This month – August – Pope Francis has asked the Catholic faithful to pray for small- and medium-sized businesses.
In a video appeal, he described SMEs as essential parts of the communities in which they operate, and lamented the hardships that the Covid pandemic had inflicted on them. Yet they had stoically endured. ‘With courage, with effort, with sacrifice, they invest in life, creating well-being, opportunities and work,’ he said.
Such businesses are ‘the ones that invest in the common good instead of hiding their money in tax havens. They all dedicate an immense creative capacity to changing things from the bottom up, where the best creativity always comes from.’
‘Despite the difficulties, they create jobs, fulfilling their social responsibility,’ he added.
Since I am both a Catholic and recognise the important role of small enterprises in an economy – I’ve worked on small business policy and write about it regularly – my initial reaction was approval. Catholic social teaching is not inherently unsympathetic to business, but in practice its focus inclines towards the left. The Church’s ‘preferential option for the poor’, an unobjectionable ethical position, is often expressed in support of redistribution and welfare measures, for enhanced labour protection, minimum wages and so on. Much less attention is paid to the imperatives of creating the wealth to enable these endeavours. To see the Pope, whose own ideological position is typically characterised as left-wing, speaking up for small business was a refreshing and overdue change of focus.
To a degree. Reflecting on this, and on the words and visuals of the video, I wonder whether this message does more real-world harm than good.
The framing of this appeal is in unambiguously moral terms. Small businesses are a force for good, a keystone of their communities, they represent moral, sacrificial activity, they are agents for positive change. They embody ‘service’. The accompanying video depicts small, cramped spaces occupied by joyful people doing the hard and humble tasks themselves. There is a hope that they will ‘find ways to continue operating, and serving their communities’ – though no mention is made in the words or depiction in the visuals of money or profit.
From a church, this is probably inevitable. But it is a message that is well represented across our discourse.
‘Little happy dance’
Consider these comments that an internet search turns up, and which have appeared as memes on social media from time to time.
‘When you buy from a small business, an actual person does a little happy dance.’
And:
‘When you buy from a small business, you’re not helping a CEO buy a third home. You’re helping a little girl get dance lessons, a little boy get his team jersey, a mum or dad put food on the table, a family pay a mortgage, or a student pay for college.’
Small businesses are presented as a type of ethical statement, and buying from them as a moral act. To do so is to ‘help’. It is to connect with ‘actual people’. It is to support the elementals of life and social relationships.
There is also the condescending and infantilising remark that a sale by a small business produces a ‘little happy dance.’
All of this obscures a fundamental point: a small business is a business. That is, it exists to provide goods or services in exchange for money, in the expectation of making a profit. In other words, the financial rewards of the activity are intended to exceed the inputs. Profits are a good thing; without profits, it’s difficult to imagine any business surviving. Indeed, the impact of the pandemic on small businesses was fundamentally that it made profits exponentially more difficult. Basically, ‘finding ways’ to carry on necessarily means finding a way to make a profit, or at least to match income to expenditure.
When the Facebook page of the local Catholic magazine, The Southern Cross, posted an article about the Pope’s appeal, I responded with an irate comment. Part of it read: ‘Small businesses are not the cute, cuddly, inoffensive, furry mammals of the economic ecosystem and to treat them as though they are does a huge disservice to the entrepreneurs who run them.’ It never ceases to amaze me how often this is lost, and ‘support’ for small business is expressed in terms that tries to distance them from, well, business in general.
Small-scale entrepreneurs may be motivated by a sense of duty to their communities, but this is unlikely to be dominant. Rather, as with any career choice, they are typically seeking an income and a particular standard of living. Exactly what the extent of their ambition may be depends on each individual and his or her prevailing circumstances. For some, it may be to provide for the basics (a mom or dad putting food on the table), for others, it may be to become wealthy (to buy that third home).
‘Profit motive’
Money is key to the motivation of small business operations. This does not imply that other factors do not play a role – service to the community among them. But strip away money, remove the ‘profit motive’, and there are likely to be precious few small businesses remaining.
In fact, it’s worth pausing for a moment to ask what is meant by SMEs, or by ‘small business.’ The Pope’s message, the memes mentioned above and a great many more besides imply that they are tiny outfits, working with trifling amounts of money and disconnected from much of the wider economy – certainly its global form. This would certainly describe some, but not all. Generally, SMEs are defined by the size of their staffs. These vary from jurisdiction to jurisdiction. In the European Union, SMEs are recognised as independent, non-subsidiary firms with fewer than 250 employees. In the Unites States, the definition encompasses firms with fewer than 500. Small firms are typically those with a staff complement below 50, while micro enterprises are defined as those with no more than 5 or 10 (depending, again, on jurisdiction.)
In South Africa, according to official definitions gazetted in 2019, small, medium and micro enterprises – South Africa uses a unique portmanteau concept of the SMME – have as many as 250 employees, and a turnover of as much as R210 million. (The precise categorisation of a given firm depends on the sector in which it operates.)
The point is that these firms can be substantial in size, and handle large volumes of money, more so that we often assume. The idea that a small business owner does a ‘happy little dance’ when making a sale is not only condescending but inaccurate, since making transactions is the lifeblood of its activities. A firm whose owner feels a need to do a ‘happy little dance’ when selling something is likely one whose current situation is dire and whose future prospects are dim indeed.
Like all businesses, small firms have to be adaptable to changes in the world of work. Images of people shifting boxes of foodstuffs in a hole-in-the-wall grocery shop – activities that might be recognisable to their predecessors two hundred years ago – capture a part of the SME economy, but certainly not all of it. Improved logistical networks and communications technology have opened up opportunities for even some of the smallest operators. Their communities and the markets are increasingly separate concepts. And this is no bad thing: if I can buy hobby materials from a vendor in Dayton, Ohio, I benefit from the expanded choice, and he from the increased opportunity to market his goods. We both benefit from the facilities offered by global credit card networks and internet service providers. (The divide between small and large businesses is a permeable one).
‘Gazelles’
Actually, this is germane to the Pope’s message that small businesses ‘invest in life, creating well-being, opportunities and work’. Successful small firms may well be on the way to become large firms. In analytical parlance, growth-oriented firms are referred to as ‘gazelles.’ And if we want the expanded ‘well-being, opportunities and work’, this is to be welcomed.
By the way, small business does not necessarily imply morality. The Pope’s comments about hiding money in tax havens is an important one, taken up by many observers and activists. But to suggest that big businesses play fast and loose with the rules, while small businesses don’t is an assumption not always borne out by evidence. Among those sectors in the economy to which the Pope referred was transport. This is a fair observation, as small operators ferry millions upon millions every day. It is also a sector that has shown considerable entrepreneurial flair in South Africa. But last year, estimates in Parliament were that the R90bn minibus taxi industry paid only R5m in taxes. In addition, violence between taxi operators has been a major headache for decades. Problems are not limited to corporate fat cats sunning themselves on obscure Caribbean beaches.
The reality is that small business owners are as varied as the firms they operate: some are saints and some are sinners. Small businesses are a significant asset to any economy – as an economic resource, and not as a moral signifier.
So while I’m happy to join in the prayers, I don’t believe it’s controversial to say that something more is needed. If we can learn this, if we can stave off the moralistic impulses, perhaps we can begin to look at what can be done to support small businesses.
This is the topic for my next column.
[Image: https://pixabay.com/photos/vietnam-hanoi-road-street-traders-6924905/]
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