SMALL IS NOT DANGEROUS

Small business as an antidote to big corporate scandals

When big businesses cook their books, they endanger us all. Given their immense size and power, there's a chance that if and when they fall, the entire economy feels the shock. Small businesses, thank Heaven, do not hold this kind of power. Unlike big businesses, small firms are decentralized, so when one fails, the lives of most people go on as usual.

Small businesses do fail every day by the thousands, but this loss is offset by the thousands of new small businesses that are started every day. So small business as a whole keeps on growing. There are now 23 million of them. In fact, small business now makes up one-half of the economy. Today, 51 percent of the private gross domestic product comes from small business. Forty-seven percent of all sales in the country are by small businesses. Fifty-three percent of the private non-farm workforce is employed by small business. Clearly, a business doesn't have to be big and centralized to be productive.

To top it off, we may have to call on small businesses to repair the damage that big business misconduct has inflicted on the economy. According to David Birch, president of the research firm Cognetics, Inc., small businesses play a crucial role in helping the economy recover from recessions. (Birch is the renowned economist whose 1979 book, The Job Generation Process, showed that small firms create most of the jobs.) "During the last two recessions in the 1980s and 1990s," Birch states, "we found that small firms do better in recessions than large firms. Large firms do massive layoffs; small firms adjust earlier and more quickly and actually create growth while large firms are collapsing. Small firms are good shock absorbers in recessionary times."

In short, the fact that half of the economy is decentralized provides a safety net for us all. And we are also protected by the potential of small businesses to heal the economy. What an antidote to corporate malfeasance!

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

Note: Small business still creates 75% of all new jobs