We have all heard about the dichotomy of globalization and isolationism, especially in the context of Brexit, the U.S. presidential election and upcoming elections in European countries. Many disenfranchised working-class people in the Western world feel left out of the new global economy and have revolted against what they see as a world order that enriches the wealthy at the expense the working class. How does this relate to a discussion on the viability of small businesses? The battle lines drawn for and against globalization are acutely relevant to any discussion on small businesses. Globalization has been cited by economists as both beneficial and harmful for small businesses. Fundamentally, globalization is the underlying force behind the factors that are engendering the atrophy of some small independently-owned businesses and the success of others.
The argument that highlights globalization’s positive impact on small businesses is buttressed by an economic report by McKinsey called Digital Globalization: The new era of global flows. It has found that “… the share of exports by large multinational corporations dropped from 84 percent in 1977 to 50 percent in 2013. Companies with fewer than 500 employees accounted for 97.8 percent of all identified US exporters and 97.2 percent of all identified US importers in 2011.” This, in any context, would suggest that the all-too-common promulgations that multinational corporations are supplanting small businesses around the world are largely unfounded. However, it must be noted that this same economic report also states that “soaring flows of data and information now generate more economic value than the global goods trade” – and that is where the problem is. Most growth in exporting from the U.S. comes from new, rather than existing, small businesses – the most successful small businesses are those that cater to an international community, not a city neighborhood. While a software startup is likely to be extremely successful on the global stage, your local ethnic restaurant or coffee shop is dependent on the local community (with a few exceptions like restaurants in Manhattan’s Little Italy), which makes them particularly vulnerable.
New York City – which is arguably the most important financial center in the world – is a microcosm of this new reality. The financial services, real estate and tech startup sectors of NYC’s economy are booming, which in turn has attracted more affluent and whiter people to NYC neighborhoods. These new residents and the wave of gentrification accompanying them have displaced minority residents and their businesses in neighborhoods like Williamsburg, as described in “The Endangered Enclave.” Furthermore, the city government under Mayor Bloomberg’s administration seems to have contributed to this problem by rezoning parts of the city in order to encourage private development at the expense of small businesses, as noted in “The Real Small Business Killer.” Small business owners in gentrified/gentrifying neighborhoods have little power to negotiate with landlords and have little recourse with which they can fight global trends toward data and information analysis. This is very worrisome and it fits well into the larger issue of globalization and its indubitably negative consequences – because when a small business is forced to close, a neighborhood loses a crucial part of its cultural identity and commercial diversity – not to mention the enormity of the economic impact of such closures on the displaced population.
