"What about the Small Business Owner?"

"What about the Small Business Owner?"

If you've ever heard any of the socialist critiques of capitalism, they all tend to be centered around problems caused by giant, multi-national corporations. Problems like the constant transfer of wealth from the people doing all of the labor into the hands of a small number of capitalists who do nothing but own the business. The old union quote by Big Bill Haywood sums up this problem quite nicely:

"The mine owners did not find the gold, they did not mine the gold, they did not mill the gold, but by some weird alchemy all the gold belonged to them!"

But capitalism isn't just giant corporations, you might be thinking. What about all of the good that small businesses do for their community and local economy? Small business owners don't just sit back and collect an income while all the employees do the work, small business owners are the ones who usually work harder than everyone else! If the problems with capitalism are caused by big businesses, then why not just incentivize more small businesses instead?

It's true that a lot of socialists will gloss over these points in order to simply their arguments down to workers vs. owners, but it is true that the small business owner usually belongs to both groups. And it is true that there are some things that are preferable about small businesses compared to large businesses. So lets answer the question here, "what about small businesses?"

To answer this, lets take a step back and talk about what the benefits of capitalist organizing principles are. The general sales pitch for capitalism is that when you leave the management of production up to the competition of the free market, that competition will make sure scarce resources are allocated as efficiently as possible toward the people who will use them most efficiently. After all, you don't want to send all of your lumber to the guy who takes an entire tree to make a single chair. This competition drives innovation because everyone is searching for the best techniques to use raw materials as efficiently as possible so that they can provide quality goods at lower costs than anyone else, and therefore win more profits than any of their competitors. All of these things are true, and they certainly are benefits to capitalism which are responsible for a lot of innovation that makes our modern economy so advanced and capable of producing tremendous wealth with relatively small inputs of labor and raw material compared to earlier points in our history. It would be incorrect to say that capitalism is responsible for all of our modern innovations, some of our greatest minds produced earth shattering developments that revolutionized entire industries, such as Thomas Salk and Albert Einstein, without the profit motive or free market competition factoring into their work whatsoever. But even though there are many who are simply driven by the innately human pursuit of knowledge, it's highly unlikely that we would develop mechanized production without the forces of capitalism at play.

But those forces only work so long as there is competition driving them forward. The problem we run into with capitalism is that competitions eventually have winners. Your reward for winning in the market place is that you get to have a larger market share, and the losers either need to adapt to keep up, or their business fails and they exit the marketplace. This is fine as long as new competitors keep entering the marketplace, but as technology develops business continues to become more and more dominated by large scale production, and that large scale production requires buy-in that becomes more and more expensive as the state-of-the-art production techniques requires investment in large factories, expensive tools, assembly lines, and automation.

So think of how many industries it's actually possible for new competition to break into. In early capitalism, competition was plentiful because all that was required for you to enter into an industry was a few hand tools and some practical knowledge. If you wanted to get into glass making, you only needed to apprentice for a few months to get the knowledge necessary, buy a few hand tools and a furnace and you were ready for business. But imagine trying to breaking into the market as an automobile manufacturer in this way. It simply isn't possible unless you already have millions of dollars of start-up capital to build a factory that can make cars that people want to buy.

So to answer the question "what about small businesses," the problem with trying to use small businesses to answer the problems created by big business is that the more capitalism develops, the fewer industries you have where small businesses are a viable competitor. You see this happening everywhere. The entire time I've been growing up I've been reading news stories about how every time Walmart opens up a store in a new area, dozens of small businesses go out of business within a few months because they just can't compete with the efficiency that a large corporation is capable of. And the result is that when all of those small businesses close, all of the good paying jobs that they provided also disappear, and all the money that was previously spent at those businesses that used to stay in the community and circulate through local commerce now instead gets spent at Walmart, and that money slowly gets siphoned out of the community and into the pockets of Walmart's owners and shareholders.

