Small business is the hero of modern capitalism. Small business owners are virtuous fighters, job creators, and courageous entrepreneurs who drive the economy. “Small business is a huge contributor to national prosperity and jobs in Australia,” says the Australian Labor Party. And you'll be hard-pressed to find a political party in any Western democracy that doesn't agree with that. A British government spokesman made an (unconfirmed) claim that firms with fewer than five people produce 95% of radical innovations. As satirist John Oliver recently noted, even amid divisive politics in the United States, everyone seems to agree that "small business is the backbone of the economy." In a world of international conglomerates and global capital, the notorious owners of Main Street get a lot of love.
With all the enthusiasm, the main mystery remains: what is the real role of small business in the economy? Is caring for small businesses a progressive goal? To be sure, the public fascination with upstarts, bootstrappers, and innovators reflects the ideals of independence, improvement, and a better future. However, the story reveals a different story: a distinct and powerful small business mythology at the heart of modern political life. Beginning in the late 1970s, the worship of small business took on a new and important role in modern capitalist countries. In particular, the Reagan and Thatcher movements turned to praising small business as the chasing horse for the very economy that thwarted upstarts and small independents, as well as privileged large national and multinational corporations.
While the love of small business may seem like an eternal feature of capitalism, the widespread belief that it is small entrepreneurs who hold the keys to economic recovery is relatively recent. Throughout the wealthy world, starting around the 1980s, small businesses emerged from the shadows of "big business" with newfound political, intellectual, and cultural influence. In the United States, President Jimmy Carter declared himself the first "small business owner" in the White House since Harry Truman. Carter promised to help small businesses by reversing government regulations. Small business lobbyists have stepped up. Founded in the 1940s as a mail-order research company, the National Federation of Independent Businesses (NFIB) reinvented itself as a powerful small business lobbying group in the 1980s. Intellectual attention to small business has also increased. In 1970, eight American universities offered courses on starting a new business; by 1980 - 137 people. There were entire magazines dedicated to entrepreneurship. “After many years of neglect, those who start and run their own businesses are considered popular heroes,” enthused one commentator.
The key moment in modern myth-making around small business came in 1978. It was then that MIT economist David Burch published the claims, which he repeated in his testimony before Congress, that small firms accounted for 80 percent of all new jobs between 1968 and 1968. 1976. Critics were quick to point out that Birch's conclusions were completely wrong, mainly because he determined the size of a firm by how many employees work in a given location (for example, in a branch, factory or store), and not on how many how many people worked in the company. In fact, most jobs in the 1970s and today are created by a small number of very fast growing firms, while most small firms either fail (cutting jobs) or stay small.
Birch later admitted that the 80 percent figure was a "stupid figure", but by the 1980s these claims were firmly rooted in popular mythology and political rhetoric. “Small businesses create eight out of every 10 new jobs,” said Richard Lesher, president of the largest pro-business lobbying organization, the US Chamber of Commerce. The shopping center is one of the most powerful symbols of modern capitalism. Small business owners are often described as virtuous, self-reliant, and independent—the same characteristics that Thomas Jefferson attributed to free farmers in pre-industrial society, or that Max Weber used to explain the Protestant work ethic that he argued was at the heart of industrial capitalism. at the end of the 19th century. Just as importantly, small businesses, by virtue of their limited scope and scale, avoid the moral baggage that is often attributed to big business, such as bureaucracy, market manipulation, and good old boy networks.
Like many powerful symbols, small businesses are notoriously difficult to define. When creating a control
Small Business Administration (SBA) in 1953, the US government officially defined it as "independently owned and operated and ... not dominant in its field of activity." Today, to qualify for an SBA loan, US manufacturers must have fewer than 500 employees, and non-manufacturers must have annual incomes below $7.5 million (although the government reserves the right to make exceptions). Higher quality traits such as a lack of management hierarchy, less formalized labor relations, and closer ties to local communities also influence how some scholars define small business. To complicate matters, "small business" covers a wide range of business functions, counting everything from a small-town dry cleaner to a wealthy software startup. We know small business the way U.S. Supreme Court Justice Potter Steward knew pornography when we see it.
Historically, however, "small business" did not exist in any meaningful sense until the advent of "big business" in the late 19th century. Before the emergence of large vertically integrated and diversified corporations, “small business” was everywhere and nowhere at the same time, and no one spoke on its behalf. The first big businesses were steel, oil, sugar, and cigarette manufacturers, and in 1890 the Sherman Act initiated American antitrust policy to protect smaller competitors from their monopolistic practices.
Large corporations that have received large research grants from large government agencies have worked with large universities to give you a modern life.
