The Economist: Big is Black Ink

The Economist has an article that argues that Big is Back as very large corporates weather the economic downturn [with help from their ‘too big to fail’ friends] much better than small businesses. And instead of offering a treacle on Big is Better, the Economist splits the difference and in good centrist fashion finds virtue in having both big and small business flourishing. The problem is that small business is not.And for the past 30 years small business has been the driver of  new jobs in the economy.

However, since the early 1990’s despite the PC and Web booms, the trend against small businesses [500 or less employees] in the US had already turned. Small businesses  declined from close to 55% of employment  in 1990 to less than 50% in employment in 2004 [see Table 2c here for the US Government data].  And the Wall Street Journal in its Weekend Aug 29-30th edition   has an article, Halting Recovery Divides America in Two, which posits that Big is Better in an Economic Battering like the past two years.  The article cites  the fact that small businesses see access to credit as either unavailable or sparse and at much more onerous terms. Thus, double the number of small businesses  saw their access to capital become more difficult in the recession.

From a populist President mired in the trench warfare that is Health Care Reform, this trend against the engine of employment – Small Business – cannot be  welcome. Everybody and her neighbor is citing the Jobless recovery. What the Wall Street Journal did was put some numbers on it – and the Financial sector, already pariahs for their instrumental role in the current downturn come up smelling Bog Awful again.

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