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Will The Real Small Businessman Stand Up?

Unfortunately, he can't, because he doesn't exist, although everyone claims to speak for him these days.
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A furious INC. reader wrote the editor recently threatening to become a former INC. reader. My criticism of the way mail-order master Joe Sugarman has conducted his long battle with the government (INC., January, page 27) had upset him. He claimed that I was in bed with the bureaucrats when I should have been out carrying Sugarman's flag. He spoke, he said, for the entire small business community in proclaiming Joe Sugarman a genuine American small business hero.

Then came another letter, also from a reader who claimed to be speaking on behalf of others in the small business community. I had done small business a favor, he said, by unmasking Joe Sugarman as a "phony" -- the writer's word, not mine.

What struck me was not that the two writers were at odds. It's not uncommon that one man's hero is another man's fool. However, both of them wrote not only on their own behalves, but, as they said, in the name of small business. And in the name of small business, they completely disagreed.

Come to think of it, that's not uncommon.

* Ted Kennedy and other Democrats argue for stiffer antitrust laws, and the Reagan Justice Department argues the opposite, both in the name of small business.

* Big banks urge deregulation of their industry and small banks oppose it, both of them in the name of what's good for small business.

* The Smaller Business Association of New England (SBANE) urges Congress to set aside some government research and development funds for small business, while the American Electronics Association (AEA) claims set-asides only complicate small companies' dealings with government agencies.

* Boeing gets low-interest financing from the Export-Import Bank by citing the business it provides to its many small suppliers and subcontractors, while the Reagan Administration guts the Small Business Administration's loan programs, because they benefit the few at the expense of the many.

* The National Small Business Association supports tax-exempt industrial revenue bonds as a small business financing tool, and the National Federation of Independent Business wants industrial revenue bonds killed as unfair to small business.

It gets pretty confusing, all these people speaking in the name of small business and none of them saying the same thing.

Sometimes the reasons people disagree are obvious, as, for example, when the parties to the argument aren't really concerned about small business except as another point on a checklist. Spokespeople for big money-center banks, for instance, tell congressional committees that deregulating their industry will help small business by expanding the base of services available as well as the amount of funds they'll be able to loan to companies everywhere. People who represent small banks argue that they're the only friends small business has, and that replacing the homegrown loan officer with some bloodless automaton in New York or Chicago will spell certain disaster for small business.

In point of fact, an awful lot of small companies have survived without help from either small or large banks, and these arguments have more to do with banks' concerns about survival than they do with a genuine concern for the welfare of the little guy.

Or take Ted Kennedy's efforts to restrict corporate mergers and acquisitions. In 1979 he had a bill drafted that would have proscribed mergers among the largest corporations and prevented even some smaller companies from selling out to well-heeled suitors. He called it the Merger Act of 1979 -- until just before he introduced it, and then he changed the name. The bill became the Small and Independent Business Protection Act of 1979. Whatever Kennedy thought the bill would do for small business, he knew that the small business title could only be of help to the bill.

Assistant Attorney General William F. Baxter, like Kennedy, professes an interest in maintaining an economic climate that will support a vigorous small business sector.Yet his views on the need to restrict corporate mergers couldn't be more different from Kennedy's.

Which of them speaks for small business? That's the question that's often asked, but it's not the right question at all. Kennedy and Baxter don't disagree over the end they seek, which is a free and competitive marketplace; they can't agree on how to get there. Small business is a pawn in the game.

Other disputes are based on more subtle concerns. No one lobbies harder for small business than the many national and regional small business organizations. Yet they too disagree constantly over what's good for their constituency. Most often it's because their real live constituents have interests that run counter to those with some abstract small business community.

The National Small Business Association, for example, likes the industrial revenue bond program because its members, predominantly small manufacturers, can use the bonds to pay for new plants or plant expansions. The National Federation of Independent Business, on the other hand, wants the program killed, because its members -- predominantly retailers and wholesalers -- must compete against national chains that use IRBs when they are financing new outlets and distribution centers.

Another example comes from the current debate over small business set-asides for research and development by the federal government's agencies. The American Electronics Association, which has many small companies in its ranks, opposes the proposal. For the most part, the AEA's member companies have ready access to capital these days. They don't need government set-asides, which might just serve to complicate further an already complicated government procurement system. Small business, they argue, will be hurt by the additional bureaucracy that set-asides will produce.

The Smaller Business Association of New England, on the other hand, has argued passionately for set-asides. SBANE counts among its members a number of companies that are starved for growth capital. Some of them need the R&D set-asides to survive. Philosophy and good intentions aside, there's not much doubt about what SBANE's position should be.

All this is not to suggest that there's anything wrong with interest groups and associations arguing as strongly as possible for the needs of their members. That's what lobbyists are paid to do. It would be better, though, if people weren't so free and easy with the small business label. There are some important issues that are critical to small business as an economic sector, things like further reform of the tax laws. The danger is that, with so many people pleading so many cases on behalf of small business, the really important issues won't get the hearing they deserve. Even the most important message loses its impact when it's repeated too many times.

Last updated: Jul 1, 1982




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