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Home Publications Blogs Beat the Press The Washington Post Goes the No Evidence Route In Pushing Small Business Woes

The Washington Post Goes the No Evidence Route In Pushing Small Business Woes

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Friday, 29 April 2011 05:45

The Washington Post devoted an article to the plight of small businesses in the recovery. It claimed that the weakness of small business growth, which it attributes primarily to a lack of access to capital, is a major factor impeding the recovery.

The piece gave absolutely no evidence that small business has performed markedly worse in this recovery than larger businesses. Nor did it give any evidence, other than the complaints of a person who owns a small coffee roasting business, that access to credit is a big problem for small businesses.

In fact, it cited the survey done by the National Federation of Independent Businesses that showed credit is not much of a problem. This survey has consistently shown that lack of demand is the major problem as noted in the article. 

If the Post did this piece based on evidence it would have highlighted the lack of demand that small businesses face. Lack of demand can of course best be addressed by additional spending, which would likely mean larger government deficits. That would directly contradict the Post's repeatedly expressed editorial position urging smaller deficits.

Comments (4)Add Comment
Cream of Efficiency Rises to the Top in Free Market Competition
written by izzatzo, April 29, 2011 8:22
The piece gave absolutely no evidence that small business has performed markedly worse in this recovery than larger businesses.


Any economist knows the reason is scale and scope economies that depend on high demand volume to justify large firms necessary to achieve low unit cost at the margin.

When demand falls off in a recession the large firms simply raise unit price to follow rising unit cost which explains the huge hoards of cash.

Since small companies don't have this kind of efficiency and market power, they seek credit based on their free market competitive reputation as bootstrap entrepreneurs.

Lenders regard these freeloaders as supply side failures - Greenspanian Irrational Exhuberers - for missing the bubble and taking unnecessary risks to go into business in the first place.

They don't deserve credit and should be culled out by the natural forces of free market competition that drives resources to their highest valued use.

Stupid liberals.
...
written by skeptonomist, April 29, 2011 9:14
The NFIB surveys provide extremely important information about the concerns of businessmen which is inexplicably ignored by all kinds of economists, not to mention politicians and the media. Of course the main thing businessmen are concerned with, and which is obviously the impediment to hiring now, is sales - that is demand. But what may be even more significant in the long run is the very slight concern small businessmen have about interest rates and finance. A major premise of monetary policy is that the availability of money at favorable rates is critical - too bad its proponents never seem to look at the data from the real world which show that this premise is false.

See the Small Business Economic Trends here:
http://www.nfib.com/research-foundation
...
written by joe, April 29, 2011 9:22
Investment in equipment and software was a primary driver for economic growth last quarter. Consumption, Change in private inventories, and investment in equipment and software account for all the growth. The drag was govt spending.

Table 1.1.2. Contributions to Percent Change in Real Gross Domestic Product
http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=2&FirstYear=2010&LastYear=2011&Freq=Qtr
...
written by DavidS, April 29, 2011 7:17
I work for a small business, for what it's worth, and our access to credit is practically unlimited.

Finding qualified employees is our biggest challenge, followed by sales. My general opinion is that the quality of the labor force has really deteriorated quickly in the past 5-10 years. But really, I don't know how representative we are compared to the rest of the country, and that's where data comes in, naturally.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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