Foreign Policy Blogs

Local Business and your Democracy

Local Business and your Democracy

The loss of local businesses will likely have a greater long term effect on your community and country past losing your favourite pub or preferred place to eat. Besides making communities interesting, innovative and increasingly energetic, smaller and medium sized companies are a significant contributor to a healthy democracy. While the Corporatist model of policy development brings together large industry, government and labour to determine policy approaches in many Western European nations, the power and influence of small and medium sized businesses is lacking. Unfortunately, many who will experience job loss in Corporatist systems may not have other options for work as there are likely only a few larger companies that would avail themselves of the skills needed for employment. We have learned in the past that economic upheaval and abrupt policy changes many years ago at France Telecom and other large companies lead to a significant number of employees committing suicide. While the direct reason prompting this hopelessness was not determined, the inability to see a future for many of them may have been the cause. Increased economic opportunities at the time might have given employees some added hope for their future.

While the Industrial Revolution produced models for economic policy development that often only included large industry, labour and the government, those that were not fully integrated into those interest groups had limited their career prospects. During the industrial revolution, locals were the ones that moved from rural to urban centres and took up positions in newly formed industries. Newcomers to North America and South America did find employment in many of those industries, but they also expanded in the next generations to make their own start-up companies, creating employment for many of those who would have not been able to find work in the few large industrial firms at the time. For these reasons, the entrepreneurial class rose to such a great degree than they compete, and often provide more employment in the US and Canada than large industry. While the SBA and CFIB still have little influence over the policy decisions of governments in the US and Canada, the number of employees that depend on the entrepreneurial class is significant.

Hernando de Soto Polar produced some of the most interesting studies on how small and medium sized companies can promote a more equitable society in his research at the beginning of the 2000s. Latin America at that point had gone through twenty years of economic upheavals after the end of many years of closed borders and Import Substitution Industrialization policies that left most nations bankrupt. He saw that his fellow Peruvians were very capable of producing economic growth in their own communities, but did not have the power to influence policy decisions that made it easier to set up and run their own companies. In his analysis on Peru and Egypt, he showed that increased ability for smaller entrepreneurs to succeed also transformed economies into more equitable places to operate, and have added powers to those motivated and intelligent individuals who wanted a healthy community, thus producing a healthy country. It can be argued that much of the wealth and flexibility in the job market in the US and parts of Canada can be attributed to small and medium sized businesses contributing to low unemployment, and having some say in the policy decisions in society.

The loss of many small and medium businesses might have a negative effect on democracy as a whole. To lose much of the entrepreneurial class by further burdening small and medium sized businesses during a recession, or depression, not only limits their progress, but also reduces jobs and eliminates the best and most innovative in society from bettering that society. In the case of Canada for example, small and medium sized businesses actually make up the the majority of job producers in the country at over 65%, but during the current crisis the Federal Government of Canada added environmental taxes on all companies and citizens in the country, and even had the audacity to give all Federal politicians a raise on the same day. In comparison, the Prime Minister of New Zealand has recently declined a large portion of her own standard pay as a message of solidarity with the public. With the country possibly heading into depression era levels of job losses, the new tax deters rehiring those who lost their jobs, while adding to the cost of living for those who now live with no income. It is tantamount to cheering on the Sheriff of Nottingham when he takes from the newly poor and gives to the rich elites in society. In addition, it reduces the power of small and medium industry to have influence on policy decisions made by the government. With those most interested in vibrant communities being punished by bad policy, it may actually be detracting from a healthy democracy in that country.

While it will be impossible to save many small and medium sized companies during this crisis, the way in which many entrepreneurs operate will allow many to return when times are better. What must be done however is to not burden them or our communities further when recovery is possible. Without their voice on local matters, jobs will not return and our economy and government will not be as in-touch with us past elite opinions and elite options.



Richard Basas

Richard Basas, a Canadian Masters Level Law student educated in Spain, England, and Canada (U of London MA 2003 LL.M., 2007), has worked researching for CSIS and as a Reporter for the Latin America Advisor. He went on to study his MA in Latin American Political Economy in London with the University of London and LSE. Subsequently, Rich followed his career into Law focusing mostly on International Commerce and EU-Americas issues. He has worked for many commercial and legal organisations as well as within the Refugee Protection Community in Toronto, Canada, representing detained non-status indivduals residing in Canada. Rich will go on to study his PhD in International Law.

Areas of Focus:
Law; Economics and Commerce; Americas; Europe; Refugees; Immigration