Thursday, February 25, 2010

The Divergence Between Small Business and MNC's

While it appears many U.S.-based multinational corporations have been able to maintain growth though expansion into emerging markets, small businesses - more reliant on the domestic economy - are in a state of deep recession.

From Sandra Pianalto of Cleveland Federal Reserve:

...according to the most recent survey of the National Federation of Independent Business, or NFIB (January 2010), members cited poor sales as their single most important problem. The latest American Express Open Pulse Survey also expresses a similar perspective.

Small businesses create most of the jobs in the economy, and as a sum, are a more significant share of the total economy:

The importance of small businesses to our economy--especially in the early stages of a recovery--cannot be overstated. They have generated 64 percent of net new jobs over the past 15 years. During the initial years following each of the prior two recessions, those in 1990 and 2001, the strongest expansion in employment came from very small firms--those with less than 20 employees.Collectively, these statistics tell us that small business is in fact big business, and its impact is even greater because it remains one of the most innovative and flexible parts of the economy.

There are factions within any ruling class, and that between MNC's and small business will become more pronounced if this type of economic divergence continues. It could create splits in the current political architecture, such as a new party, or a right-wing 'populist' movement within the Republican party.

1'When the Small Stuff Is Anything But Small' - Cleveland Fed; Sandra Pianalto

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