Yves here. This post by Richard Murphy makes an important and often overlooked point: the roles played by small and large businesses are very different, and that has policy implications. But I have a question about the passing comment about small businesses, that they were founded because the founder wanted to make a lot of money.
Even in my limited circle, selfish motives were often not the driver of starting a new job. Many middle managers and professionals end up in an untenable situation, such as the acquisition of their employers (soon or they will be fired; the employees of the target are considered wrong), having a new employer who prioritizes. the employee considers you to be misguided or unethical; or you have to move to keep the job. Mid-level workers often have limited job opportunities elsewhere in the industry (there simply aren’t many comparable places and often not in the employers that are acceptable when the worker wants to jump). So if they have identified a need that is not well served in their industry, that may serve as a basis for starting a niche business (in fact, business research has found that this type of business has a higher probability of success).
By Richard Murphy, part-time Professor of Accounting Practice at Sheffield University Management School, director of the Corporate Accountability Network, member of Finance for the Future LLP, and director of Tax Research LLP. Originally published on Fund the Future
Pretending there are almost any similarities between small and large businesses is absurd. Small businesses must help us, or they fail. Big business is trying to get us into debt to make sure they keep growing. We need to rethink what we think about the private sector – and what parts of it we want to develop.
This is the audio version of this video:
And this is the transcript:
Large businesses and small businesses are not the same. They may resemble chalk and cheese in all their similarities. It seems that many people do not understand that. In particular, many politicians do not understand that, and neither do many journalists. But it is really important that this difference is understood because if there is this confusion, which thinks that big businesses are small businesses that are bigger, then we are in a big problem when it comes to economic policy.
Small businesses have completely different characteristics from large businesses that are household brand names.
Small businesses are doing something useful in the beginning. They can only survive because they provide a product or service that someone actually wants to buy. And I rather emphasize that point.
Generally, they do not produce a product market. Instead they meet a need. Therefore, a lot of small businesses in the service sector are doing things that people genuinely want. They are plumbers, they are builders, they are electricians, they are decorators, they are people who provide personal services of various kinds, from chiropodists to home tutors to all kinds of things like that.
Those businesses are run by people who work creatively, artisans, experts in their field, who know how to do something better than anyone who buys their services can hope to achieve. That’s their raison d’etre – their reason for being – their niche, which gives them the opportunity to earn more money than they would otherwise. That’s why people take the risk of going freelance in the first place, because, don’t get me wrong here, it’s hard to be self-employed, and it involves more risk than being employed.
So those businesses are really important.
Some of them are also growing. They tend to recruit others who want to work for them, but they still meet the same broad criteria of providing a service that someone wants and knows they want without being prompted to feel the need to buy.
The advertising done by these businesses reflects that. They’re not there saying, we’ve got this new product, whatever it is – a new dog leash or whatever they’ve come up with. No, what they’re really doing is offering something that already exists and all they’re doing when they’re advertising is making people aware of their availability to do whatever they’re good at.
Let’s compare that to many large businesses. Large businesses are completely different from small businesses because basically, unlike a small business, which is part of the market it belongs to, a large business wants to control, exploit, and even create its own market. .
A prime example is Apple. Apple wanted, from the beginning of its existence, to create a market for the PC that had never existed before, then it expanded into iPods into iPhones and Apple Music and all kinds of things, but it created a market that never existed before .
There were similar companies in previous generations. Hoover was an example. Most common was the idea that the Hoover was something new and familiar that everyone wanted so we could all see what a hoover was even though it might not be made by the Hoover company.
And that’s what a great company does. It tries to create a niche that did not exist before and by protecting what it does through the use of intellectual property law of patents and copyrights etc. It creates a place for itself where it can make what is called the most common profit.
Gross profit means that it is a measure of profit over and above what would be earned by a typical company that participated in the market rather than creating the market.
Now, these big companies, because they can manipulate the markets, make the markets, and use the markets, they tend to make a lot of profit. And because of that, they do something very different for small businesses. They grow very fast.
