PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Small Businesses Empowered, Not Shut Out, by So-Called “Big Tech”

By at 12 March, 2021, 12:51 pm

by Raymond J. Keating-

Technology has empowered entrepreneurs and small businesses in unprecedented ways in recent times. Avenues and options to market and sell their goods and services to potential customers in their own towns, across the nation and around the world have never been so plentiful and affordable thanks to investments and innovations in computer, telecommunications, digital and online technologies and services.

And consumers, ultimately, are served thanks to new and improved products, flourishing choices, and dynamic, competitive markets.

And yet, even as opportunities and rewards continue expand, we see efforts to undermine innovation and investment via expanded government regulation, including on the antitrust front. Such efforts are rooted in grossly mistaken notions about how free enterprise actually works. Perhaps most striking, while misguided government actions are always troubling and counterproductive, they are particularly bewildering when the benefits of dynamic, competitive markets should become even more obvious due to certain circumstances.

A Small Business Lifeline

Consider the fact that the U.S. and global economies have suffered over the past year due to the COVID-19 pandemic and related government shutdowns. While businesses, jobs and our economy have been devastated, e-commerce has proven to be an essential lifeline for millions of small businesses, their employees and consumers.

As noted in a recent SBE Council analysis, the pandemic has taken a heavy toll on entrepreneurship in the U.S.:

● “First, the latest from TracktheRecovery.org, a project of Harvard and Brown universities and the Bill and Melinda Gates Foundation, estimates (as of February 23, 2021) that 37.7 percent of U.S. small businesses have closed since January 2020. Using SBA estimates of the number of small businesses, that translates into a breathtaking 11.9 million closed small businesses. If we zero in on businesses with employees, this would indicate that 2.3 million of those firms are closed.”

● “One measure of small businesses offered by the U.S. Bureau of Labor Statistics is the number of self-employed. BLS self-employment data are broken into two categories – unincorporated self-employed and incorporated self-employed. Self-employment data tends to capture very small businesses, including startups. Combining unincorporated and incorporated data, and since the incorporated data is not seasonally adjusted, we can compare the same periods from each year… the decline in total self-employed from February 2020 to February 2021 was substantial, coming in at a decline of about 738,000. That’s the largest decline going back to 2000.”

These estimates point to the suffering among small businesses and across our economy.

But also consider that e-commerce investments and innovations have been invaluable for small businesses and entrepreneurs during these times. In a very real sense, matters would have been far worse absent the investments made in computer, telecommunications, digital and online technologies and services that serve entrepreneurs, small businesses, and their employees and customers. For good measure, even in these tough times, entrepreneurs and small businesses have found and created new opportunities, again thanks for these vital technological tools.

A Chase Ink survey of small businesses released in early October 2020 offered the following findings:

● “35% of small business owners stated that the pandemic would have forced their business to close without e-commerce.”

● “44% of small business owners who sell products/services online have seen a boost in their e-commerce sales since 2019 and reported an average 37% overall increase.”

● “19% of small business owners began selling products online or shipping to customers for the first time in 2020.”

● “48% of small business owners say social media has become a more important part of their business this year.”

● “Almost two-thirds (64%) of small business owners agree that the changes they have made to their business this year will continue into 2021.”

Also, consider various findings from a small business survey released by QuickBooks in early January 2021:

● “One in four survey respondents said they still operate primarily from brick-and-mortar locations. On the flip side, 36% said they operate primarily online, either through their own website or through an e-commerce platform like Amazon or Etsy. The remaining 35% use a mixture of both. Overall, 72% of respondents said their business operates online in some capacity.”

● “…businesses with some kind of online sales strategy were more likely to experience higher-than-expected profits. Just under half (46%) of primarily online businesses said profits exceeded expectations, compared to only 35% of primarily brick-and-mortar businesses.”

● “More than half (60%) of small businesses said they were more reliant on digital technology in 2020. One in three businesses that increased their investment in digital technology said that investment directly contributed to higher profits. More than one in four (28%) said it made them feel more confident about the future.”

● “Compared to a year ago, 50% of small businesses said they are now doing more business online. Of them, half said they’re doing significantly more business online.”

