU will cost the British economy dearly.

Just as the free movement of goods drives economic growth, so does the free movement of people. Different people have different ideas, different experiences and, perhaps, most importantly, the need to start something new.

The Kauffman Foundation quantifies something called opportunity share, which gives a different picture. They define opportunity share as the people starting a business because they want to, not due to unemployment. If you look at that, native-born and immigrants start businesses at the same rate.

The difference is that many immigrants simply don’t have other opportunities. They have to startup. They have to create something new because nothing is given to them. These are not lazy people on welfare, their lived reality is the myth of the American entrepreneur. American entrepreneurship isn’t driven by Americans. It’s driven by immigration.

Fairlie, Robert, Sameeksha Desai, and A.J. Herrmann. (2019) 2018 National Report on Early-Stage Entrepreneurship, Kauffman Indicators of Entrepreneurship, Ewing Marion Kauffman Foundation: Kansas City