Category Archives: Economics

The New National Economy

bag-O-moneyThe failure of several large financial institutions demonstrates that bad management can bring down a business of any size. As a small business it is unlikely that the government will bail you out when you make those mistakes, so it is up to you to be the best business person you can be. Take responsibility with your customers and your suppliers. Any attempt to BS them will not go well, and no one can afford to lose ether in this economic environment.

Small business must become the backbone of the new economy. When a large conglomerate goes under, it damages the national economy. A single large company failing can cost the economy thousands of jobs, the loss of stockholder savings, millions of dollars in disposable income, and additional millions in unemployment and social services. It effects not only the employees of the failed company but most likely thousands of jobs spread across suppliers/vendors and their suppliers/vendors. A large company can literally effect five or six layers deep and bring the actual number of jobs lost to ten times original estimate.

The cascading failures of 2008 caused by failing financial institutions are still not fully realized. Jobs are being lost every day even as you read this article. Though there are many contributing factors and failings in government and the financial institutions that precipitated the situation, they are not the underlying cause. The virtual elimination of the “middle” class is the primary cause of the economic situation we are in now.

Over the last several decades businesses have succumb to the “buyout” or being put out of business by the unbeatable buying power of a big-chain-store, large companies grow larger and the number of small businesses continues to decline. So how is this the big problem? It is actually a simple situation. When a big company fails it effects an equally large group of people and beyond. When a small business fails it rarely effects more than those directly employed and there family. It really is that simple. There are contributing factors as well, one of the biggest is the decision to outsource, manufacturing and services, to overseas companies; something unlikely to be done by a small business, and even if it where it would have a much smaller effect.

How do we fix this mess? The path to national recovery has many facets, the most important of which is equally as difficult. The business world has a whole needs to take a more nationalist view of its responsibilities; even when it means giving up a few points of the profit margin to keep jobs and manufacturing here in the United States. A company that claims they could not survive if it employed or manufactured locally is showing it’s short sightedness and a lack of sound management. The practice of building a company specifically to be bought out needs to stop. The practice of big companies buying up small companies and then closing them just to eliminate competition needs to stop.

What this all breaks down to is that business as a whole needs to be a responsible citizen. The bottom line of the balance sheet is not the bottom line. The consumer must also be a responsible citizen, buy American products when ever possible, seek out, support and encourage small business as much as possible, and be vocal about your support, encourage others to do the same. As a small business owner/manager you too must be a responsible citizen by using local suppliers when ever possible, join local business and professional associations, share your pride with your customers and fellow business owners/managers.

Business as a whole needs to look at the big picture, investors need to look at the big picture, consumers need to look at the big picture. Everyone needs to take responsibility for the national economy.