Collective Failure
What if our economy no longer supports small businesses?
Greetings! This post is part of a series called Enough is Enough, a summer of exploring failure. We kicked off with a piece on Queer Failure, and if you’d like to read more about what’s to come, find that here.
Today I’m thinking my way through something that’s been troubling me these past six months or so: the creeping awareness that our economy may no longer support certain kinds of businesses.
One particular Friday this past spring I received separate emails announcing the closures of three different businesses. This was on the heels of a client meeting discussing a couple other not-yet-public closures or thinking about calling it situations floating around community back channels. I’d already been thinking about failure and upheaval for some time, but this felt like evidence of a question I’d been asking myself:
Are there certain kinds of businesses that our economy no longer supports?
With one exception1, all of these businesses attained certain success benchmarks — scale, loyal customers and followings, excellence of product. And while I don’t have x-ray vision into all of their financials, they’ve no doubt been rocked by the past 3 years of pandemic and economic upheaval but have probably been in the category of still eking by.
What’s shared among them is that they are all food or small production or manufacturing enterprises, and for various reasons reached a tipping point too far. In some cases they’ve raised wages as high as they can (and in one case, higher than they can, because they felt they didn’t have a choice), but can’t raise prices any higher.
It’s certainly not that these people aren’t smart enough, haven’t worked hard enough, or just need to take more naps and vacations and self care themselves out of burn out. They’ve all made bad decisions for sure, and I’m 100% certain that there are things they need to fix within in their businesses. But trends are trends.
In our power-of-now, entrepreneurial-juiced environment, it’s hard to wrap our heads around this concept: that we may have reached a point where very basic sorts of businesses— the kind you might interact with every week, selling real stuff that people want and need— are having their oxygen supply cut off.
The myth of willpower tells us that anything, if we apply ourselves diligently and with enough gusto, can be ours. We’ve been thoroughly steeped in the idea that we have complete power over the success of our businesses, when in reality there are all sorts of larger policy and societal decisions that create the sort of environment where a small business could thrive or not.
The Cost of Care
Externalized Costs are costs incurred by a business that are passed on outside of the business itself, translating to fewer expenses, which leads to greater profits. Classifying Uber drivers as contractors instead of employees externalizes the costs of auto insurance, fuel, and waiting around time2. (The increases in traffic and pollution that ride sharing create are another form of externalized costs.)
In the United States, we’ve largely foisted health insurance costs on employers, which are often businesses, who, when they don’t offer fully subsidized health insurance coverage, pass those costs to employees. There are absolutely tons of examples of big corporate morally dubious or obviously evil cost externalizing…and all of us who own businesses also engage in this in some fashion.
Monopoly expert Matt Stoller wrote recently about the context of the Writer’s Strike in Hollywood in which “studio-streamers accidentally transformed a high-wage, high-profit business into a low-wage low-profit commodified one.” In his telling, the strike takes on an existential question about our (U.S) media landscape as a whole and the ways in which common monopoly tactics— vertical integration, predatory pricing, and a capitalist race to the bottom— have broken the entire system.
It made me wonder whom or what small businesses would strike against? Who do we hold accountable for the broken system? But then I realized I was asking the wrong question, or rather, it’s too narrow. The problem is housing. Our absolutely fucked health care system. Child care. In short, the extent to which our very basic needs are mediated through an avaricious market.
Even with all the daily evidence of rot, the effects of monopolistic, VC-driven, late stage capitalism can feel abstract. A wave of small business closures brings it closer to home.
We’re witnessing what happens when a society that takes little care of it’s people collides with an economy that squeezes the many so that the few may (exponentially) prosper.
All of the pandemic funding actually did plug a lot of holes. PPP & EIDL loans, as imperfect vehicles as they proved to be, did keep a lot of folks going, as did the credits folks received in 2021 for keeping employees on payroll. But of course, that was all temporary. Now we expect everyone to go back to normal, only with more inflation and the same amount of uncertainty.
The thing is, the government already subsidizes large swaths of the economy. In the form of tax breaks, subsidies or grants. Non-profits are tax exempt and able to receive tax-exempt donations because charitable endeavors (theoretically) provide a public good that may not be able to generate revenue in the way a commercial business activity could.
Or to put another way, we have business and tax structures to support business entities that we do not expect to otherwise be profitable. And we can point to all sorts of examples of large, publicly visible companies bleeding ginormous amounts of capital all over the place. If you, my fellow small business leader, attempted to run a business model as chronically unprofitable as Uber, you’d have been out on your ass long ago.
