The Small Business Myth

Via From the archives: the small business myth, by Doug Henwood.

What I find more surprising, and disturbing, is the tendency of some folks on the left to embrace small business with some passion. This is particularly true in the unfortunately named anti-globalization movement—as if internationalization itself were the problem rather than the way it’s carried out. Their anti-globalism is connected to a desire to “relocalize” economies, and with them to reorient production on a much smaller scale. These aims seem more motivated by nostalgia—and, in many cases, by a nostalgia for something that never existed—than any serious analysis.

Larger firms are also far more productive than smaller ones. Small-is-beautiful advocates rarely tell us how tiny enterprises would produce locomotives, computers or telephones; maybe they’d prefer to do away with these things and revive a hunter–gatherer society. But if that’s what they intend to do they should tell us.

And people who presumably care about workers should also rethink their passion for tininess: the experience of actually existing small businesses show that they’re not great employers, with poor pay, cheesier benefits and more dangerous workplaces. Bigger firms are easier to regulate, more open to public scrutiny, friendlier to affirmative action programs and more vulnerable to union organizing.

Pro-Market Localism

Localism has developed into many different streams which can be roughly grouped into localists who support capitalism and those who want to overcome it. Pro-market localists suggest that market regulation can create ethical local capitalism. Some build small businesses, while others promote non-profits and cooperatives. Locally-owned businesses are supposed to keep money in the local communities and, since they’re small, treat workers and the environment better.

Pro-market localists say that if the economy is just a collection of use-values, then we can make capitalism better by producing fewer, high-quality goods. Markets are good things and they can be regulated, providing they are operated according to principles of social justice. The answer is to make the economy less efficient.

They also claim the small scale of local business makes it more ethical. Big business separates owners from those who work and consume; bring them together, the localists say, and business will be more personal. In these circumstances, labor exploitation no longer matters: “even autocratic control is no serious problem in a small-scale enterprise which, led by a working proprietor, has almost a family character.” As long as the business is small, “private ownership is natural, fruitful, and just.” Capitalism is fair as long as it’s done correctly. Profit can be made optional by caring about the proper, local size.

This points to a key confusion at the heart of localism: it conflates the size of ownership with the size of production. The two are very different: while larger production needs concentrations of machinery and labor power, larger ownership doesn’t. Confusing facilities with ownership allows localists to echo Adam Smith’s promotion of small, equal capitals. Opposed to a capitalism controlled by monopolies, Smith believed that markets could be self-regulating and competitive if producers and consumers were kept small. Smith had the benefit of describing his own historical period: during the 18th century, small companies battled it out to control local markets. Not today: small business is less important to directing economic activity.

Idealizing small business is simply a form of nostalgia for earlier forms of capitalism, which weren’t necessarily any better. Small, family-owned businesses also pay poor wages, price-gouge customers, and destroy the environment. As of 2010, U.S. small business owners were 83% white, married, older men. That figure shrank only 4% from 2000. This means that the small business culture localists defend is also fairly exclusive.


Greg Sharzer, No Local: Why Small-Scale Alternatives Won’t Change The World (Winchester, UK: Zero Books, 2012), 20-23, 29.


Nostalgia must be guarded against — it’s debilitating. People become nostalgic when they feel they’ve lost control of their lives. When they see no way forward, they look backward. Nostalgia is fear of the future, a symptom of resignation.

It’s sad to think that there are people who long for the degradation that existed in the “East Village” in the 1970s/80s. These are primarily (exclusively?) people who moved in when the neighborhood had been all but abandoned. Today, those left pine for the time when few people would venture into the area. They don’t take into consideration that regular, working people left due to the degree of decay that they cherish so much. “Slumming” is not something people born into slums find attractive.

When I was growing up, it was the beginning of the period of crisis that led to the current neo-liberal era. Nostalgia then was for the 1950s: American Graffiti was the rage. I remember my high-school English teacher asking our class why we were so enamored of the 50s. The 50s weren’t so great, he said. It was the time of McCarthy. Of course, it wasn’t our nostalgia; we were just high-school kids. It was the nostalgia of his generation. But it was the time of crisis, and to take people’s minds off of it, an idealized vision of the past was offered up as a distraction. Today, oddly enough, that idealized vision is of the crisis period itself! I guess it shows that the time is less important than the superimposing of childhood memories onto that time.

I had the idea to write this recently while walking with my son, approaching Whole Foods on Houston Street. It occurred to me that this will be his recollection of Houston and Second Avenue, while others go to their graves lamenting the demise of the Mars Bar. Your starting point is where you are today, and your goal is the future, not the idealized past.