Smalll Businesses

We hear a lot of talk about the importance of investing in small businesses.But are small businesses really a benefit?If so, what benefit do they provide?What are their drawbacks?As far as I can tell, small businesses are inefficient. They also employ far fewer people. The only apparent benefit is their tendency to pay more. But this is not a result of them being a small business. A big business that pays its employees the same as a small business is much better than a number of small businesses that together equal the sales volume of the big business. This is because big businesses are more efficient and can justify more hiring than many small businesses.Perhaps I'm wrong, but small businesses don't seem to be the way to go. A better approach to fixing economic problems would be to mandate better pay for those working at big businesses (their main drawback being their ability to use their influence to control wages). In fact, communally-owned big businesses would theoretically not suffer from any of these problems...And now I don't know what I'm saying.Pick it apart. I throw my thoughts to the lions!

Suppose a volume of sales equal to 20 units (or its increase) is required to justify the hiring of each additional employee and a local economy has a demand of 200 units.The maximum number of employees possible in this scenario is 10.If we are to meet that demand through small businesses, there are only a couple efficient ways to meet that demand and maximize employment (=10). If we have 7 small businesses, each one will sell approximately 28 units. This allows these businesses to collectively employee 7 people: 3 below the maximum. If we have 6 small businesses, each one will sell about 33 units. This allows the employment 6 people: 4 below the maximum. In fact, with a small-business based system, there are only two models that allow for maximum employment: 10 businesses employing 1 person each or 5 businesses employing 2 people each.In all other cases there is an extra amount of demand per business thatthough in aggregate would justify the employment of extra individualswhen spread amongst the several different firms obliterates that justification and the employment of those additional workers.However, in a big-business model, there is never a scenario where 200 units can be sold without the justification for the maximum number of employees (=10) also existing.Furthermore, even in a model for a small-business economy that achieves the maximum level of employment, as demand rises, the same inefficiencies in employment creep back into the model.Suppose there are 5 firms selling 40 units each and employing 2 people (total 200 units and 10 people). Now suppose local demand rises to 220 (+20). No one firm will give up access to its share of the additional sales, and so the additional 20 are spread over the five firms to give each an extra 4 units of sale. No additional employment is created.However, in a big-business model, the extra 20 units of sale will immediately trigger the justifications for an additional unit of employment. A small business model of 5 firms would require the additional demand of 100 more units to finally justify an increase of employment in the firms (1 extra employee each = 5). The big-business, of course, will also add 5 employees at the same time; the only difference being that it can add an additional employee anytime the demand increases by 20 units. The small business model requires an increase in demand of 100 units.It's all or nothing with the small-business model, with everything in between being inefficient. A big business can remain efficient even in between.When it comes to employment efficiency, the small-business model can only ever be as good as the big business model, and more often than not is drastically inferior to it. In terms of employment, in an economy of small businesses we cannot as easily reach a level of employment consistent with the total market demand for that employment.The only other option in the small-business model is to move all additional 20 units of demand to a single firm; not only is this unlikely, but if it does occur it is a sign of domination by a single firm over the others (a move toward a big-business model).In an economy of ever-increasing demand, the big-business model is the only one that works, mainly because the satisfaction of increased demand (caused by a number of factors) requires a level of efficiency that an economy of small businesses simply cannot provide. The efficiency of big business is an explanation for why big business is preferred in a dense economic scenario (such as we often have in the U.S.: lots of people living in a single area).This is only one of the reasons for big businesses being more efficient. They also promote other efficiencies, e.g., in shipping of goods, packaging, selling (maybe we don't need 5 cash registers to sell 200 units, maybe we really only need 4), etc.In fact, the only downfall I can see to a big-business model is that the power held by the big business allows it to manipulate things in its favor (for example, lowering wages). But these problems are easily fixed by enacting laws that limit a big-businesses power; creating a system where efficiency is maximized and abuse minimized.But we cannot reasonably get to that level of maximum efficiency if we stick to the small-business model. We have to use a controlled big-business model or drown in our inefficiency.

What you and NoNukes are both talking about relates to increased efficiency that results in fewer employees being required per unit of output.Typically this is a bad thing for the people doing the work, since they become unemployed. But in a properly managed system, this is not necessary, because one of the two following things can happen:

1. The 'extra' labor can be put to use producing some other essential or demanded product, or
2. In the case that there are no more essential or demanded products, the overall labor input can simply be reduced and the gains from increasing efficiency be distributed.

