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Illustration: Rebecca Zisser/Axios

For decades, U.S. tech startups have been the beating heart of Silicon Valley. But almost unnoticed by economists, they are now in the same funk dogging some other sectors of the American economy.

Why it matters: In the booming 1980s and 1990s, much of U.S. job and productivity growth was the handiwork of a few young startups and their hit innovations. But the decline, which began in 2005, has stripped the economy of one of its most vibrant engines of wage and productivity growth, says John Haltiwanger, an economist at the University of Maryland.

Quick take: American startups are in a 13-year slump, their numbers shrunken from their heyday and, with a few conspicuous exceptions, their inventions not the financial world-killers of prior kin, according to new research.

  • As you see in the chart below, the decline began long before the financial crash — in fact, halted there — and entrepreneurs have barely picked up the pace since then despite the economic recovery.
Expand chart
Data: Census Bureau; Chart: Chris Canipe/Axios

The background: For years, economists have been trying to figure out why productivity growth in major western economies has been flat despite soaring corporate profit, low joblessness and low inflation. Apart from the dotcom spurt in the 1990s, U.S. productivity growth has been flat since about 1970. It was 2.9% a year from 1995 to 2004, but halved to 1.3% on average from 2005 through 2017. The same has been true across the world's advanced economies. Among the reasons they have come up with:

  • We've created all the big inventions: The University of Chicago's Robert Gordon says in his seminal 2016 book, The Rise and Fall of American Growth, that we have already produced the most consequential inventions like electricity and internal combustion. Anything else isn't going to have the same punch.
  • We're in a transition period: Economists from MIT and the University of Chicago cite a lag between the launch of a new technology, such as artificial intelligence and its visibility in productivity numbers. We are in that period now, they say.

Haltiwanger dismisses neither of those reasons, but told Axios at conference Thursday at the Dallas Fed that the loss of the propulsion of startups is a primary reason for the current malaise. He speculates that Big Tech companies may be buying up a lot of them before they make their big splash, thus smothering their potential.

  • To the degree that's true, the result is that society loses, he said. "The large companies are engaged in defensive innovation," he said.
  • In the real world: Last week, Axios' Dan Primack wrote about "killer acquisitions" in the pharma industry, highlighting that mergers prevent about 5% of new drugs from reaching the market.

Go deeper

Wildfires ravage communities in Northern California as thousands evacuate

Firefighters monitoring the scene as flames from the Dixie Fire jump across highway 89 near Greenville, California, on Tuesday. Photo: Josh Edelson/AFP via Getty Images

Two massive California wildfires have triggered new mandatory evacuation orders for thousands of people and destroyed homes and businesses in the state's north overnight.

Details: The Dixie Fire, California's biggest blaze, razed houses and businesses as it ripped through the town of Greenville and surrounding areas in Plumas County Wednesday night. The rapidly spreading River Fire burned "multiple" homes as it tore through Placer and Nevada counties, KOVR notes.

Updated 2 hours ago - Sports

Olympics dashboard

The U.S. women's team celebrates during a game against the Netherlands on July 30, 2021 in Yokohama, Japan. Photo: Logan Beerman/ISI Photos/Getty Images

⚽: U.S. women's soccer team beats Australia, wins bronze

🥇: Ryan Crouser breaks his own Olympic shot put record to win gold for U.S.

🛶: U.S. teenager Nevin Harrison wins first Olympic women's canoe 200m

🏐: U.S. Olympic beach volleyball duo one step away from realizing gold medal dream

📷: In photos: Tokyo Olympics day 13 highlights

Go deeper: Full Axios coverage

2 hours ago - Sports

U.S. women's soccer team beats Australia, wins Olympic bronze

The U.S. women's team celebrates during a game against the Netherlands on July 30, 2021 in Yokohama, Japan. Photo: Logan Beerman/ISI Photos/Getty Images

The U.S. women's soccer team won the bronze medal on Thursday after beating ninth-ranked Australia 4-3.

Why it matters: Thursday's victory marks the U.S. team's first bronze in Olympic history, handing the team a medal after it failed to earn one during the Rio Games in 2016.