The Importance of Small Businesses in a Free Market Society

‘An economy is nothing more than the sum of its businesses’

Businesses in America provide an essential role to the rest of society; that is, they provide value, and therefore create wealth. Businesses are the cornerstone to our economic system, and that is why it is of utmost importance to promote and incentivize business creation and growth. This is one of the reasons that economists began to measure GDP to see how businesses were performing, why governments created tax breaks for entrepreneurs, and so on. Businesses are important to the economy, and the most important sect of businesses as a whole are small businesses, both to their communities and their nation.

There are countless reasons why small businesses are important, especially to a free-market economy. Because we don’t have all day, however, we will only go over just a few reasons. First and foremost, small businesses offer greater competition in any market they enter into, and therefore increase standards of living in a society. In a true free market, there is financial incentive for small businesses to prop themselves up into any sect of the economy which lacks an adequate supply of competition in regards to consumer demand. Second, they offer jobs to a community, which both betters the life of those who would have otherwise been unemployed and increases its credibility and overall image in the eyes of its current, future, and potential customers.  Third, and most importantly, they do not operate as a large corporation. Small businesses have people to answer to the next day, a communal image to upkeep, whereas a corporation does not; at least, not to the extent of the small business. While these three reasons are simple and easy to explain, we should still go through the trouble of further understanding them and why they are important enough to be discussed here.

Greater competition is always good for the consumer. Competition between firms lowers prices for different commodities, makes the dollar more valuable in terms of American products, and increases standards of living for everyone involved. Why are these statements true of competition? They are true because companies who offer the same product to a consumer base must compete with each other on the open market in order to sell their product, thus creating revenue for their company. After all, items cannot collect revenue on a shelf; they only collect dust. Moving on to what I’m calling competitive deflation, because products are cheaper in the wake of increased competition, dollars are now more valuable than they were before. You can buy more of a product for the same amount, or even a lesser amount, than you could before competition. Competitive deflation therefore leads to a higher standard of living for everyone; the businessman, the employer, the employee, and the ordinary consumer. The businessman, because competition has unequivocally helped him sell more products and better his image in the eyes of his community. The employer, because he can now afford to hire more employees with the money being saved by the company and higher revenues due to more products being sold. The employee, because increased competition for labor has ensued between competing small businesses, trying to out hire and drive each other out of business. Therefore, higher wages are being offered to current and potential workers. An argument can be made that employees benefit the most from free competition, along with the consumer, who now pays less for goods, whether they be normal, luxury, or inferior.

Small businesses offer a solution to unemployment that other entities are simply unable to offer themselves; a greater understanding of different communities. Small businesses often mold themselves to offer a commodity that their community needs or wants; in other words, demands. Small businesses will also hire and operate locally, meaning not only do they create an image for themselves in their community, but they also have people to answer to if things go wrong. Large companies have an image to uphold too, but the smaller details often matter more to smaller businesses. In short, small businesses will have a greater respect for what they do, even for the minutest of details. Small businesses often require more than simply labor from their employees, and therefore offer more than labor to their employees; they offer career experience, and introduce young men and women to the real world and show how honest people operate. This helps the youth in a community find what they are passionate about, and teaches them about hard work and attention to detail.

Small businesses are the solution to a stagnant national economy. When we promote the creation and growth of small businesses, we promote higher standards of living for entrepreneurs, employees, and consumers in a free market. More than that, we promote an economy that, in the long run, will experience a downward trend of unemployment, an upward trend of business growth, and a more valuable American dollar. It is not solely the rich who benefit from increased competition and a more valuable U.S. dollar, but rather the poor and impoverished, for now they can afford more goods, and possibly get a higher-paying job to raise themselves up from the poverty line. In fact, it is the poor and impoverished which competition helps the most. It is not greedy to promote business, nor is it taking advantage of the poor; on the contrary, it is trying to make life better for those who may have had it rough, and trying to help them turn their lives around. Small business is the savior of a free-market, and it is imperative that, as a free nation, we remember this fact.  

Author: Matthew White

Founder and editor-in-chief of The Everyday Republic.

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