Is Saving the Mom & Pop Worth It?

Yes.

Matt Yglesias thinks that liberals should beware being too sympathetic to small businesses. While it may make good rhetoric, he thinks that the benefits of the mom & pop store have been oversold. I think that Yglesias's position is near-sighted as policy and foolhardy as politics.

The argument levied by Yglesias, Krugman, and others against "small business liberalism" is that small businesses tend to produce minimum wage jobs with low benefits and also provide worse products at higher prices to consumers. They believe that while there may be a romantic attachment to the independent propreitor, like the small farmer, they think they really aren't worth saving.

There are ready replies to all of these points.

1. Small businesses may produce lower-quality jobs, but they also tend to produce all of the new jobs. It makes sense to use government policy to subsidize benefits for those workers, rather than just pretend they don't exist. Also, big businesses are moving towards a low pay, no benefit model, so the apparent differences may evaporate.

2. Small businesses tend to distribute economic power more broadly once one takes into account the proprietors themselves. Compare 50 small stores to 1 megastore, and you'll see 50 people making $100,000 a year compared to 1 making $1,000,000 a year.

3. Small businesses could have greater economies of scale if they were able to form cooperatives by industry to negotiate lower prices. This would give most of the advantages of big corporations with fewer of the disadvantages.

4. Yglesias's focus on the convenience store misses the thousands of other independent stores that do provide good products.

5. To the extent that the mom & pops do have lower-quality products, I would think it is because of exclusive contracts between big corporations and the producers of products. Why shouldn't the neighborhood concern be able to sell Martha Stewart?

6. The lower costs of the retail chains is largely due to unjust market exploitation, bad labor practices, and public subsidies. Make them absorb the real costs of their business, and I expect that the price differential would disappear.

7. Abandoning a small business also neglects non-economic benefits derived from them. Areas with lots of small businesses tend to be a lot more vibrant and socially coherent. There are also enormous psychological benefits to economic independence. And whatever the petty problems of working directly for your employer, compare this with working in a giant corporation. Come on Matt, have you even seen Office Space?

This last point brings me to the politics of the situation. Owning a small business is a basic American aspiration. To the extent that Democrats can bring them into our coalition, we can co-opt a politically powerful group, while at the same time exposing Republicans as tools of big business. It would revive our political prospects in rural areas and small towns, give great power & coherence to our political narrative as the party of opportunity, and deprive the Republicans of a key constituency all at the same time.

To throw away this group, to jettison an important part of the American Dream, because Yglesias went to a crappy corner store - well that's just silly.