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America and Michigan Need Big Business to Help Drive Growth

Monday, Nov 21, 2011
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  • Viewpoints

There’s a lot of talk these days about how to grow the economy.  Much of it focuses on how to increase business start-ups and grow small businesses.  That’s because small businesses have been responsible for most of the nation’s job creation.

What often gets over-looked is that small business is also responsible for most of the job reductions because they fail at a higher rate than large businesses.  A good deal of their business is also dependent on contracts with large companies as corporations focus on staying lean.

But what might be most over-looked is the role big business plays in driving exports.  The more a region exports, the more income it brings in from outside its borders that grows the wealth of its citizens.  To grow income significantly, you need to export at scale and only big business has the size, brands and capabilities to export at a large scale. 

Italy is a great example of why big business matters.  The Economist noted that “Italy still has some world-class firms and brands, and an exporting prowess that could be built on. Yet it does not have enough firms of sufficient scale. The ubiquity of micro family businesses is related to Italy’s rigid regulations, as are its tax-collecting problems. Small firms fall below the regulatory thresholds and are less often attached to the formal economy. If Italy is to carry its outsize public debts, it urgently needs to promote an environment where big businesses can flourish.”

Small business growth is critical to Michigan’s future.  But so is big business growth.  State policy shouldn’t favor one over the other – it should support both.

 

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