On The Politics of Small Business

tienda_ElProgresso_Honduras
I was traveling in Honduras, Guatemala, and Chiapas, Mexico, finding individuals who were making a living in entreprenuering ways. Much of this was done outside of the official economy, and it was everywhere, yet this was a “business culture” not unlike the one we have in the United States. What set the two places apart is that the business culture in the United States is supported by a financial system and government policy that supports the risk taker.

I grew up with this idea that [North] America is built on the hard work of small business. Its this romanticized notion that to be a small business is as [North] American as it gets. Yet the irony of this is that small businesses are derided for their inefficiency, lack of customer service, and a general lack of business sophistication. As [North] Americans we hate the idea of the small business itself in our economy, but we love the idea of what it means to be a small business owner. From this aspiration grows the millions of small businesses across the nation.

The US has a long history of this. The French traveller Alexis de Tocqueville, wrote in his book way back in 1835, how astonished he was during his trip to the United States not by “the marvelous grandeur of undertakings” in the newly founded nation, as much “as the innumerable multitude of small ones” he found everywhere. Everyone was in business for themselves- industrious, capable, and invested were the [North] American qualities. But what a small business was in 1835, to what we may consider a small business now is quite a different reality, as is the politics of business.

First consider one of the more astonishing claims I ran across in my business accounting class that suggested that 99.7% of the employees in the United States of America were employed by some 22.9 million small businesses spread across virtually every neighborhood across the country. That means that small business employs close to 56 million people in the Untied States. The Small Business Adminstration (SBA), where this information came from, also said that these same small businesses create more new jobs than larger firms.

When we frame our understanding of the economy through this lens of small business, its possible grasp how astonishing this statistic is. It took me a bit of time to process that places like Ambala Cash & Carry in Cerritos, a suburb of Los Angeles, and thousands of these sorts of business employs the vast majority of employable adults in the US. Yet my mind considers retail giant Walmart as the largest employer in the country, 2.2 million employees, pales in comparison to the collective employment of small businesses.

So I am not surprised that the 2016 Presidential candidates are all talking about small businesses right now.

Like Ted Cruz, within minutes of becoming a candidate for the Republican Party, was talking about how his wife created a bakery while in high school. He told us that this was a ‘small business’, I see that as a small business.

Then there is Nish Acharya, a contributor at Forbes, who wrote in a July article that Hilary Clinton, the leading Democratic Presidential nominee, gave “the most substantive economic address of the 2016 campaign to date.” Again, Clinton in her speech, brought small business owners to the center of the presidential politics. Promising to streamline government, make it easier to start businesses, procure from government, comply with regulation, and stressing the importance of access to capital for small business owners, the implication was that the economy of the nation was small business.

This ‘small business’ talk started with President Reagan framing the American Revolution being led by the interests of small business owners according to Mansel Blackford in A History of Small Business in America. That was a time when economists saw these sorts of enterprises as sources of economic rejuvenation, after large firms had failed to produce the steam necessary to get economic growth going in the United States. “We came to Washington confident that this small business spirit” extolled Reagan in his address to the nation, “could make America well and get our economy moving again. Well, it’s working.”

Remember Japan was knocking our big businesses around- from Toyota to Sony- we faced a “Samurai invasion” from the West. In the East, West Germany had risen from the ashes of World War II, all the while in France there was still talk about American colonialism in Continental Europe. For Reagan, and the Economists of the 1980’s, small business was a source of pride. In fact, it was these small manufacturing firms that were leading the US Space program to new heights.

We currently live in a similar reality, post 2008 economic collapse, big business has not been able to produce the jobs or the economic benefit across our economy. This is partly why I believe its become fashionable again to center policy in the 2016 Presidential race around small business. The cynical me thinks about how politicians are pandering to their constituency by placing small business at the center of the North American economy, after years of lauding the multinationals in a globalizing economy.

Small business is back as the poster child for what built the United States, and how it will keep building the nation. Clinton refers to “small businesses” receiving government contracts, which sounds a like a lot larger business model then my perception of “small.” A lot of my millennial friends are self- employed, entrepreneurs who are building their own form of a “small business” because of the economic turbulence left them on the curbside of the flailing economy. Yet, their business seems more of a “micro-entriprise” then a “small business” politicians are talking about.

So what precisely are we talking about? I think thats important to understand given all the stuff being tossed out in the political discourse. For me also, I seem to be thinking about development work and the role of small business in places like Honduras, Guatemala, and Chiapas, versus US multinationals plopping down maquiladoras in the hopes of creating a pathway to the middle class.

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