Small Business: Are Some Too Small to Survive?

It doesn’t matter if you’re obscenely wealthy, living under a bridge, own a Mom and Pop business, or are the most mega of mega multinationals, you want a tax break. Regardless of how much your lobbyists can con out of legislators or how much the country can afford to give, everyone promises to rush right out and stimulate the heck out of the economy, thereby single-handedly putting everyone back to work.

Of course, if this were possible we’d have avoided the financial collapse and licked unemployment before the first CEO could skim his bonus off the top. Truth is, if someone’s paid 2 bucks a year in taxes, they’d complain it wasn’t a buck.

Such is life in a capitalist society.

One of the most repeated mantras in the political/economic wilderness is that small businesses create jobs like an alchemist creates gold from base metal. I suspect that’s true because Big Corporations are a lot better at creating jobs in Bangalore than Bangor and it’s not like they have sterling track records to contradict that. But, if Big Businesses aren’t “too big to fail”, aren’t some small businesses “too small to survive”?

Small Biz Owners Have Bigger Balls Than Me
I have a lot of respect for anyone willing to work themselves silly trying to make a living out of the ether. They have bigger balls than me. But if the sole criteria for success was hard work, coal miners and garbage picker uppers would get the gazillion dollar bonuses.

Likewise, if the only criteria was the ability to take huge risks, corporateers would still come out in the lead, notwithstanding they took the risks with someone else’s money, doing something an imbecile should know better than to do, and tripling their compensation for failing to do what they set out to do. The only difference is the size of the risk that caused the business’s implosion.

Many, many more small business fail than survive. There are a variety of reasons. Some people never thought running a business was so tough. All they wanted was to escape some domineering middle manager of a boss. Others got loans no sane bank should’ve given them. Still others lacked a flair for the creatively entrepreneurial, somehow thinking the world needed one more pizza place or boutique shop selling dried flowers and “crafts” they wouldn’t keep in their own homes.

On a cost/benefit ratio, small business is a dicey way to create jobs. Most of owners end up on the unemployment rolls alongside anyone unlucky enough to work for them, while simultaneously stiffing creditors and their poorly paid serfs because they couldn’t pay the bills. That’s at least 4 jobs lost right there. One step forward, for steps back.

And, the jobs small business does create aren’t usually the skilled machinist, shipbuilder, electronics technician kind. Most are pizza delivery guys and high school kids twisting dried flowers into malodorous bunches for minimum wage – no vacation, no sick time, no retirement, no health coverage, and in some cases, not enough to buy the pizzas they deliver. The economy can’t aford to create many more jobs like that, regardless of who creates them.

Small Business Says It Can’t Pay
Small business and their lobbies routinely complain they can’t afford the minimum wages already set. They say they have to reinstitute a de facto indentured servitude system to make ends meet and what they say is true. In Big Biz, they call this under-capitalization.

But then, McDonalds and Pizza Hut claim the same thing because burger prices will have to move from Dollar Menus to Two Dollar Menus and that’ll cost the shareholders 2 cents per share. Neither would pay any more than absolutely necessary because every dollar going to employees is a dollar not shown on a profit sheet. They aren’t, as they often remind people, charities.

I believe in small business. They are an important part of the economy and shouldn’t be trivialized. They can create good, quality jobs and improve the economy. However, we can’t afford to incentivize the weak any more than we can afford to foot the bill for all the oil BP can spill or all the slave-labor jeans Levi’s can make in Bangladesh.

Like it or not, everyone – Big Business, small business, low-middle-and upper income taxpayers – have to give something up. What everyone really wants is a no-pain fix and that ain’t gonna happen.

So let’s be honest about the ability for any single segment of the economy to fix this problem. Small business is not the only option. If they can’t raise the capital to compete, they are too small to survive. If daft bankers make bad investments, they aren’t “too big to fail”.

Big corporations and their larger stockholders have to stop living like warlords in Afghanistan and not expect a return on investment is a God-given right. And the rest of us probably won’t miss a $100 a year tax break anyway. If we can’t, it’s cheaper for those who can to help those who can’t, regardless if you think it’s unfair, or socialism, for free marketism at its finest.

Just as not all jobs are equal, not all businesses, or taxpayers are either.

It’s a fact, get over it.

Cross posted at The Omnipotent Poobah Speaks!

Tags: Bangalore, Economic Policy, Employment, Job Creation, McDonalds, Pizza Hut, Small Business, tax breaks, Too Big To Fail, too smal to survive, unemployment (all tags)

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