● “Nearly half of all small businesses (49%) are spending more on digital technology now than they were 12 months ago. These businesses are most likely to invest in digital sales, marketing, and customer service.”

As for the benefits experienced from digital investments, the survey broke those down as follows:

Source: “Moving your business online could be the key to success in 2021,” QuickBooks, January 4, 2021.

● For good measure, “one in three businesses say they experienced these benefits immediately. A total of 77% said these investments paid off within the first three months.”

Intrusive Government Action Would Sever the Lifeline, Harm Entrepreneurship

So, while it is clear that entrepreneurs, small businesses and consumers have benefited, are benefitting and will continue to benefit from a wide array of services being offered by assorted technology companies, including market leaders like Amazon, Apple, Facebook and Google, Congress, some state elected officials, and many regulators are actively working to undermine such sectors and companies via costly, unnecessary and misguided regulation.

SBE Council recently has laid out some of the problems with these government antitrust efforts in the following briefs:

● “The Treacherous Turn on Antitrust Regulation of U.S. Tech Companies – This brief takes a deep dive on two congressional reports focused on antitrust regulation of large U.S. technology firms. A report from congressional Democrats and another from Republicans once again confirms that current antitrust law and regulation are disconnected from economic and market realities. Unfortunately, so are the changes to antitrust law and enforcement being proposed from both sides of the political aisle.

● “The Tech Antitrust Sideshow vs. Small Business Realities – While politicians attack so-called “Big Tech,” this brief explores how market leaders like Amazon.com work with and help entrepreneurs and small businesses.

● “Increased Antitrust Hype Overlooks Value of Tech for Small Businesses – This analysis highlights the importance of a social media leader like Facebook to entrepreneurs and small businesses, especially in terms of reaching new customers and maintaining communications with customers. Significant concerns are noted about various Members of Congress looking to increase antitrust regulatory burdens on leading tech companies that serve consumers and small businesses.

● “Small Business and “Big Tech” – A Personal Story – In this blog post, I write about the benefits that various technology leaders offer small businesses as an economist, but also via his own story as a small business owner – as an author – who has benefited from services offered by the likes of Amazon and Facebook.

The Fallacy of “Gatekeeping”

But there’s more. For example, in the massive report against four U.S. technology market leaders, the Democratic majority in the House Subcommittee on Antitrust, Commercial and Administrative Law of the Committee on the Judiciary tossed out accusations that these companies were somehow “gatekeepers.” A gatekeeper is an entity that controls access.

In this report, it is asserted, “The companies investigated by the Subcommittee—Amazon, Apple, Facebook, and Google—have captured control over key channels of distribution and have come to function as gatekeepers.”

Indeed, the words “gatekeeper” and “gatekeeping” get tossed around quite a bit. However, the notion that online markets, especially when it comes to retail and being able to reach consumers, are somehow subject to monopolies engaged in gatekeeping exhibits a gross disconnect as to what actually is ongoing in the marketplace.

As noted earlier, entrepreneurs and small businesses have unprecedented, affordable, ever-changing and expanding avenues and options to market and sell their goods and services to consumers in their own towns, across the nation and around the world, again, due to investments and innovations in computer, telecommunications, digital and online technologies and services. The tools and ability to do so are not only offered by companies like Amazon, Apple, Facebook and Google, but also via Walmart, Shopify, eBay, Etsy, Overstock, Wish, Newegg, and CafePress, and those are but a few examples.

And of course, entrepreneurs and small businesses reach out directly via their own websites, with all kinds of easy-to-use tools to make selling from one’s site easy for the business owners and for customers.

There are no companies with vast power that control access to consumers. Gatekeeping is a strange fiction of politics, not a reality of markets – especially in this age of online dynamism.

Congress should not be going off on quixotic endeavors involving politically driven antitrust regulation that attack and wind up undermining leading U.S. companies, and by extension the entrepreneurs, small businesses and consumers they serve. Instead, our elected officials should be engaged in efforts to reduce governmental costs that hamper the entrepreneurial and investing efforts that lead to economic, income and job growth.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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