Saw this article at the Washington Post today (I know, not the most economy savvy publication). It discusses the reason why small businesses are dying out, placing the blame on the Reagan administration's loosening of anti-trust legislation. What do you think?
The article is here: http://www.washingtonpost.com/wp-dyn/content/article/2010/02/19/AR2010021902043.html?sid=ST2010021903983&sub=AR
Good.
scineram: Good.
Great.
Democracy means the opportunity to be everyone's slave.—Karl Kraus.
Why am I reminded of the South Park episode where Starbucks replaced the local coffeehouses?
My problem is that the article appears to say that more anti-trust legislation is needed, which is my mind does not signify a free market. I guess the reason I posted this was to get everyone's opinion on how a libertarian free market, sans government intervention, would prevent large companies from flooding the market and destroying small business.
I'm not so much talking about monopoly, so much as a corporate monopoly. For example, if all anti-trust legislation is repealed from the markets could Wal-Mart, Target, and Costco just move in and saturate the markets, causing small businesses to disappear?
ashleycsmith85:I guess the reason I posted this was to get everyone's opinion on how a libertarian free market, sans government intervention, would prevent large companies from flooding the market and destroying small business.
Without government protection, I find it hard to visualize how companies would get large enough to threaten anything even close to monopoly.
Byzantine: Workplace regulations and taxation impose huge barriers to entry for small business, so only those businesses large enough to spread the government-imposed costs among many consumers will end up surviving.
Workplace regulations and taxation impose huge barriers to entry for small business, so only those businesses large enough to spread the government-imposed costs among many consumers will end up surviving.
I think that is a good point. We see that locally, with the number of steps and start-up regulations it takes to start and maintain a small business. Government-imposed employee healthcare and wage regulations don't help either. And without the regulations I guess people could go back to starting small businesses in their homes, which would save costs as well.
ashleycsmith85:What do you think?
Do you have about 50 minutes to watch this video:
Israel Kirzner (still alive) may be the greatest living economist in this particular field. Here is a lecture from 1988.
DD5: ashleycsmith85:What do you think? Do you have about 50 minutes to watch this video: COMPETITION AND ENTREPRENEURSHIP Israel Kirzner (still alive) may be the greatest living economist in this particular field. Here is a lecture from 1988.
I'll make time.
I find it interesting that the article mentions Luxembourg to be the only country lower than United States in terms of ranking of small business ownership.
Luxembourg...easily among the top three richest nations in the world is somehow an example of poor economic policy? In a capital-intensive economy like Luxembourg, the output is so high, that each Luxembourger produces between $80,000 and $90,000 worth of services. It's one of the highest per capita incomes in the world. In their society of large diversified banking corporations, the increased generation of capital allows for every Luxembourger to earn more and have a higher standard of living than the typical owner of an Italian small business, like a premium violin maker who spends huge amounts of money to procure all materials for his violin, personally handcrafts each one of them for a lengthy period of time, pays a musical instrument marketing agency to help him find buyers for his violins through their sales catalogues, manages to sell them for a million dollars apiece, and pockets only whatever he can keep after all those expenses and putting in a huge amount of money to meet working capital requirements.
My parents are small business owners. The choice is largely out of passion; they don't like working for someone else, and they like the independence. BUT, being a small business owner means that you cut down heavily on all personal expenses and live on very little while ploughing as much money possible into your business. You then reinvest most of what you earn and only pay yourself a modest salary out of that business. Their business earns $400,000 a year in sales, but they pay themselves $16,800 as salary. They refuse to ask for outside financing, because outsiders would demand major structural changes in their business. Again, my parents love it, but understand that the rest of society gains more from joining a large corporation with more capital that thus produces more for those people and helps those people earn more. Apple earns $230,000 per worker; this large corporation arrangement is disadvantageous to whom?
I know that small businesses are considered the heroes and underdog champions of free market capitalist society, but at some point, someone was foolish enough to confuse what is good for competitors for what is good for competition, and an equal and "fair" playing field for a free playing field. I am sorry; all those big bureaucratised businesses are an inevitable part of free society, because free society demands goods that come from large projects with large capital requirements.
Liberty is not equality.
Prateek Sanjay: I know that small businesses are considered the heroes and underdog champions of free market capitalist society, but at some point, someone was foolish enough to confuse what is good for competitors for what is good for competition, and an equal and "fair" playing field for a free playing field. I am sorry; all those big bureaucratised businesses are an inevitable part of free society, because free society demands goods that come from large projects with large capital requirements. Liberty is not equality.
I definitely get your point and I wholeheartedly support a free playing feel, despite what the outcomes of that are. If small businesses can't compete and can't offer competitive prices, I will support the business that does offer me competitive prices. Of course, being free, I'll also base where I shop on customer service and other subjective reasons.
I also think that many of those big businesses, once government subsidies of certain industries are removed, will not do as well as they do now and that small businesses, like your parents', will be much more profitable when they are not dealing with wage laws, healthcare requirements, taxes, zoning laws, state inspections, etc.
It seems, from everything I have read, that in a completely free market we are likely to still have those big corporate businesses (which is good, and necessary), but that the balance between big and small business will be regulated by the market and not government bureaucrats.
Small businesses are dying off for a plethora of reasons. For example, the U.S. government pretty much just made it illegal for small businesses to make toys, in essence making it illegal to be a small business toys producer. It has nothing to do with anti-trust legislation.
At most, I think only 5% of the adult population would need to stop cooperating to have real change.
DD5:Do you have about 50 minutes to watch this video:
Wow. That's the first lecture I've listened to from Kirzner. As a result, look at my signature, below. Thanks, DD5.
"The market is a process." - Ludwig von Mises, as related by Israel Kirzner. "Capital formation is a beautiful thing" - Chloe732.