Today, in response to an interview that I’d posted recently with the founders of the Ypsi/Arbor small business support group Small & Mighty, a reader by the name of KJC posted a link to an article titled “Small is not Beautiful,” implying, I think it’s pretty clear, that many of us are misguided in our love of small, local businesses. And, as no one has taken me to task in a while over my unabashed boosterism of local business, I thought that I’d move it up here, to the front page, so that we could discuss it properly. Here’s a clip from the article.
…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.
A progressive case for bigness is rare and unpopular these days, but somebody has to make it.
First, let me start by saying that I agree that, just because a company is locally-owned, does not mean that it’s necessarily good. I haven’t said that in the past, as I thought that it was pretty obvious, but perhaps it’s something that I need to be more explicit about. I’m painfully aware that there are assholes who run local businesses, abuse employees and add little value to the communities in which they operate. (Like many of you, I’ve had the pleasure of working for some of these folks.) Second, if you scroll back through the archives, you’ll also find instances where, on several occasions, I’ve said positive things about large companies, like Costco – a company, which, by all accounts, treats its employees well, and strives to ensure that its suppliers do the same. (If I’m not mistaken, I’ve also expressed in the past that I’m torn on the subject of Starbucks, as I hate the homogeneity they bring to communities, but respect the fact that they provide insurance to part-time workers, champion gay rights, etc.)
So, let’s start by dropping the false notion, as KJC would suggest, that I believe that all big companies are evil, and all small ones are terrific. I may be idealistic, but I’m not naive. I can appreciate that we live in a complex world and that the issues that we’re facing are far from black and white. At the same time, though, I have no reason to think that Michael Shuman is lying when he says that he’s never seen an academic study that’s shown that a chain business, with out-of-state ownership, has contributed more wealth to a local community than a comparable business whose owners are rooted in the community. So, yes, I believe that, all things being equal, I’d rather do business with entrepreneurs who live in our community, and have to face us each and every day, than with their corporate counterparts, who just see Ypsilanti as a line on a spreadsheet, and don’t know the names of those people they employ in our community.
I know that some of the jobs that these small businesses create aren’t ideal. I know that, with regard to the food service industry in particular, it can be poorly-paying, grueling work, often without insurance. I can very well remember, for instance, busting my foot, and having to hop around the kitchen that I worked in for several weeks, in pain, as I was unable to see a doctor. Still, though, I think I was better off at the time working for Seva, than I would have been working for McDonalds… I could go on, but I think that Jean Henry, one of the founders of Small & Mighty, does a better job than I could. Here’s how she responded to KJC.
First I would say (as an employee of Zingerman’s) that, in comparison to WalMart and McDonald’s, at any level (other than maybe top) of the organization, staff at Zingerman’s are doing far better in terms of wage, benefits, engagement and employee satisfaction than the aternatives. There are national businesses (Costco for example) that do better than we do in terms of wage scale, but I can’t think of any totally situated in the food business like we are. And we are working on it very very actively. Industrial production in the food business has created a system in which consumers pay very little (relative to in the past and as a percentage of income) for food – and we waste an average of 30%+ of that – and no one in the supply chain is making a reasonable living (except the giants) and, yes, it’s all at risk. In food, the better the integrity of your product and service, the lower your profit margin — even at Zingerman’s prices.
Less established small businesses than Zingerman’s are in much the same economic position as their staff – they struggle to survive in an economic structure that is marshaled against their interests. (They can’t afford the rent, the bills or health insurance either in many cases.) There is plenty of evidence of this. There is also plenty of evidence, contrary to the posted article, that small businesses create more sustainable jobs than the big ‘C’ corporations. But, yes, they often do so at a lower wage base, and almost always with fewer benefits, because they are not as profitable.
The capital in this country does not flow towards its most efficient and productive engines – small businesses. Small businesses give back more generously to their local communities. Of $1 spent at a local independent business, 68 cents stays in the community vs. 43 cents at a national chain store. In independent retail and restaurants the differential is higher. (More info can be found at the BALLE website.) Small independent businesses should also offer better product, service and experience than a chain store. In the end, no one is asking anyone to support local business as a charity. They should provide value. But I would ask you to consider the fabric of your community without them.
The best small business owners risk everything and walk a financial tightrope daily in order to make their vision a reality, because they love what they do and where they do it. They struggle along with their staff in a shared boat in the rough seas of the current economic structure. It is no mistake that the Occupy movement identified with small business owners as part of the 99%… And as part of the solution. If you would like small businesses to be able to pay higher wages then you must be prepared to pay more for their services, or work to invert the current systemic bias toward big and bad.
I try to pay with cash at local businesses doing good work in order to give them more capital to invest in their business, staff and the local economy. Doing so saves them about 4% in credit/debit card fees on each transaction (likely doubling their profit margin) and doesn’t feed into the predatory national banking system. It also keeps me on budget. Do what you can. Think about the big picture. And ask staff at local businesses how they like working there and why they, in many cases, resist working elsewhere for more money. Their answers will often be very close to their bosses answer to “why were you so crazy as to go out on your own?” For many many happy, thriving but often broke people out there, it’s worth it.
So, where do you stand on all of this?
[note: The image at the top of the page is from You've Got Mail, the not-so-good 1998 remake of 1940's The Shop Around the Corner, in which Tom Hanks and Meg Ryan fall in love, despite the fact that Hanks runs an enormous bookstore chain which threatens to put Ryan's lovely little book shop out of business... Sorry, but I couldn't think of better image to illustrate this post.]