Microcapitalism: the economics of small business

The current economic crisis, including the loss of millions of jobs, has put a spotlight on small business, entrepreneurial attitudes, and self-reliance.

Photo Credit: Nina Frazier

Most of the individuals and organizations involved in this movement identify themselves as capitalists; however there is almost nothing that distinguishes the definition of capitalism in reference to small businesses as compared to the capitalism of AT&T, Wal-mart, or the automobile industry.

What these small business leaders are advocating is in fact Microcapitalism, an idea that capital should not only be in the hands of private citizens, but in the hands of as many private citizens as possible. Seth Godin has published several books an articles on this, including Small is the New Big. Microcapitalism is, in fact, an old idea. The idea that the village blacksmith, the family farm, and the general store owner should own their business, the land their business sat on, and take full responsibility for their production and income are as old as civilization itself.

In this sense, socialism and capitalism (in particular post-industrial revolution capitalism) are more recent developments in human history. It was simply not possible for one owner of a business to employ tens or hundreds of thousands of employees until the invention of machinery to simplify jobs to the level of assembly-line production, or for the state to try to create such a level of control over its citizens.

Despite the integral nature of microcapitalism, it was not formalized as a socio-economic theory until the early twentieth century, when Hillaire Belloc and G.K. Chesterton began to promote the idea as "Distributism," a counter to socialism and big-business capitalism that were unraveling the backbone of society. Unfortunately, the name Distributism failed to catch on over the last century for a number of reasons, including the confusion of the meaning of the word, which refers to the distribution of productive property in the private sector, not the distribution of wealth. Also, the name was used by socialists and nationalists to advance their theories, and in recent years it has been tied almost exclusively with Roman Catholic social teaching.

Despite the confusing history of the name attached to the theory, the principles are sound and proving themselves as we speak. How many of our friends, neighbors - even ourselves - are today looking for another job in which we are to advance someone else's wealth? Our education has been geared towards being good "wage slaves" dependent on someone else for our daily sustenance. When that employer falters, thousands upon thousands of us are sent into the wilderness, fighting among st each other to sever another master, instead of building our own businesses, marketing ourselves, and building self-reliance.

"Our society is so abnormal that the normal man never dreams of having the normal occupation of looking after his own property. When he chooses a trade, he chooses one of the ten thousand trades that involve looking after other people's property," said Chesterton in 1932, a statement that rings just as true over 70 years later.

If a majority of the world's citizens were to run their own business or work for a family-owned business, we would not be in the crisis we are today. The current capitalistic model puts no limit on the size of business, and a major employer like General Motors is rather like a snake eating its own tail. If it lays off or lowers the salary of its employees, it is reducing the buying power of its own customers, which leads to reduced sales and the necessity of more cutbacks and layoffs.

On the other hand, the self -employed small business always has at their own disposal resources particular to their trade. In case of monetary or credit shortcomings they can resort to barter. In the face of recession, they can adapt and specialize more quickly than large businesses. Finally, the self-employed has control over his employment, and eliminates the risk of his and his family's income being wiped out by a pink slip from a master he likely has never met.

"Too much capitalism does not mean too many capitalists, but too few capitalists," remarked Chesterton, and we are already beginning to return to the multiplicity of small businesses, instead of the consolidation of capital in big business.

Let us continue the revolution towards the capitalism of small business - microcapitalism.