Tuesday, November 2, 2010

What Drives the Small Business Economy?

Today I wanted to share a little on politics, the economy, and small business. After all, it is Election Day. America is great because it is the land of opportunity. People have the freedom to try something new and succeed. However, along with that comes the opportunity to fail. In the last few years it seems that many have tried to eliminate the opportunity to fail in the hopes that all will succeed all of the time. This cannot work. To understand why, we must understand the economics behind the US economy and what drives the small business economy.

While not always this simplistic, basic economics can be explained as people freely exchanging goods and services with one another. With time, individuals in the economy begin to specialize in producing a particular good or rendering a certain service. These small businesses are able to produce their products more efficiently because that’s all they think about. When they need some other service, they trade with other small businesses specializing in the service they need. Of course, when trading for various items becomes cumbersome, money comes into the picture to act as a store of the value of the items on either side of the trade.

These businesses only succeed if they are able to make a product as good or better than the individual on the other side of the trade could make. If they don’t, they will not succeed unless they change. This change may be producing a different type of product or service or learning how to do work better. Because individuals tend to produce things they are interested in and they spend a lot of time doing it, they tend to get better at it. The small business economy and our entire economy in general, only improve and function properly if individuals are good at what they do. And where there is demand in the market for their products or services indicates whether they are properly producing something that other individuals need.

Coming back to the topic of our current small business economy, I wanted to share the following video which recaps many small business managers’ feelings toward big government. What do you think?

I hope you enjoyed this small business article on the small business economy. Please share it using one of the social media or email links below!

(Image: Some rights reserved,  William Warby.)

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