A (Really) Small Business Index of the EconomyOctober 6, 2008
One almost-compulsive habit I have is asking “how is business going?” whenever I have occasion to talk to the owner of a small business. These opportunities are frequent. Almost all of us run into small business owners several times a week as we shop, eat lunch and go about our daily lives. I could spin an academic story about why I frequently ask this question, but the real answer is that I grew up in a family that owned some small businesses and just find small business owners interesting people to talk to. An added benefit, though, is that you often get a faster and better sense of what is going on in the economy than the often-significantly-lagged government statistics suggest. Alan Greenspan was well known for talking incessantly with business people, trying to figure out the next risk on the economic horizon. But he was talking to the CEO’s of the Goldman Sachs and General Electrics of the world. I am more likely to talk to the owner of a local Chinese restaurant. In fact, during the last ten days I have asked my compulsive question to the owners of
- a Chinese restaurant
- a dealership that sells mostly Vespa scooters
- a not-too-small (20 people) software developer
- a company that makes and markets some art and design products made of cardboard
All reported a recent decrease in sales. So, I am not waiting for the government statistics to tell me the economy is contracting. While four small businesses each reporting that their sales are decreasing could be a fluke, I doubt it. The economy is already contracting.
History suggests that increases in the rate of savings should soon follow. Now is a great time for public policy to focus on developing the infrastructure that helps savings become a habit. A sensible place to start is with small businesses and allowing their employees access to the same types of tax deferred retirement savings vehicles that the employees of large companies have. Acting now can help ensure that when the economy does come storming back, and most certainly it will, this new found thrift does not go the way of the dinosaur.