Answering the Question, "How Would Small Businesses Work Under Socialism?"
And important clarifications on the limited role small businesses play in the American economy.
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Small businesses are an American favorite. Capitalist ideologues, anti-Corporate Lefties, and even non-political people love the idea of an enterprising citizen rolling up their sleeves and building something from nothing. “Shop local” signs and stickers decorate every small town, and politicians of both parties make great use of slogans like “Save Main Street, not Wall Street.” (Though they routinely act on behalf of the latter.)
Thanks to the universal fondness for mom-and-pop shops, those who wish to uphold Capitalism use small businesses as a shield, claiming increased labor protections or higher tax rates are attacks on your local bakery. To refute this deceitful tactic, as well as depict the role local businesses would play in a Socialist economy, it’s important to understand the role small businesses play in the American economy.
Dispute will ensue, as there is no agreed-upon definition of “small” or “business.” (I’ve never considered this Substack a “business,” yet it qualifies as one.) For example, this Forbes article provides a plethora of small business stats, but never defines “small business.”
For clarity, here are the definitions I use:
Small business (1 - 20 employees)
Medium business (20 - 99 employees)
Large business (+100 employees)
Despite the exaggerated praise they receive, the reality is that our economy is NOT comprised of small businesses. Only 18% of American workers work for a company with 20 or fewer employees. America is the nucleus of global Capitalism. Our dollar is the benchmark for all other currencies. This isn’t because we have an economy of 30 million small-town sporting goods stores, but because our laissez-faire politics provides fertile ground for international Capital to grow, unhindered by labor unions and environmental protections. We can see this in the below graph, which shows the strong relationship between American GDP and the performance of S&P 500 companies. Big businesses steer our economy. No such relationship exists for small businesses.
This is all to say that small businesses receive an undue amount of attention in political discourse. They don’t employ a big percentage of the workforce, they routinely fail (50% close by the fifth year of operation), and even when they succeed, profits are thin. So, while it would still benefit Socialist societies to enable ways for small businesses to exist, it is crucial to remember that despite the inflated role they are purported to have, small businesses are relatively insignificant in the American economy.
How Would Small Businesses Work in Socialism?
Put simply, Socialism is economic democracy — if your life is impacted by a business or industry, you should get an equal say in how it runs. And while manifesting this principle en masse would require the nationalization of many large corporations, I still recognize the benefits of local enterprise.
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