By: Rad Geek
On the bus, I pass by, literally dozens of small businesses who have somehow managed to deal with the regulations that come with opening a business. And I’m pretty sure only a small amount of them are rich and well-connected.
Nobody is claiming that there is no such thing as a small business. The left-libertarian claim is, generally, that in a freed market there would be many more small businesses, including a rich set of “microenterprises†far smaller than the storefront businesses that you seem to be thinking of, than there currently are. Not because it’s impossible to start one now, but because it is both difficult and costly. Not (just) because of the costs and risks that are inevitably involved in any business venture, but because the regulatory market makes it overwhelmingly more difficult, more risky and more costly than normal market factors would make it.
When I walked around my old neighborhood in southeast Las Vegas, I saw a fair number of “small,†locally owned businesses in which hardworking but relatively privileged and comfortable “small businesspeople†had set up shops. (These are in small storefronts that typically cost about $1,000-$2,000/mo for rent, or in out-parcel buildings that cost much more.)
But of course those who make enough money at their business to pay $1,000-$2,000 a month for a small storefront are already people who have, and are making, a fair amount of money, or at least have decent access to credit. I also saw a lot of the local homeless people who barely scratched by by gathering up discarded goods from dumpsters and curbsides, loading them into grocery carts, and carrying them down to an impromptu swap meet on some of the empty parking lots in the neighborhood. I suppose you can guess which of these two groups was more likely to have cops show up and force them to close up shop because they hadn’t paid out a hundred bucks for a business license. You probably also can guess which group of entrepreneurs was, relatively, more wealthy and more well-connected than the other.
Anyway. Where the regulatory state really cuts against small businesses, on the margin, is amongst people who would be able to make a living, in a very small scale business, but don’t have tends of thousands of dollars a year to spend on commercially-zoned storefronts, licenses, inspections, etc. etc. etc. And amongst those who can afford these things for the moment, but whose business is constantly on the edge of failure because of the very high fixed costs that the regulatory structure forces upon them.
(About 50% of small businesses fail within the first five years; but the reason for that is not just because it’s so hard to start a business. It’s because businesses face a cost structure that is extensively rigged in the direction of high compliance costs and potentially disastrous legal punishments.)
Right now, the kind of regulations that left-libertarians typically complain about (e.g., those that effectively require food vendors to have a separate, extraordinarily expensive commercial kitchen; those that exclude them from running businesses out of their homes; those that require them to spend hundreds of dollars on a business license before they can so much as sell things off a folding table or out of the back of a truck) cut against small businesses in general, and most of all against the kind of worker-run microenterprise that many ordinary people might easily be able to engage in, were it not for legal restrictions that effectively require you to be in a socioeconomic position to join the ranks of established “small businesspeople.â€