The “Small Business” Obsession

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Stacy Mitchell’s piece on Wal-Mart makes plenty of decent points—certainly it would be nice if local zoning boards didn’t kowtow to corporations at every turn, for instance—but her paean to small businesses in this paragraph looks like a sacred cow ripe for the gutting:

We’ve lost tens of thousands of independent businesses over the last decade and, with them, an important part of the fabric of American life. Small businesses contribute significantly to the vitality of local economies. They nurture social capital, disperse wealth and vest decision-making in local communities rather than corporate headquarters. They are the means by which generations of families have pulled themselves into the middle class.

It seems like the only thing you can ever get anti-globalization activists and the Chamber of Commerce to agree on is the unimpeachable virtue of small business. Now they may well “nurture social capital, disperse wealth, and vest-decision making in local communities.” That’s possible. But 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—at least in manufacturing, a Federal Reserve Board study done in 1997 found that “net job creation… displays no systematic relationship to employer size,” and big firms tend to create more durable jobs, partly because they engage in more “planning,” that old socialist bugbear.

The point isn’t to pile on small businesses—they’re great and many obviously have advantages over monstrous corporations, especially for their owners. Would that everyone could be his or her own boss. But some of the enthusiasm here ought to be tempered, I think. Especially since 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.”

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