Are Small Businesses Better?

Dear Commie,

I feel like I’m supposed to love small businesses for not being Wal Marts but while “Not Wal Mart” is good, I’m still not sure that makes small businesses great. What do socialists think about small businesses? Are they better or different than the big businesses?


Big or Small, I Kind of Hate Them All

Dear Hater,

“Small business” has a romantic image in the United States. When “small business” thrives, people tend to see a confirmation of the American Dream: ordinary people can, with a little determination and perseverance, become their own boss. So socialists often get asked: What do you think of these ordinary people, and of this American Dream? The answer is hardly simple.

I’d say there is no reason to romanticize small businesses, though there is no particular reason to demonize them either. On one hand, small business owners employ workers and by definition exploit those workers for profits just like the owners of big businesses. On the other hand, they are often anchored to communities, including working-class communities, in ways that big businesses are not. 

These contradictory elements make small business an interesting problem for socialists, and as a result of these elements, small business owners face a choice of allegiances when conflict heats up between the working class and the big capitalists. Do small business owners see themselves first as owners of capital and throw in their lot with the big capitalists against the working class? Or do they side with their community, mostly made up of working people, against the big capitalists?

First, small isn’t always beautiful. The basic constraints on the small business owner are the same as they are with any other business owner. Under capitalism, business owners need to keep the cost of inputs as low as possible in order to have the best return on their investment. They have many “fixed” input costs, which are often very difficult to affect, especially for smaller businesses. Labor costs are often the easiest to minimize. One can fire some people, overwork others, manipulate the schedule for maximum flexibility and so on. It should come as no surprise that average earnings at small businesses tend to be lower than those at large ones, and lower than the economy-wide average. 

These constraints are present no matter what — “good” bosses and “bad” bosses have the same “bottom line.” However, bosses’ personality traits often matter more for workers at small businesses. Unlike at big businesses, workers may interact with the owner on a regular, even daily, basis, unmediated by layers and layers of management. The employer/employee relationship is overlain with a personal relationship. 

There are millions of small business employers in the United States, and they are all kinds of people — generous or selfish, caring or callous, gentle or abusive. All have considerable power over their employees and enormous leeway in how they choose to wield it. For those 30% of workers employed by a small business, only luck-of-the-draw decides whether they work for a decent person or a tyrant.

Additionally, small businesses are politically weird. They depend both on worker submission and community support. Most small businesses fail, even in good times, within five years of getting started. Their owners, who had hoped to become wealthy, sink back into the ranks of the working class that they tried to escape. This “caught-between” position has historically put small business owners all over the political map. 

Under certain conditions, small business owners may become radical right-wing extremists. Some historians of fascism, for instance, have noted the high degree of support for Nazis among small businessmen, who saw the party as a means to put down a restive working class, restore order and allow them to get back to business. In other conditions, small business owners may align themselves with an embattled working class. In the United States, for example, small business owners have occasionally offered material support to striking workers. 

This outward show of solidarity is partly due to the fact that those workers spend their wages at the local shops, of course, but a genuine sentiment of support may come along with the material interest as well. To me, the political volatility of the small business class poses tactical questions for socialists and working-class organizations about coalitions and alliances that are generally not posed when big business is concerned.

The COVID-19 pandemic has led to an unprecedented uncertainty for small businesses. Some part of the right-wing Reopen demonstrations seems to have been led by small business owners concerned about the impact of the shutdown on their business. State and local governments have also caved to the interests of this group by prematurely lifting pandemic repression measures in cities with the result that cases are increasing more rapidly than ever.

If the federal government had guaranteed to cover the payroll expenses of small businesses so that they could continue paying workers through the shutdown, the Trump Administration might have easily been able to unify small business support and greater support of the working class behind the 2020 reelection campaign. Instead, officials allowed tens of millions of newly-unemployed workers to face an unprepared unemployment insurance system and left most small businesses to fend for themselves. The small business class alone is not sufficiently powerful to win the aid needed to survive the pandemic.

Thanks to these various contradictory elements, small business owners may now respond to the COVID pandemic by bringing about uglier labor conditions — putting workers in increasingly dangerous situations, forcing workers to bear the burden of self-isolation without the benefit of paid time off and so on. However, there is a chance that small business owners will make the bold demand that the federal government has the responsibility to bail out the “real” economy, not just Wall Street. For this to happen, though, a resurgence of the working class will have to lead society through the storm.


Michael Martinez

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