I don't really know what you are talking about. But I don't think what I've mentioned would necessarily lead to the outcomes you've detailed.First, there is no reason to limit the freedom of speech. And no reason to lock folks up either.Second, it's important to distinguish differently-derived profits. In my last post, I mentioned the increase in profits made possible by reducing employment upon the implementation of an alternate production process. These profits simply cannot be allowed to remain in the hands of the company owners. The effect of doing so is to concentrate wealth from the working class to the owning class; 'efficiencies' that simply concentrate wealth (and, in fact, do nothing else) are contrary to the interests of the public good and so no publicly controlled society (= democracy) should sensibly allow such.Finally, there is no reason why the price of highly-demanded goods should not increase as it already does in a typical supply-demand market system. In fact, I cannot see any way that prices could not increase unless being artificially controlled: as a good becomes more scarce, only those willing to pay more would win the bid to purchase it. A disgusting example of what happens when the gains from increased efficiency in labor are allowed to be concentrated.

It's not about being a part of a 'reduced' classat least not in the sense that it's a bad thing. It's about realizing when society has reached a point where people can devote less of themselves to working and still receive the same benefit.In fact this goes back to the issues that were being discussed in my Replacing Consumerism thread. The sensible (and, in fact, desired) solution to being able to produce the same amount of stuff with less work is to produce the same amount of stuff with less work. If you can feed yourself with four hours of work instead of ten, then you will work for four hours. Likewise, if a society can receive the same benefit from less work, then it should work less. The only time this is a problem is when a system exists (= capitalism, feudalism, etc.) that redirects this benefit away from the workers producing it and into the hands of someone else.But a publicly-owned system for controlling society (= democratic government) should have no problem fixing this flaw and ensuring the benefit goes to those producing it: the public. That happens. In fact, it is inevitable in any changing system that some of its members will have nothing of value to contribute (whether they previously did or not).When that system is made up of monsters, then the non-contributors are left behind to starve or otherwise die.When the system is made up of rational, reasonable, and (hopefully) compassionate creatures, then the non-contributors are floated having been recognized as a necessary part of the system: everyone who does contribute pays a little toward supporting those who don't with the realization that their own prosperity is the result of the operation of the system that also creates the non-contributors. The non-contributors exist precisely because of the same system responsible for the prosperity of the contributors.Again, a publicly-owned society should have no problem making this happen. Only a society privately owned will fail to rise to meet these challenges to the human condition.Jon

That's just it: it's not money 'out of your own pocket'. It is the 99% that is responsible for most economic prosperity, yet the 1% that benefits most.

_________                     _________
|         |                   |         |
|         |  ---------------> |         |
| PRODUCE | Economic Activity | CONSUME |
|         | <---------------  |         |
|_________|                   |_________|
       ^         |||||||        ^
       |_________|||||||________|
                 Benefit
                 |||||||
                 VVVVVVV
                  _____
                 |     |
                 | 1%  |
                 |_____|                 

The benefit is produced by the bulk of society, and that is to whom it belongs. But the current system allows it to be carted off by a few slick turds.That doesn't seem right to me.Does that seem right to you?

It depends on how the robot will 'pay for itself'. Is it going to allow you to reduce labor? Is it just going to make other inputs cheaper/reduce other inputs?The point I was trying to make is that when the only purpose of the increased efficiency is to allow wealth to be concentrated into the hands of the owners at the expense of the laborers, then a fair and just public system that exists for the benefit of society as a whole has an interest in either eliminating such behaviors entirely or sharply curbing them. They can take productivity gains. The case in which they cannot is the case in which the society is already producing exactly the amount of everything that is or can be demanded. But in a society of unmet wants/needs any labor saved in the satisfaction of one want/need can be devoted to the satisfaction of another want/need (with exceptions, as we've discussed).

And that is very good. Such a system ensures that owners will not innovate in a direction that only concentrates wealth into their hands at the expense of their workforce, and that, if they do attempt such innovation, the workforce will be the benefactor by enjoying extra leisure time while maintaining the same income.In fact, you may find in such a system that the owners never seek innovations in saving labor while the workforce does so continuously. No longer is the owner idly plotting his next move to siphon wealth from his workforce and minimize their welfare, but the workforce itself is constantly seeking new ways to ease its own burden, increase its own leisure, and maximize its own welfare: A system where the whole of productive society is neverendingly finding new ways to better itself. Only if he figures a way to make more money at the expense of his workforce. If, on the other hand, he finds a way to make more money by, for example, reducing the amount of material required in the production of each widget, then his workers will receive no raise whatsoever, or, they will receive a raise equal to the amount of money saved by the fact that less material must be worked: the owner's benefit comes only from the amount of saving directly and actually attributable to the savings in purchasing less material.Nevertheless, in the large scale many folks at the material mine may find their hours reduced with the sale of less material. These are the true casualties of a production system built around specialization of skills; and they are to be cared for as described in Message 18. And when the employees can be made better off from the purchase of the robot, then they may well choose to innovate in that direction.

