Monday, April 5, 2010

Business Community

Synonyms: Entrepreneurs, The "Holy" 18

Categories: Euphemism, Rationalisation

Definition: The term "business community" is a term often used by political pundits or the advocates of corporate influence in order to put an acceptable face on their ideology of plutocratic patronage. By misidentifying the "business community" at large with the sympathetic figure of the lone, poorly capitalized entrepreneur risking everything on his American Dream, these unscrupulous actors promote policies which actually undermine the interests of the true small entrepeneur and, in effect, pervert some of our most cherished ideals like "competition" and "free enterprise".

We should have every sympathy for the struggle of the independent small business person, and do everything we can to make sure that we as a society provide as level playing field as possible. That is the American way. But that requires us first to truly understand the power dynamic currently prevailing in the real "business community".

"Where Will The Jobs Come From?" is a recent economic survey of the employment environment published by the Ewing Marion Kauffman Foundation, a $2 billion organization whose mission is to promote entrepreneurship.1 While the report clearly emphasizes the importance of the small start-up to innovation, the report also notes that, as of 2006, the traditional wisdom that about half of all employment comes from small businesses is somewhat misleading. Misleading because what it fails to say is that larger businesses (traditionally defined as companies with 500 or more employers), employ the other half of the American workforce and comprise only 0.3% of all employer firms. 2

Figures within the Kauffman report seem to reflect that power of a relative handful of large firms is increasing at a disproportionate rate. While comprising a mere 0.3% of all emloyer firms in 2006, they accounted for approximately 22 percent of net job creation in 2007.3

The significance of this trend seems magnified when one considers that, according to Kauffman's reckoning, " . . . most young firms will tend to be small; very few grow to enormous size in their first three years of existence, "4 and that, ". . . roughly a third close by their second year in existence, while half will make it to age five."5 The obvious implication: the long-term job creation effect of small firms is very likely ephemeral in comparison to the effect of the large firms.

Yet even this analysis may understate the out-sized impact of these very few powerful firms. Kauffman does not present a specific estimate, but does generally acknowledge the skewing effect of large firm power on data.6 It is unclear how, if at all, it has reflected the direct control of small subsidiary companies within larger corporate groups in this dataset.7

The nature and extent of indirect control exerted by larger firms over small firms in their day-to-day dealings is the subject of many different analyses, although it is given only the most cursory treatment within the present Kauffman report. Estimates vary widely and the sophistication of methodology required to fully analyze even a small sample of them would be well beyond the scope I have set for this definition. But there can be little doubt that the influence of these large firms is out of all proportion to their number. It strains credulity to believe that there would be a properly level playing field in an analogous population of 6,000 persons where a mere 18 of them control at least half of the available resources.8

How robust could the principle of 'one person one vote' really be in a nation where the wealthiest 0.3% control at least as many resources of the other 99.7%? Those numbers seem much more characteristic of a banana republic than the world's great democracy. In such an environment, is it realistic to suppose that there could be truly free enterprise or that an individual can have a meaningful 'vote with his dollar'?

Etymology: Precise origin unknown. Variation of a persistent rhetorical schema whereby patricians attempt to manipulate populist themes (e.g., the aristocratic military dictator Julius Caesar's leadership of the populares party).

1 ;

2, Table 1
3 ibid, Figure 5

4 ibid, Page 6

5 ibid, Page 5

6 ibid, Page 11

7 ibid, Page 10

8 This seems to actually be the case in the U.S. with regard to employment. The 0.3% of employer firms discussed by Kauffman at the linked within fn2 totalled ~18,000--out of a grand total of ~6,022,000. Additional supporting data from "us_6digitnaics_2006.xls" at , top row indicating total number of employer firms.

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