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December 09, 2005

Against Small Business

Read Brad Plumer on the misplaced admiration for small business. I desperately want to write "The Case Against Small Businesses," which is such a New Republic article I'm surprised it hasn't spontaneously burst onto their cover before now. Maybe one day I will. In the meantime, Plumer's got much of it covered:

small businesses also tend to pay their workers less, offer fewer benefits, are much, much harder for unions to organize, and are often more dangerous places to work. They're rarely more innovative, and they aren't the really the "motor" behind job growth in America[...]

the pagan god of small business gets invoked every single time a progressive policy idea comes gurgling out of the faucet. "No, we can't raise taxes, it will hurt small businesses." "No, we can't have national health care, it will hurt small businesses." Eff that.

That last bit is particularly important. Barely-surviving mom and pop shops are routinely invoked by lobbyists of massive multinationals attempting to stop progressive policies. If a business is operating at margins that don't allow for a slight increase in the minimum wage, it should be culled by the market, not left to limp on and gum up the political process.

As it is, the Chamber of Commerce tends to shield themselves with undercapitalized organizations, shoving them in front of legislation like a parent halting the tractor with their kid. It's disgraceful. And yet liberals like to fall for it, building in all manner of weird subsidies so we can promise a minimal impact on floundering shops -- they're just too important to sacrifice.

Companies should be evaluated on their business practices, not their size. This weird, unthinking, vestigial affection for a Jeffersonian economy is not only economically nonsensical, it's simply not compatible with progressive goals.

December 9, 2005 | Permalink


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Ezra writes: "Barely-surviving mom and pop shops are routinely invoked by lobbyists of massive multinationals attempting to stop progressive policies. If a business is operating at margins that don't allow for a slight increase in the minimum wage, it ... [Read More]

Tracked on Dec 11, 2005 3:31:46 AM


My guess is that the pro-small business heuristic is based on the idea that you can't really have the extraordinarily vast inequalities of wealth and power that we see in a large business-based economy if the big players in your capitalist economy are proprietary businessmen with 150 employees. This is probably basically true, but you also can't really have the economies of scale either.

Then, of course, there's the "I wanna go to a bookstore besides Borders!" lament. There are, as Brad mentions, valid complaints about municipalities kowtowing to big, corporate developers' every wish with zoning and tax-increment financing, but I suppose if people prefer their local bookstore, they'll go to it, and it'll stay in business.

Posted by: Julian Elson | Dec 9, 2005 3:57:01 PM

Some of this seems rather odd, like the "more dangerous" part. The small business I work for is an engineering firm, how much danger can I be in? Bad ergonomics (check)? The "small businesses" I think of are not inherently "dangerous" professions: retail shops, graphic designers, engineers, IT professionals. Are there a lot of small industrial businesses out there? Not in my neck of the woods. As far as innovation goes, I don't think they're less innovative than large companies, so at worst it's a wash. Unionizing, though, I can agree with.

However, small businesses can fit into small towns better than large ones, and encourages people to work in their hometown, rather than commute 30 minutes or more to their place of employment. That's a great sprawl antidote.

I've thought that universal health care would be good for my bosses' bottom line, since the very generous benefits they shell out a few grand for each month would be replaced with a single-payer system that costs less. Sounds like a case for presenting new evidence rather than contrarian small-business bashing.

Posted by: verplanck colvin | Dec 9, 2005 4:05:08 PM

Small businesses that survive are fine. Obviously, they're good businesses. But if a small business can't survive in a particular environment -- say, one with universal health care -- it may be the small business, and not the idea, that should be scrapped.

Posted by: Ezra | Dec 9, 2005 4:17:16 PM

Small business, large business, all business needs universal health care. Just the paperwork savings is enough to cover EVERYONE for LESS than we spend now.

Posted by: fasteddie | Dec 9, 2005 4:35:56 PM

This post is one of the stupidest posts you have made to date. How many of you actually went to business school? Here are some facts for those who didn't. Read this before you say "fuck 'em"....

Small Business

Represent more than 99.7 percent of all employers.
Employ more than half of all private sector employees
Pay 44.5 percent of total U.S. private payroll.
Generate 60 to 80 percent of net new jobs annually.
Create more than 50 percent of nonfarm private gross domestic product (GDP).
Supplied 22.8 percent of the total value of federal prime contracts (about $50 billion) in FY 2001.
Produce 13 to 14 times more patents per employee than large patenting firms. These patents are twice as likely as large firm patents to be among the one percent most cited.
Are employers of 39 percent of high tech workers (such as scientists, engineers, and computer workers ) .
Are 53 percent home-based and 3 percent franchises.
Made up 97 percent of all identified exporters and produced 29 percent of the known export value in FY 2001.