Small businesses tend to plateau and stop. And there are good reasons for that. Usually, they only have a defined area where they can work. Or, they are run by one, two, or three people or so. And they are reaching the limit of their management power, and they don’t want to expand because of it. They are happy. Small businesses are satisfying.
Big business is not satisfied. Big businesses always want more. Most of the world’s problems are down to big business wanting more.
The exploitation of the planet is largely dependent on that one goal of big business.
The exploitation of people also, in time, was for the same reason. Big business wanted more profits, and they got it by suppressing terms and conditions, wages, labor rights, vacation pay rights, pension rights, sick pay, and everything else they could.
And that continues. You can even see it now. Labor is proposing new employment laws, which I welcome. One of the few things it does well. And those employment laws are being challenged by big business as a fundamental threat to their right to work as they wish. It is their right, in other words, to make a profit at the expense of the people they employ.
Now, you can target these companies. I have already mentioned one. But there are also supermarket brands, and there are also sports brands.
So, for example, at one time, everyone participated in a football league, and they were the same organizations. I’m old enough to remember when Ipswich Town won the Premiership. It was called that at the time. But they were no ordinary company that wanted to exploit their situation to increase their profits. It was just a local club.
Now we have great products. Chelsea, Manchester City, Manchester United – although it is dirty on the pitch – and some Liverpool, for example, and of course, the likes of them all over Europe and beyond – they exploit their brand to make an extraordinary profit by selling merchandise and everything under the sun, creating markets for things we didn’t know we needed. Shirts with numbers and names on the back, for example. This is what big businesses do. The cost to all of us was great.
Because let’s also clarify what great businessmen do. Small business loans for finance. And frankly, many small business owners hate their banks. I don’t want to exaggerate, but I have never met someone who has a good relationship with their bank. They all tend to hate them because of their service, their expenses, their refusal to lend, and everything else.
Big business, instead, works hand in hand with finance to keep us in debt. A small business doesn’t do that; It doesn’t usually provide funding to go along with what it does. But big business. And the reason why, is that they want us to keep coming back for more whether we can afford it or not so they give us credit. And the credit they give us means they work with finance to keep us in good standing as creditors.
And as debtors, we are visible in the system. We will not risk losing our jobs because we will not be able to pay what we owe. So we cannot argue with our employers. And we need to continue to service their system. Their system, which continues to grow because of that, obviously, even though we know that the world cannot support that growth over time.
Big business and finance, which is a small group of big business, deliberately set out to exploit us by giving out loans that many people can’t afford – as we know very well what happened during the recent cost of living crisis. – those who are united are so different from small businesses that it is ridiculous to say that they are part of the same private sector economy where they are all combined.
The three segments I have identified now – small business, large business and finance – are completely different. But if you are going to combine any of them, big business and finance.
They work to exploit, create new markets, and ultimately destroy our planet in time. Although a small business is a business, it takes risks, incurs potential losses, and meets the needs.
One of those fields, and only one of them, is of great benefit to our society. Big business doesn’t exist.
When it comes down to it, most things that big businesses can do can be done by small businesses and maybe even better. We no longer need to innovate to destroy the planet.
We don’t have to be in debt to the extent that we are. We can have lower housing prices, for example. And we can have smaller cars, and we’ll still get from A to B as well. Therefore, we can have small car loans.
We couldn’t eat more of the planet and get better.
We can reduce our energy consumption, otherwise it would upset those big companies in that big business sector who want us to use more, not less.
We can take steps to change.
Small businesses are part of that sustainable future.
I wonder if they are big businesses. Because big business doesn’t work for our benefit, and often, small businesses do.
And in general, small businesses can do many things that big businesses do just as well, if not better, because they tend to innovate more than big companies actually because one thing big companies don’t want to innovate because that threatens their market control, that’s why they buy a lot of their smaller competitors to kill them their products.
It is time to rethink what the private sector is. There is a private sector that we want and that we must preserve and that we must nurture. That is not what Keir Starmer is trying to promote in the UK. It is not a market focused on the City of London. That’s what’s down on your High Street or out in your local industrial estate. That’s what should encourage you. And he doesn’t do that. And the cost to all of us may be greater as a result.
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