There are certainly restaurants, bakeries, clothing companies, and all sorts of small businesses that are sustaining themselves, and even thriving.
But those shouldn’t feel like exceptions where we suspect some secret edge.
So what happens when regular small businesses, that are supposed to stand on their own two feet…simply cannot?
Not as a matter of will, stubbornness, or lack of business acumen. But because paying employees $22 an hour— or more— will break the business. Many many words have been expounded on whether there really is a labor shortage or just a “people don’t want these jobs under these terms” shortage.
I’m not going to wade into that debate in this piece, except to state that in most cases $22 an hour does not add up to an abundant livelihood when individuals are shouldering expensive costs of all their basic needs.
And of course, “pay people more and just raise the prices” is not a solution either!3
We’ve privatized and individualized so many costs related to basic rights and care, that the equations, if they ever even worked (spoiler: they didn’t), just don’t add up any more.
We broke the math.
…but are we just evolving something else?
In spite of what I’ve written above, I want to circle back to the Queering Failure view: maybe these individually-led enterprises shouldn’t succeed, because the terms of their success aren’t worth supporting. Namely: the burden of individual business ownership. Capital intensive scale as a necessity. Certainly reliance on precarious low wage and hourly labor.
Alternatives and other ideas continue bubbling up. Pastry chefs leaving restaurants to bake cakes in their kitchens. Restaurants reopening with worker-ownership structures. And even larger-scale legislative support.
I live in a corner of rural Vermont that is absolutely rich with cottage industry and interesting micro-business. Our local grocery co-op has a bread delivery schedule where almost every day of the week I can buy exceptional bread from a rotation of 4-5 different bakeries delivered that morning. If I ate meat, I could walk up the dirt road 5 minutes to pick up organic beef. 5 minutes in the other direction is a goat farm with a sideline of dog food.
However, it’s not all some rosy socialist utopia up here: Dairy farms are really struggling! Vermont has the second highest per capita rate of homelessness in the country (only California is higher) and many school districts can’t fill vacant positions because there’s nowhere to house the teachers. Like many rural places, people have mostly always made a living by piecing together jobs and skills into a semblance of a living. From what I hear, it used to work okay when life was cheaper.
I’ve read multiple articles about pastry chefs and bakers leaving full time restaurant industry roles to start micro-businesses of one— very happily, according to these articles— but it may just be that there doesn’t seem to be a viable alternative. I suspect these examples are temporary businesses that last while they make sense— there’s quite a few mentions of too little sleep, and hand delivering boxes of treats will get old fast— and eventually fade away.
I’m both personally very into small weird little enterprises…and want to be clear that an economy of huge monopolies on one end and millions of individuals with micro-businesses on the other is, well, almost certainly guaranteed to be fucked4.
We need more than individuals working in their own corners to figure out their own livelihoods.
These questions aren’t meant make us throw up our hands in defeat. But rather ask the deeper questions: whose needs do we want to meet, and on what terms?
This economy has always supported some businesses over others. Some people over others.
Women, queers, and people of color seeking funding continue to receive the barely coded message that their ventures are “too risky”, while white men with track records of completely blowing it continue to receive gobs of funding for their latest dumb idea.
Which is to say: I’m not asking any new questions, only unearthing old questions about the latest manifestation of an unequal, extractive, and deeply problematic economy.
And I don’t think we’re all doomed.
One of the questions that most incites me to hope is “What would it look like if the economy loved Black people?”
There are so many people imagining and putting into practice answers to that question, which all involve thinking about a just economy, a regenerative instead of an extractive economy. What these answers and ideas share is a reach beyond an individual business solution, and instead seek to build new and different infrastructure to support different types businesses operating in new ways.
Not every individual business has a right to exist, many do and will fail by their own merit. That’s not the same as asking questions around who and what we want to see thrive, and what sort of economy we need to build to make it so.
Even though I’m going to write about systemic issues, that doesn’t rob individuals from the freedom to make horrendous decisions and tank on their own merit.
Uber, Doordash, and their ilk are pretty famous at this point for their unprofitable business models, even with all the costs they have externalized. They also have a habit of making their aims loud and clear, like in the recent objections to minimum wage laws, when they are held to account.
I’m focusing on labor, but while it’s the biggest pressure, it’s certainly not the only one: raw materials, insurance, rent, energy costs are all up too. And this isn’t a U.S. focused problem even though that’s the context I’m writing within.
I’ve long sort of ruefully joked that sometime in the not-too-distant-dystopic future we will all end up either employed by Amazon or in someone’s MLM downline shilling snake oil. No other options.