Sources: U.S. Bureau of the Census; Advocacy-funded research by Joel Popkin and Company (Research Summary #211); Federal Procurement Data System; Advocacy-funded research by CHI Research, Inc. (Research Summary #225); Bureau of Labor Statistics, Current Population Survey; U.S. Department of Commerce, International Trade Administration. http://www.sba.gov/advo/stats/sbfaq.html

Posted by: Fred Jones | Dec 9, 2005 4:50:58 PM

Thanks, Fred. That's all you learned in business school?

Posted by: Cryptic Ned | Dec 9, 2005 4:57:57 PM

OK, Fred Jones is a comic genius. I mean, who else but a comic genius could proffer the absurdity of a logical positivist rebuttal to a normative ethical position?

Sheer genius.

Posted by: paperwight | Dec 9, 2005 5:01:14 PM

How many of you actually went to business school?

Well, I guess you answered *THAT* question!!

Posted by: Fred Jones | Dec 9, 2005 5:12:28 PM

Ezra, the problem with this post is you've started with a reasonable point, namely, that not all small businesses are going to survive, so let's not worry so much about the marginal ones when enacting policy. OK. Then you go on to more or less suggest that small businesses in general are not compatible with progressive goals, so screw small businesses. In a word, (well OK 2 words), fuck that.

Every big business was a small business once.

Having actually started and run my own business, as well as having several friends who've done the same thing, I can tell you that it's a fine line to walk beteeen building a business-friendly environment and building a regulatory system that protects employees, the environment, and the community. The amount of hoops you have to jump through when starting a business is not that big. It gets at least 10x worse when you start hiring employees.

We don't need more McJobs at companies like Wal-Mart. We need more good jobs. It's an eminently progressive goal to try to find ways to tilt the scales a bit more towards making it possible to create those jobs.

Posted by: fiat lux | Dec 9, 2005 5:28:36 PM

So Fred, what exactly is your point? Should we subsidize inefficient, unprofitable businesses merely because they are small? Are you for free markets or not? Are you against welfare as a matter of principle, or only when it goes to people you don't want it to?

I'm surprised that you disagree so vehemently with Ezra's post. Perhaps you actually just misread it and thought that Ezra was suggesting that all small businesses should be collectivized or something. Or it could be that you automatically disagree with whatever is posted here, no matter what it is.

Posted by: Stephen | Dec 9, 2005 5:36:53 PM

I totally understand the romance surrounding small business. I've worked a lot of minimum wage jobs, and I always tried to get hired by the "mom and pop"-type places; though I've also done menial work for bigger, corporate outfits. My experience was the employees got treated equally like shit in both types of business (I didn't; but I was a slumming grad student from an upper-middle-class household; they knew I could just quit) but that in general, employees found it less degrading to be mistreated or lectured at the small-proprietor places than at the big outfits. For one, it was obvious that the owners weren't themselves rich or "hiding" profits. This was despite the fact that there was zero chance for advancement at the smaller places. The last time I worked for min wage was at a non-franchise sandwich shop in a mall food court run by an Iranian man who was a trained engineer who just couldn't get hired full time in Canada. He was pretty miserable having to run a barely profitable sandwich shop and was a constant target of the teenagers in the mall (some of whose friends he'd hired and fired). Sometimes he'd take it out on the staff. But overall he was a pretty sympathetic character. I liked and admired him and his "small business" -- even though a happier outcome all around would have been for him to be an employed engineer and his employees (especially his manager who he could only pay a dollar per hour more than the rest of us) to be working someplace where there was some kind of ladder to climb. It's much easier to demonize the Faceless Board of Directors and their profit margin than it is the dead-end that some (certainly not all but a lot) of small businesses are for their owners and employees.

Posted by: Laura | Dec 9, 2005 5:42:26 PM

Liberals are quick enough to use pathetic examples to garner support for economically irrational laws that they favor (such as those requiring handicapped accessibility or special education). Is this equally "disgraceful"?

Posted by: James B. Shearer | Dec 9, 2005 7:35:08 PM

The point here, I thought obviously, was that the a priori fetishization of small business is a stupid position. Even worse is the magic power the words "snmall business" have in public debates. Small businesses should be treated like other businesses. Forget whether they're small or big, independent or corporate -- they're just businesses.

Posted by: Ezra | Dec 9, 2005 7:36:22 PM

Interesting--let's subsidize everybody who is impoverished, lacks healthcare, down on their luck, disabled, lacks ambition, hasn't brains, works in the fields picking tomatoes or works for Wal-Mart, but screw the small businesses? Rather inconsistent ideology...your sounding more Libertarian there.....which may not be a bad thing.

Posted by: Steve Mudge | Dec 9, 2005 7:47:03 PM

Steve, there's a difference between people (and their close relatives, strawmen) and a business. Anyone who declares such a view to be inconsistent is beyond me.

Posted by: TheDeadlyShoe | Dec 9, 2005 8:08:27 PM

The point here, I thought obviously, was that the a priori fetishization of small business is a stupid position.

