SMALL BUSINESS ISN'T ASHAMED OF ITSELF

"Capitalism's Other Side "
Fred P. Hochberg

Andy Grove, the founder of Intel, summed up the mood of recent weeks when he said he is "embarrassed and ashamed" to be a corporate executive in America today.

Like so many other great successes, Intel was nurtured in its early years by an economic system that encourages innovation and entrepreneurship, and was helped by institutions like the Small Business Administration. The company grew into an example of American ingenuity.

Historically, America's small business owners have always focused on fundamentals. They concentrate on creating something of value, generating jobs and profits in the process. At the heart of the current corporate quagmire is a departure from these principles.

Driven by the perceived imperatives of the stock market, many corporations have skewed their priorities. Meeting quarterly earnings projections has become more important for them than building long-term shareholder value. .

The result can be seen in the implosion of giant corporations, thousands of layoffs and evaporating retirement savings. This spectacle has cast a pall not only over corporate America but also over the entire American brand of free market capitalism.

Despite the pessimism at home and abroad, most American corporations are above-board in running their businesses and recording their bottom lines. But more important, it's just not true that as big corporations go, so goes the American economy.

During the 1990s, more than 80 percent of the net gain in new jobs was created not by corporate giants but by small companies involved in a range of businesses far broader than the dot-coms. By the end of the decade, nearly half of the work force was employed in small businesses. Their efforts powered the record economic growth of the 1990s.

Government and business leaders from around the world come to America to learn how we nurture and sustain small entrepreneurs. But we are not doing nearly enough to show the world this side of American capitalism.

The Bush administration removed the Small Business Administration from the cabinet and proposed cutting its funding by more than 20 percent. Worse, it aims to reduce its lending capacity by half. This year $9.4 billion is available for small business loans guaranteed by the agency. For next year the administration is proposing a level of less than $5 billion. At a minimum, the administration should restore or even increase the agency's lending capacity.

At a time of shaken confidence in American business, the administration should also work to put the small business model at the heart of America's global economic message. It should invest more resources to encourage the growth of small businesses in the developing world through micro-lending institutions. Micro-lending gives people the opportunity to improve their lives and become stakeholders in their societies. It nurtures the fundamental values of democracy.

Businesses based on jobs and profit, not the gambles of the stock market, are the real foundation of American capitalism. I have never heard small business owners say they were embarrassed by what they do. They are rightfully proud of the enterprises they have built.

The writer was deputy administrator and acting administrator of the U.S. Small Business Administration from 1998 to 2001. He contributed this comment to The New York Times.

Byron Kennard, Executive Director
The Center for Small Business and the Environment
P.O. Box 53127
Washington, DC 20009

(Phone) 202.332-6875
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