Gary Eckstein

The global economic crisis has resulted in the collapse of numerous large companies. The most prominent of these have been those in the Finance sector (e.g. banks). The banks in particular have become far more risk averse so to minimize adverse risk of loan defaults. Of course this lowering of risk tolerance has had a devastating effect on small business.

I have spoken to a few small business owners who are not able to get finance for their businesses due to reduced risk appetite by the banks. This is devastating for small business and many small businesses are likely to collapse as a result. It is also so much more difficult to get finance to start new businesses now and this directly affects rates of unemployment and taxes received by the government.

But the joke of all this is that the large organizations such as Ford and General Motors (in Australia, the U.S.A and elsewhere), AIG, Bear Stearns, Fannie Mae, Freddie Mac, RBS, Northern Rock and so on are the ones getting bailed out by governments when they’re about to fail. What about small business, the people that really take on substantial risk? Small business is critical to the economy and the people who own small businesses are generally very exposed the external economic environment. The owners of small business also earn far less than the executives of large corporations yet take on so much more risk. Small business is the economic base of any free market (or relatively free market) economy and employs substantial numbers of people. I’m against substantial intervention by the government in the economy (hey, the economic crisis was caused by government meddling in the economy in the first place) but if the government insists on getting involved then why isn’t it spending an equal amount on, or doing as much for, small business as it is on large business (in fairness, governments are doing bits to help small business)?

Come on governments; stop favoring big business and help the true drivers of the economy; small business!

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