The Welfare of Businesses Is Irrelevant And Elitist

Russell Berman and Bernie Becker at The Hill recently wrote that both Democrats and Republicans are claiming that they are defending the wellbeing of, “American families and small businesses” from the other party who is protecting corporate interests and Wall Street.  There is some merit in measuring the wellbeing of families because median household income is closely correlated with individual welfare in the short run (there are bigger long-run problems due to changing family size and intra-family inequality), but there is no merit in caring about the welfare of “small businesses” at all.  That is irrelevant to whether individuals are well off or not.

Americans tend to think that ‘small is beautiful‘, but In America, “small businesses” are not very small.  They are officially defined by the Small Business Administration as having up to 500 employees, but even that is not a firm maximum and sometimes even larger businesses qualify as “small”.  Thus, by number of employees, Facebook would have qualified as a “small business” back in early 2008 when it was already such a juggernaut that Ben Mezrich was already writing a book about it and Aaron Sorkin was already writing the screenplay for its movie, The Social Network¡¿Some small business.

But even if a business only has ten employees, if they are poorly paid, then who cares if the business is doing well because the owner is reaping huge profits.  Almost all American slaveholders were small businesses and they were quite prosperous, but that is irrelevant for measuring the wellbeing of people in the American South.  A much better measure of wellbeing is the income of the median American.  That is much more important than the profits of “small business.” This is particularly true when “small businesses” include the likes of the Facebook “Accidental Billionaires” on the eve of their first movie screenplay.  Talking about the wellbeing of businesses (even “small” ones) rather than people is an elitist thing to do because many “small” businesses are owned by rich elites and this measure ignores the vast majority of Americans who work for a large organization.

Politicians love to lionize small businesses, because they are elitist and spend much of their time rubbing shoulders with elite business owners.  Why should we valorize the wellbeing of business owners above the wellbeing of their employees?  The two parties cannot be judged as to whether they help “small businesses” because we cannot define “small business” in a way that is meaningful for measuring the wellbeing of people.  Given the rising GDP statistics during the last couple years, it is likely that small businesses have been pretty profitable (yea), but that has not helped the unemployed nor the median American (boo).  Business welfare has been great.  The problem is that American businesses have not been serving the American people as well as they usually do.  The profits have not trickled down to boost wages nor employment.

That is why businesses don’t matter.  People matter.

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