As the barrier to entry for most industries keeps getting higher and higher, it becomes harder and harder for anyone start up new businesses in those industries. So the more capitalism develops, more competition gets pushed out of the market and less competition is available to take its place.

So think about the industries where small businesses are actually still able to compete in. Plumbers, electricians, and contractors are a good example, but what these things all have in common is that they have relatively low buy-ins. All you need is a bag of tools and enough experience to do the job well. Less common but still somewhat prevalent is boutique stores, or businesses that revolve mostly around service like family owned restaurants. The buy-in for these businesses is a bit higher because you need to pay for the retail space, and most of these businesses struggle to keep up with the franchise stores they compete with and these businesses commonly fail within the first year. But for any of the major industries, break-in by new competitors is incredibly rare. The only new competition in the automobile industry in the past few decades has been Tesla, and in order to enter that market Elon needed to already have wealth from his family's apartheid emerald mines and investment in financial businesses like PayPal. Sure, you could say that he made smart investments and that's why he was able to afford the start-up capital, but that still doesn't change the fact that entering into that industry as a competitor is only available to those wealthy enough to afford the buy-in. That's a very small group of people, and those aren't exactly great conditions for a system that works best when competition is plentiful.

The same is true for industries like agriculture, construction, pharmaceuticals, travel, aviation, telecommunications, satellite communications, distribution, and pretty much all commodity production.

Small business can't be the solution to all of these industries, because the more capitalism develops, the further away we get from the conditions of early capitalism where large numbers of handicraft producers were all competing with each other, and the more production becomes dominated by large scale enterprises.

When socialists propose that we stop organizing our economy around principles of competition and instead organize our economy principles of cooperation, the reality is that most industry already organized around large numbers of people cooperating so that the business succeeds. That's what corporations are. We already have large segments of production organized through central planning instead of free market competition. The only difference is that right now, corporations like Amazon are the ones organizing our economy, and they are organizing it in whichever way maximizes profits for the do-nothing owners and shareholders who get to hoard all the fruits of their employees labor. Socialists merely propose that we organize these large businesses that we all participate in democratically, and organize production primarily around satisfying the interests of the people who are doing the work rather than organizing production around satisfying the interests of a small number of capitalists.

Organizing our economy around competition makes some amount of sense when commodities are scarce and you only want those resources to go to those who will use them most efficiently. But our society has advanced so far that scarcity is almost a thing of the past, and could be eliminated in most areas of our life if we would only work towards achieving that goal. But capitalism is holding that progress back because capitalism needs to leverage scarcity to create profits. You see this in all sorts of ways, from industries shifting away from creating durable goods that only need to be bought once towards designing things with planned obsolescence in mind, which creates scarcity by making sure supply keeps getting disposed of as products break down so that they need to be replaced. You see this in the housing market, where millions of people are homeless despite the fact that there are tens of millions of vacant homes that are only being withheld from the market by property managers and property speculators because creating an artificial scarcity in housing allows them to sell at much higher prices.

We currently have the technology to automate some of the most tedious, unfulfilling jobs, and therefore create the same standard of living with far less labor, therefore freeing up that human potential for pursuits that are far more fulfilling and far more valuable than bagging groceries or working as a cashier. But under capitalism, we are afraid of that automation because it will eliminate millions of jobs, and capitalism only gives you access to your means of survival if you're either independently wealthy, or if you're creating value for a capitalist who gets to act as a gatekeeper between the masses and their means of subsistence.

Small business can't fix these problems, and we shouldn't want roll back the clock to a time where small businesses were viable. We should celebrate the advances we've made as a society, we should embrace the large scale industry that allows us to provide such a high standard of living for so many people. We just shouldn't let our labor be organized by a small number of tyrants of industry who only have the interests of themselves and their shareholders in mind. We need to organize production around serving the interests of the people who actually do all of the work that makes the economy function. The only way we advance our mutual interests against a system that exploits our labor for the profits of a tiny segment of society is by organizing together, demanding our fair share, and organizing our economy around principles of cooperation and democracy.