The real boom in the political consciousness of small business came at the beginning of the 20th century, when the chain store model appeared. Based on antitrust traditions, the anti-grid movement protected small retailers who faced destructive competition from mail-order firms and department stores.
In the United States, Representative Wright Patman became the face of the anti-chain movement. Patman was a loose, balding populist and Democratic congressman from rural Texas. First elected to Congress in 1928, the son of tenant farmers became famous as an ardent defender of small businesses—the “common people”—against the predations of Eastern bankers, industrialists, and chain stores. In 1935, Patman pushed through legislation to limit the discounts large retailers could offer. The Robinson-Patman Act, proclaimed "Magna Carta for Small Businesses" (Senate Majority Leader Joseph Robinson (D-AR) was a co-sponsor) became law. President Franklin Roosevelt feared the bill would hinder economic recovery, but signed it anyway as a sign of the cause's popularity. Patman defended the measure for its commitment to "fairness"—by making the same discounts available to all shoppers (whether at a chain store or a small grocery store), the law dealt a blow to concentrated wealth and privilege while maintaining consumer value benefits. this mass distribution has created.
The Robinson-Patman Act marked the end, not the beginning, of a political regime that protected small firms. In the years after World War II, small business was a divided and weak community. The ethics of the "big" reigned supreme. Large corporations that have received large research grants from large government agencies have worked with large universities to give you modern life, from pharmaceuticals to aerospace, from computers to communications. By the time Wright Patman died in 1976, at the age of 83, the mass reaction to scale and the renewed focus on small business had not yet taken hold.
But if Patman had lived to see the 1980s, he probably wouldn't have learned about the new ways that politicians welcome and protect small businesses. Throughout the first half of the 20th century, small business advocates such as Patman argued that small firms are inherently virtuous and deserve special protection, even if larger companies offer lower prices or greater efficiency. Nevertheless, by the 1980s, a decade of recession, inflation, fiscal crises, and low productivity combined to change the political culture in wealthy capitalist countries. In the United States, Western Europe, and eventually Australia, the logic of protecting small businesses has completely changed: instead of being a virtue, smallness has become an antidote to the bloat and inefficiency of big business; independence, source of innovation.
The TV revival of the symbolic political appeal of small business in the 1980s brought another key change: activists used it not to attack big business, but to attack big government. Wrapped in the mythology of small business, these conservatives have successfully rethought a century-old debate about the size of the economy.
These changes were given
not easy. To the dismay of small business groups and many conservative activists, the Republican Party retained its longstanding image as a big business party, especially during the early years of the Reagan administration. Many small business owners complained that the Republican tax policy favored larger firms that used loopholes and provisions to write off depreciation on large assets. In addition, they argued that the growing federal budget deficit, which widened due to Reagan's tax cuts in 1981 and the slump that continued through the end of 1982, led to high interest rates that hurt the little kids the most.
Members of the Reagan administration were concerned about their popularity among small business owners. “Small business is the backbone of the Republicans,” Elizabeth Dole, director of public affairs for the White House, told George W. Bush, then vice president, in 1981. and upper-middle-class white men, and most of them pursued economically conservative policies. But parts of the small business community are drifting away, Dole warned, because they believe "this administration is good for big business and corporate America." In 1983, White House staffer Red Kavaney warned that the Democratic National Committee planned to flirt with the small business community. If Republicans "become too strongly associated with the big ones at the expense of the small ones," Caveney predicted,
Republicans have taken up the rhetorical mantle of small business, but instead of changing their political message, they have changed what it means to speak for small business. For most of the century, small business activists have emphasized the virtues of competition. They argued that small businesses needed legal support—through punitive taxes on market dominants and the breakdown of monopolies—because their very existence created a more competitive market.
Economic conservatives in the 1980s put forward the opposite version. Murray Weidenbaum, the first chairman of the Reagan Council of Economic Advisers, said that the main goal of politicians should be economic growth, not competition. Some sectors of the economy, including the fast-growing service sector, were more productive in small businesses. Industrial production, on the other hand, did well when a small number of giant operators took advantage of their size to produce more efficiently on a large scale.
"Entrepreneur" today implies a growth orientation: small business owners who don't want to remain small business owners.
What mattered to Weidenbaum was not size or market share per se, but rather how well businesses grew, because only a growing economy could create new jobs. In other words, the single-minded focus on small business as a job creator confuses cause and effect. “It wasn’t small business that created jobs,” he concluded, “it was economic growth” (emphasis mine).
By focusing on growth rather than small business per se, conservatives have subtly manipulated the mythology of small business. Most small businesses do not grow into medium or large companies, and in fact the vast majority of them fail within five years. In the past, small business advocates understood the near-permanent state in which small business represented and treated small business owners as a stable class. However, the conservative politics of the 1980s focused instead on a small subset of the small business community: entrepreneurs.
