Size Does Matter
Lots of touchy-feely schadenfreude to be found at Ben Jones’ excellent Housing Bubble Blog and in the nooz emanating from the erstwhile federal capitol of the country. Lawmakers are just beginning to perceive that maybe they ought to do something about the mounting inventories of empty homes, homes in foreclosure, and mortgages going kaput.
As usual, the real news has something to do with what’s /not/ being talked about. For all the billions being tossed willy-nilly at Wall Street fat cats, at automakers who persistently ignored decades of market signals, and at the very people who created the financial mess we’re now wallowing in, there’s almost no talk whatsoever of changing the business environment to make it more friendly to (and more survivable by) the many small businesses in our country.
Fully 80% of the workers here in the great United Parking Lot of America work in enterprises of 20 employees or smaller. Don’t know how long that ratio has been standing, but I’d guess it was more like 95% as of 130 years ago.
A lot of business activity is collapsing right now. Much of it is in the field of these smaller businesses which nonetheless make up the bulk of the nation’s wage-earning power, even if those bosses-of-20 aren’t rich enough to fly their own private jets to DC to beg for money, and even if they don’t make the listings in the Googlethorp-Smurfburg Stock Index. Many of these smaller companies had lesser roles in niches that the bigger businesses just couldn’t get into or (more likely) didn’t care to. The most direct version of this type of dependent small business is the mom-and-pop greasy spoon across the street from the GM factory.
Ironically, the whole excuse for the massive (and growing) current bailout program is that we had to rescue the finance industry because (they said) without finance there is no business activity. But instead it seems that the larger banks are just treating the money as BAU funding (business as usual) and are putting it into executive compensation, scheduled performance bonuses, and the like. See the following for a story of BoA cutting off a business:
Kunstler makes it very clear in The Long Emergency that without the bounty of vast streams of FF energy, and without safe convenient cheap trans- and inter-continental shipping, any business activity as we know it will necessarily be of a much smaller and more modest scale.
Without meaning to get into the sort of nyaa-nyaa prophesy so common on the internets, I’d like to propose that we’re going to see an interesting conjunction of circumstances, and rather soon, that has some of the necessary preconditions for the resurgence of small local businesses being the dominant part of any local economic activity. Millions will be unemployed by the time this thing bottoms out. Within the same time frame, scores of businesses, large and small alike, will have collapsed. We are already familiar with how the large corporate stores have squeezed out most every other specialty store larger than a common liquor- or convenience-store. When those larger businesses collapse, and with them all their many satellite stores (particularly the grocery stores) what other businesses will be around to provide for the most basic of necessities?
Will there be any enterprising folks ready to sell hoes, rakes, shovels, buckets, and heirloom seeds for common vegetables? Do you have a local blacksmith/fabricator capable of making something like a woodstove using available scrap metal? What will these people accept as money in lieu of the by-then defunct or devalued paper currency now in circulation?
What about paper, or some kind of printing place that can do a local newspaper? How about lumber? Does anyone run a tanning operation? How about weaving cloth and making the materials needed by weavers?
Oddly enough, if you take the “greed” part out of the equation, it’s not too hard to locally make most of the things that are needed locally. It might make some sense, economically, to send down to New York for pins & needles, pen nibs, specialized medicines, published books not available locally, etc, but a lot of the common goods can be made locally without too much of a setup needed.
Here’s the catch: no one’s going to enjoy materially extravagant lifestyles based on that kind of living. (Am not going to say this would be good medicine for most of us.) Folks would still have to haul their own water (or pump it from a well, if they’re lucky), chop their own wood (or buy it from someone local who did the chopping), and grow their own food (or buy it from someone who grew it locally, though this could turn into a big money sink after awhile).
It’s no exaggeration to say that despite our current set of appetites (ha, I’m totally guilty of being a net info junkie in that regard) our basic human psyche is well-equipped to our living locally our whole lives, never straying more than 20 miles from home, and never meeting more than a few hundred people at the most.
The small New England town where I live once had at least six different paper mills. We still have a family-owned small sawmill and a few of the original mill buildings from the heyday of the local mills. It would probably be correct to say that this town changed more in the past 50 year than it did during the prior 200+ years of European-originated settlement .. and the one big change has been the death of nearly all local enterprises.