It's a political move, and a valuable one, because most people with a job work for a small business. Most business owners are owners of small businesses. It's something people can relate to more easily. On the health care issue, I think it's particularly important, because I'm sure people would be more like to start small businesses if they didn't have to worry about losing their health insurance at a large corporation.

Posted by: Constantine | Dec 9, 2005 8:17:44 PM

Deadly Shoe--Mom and Pop running a marginal business are people.

Posted by: Steve Mudge | Dec 9, 2005 8:39:00 PM

How about the a priori fetishization of homeownership? If a certain policy will cause millions of people to lose their homes should we say, not to worry homes are just buildings, they are not people?

Posted by: James B. Shearer | Dec 9, 2005 8:50:20 PM

We're not talking about homeownership here. Let's stay focused.

The basic argument as I saw it - and the one I agree with - is that "Companies should be evaluated on their business practices, not their size."

I have heard many arguments against bad business practices and the least effective is any one that uses small businesses as an example. I won't shop Wal-Mart, but not because they ran the Mom-and-Pops out of town. They actually ran the competition out of town, large and small, and competition helps the economy, not these monolithic trusts.

Posted by: Pepper | Dec 9, 2005 9:17:48 PM

Word to the Pepper.

Posted by: Ezra | Dec 9, 2005 9:23:35 PM

I think Ezra made some good points. It's analagous to whole "family farm" sham frequently trotted out by business school drop-outs like Fred and cheap-labor conservatives. It's amazing, isn't it, how the "free market" operates until, well, it doesn't. So much for that theory.

But on to some more specific thoughts.

James, are you referring to the bankruptcy bill?

Stephen, I think nailed cut-and-paste Fred with your final sentence.

Colvin, you make some good points as well but what I think you're not taking into consideration is the shield that cheap labor conservatives make of small businesses. Companies, small or large, either work or not. They're either safe or not. I think, by and large, due economies of scale, larger companies tend to be "safer" because they have to be. They're higher profile, have deeper pockets, hence more to lose. I've seen a large number of small businesses who pull an amazing amount of shit on the sly for no reason better than they can get away with it.

I'm not making the case that an absolute "fuck small business" policy is a good one, nor do I think Ezra was. But this fetishization of the "small businessman" is a creation of people who could give a rat's ass about that same small business person and really only trying to further line their own pockets.

Just my take.

Posted by: ice weasel | Dec 9, 2005 9:26:11 PM

ice weasel, no I was not referring to the bankruptcy bill which as I understand it left the ridiculous unlimited homeowner exemptions in Florida and Texas largely intact. In any case these exemptions favor a few rich deadbeats not millions of people.

Posted by: James B. Shearer | Dec 9, 2005 9:46:43 PM

The Chamber of Commerce is going to be pro small business. They're run by tradesmen, professionals and salespeople. Not even the communists thought they could be dispensed with. Multinationals playing games to evade taxes that others are stuck with, buying politicians and perverting society to their profit regardless of consequences is whole 'nother ball of wax. Yes, they're all businesses. All U.S. voters are Americans. Your point is what, exactly ?

Posted by: opit | Dec 9, 2005 10:28:31 PM

Forget whether they're small or big, independent or corporate -- they're just businesses.

Yes, but the reality is, a business with 10 employees does not have the resources and capabilities that a business with 100 employees does. It's not that one is a 'better' business than the other, there's simply fewer hands with which to get the work done in the smaller company.

Why punish the smaller company by demanding it devote a larger percentage of its available time to meeting government requirements than the larger one?

Posted by: fiat lux | Dec 9, 2005 11:39:37 PM

"Companies should be evaluated on their business practices, not their size."

Based on postings typically found on this site that would mean that if a business:
- can not afford to pay all of it employees 2x - 3x the minimum wage (even for entry level positions) -- what is often referred to as a "living wage"
- can not afford to provide comprehensive health care to all of its employees
- expects its employees to work at least 40 hours per week and potentially some overtime because thats what is needed for the company to be successful
- is not unionized
- does not want to be burdened by more regulation
- does not want to pay more taxes
- pays its executives more than its regular staff
- would like to earn a profit

Then this company "should be culled by the market".

As Fred Jones noted, small businesses provide a LOT of economic benefits -- both to the people that work for them and the economy as a whole.

If my option is unemployment, government welfare, or having a job at a small business I would be thankful to have the job. If I am fortunate to have a job I would hope that my position wouldn't be eliminated by a bunch of people that don't work for my company, that won't be impacted by the closure of my company, and that have nothing better to do than to sit around and complain about how rough my employer is on me.

"I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very [economic] freedom that I provide and then questions the manner in which I provide it. I would rather you just said 'thank you' and went on your way"


Posted by: m | Dec 10, 2005 2:06:54 AM

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