Although the classic definition of "entrepreneur" simply referred to someone who started a new business (French for "one who gets down to business"), the term took on a new connotation in the late 20th century. "Entrepreneur" today implies a growth orientation; while the simple small business owner may continue to be small, the entrepreneur strives to get rich. In short, entrepreneurs are small business owners who don't want to remain small business owners.
A growing fetish for entrepreneurship became an integral part of the conservative project, which blurred the distinction between small and large firms. President Reagan himself perpetuated this shift. Reagan, whose pre-political experience in the private sector was Hollywood and General Electric, two examples of big business in the mid-20th century, positioned himself as a populist advocate for the people, even promoting an economic vision based on the interests of concentrated wealth. Boasting about the economic recovery in 1987, he insisted that "small businesses do best with stable prices, low interest rates, and strong growth." Moreover, "American entrepreneurs are constantly experimenting with new products, new technologies, and new distribution channels." And
in other words, small business. maintenance or maintenance of an existing system.
Yet Reagan betrayed the bait and the substitute. “The great industrial and commercial centers of our country were built by innovators like Henry Ford and Alexander Graham Bell,” he continued, “whose small businesses grew to help shape the new economy.” In one fell swoop, the president—perhaps inadvertently—gave up the game: the value of small firms was not in promoting competition or preserving local values, but rather in their ability to stop being small businesses. Except for that wording, of course, there were millions of nail salons, fast food franchises, accountants, landscapers, general contractors, housekeepers, cosmetics dealers, photography studios, restaurant owners, small town lawyers, and florists who would never be the next Ford Motor. Company or AT&T.
Why does all this matter?
Since the 1980s, the pace of global capitalism has accelerated, and economic transactions are taking place at an unprecedented speed and complexity in human history. At the same time, political culture became increasingly fragmented and atomized. From the disintegration of party power to tribalist politics and excessive partisanship, re-segregation by place of residence and education, to media segmentation, the split dominates. The bigger things got, the stronger the desire to become small.
This manic tension—between the scale of modern life and the mighty siren call of the atomized terrain—underlies a destabilizing transformation within capitalism itself.
The current moment in history is witnessing the collapse of the so-called "Berle and Means" corporation - a shareholder-owned but manager-controlled, bureaucratic and closely interconnected organization first described in Adolph Berle and Gardiner Means' book The Modern Corporation and Private Property. Estate (1935). Since the end of the mid-20th century conglomerate wave, corporations have concentrated and rationalized. Since the 1990s, the number of public companies has declined. Trade liberalization and cross-border capital flows have accelerated the Nikefication of manufacturing, creating a world in which anonymous and poorly regulated sweatshops in developing countries pay meager wages to workers producing goods adorned with a global brand. The Internet has opened up new opportunities for instant communication and coordination, and firms have responded by outsourcing and offshoring far more than manufacturing. By outsourcing their functions of financing, distribution, advertising, human resources, and customer service to the lowest bidder, many of the world's largest companies today are little more than coordinators of a vast network of nodes. The breakup of the classic corporation came along with a new focus on portfolio management and short-term valuation in business. Such managerial priorities reflect the growing ideological and economic influence of the shareholder value movement, as well as a broader commitment to the neoliberal vision of value.
This disintegration of the corporation as an economic and social institution is an essential feature of modern capitalism and profoundly defines how we value—and revalue—small business. The collapse of the old order, although expressed in the populist language of "joint-stock democracy", created uncertainty and turmoil, as well as freedom and opportunity, and these ups and downs were unevenly distributed. Well-educated people with privileged access can take advantage of the new niches that are opening up and become entrepreneurs. However, those at lower levels face a deteriorating employment situation, marred by wage stagnation, reduced mobility, and low-paying, low-benefit jobs. Social safety nets are evaporating and wealth inequality is widening. Necessity-based self-employment is on the rise in rich and poor countries alike. Self-sufficiency has always been part of the appeal of starting your own business. In a globalized, atomized economy, it has also become an unstable lifeline.
By linking the political agendas of small business and big business, the conservatives in the 1980s laid the foundation for a series of political changes that accelerated the globalizing forces of the late stage of capitalism and failed to mitigate their effects. By assuming that small businesses were unique or exceptionally innovative, they ignored the real world of small business owners and perpetuated the devastating myth that small companies were judged on their ability to become big businesses. In doing so, they missed the most important developments of global capitalism: the simultaneous split of the mid-century corporate world and the rise of an isolated, privileged global elite that marginalized and weakened the vast majority of small businesses.enterprises.