Small businesses can fix economy if Washington lets them
Posted by Elena del Valle on September 28, 2011
By Lloyd Chapman
President
American Small Business League
Lloyd Chapman, president, American Small Business League
Photo: American Small Business League
Small businesses are the backbone of the American economy. There are more than 27 million of them and the latest U.S. Census Bureau data tells us that they create 90 percent of all net new jobs. Small businesses are responsible for half the private sector workforce, half of gross domestic product and more than 90 percent of U.S. exports. Also, 98 percent of U.S. companies have less than 100 employees. Yet policymakers either fail to realize this or flat out ignore it. Since 2009, small businesses have received a very small portion of stimulus dollars, while billions have gone to big banks and large corporations.
In 1953 Congress passed the Small Business Act, requiring a percentage of federal contracts to be awarded to small businesses (Currently set at 23 percent). This was a unique approach to economic stimulus. Congress basically decided to use the federal government, being the largest purchaser of goods and services in the world, to stimulate the economy by directing infrastructure spending to the nation’s chief job creators.
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Excellent article reinforcing a key point- small business really drives growth and we can and should be doing more to promote our small business sector. While clearly our political leaders are not listening, our major global competitors such as China get it, and have implemented focused programs to aggressively support their small business sector. Why? Small businesses in China employs about 75 percent of all urban employees, and drive innovation, holding about 60 percent of all invention patents and accounting for about 80 percent of new products. Companies, not countries, compete in the global marketplace and developing a robust small business sector is the key global competitive strategy being used by China, India and others. And looking at our economic situation, they do appear to be winning. Several years ago, I met with the Chinese to discuss entrepreneurial management education, a subject of great interest for obvious reasons, and it was clear to me they are clearly committed.
But in the U.S., SBA statistics show that during the past 15 years, entrepreneurial firms accounted for 64 percent of net new hires in the U.S. and pay 44 percent of the U.S. private payroll. And I can cite many other statistics. Looking at innovation, for example, SBA statistics show small firms produce 13 times more patents per employee than large firms. And there are many more statistics. We are missing a real opportunity here to get our economy back on track.
What emerges is the need for more pro-active national policies to promote and drive growth of entrepreneurial firms- that is the best approach to promote innovation, create jobs and drive economic growth. These new policies will be driven not solely by government agencies, but by creative government/business alliances drawing upon ideas developed within various countries who understand how the small business sector can serve as a global competitive weapon. In the past several months I have been carrying this message and discussing ideas in posts on Fareed Zakaria’s “Create Jobs” article and other media, including a recent nationally syndicated radio interview on The Rita Cosby jumpShow to discuss President Obama’s job plan – I am getting positive feedback and will start discussions with the administration in several weeks to share some ideas.
While the challenge of jumpstarting growth of our entrepreneurial business sector is formidable, I am confident we can achieve this objective, and the economic benefits will, in my view, make a real contribution to improve our economy and create jobs. Clearly excitng times lie ahead.
Paul B. Silverman is the author of a new entrepreneurial management strategy book Worm on a Chopstick: Understanding Today’s Entrepreneurial Age: Directions, Strategies, Management Perspectives, serves as CEO of Sante Corporation, creating a new vision for personal health care management, and is an Adjunct Professor in the Center For Entrepreneurial Excellence in the School of Business at George Washington University
He can be reached at paul@paulbsilverman.com
Actually, it is up to small business if they will let Washington not allow them, they can’t really fix the economy. It is up to both business and government sectors to get the economy up. Nice article here.
I appreciate your comment.