Thursday, January 21, 2010


The Evolution of Small to Large:

We’re all aware of how booming Small Business sectors of capitalistic countries have traditionally accounted largely for a society’s socio-economical growth. Here in the U.S., the living standards (poor eating habits, gas guzzling SUV’s, overpriced designer clothes), we enjoy today would not be as accessible be it not for the volume of the small-scale innovation that lead to huge ideas, technological advancements, and employment opportunities created, affording Americans to (hoard), I mean consume the goods and services we covet on a daily basis (you know, the crap you just bought off that infomercial). Over time, consumers in a free market economy demanded more convenience (7-elevens on every corner) and affordability (buy one snuggie get one free bogus incentives you always fall for), forcing the smaller less efficient firms to evolve – (merge or die), resulting in the monopolistic type firms we now refer to as “big business”. (That in addition to the fact small businesses can’t survive just because they think a computer and a desk gives them the right to compete with billion dollar organizations!) LOL (NOTE: This obviously excludes massage parlors, nail shops and if you live in LA, medical marijuana clinics...dude.)

The Problem:

The discussion today, seriously, is whether small businesses are sustainable in a capitalistic world of “corporatocracy” (<- this is where you Google the wiki definition), where big businesses are considered to have almost absolute power of consumer purchases via their government relationships… and why are they allowed to utilize such blatant practices during economic turmoil where small business growth and competition are vital to economic recovery?

Fact or Fiction?

With strong financial backing from private & public offerings to investors, (you’re familiar with Bank of Madoff, yes?), large companies have easy access to capital, the main advantage they have over small businesses, gaining greater market share. How do capital and market share equate to power you ask? Simple... (duhh) Spend one day watching political news segments and you’ll hear mention of fully-funded lobbyists groups with big business interests as an utmost priority. Thus, the public has in inherent implication of bureaucracy aiding and abetting big business interests. But who’s really to blame for this common day practice??? (Osama Bin Laden maybe?)

Here is a classical economical outlook on this issue found at the Ludwig Von Mises Institute Literature database:

“Bureaucratic management as such is not an evil. It is the only method available for the administration of the proper affairs of government. The public servants would become irresponsible despots if they were not obliged to behave in the conduct of the affairs entrusted them precisely in the way the authorities, the office holders elected by the people, order them to behave. But bureaucratism turns into a nuisance if it invades the conduct of profit-seeking business and induces it to substitute the business principle "serve the customer" for the bureaucratic principle "comply with the regulations and instructions."

What makes big business adopt in some regards bureaucratic methods is not its size but the policies practiced today of government interference with business. As conditions are today it is more profitable for a concern to be on good personal terms with men in the various government agencies that are harassing business than to improve the services it renders to the consumers. The main problem for many enterprises is how to avoid as much as possible the animosity of officeholders. Men who for some reasons are not popular with the ruling party are considered unfit to manage the affairs of a company. Former employees of government agencies are hired by business, not on account of their abilities but on account of their connections.

The boards of directors find it necessary to spend large sums out of the shareholders' property for purposes that have no relation to the company's business and do not yield anything for it but popularity with the administration and the party in power. In considering changes in production and marketing, the first question is often: "How will this move affect our "public relations'?" Big business is fully aware of the fact that the authorities have the power to harm it by proceeding further in the discriminatory methods of taxation and in many other regards. Big business is the main target in the undisguised war that government is waging against private enterprise.”

- Small & Big Business - Paper presented at the 1961 (Turin, Italy) meeting of the Mont P?lerin Society.

Though the above excerpt eloquently makes the same arguments as those held by classical economists Max Weber, Robert Michels, Karl Marx and Michel Crozier (a bunch of dead smart guys) that bureaucracy was essential to the role of efficient management of big business under proper conditions, it also exposes who’s really to blame for this historical practice we call lobbying today: government officials (surprise...NOT!). What once was a system intended to efficiently ensure compliance for big business under Classical Management Theory evolved into government corruption. Basically, the government fat cats were the ones who ran the show, dictating the benefits and/or penalties (bogus PR media coverage, tax hikes, and maybe afterschool detention lol) should big business not fall in line and allocate the payroll to include certain individuals.

In conclusion, we look to our favorite economist for advice:


Even though Adam Smith would be proud capitalism reached the heights of Wal-Mart, he would never have expected to see the day when “the snake oil salesmen” have their products sold on a mass-scale with the help of the government. Meaning that, as much as small businesses aspire to flourish during economic turmoil and create quality products, survival will be extremely difficult because of competition with cheap (and extremely useless)products consumers demand (continue to waste money on) and their limited marketing budgets (lack of money for government payoffs!).

“The proposal of any new law or regulation which comes from [businessmen], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”

- Adam Smith, An Inquiry into the Nature and Cause of the Wealth of Nations,
vol. 1, pt. xi, p.10 (1776)

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