Then you'd have situation 1 from Message 13: "The 'extra' labor can be put to use producing some other essential or demanded product, ... "

How is anything implemented?

Thank you. I had a migraine earlier and couldn't think enough to type. Your third option, along with government mandate, are the two I would have listed.Strikes can work, but they are more difficult to implement, and often result in fixes that are only slight improvements over previous conditions. An owner can decide alone to withhold the means of production (thus 'strike'), but the workforce has to act collectively to achieve the same with their labor. The owner, generally having more wealth, can also more easily weather a period of non-production; while the workers cannot afford to go without regular income for nearly as long.In a strike, the owners still have considerable advantage. But their advantage is even greater in a system that relies on their own goodwill. It would be nice for all companies to realize the justness of increasing the share of the production benefit taken by the producers, but not many companies actually care.More effective than either of these options is to simply force the owners to act properly. Since the government holds the monopoly on enforcement, the owners can do little more than oblige. But this option still creates discord and resentment between the owners and the workers. And there is really only one way to remove that disunity and the best way to resolve the owner-worker struggle: make the owners and workers one and the same.Only in a system where the producers own the means of production can the rewards of their efforts ever be properly and justly distributed to them according to their efforts. The workers can then decide for themselves which innovations to implement; they can innovate away their workload with no fear it will diminish their share in the productivity.If one worker makes 10 widgets an hour with a profit of $1/widget, then his daily pay after making 80 widgets is $80. If the workforce can cut the amount of time required to make widgets in half, then he makes 20 widgets an hour, with a profit of $1/widget, and his daily pay after making 80 widgets is $80, but with four hours more of leisure than he had before.Even better, where the previous system utilized a single owner spending 8 hrs/day looking for ways to innovate, this system now allows the entire workforce 4 hrs/day to devote to innovation. Contrary to NoNukes's concern that innovation might be stifled because the incentive to do so is gone, such a system would present thousands upon thousands times more innovation than the current one. Every worker in the line could still have two more hours of leisure than before and, by devoting the remaining two to innovation, still put more effort to innovate than a single owner ever could.Total societal prosperity could be the only result.What sickness must possess a culture that so readily chooses the current model over the abundantly better alternative? Is it a sickness from which mankind itself suffers? Will a system of mutual cooperation and benefit always fail as greed propels a few men to exploit the masses for their own benefit?And how do small businesses fit into all this? I guess that's supposed to be the topic...

If I work my fields and produce ten acres of corn, then to ten acres of corn I am entitled. If I work to produce only five acres of corn, then five acres of corn is what I earn.It's the basic principle that a laborer is entitled to a benefit from his work commensurate with the productivity of that work.Unchecked hourly-wage labor is an affront to this basic principle of human decency. It reverses the relationship between a laborer's productivity and the benefit he receives from his work: as soon as he becomes more productive, the amount of time he is required to work decreases and he ends up with less benefit than before despite being more productive.Remember, the owner may think up ways to increase productivity, but it is the workers who actually more productive. Should the man who solves the problem of increasing productivity be entitled to some of that benefit? Of course. But should he be entitled to all of it?The whole ridiculousness of the current system boils down to the fact that workers do not own the means of production. Instead, those means have been concentrated into the hands of a few individuals who use their position to exploit the workforceif people need widget XYZ, then whoever owns the means to produce widget XYZ can charge a premium for use of those means.This is the concept which underlies the exploitation of a society's workforce by those who own the means of production. Call it what you will; repackage it how you want; it's all the same in the end. Yes. In fact, I would say that almost all labor should be compensated for based on the quantity of production rather than the duration of production. When production decreases as a result of falling demand the saved labor can be devoted to some other production or the laborers' reduced pay made up for (to some extent) though a safety-net program as RAZD and I have discussed. When the owner has to pay workers based on their productivity, then he isn't going to use his 'own' money to innovate labor reductions. If he does, he's something of a fool.The owner already has his undue benefit simply in the fact that he contributes nothing of value to the product by way of his ownership of the means of production and yet still receives a benefit that his workers alone produce. He's already a non-contributor being floated by the contributors (and floated quite high).If we decide to give him an additional cut of the increased productivity because he innovated it, then we're paying him twice: once for doing nothing and again for doing something. It'd be like having gainful employment and receiving unemployment benefits at the same time.I guess I just can't figure out how the hell that makes sense.Can you help me understand how that makes sense?

A real 'let them eat cake' response. And if you don't agree on the terms? When the owner does nothing but own, then his cut of the productivity can be nothing but theft.

Perhaps if you paid them more...

"Why wouldn't you want everyone to get unlimited free cake everyday!? Its delicious cake. And its free. To everyone! How could you not want that?"

"No, I mean, its not possible. How would go about implementing it?"