2015 02 – Letter on Small Business

Reader’s letter: Bernstein rules ok

In Labour Affairs Number 253 (December 2014) in his Notes on the News, Gwydion Williams says the following:

Successful small businesses are an increasing rarity. The Internet and the World Wide Web – both of them pioneered by state-funded research far removed from any commercial motive – have not helped. The new technology has allowed a few small businesses to grow gigantic and crashed most of the rest. The trends described by Marx in the 1848 Communist Manifesto has continued quite smoothly: independent small production continues to decline.

In asserting this Williams is intervening in an old debate which started with Eduard Bernstein’s revisionism in the 1890s, where he claimed, amongst other things, that the small business sector, rather than disappearing as forecast by Marx, was thriving. He was attacked by a variety of figures including Kautsky and Rosa Luxemburg.

Much of what Williams writes is interesting and stimulating, but the above paragraph is seriously misleading, and unhelpful in understanding the economic background to current British politics, and doubtless the politics of other advanced countries.

It feels intuitively wrong. If you visit a newsagent today there is a massive proliferation of magazines made possible by computer-based technology – Labour Affairs itself looks much more professional than its predecessors from the 1970s. Just thinking of women’s magazines, there were about three or four titles in the 1950s, whereas there are dozens today. If you engage in shopping online, apart from very big retailers such as Amazon, who fit Williams’ quotation, there is a huge range of very small enterprises, some of them very specialised, who are able to cater to a worldwide customer base.

It would be interesting to look at statistics dating back to 1848, but those produced by the Office for National Statistics for the years from 2002 up to 2013 suggest a relatively thriving and growing small business sector. The ONS use the definition of a Small or Medium Enterprise (SME) as one which has 250 employees or less. The numerical majority of such businesses actually employ just one person, but presumably “small businesses” in what Williams writes, and under 250 employees, are roughly the same thing. The sector has been growing since the year 2000: “The increase in the overall business population since 2000 was largely driven by SMEs – their estimated number increased from 3.5 million to 4.9 million (41.0 per cent) between the start of 2000 and the start of 2013.” What about their role in the economy overall?

At the start of 2013 these 4.9 million enterprises employed almost 14 ½ million people and had a turnover of £1.5 trillion. The economy may be dominated by giant enterprises, but given that the total workforce employed by the private sector was 24.3 million people the small business sector remains highly significant and appears to be growing if anything. 4 million people are simply self-employed with no employees – doubtless this covers a very varied group of people from window cleaners through to solicitors, accountants, independent consultants to businesses and governments, web designers etc. A look at the voting patterns of people in this sector would be interesting and worthwhile.

Source of the statistics: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/254552/13-92-business-population-estimates-2013-stats-release-4.pdf

Mark Cowling

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