James Surowiecki, journalist and author of The New Yorker‘s “Financial Page,” calls bullshit on those who indulge in what he calls the “fetishization of small business.”
Surowiecki argues that mom and pop businesses are less productive than national chains. They charge significantly higher prices and offer, on average, lower wages and benefits. They’re less likely to innovate, invest in new technologies or expand. They are, however, more likely to do one important thing: Fail.
He writes that while it’s true small businesses create most jobs, “they also destroy most jobs, since, while starting a business is easy, keeping it going is hard.”
Surowiecki adds this:
The developed countries with the highest percentage of workers employed by small businesses include Greece, Portugal, Spain, and Italy—that is, the four countries whose economic woes are wreaking such havoc on financial markets. Meanwhile, the countries with the lowest percentage of workers employed by small businesses are Germany, Sweden, Denmark, and the U.S.—some of the strongest economies in the world. This correlation is not a coincidence.
And here’s a little something for all you populists out there:
It’s hardly a coincidence that in the decades after the Second World War, when ordinary American workers became part of the middle class, very big companies employed a huge percentage of the workforce: in the early seventies, one in five non-farm workers worked for a Fortune 500 company. Small may be beautiful. It’s just not all that prosperous.
We probably won’t see that on any Occupy Wall Street signboards.
Read the article here.