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The case against small business
Eli Dile   on Monday, April 16, 2018 at 12:00:00 am

Perhaps no public policy has more bipartisan appeal than supporting small business. But America’s adoration of mom and pop is misplaced, according to Robert Atkinson of the Information Technology and Innovation Foundation and Michael Lind of New America. They want people to come to terms with the contrarian notion that Big is Beautiful, the title of their new book and the subject of discussion at the National Press Club earlier today in Washington, D.C.

More than half of Americans have negative attitudes toward big business. The word “big” itself has become a reliable pejorative to attach to any number of groups (big oil, big pharma, big government, etc.). But Atkinson cited a laundry list of statistics to argue that large companies are the true drivers of American prosperity. According to Atkinson, large businesses:

  • Pay 54 percent more than companies with fewer than 100 employees;
  • Offer 2.5 times more paid leave and insurance and 3.9 times more in retirement benefits;
  • Account for 84 percent of R&D;
  • Are less likely to discriminate in hiring; and
  • Are more likely to export, operate sustainably, and pay their taxes.

But what about jobs? Even the policy layperson often identifies small business as the country’s engine of job creation.

“They do create a lot of jobs, but they also destroy a lot of jobs,” Atkinson said. He clarified that most job creation occurs in the first year of operation, but jobs decline every year after for the average small business. Atkinson also threw cold water on the notion that the decline in business starts is a cause for concern.

“Startups are going down, and thank God they’re going down,” Atkinson said. “These are mostly lifestyle businesses that don’t grow and don’t make a lot of money.” Meanwhile, the number of high-growth startups is, in fact, rising. The panel also noted that the median small business owner makes less than the median wage earner.

Economic development organizations get it right by prioritizing high-growth, export-oriented firms, according to Atkinson and Lind. Of course, more EDOs are engaging small businesses and entrepreneur development, and rightly so (as long as firms are in the traded sector). But Atkinson also had criticism for a long-held staple of economic development policy: local procurement. The problem with giving preference to local businesses for municipal contracts is it often results in an inferior product that costs taxpayers more money.

Ultimately, scale is critical for U.S. competitiveness, according to the authors. Calls for the U.S. government to break up large companies come at a time when countries such as China are investing directly in large firms. Atkinson noted that if the average U.S. firm was of comparable size to its Canadian counterparts, every American would be 3 percent poorer.

“Public policy should not be putting its thumb on the scale of size,” Atkinson said.

Comments

I've held this similar belief for a long time - but it is often unpopular in the a local community.
Posted by: iMISmember on April 20, 2018 at 2:48:26 pm

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