Nathan B. Oman: Is small business better? It's a complicated question

Nathan B. Oman

Published: Friday, Dec. 2 2011 12:00 a.m. MST

Tom Weisbecker, who operates the Isaly's restaurant and delicatessen in West View, Pa., talks about the high cost of doing business, Wednesday, May 21, 2008.

Associated Press

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The American public is grumpy. The tea party has focused the frustrations of the right on government bailouts for Wall Street, and the Occupy movement has galvanized the left around the sins of the 1 percent, the super rich who run the big banks excoriated by the tea party.

The two movements thus share many of the same villains — Wall Street executives — and perhaps more ironically, many of the same heroes, in particular small businesses. To be sure, the occupiers have included more than a few anti-capitalists, but the majority of the protesters insist that they aren't against commerce, just the pernicious influence of big corporations. Small — including small business — is beautiful.

The sainted status of small business goes back to the founding of the republic. Thomas Jefferson exalted the yeoman farmer as the ideal citizen. With the passing of agriculture's dominance, the small business owner has become the yeoman farmer of the modern world. He or she is the sturdy, honest, industrious and virtuous citizen.

Despite the emotional consensus in favor of small business, however, there are actually quite different ways of understanding its virtues. Consider two very different cases: The France of the Third Republic and Silicon Valley.

The Third Republic was the France that fought World War I and surrendered to Hitler in the summer of 1940. Economically, it was devoted to the small and the local. Much of the population farmed, mainly on small plots. Most manufacturing was small-scale, even artisanal (think hand-made French cheese). The state acted aggressively to protect the small and the local from competition with the large and the global.

What the Third Republic promised was a world where a certain vision of culture and community based on economic stability and personal economic interactions was protected from the corrosive force of impersonal and uncaring economic bigness. The reality, of course, was somewhat different, as the Third Republic went down in defeat before a more dynamic and economically robust Germany and could only be rescued by an even more dynamic and economically robust United States.

Silicon Valley is also dominated by small businesses, but it would be difficult to imagine an environment more different than the Third Republic. The start-up companies south of San Francisco are in the business of what the economist Joseph Schumpeter called "creative destruction." Far from cowering before the big, these companies are eager to compete with and shake up large incumbent businesses. Think of how the music industry — dominated by huge companies like Sony — has been reshaped by upstart firms like Napster and Spotify.

Both visions of smallness fear the political power of the big. Main street retailers in town after town across America have seen their local political power — power that had been sufficient to create relatively protected spheres through things like restrictive zoning ordinances — fall before Wal-Mart and other big box retailers. Start-ups, in turn, have faced legal efforts by incumbents to squash threats to their business models. Witness early industry efforts to halt the Internet distribution of music and movies.

In a final irony, the differing visions of small business represented by Silicon Valley and the Third Republic don't track well onto the cultural politics of America. In many ways, the exaltation of the small and the local was deeply conservative. It's a vision that values social stability, tradition and a community with the cultural self-confidence to police the conduct of its members' lives.

Creative destruction, in turn, is at heart a liberal creed. It favors change over tradition, the dynamic over the static, the new over the old. Yet social liberals are frequently found among the ranks of the Wal-Mart haters, and social conservatives often laud the virtues of capitalist destruction. Small, it would seem, is also complicated.

Nathan B. Oman is an associate professor of law at The College of William & Mary in Virginia.

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