Joel Fox is the Editor of Fox & Hounds and President of the Small Business Action Committee.
Los Angeles Times business page columnist, Michael Hiltzik, and I often disagree.
I’ll never understand why the Times insists on business columnists who spend a great deal of time criticizing the business community, as they have over recent years. In my view, working toward a more business friendly state would lead California out of its perennial doldrums. Saying that, however, I think Hiltzik’s latest column hits on a subject that can help the state and country recover.
Hiltzik criticizes corporations from sitting on piles of cash. He reports that “operating earnings of companies in the Standard & Poor’s 500 index jumped 38.4% in the second quarter compared with a year earlier, according to Thomson Reuters, and companies are sitting on an estimated $1.8 trillion in cash …”
While much of his column is devoted to discussing increased pay for corporation employees, I want to focus on another tack – freeing up some of those reserves so small businesses can get the resources to expand.
Small businesses, as is often stated, are the engine of the economy. But, the engine is sputtering because it’s low on fuel. It is understandable that big business wants to take a conservative approach during these times because of uncertainty in what government regulation and the business cycle might bring. However, considering the size of the cash piles, some money should be freed up to help small business grow.
All corporations work with small businesses in one way or another and know small businesses’ value not only to the corporations’ bottom line but also to the economy as a whole. Entrepreneurship needs to be encouraged and supported financially. That can occur with direct business-to-business loans or by having corporations pressure reluctant bankers to free some of the corporations’ revenue sitting in the bank’s vaults for small business loans.
Hiltzik, in encouraging big business to increase employee pay, points to Henry Ford as an example. Ford increased pay and expanded an industry. I think of A.P. Giannini’s response after the 1906 San Francisco earthquake. Then the president of the Bank of Italy, which would become the Bank of America, Giannini set up shop on a plank held up by barrels and made loans to help rebuild the city while other banks stayed closed. Taking a chance on the small guy to rebuild a devastated economy worked then and would work again.
These are uncertain times, but big business has often praised the working relationship with small business. If the corporations are in position to help get the economy moving, then they should do all they can to encourage entrepreneurs and small business.
After all, each big business started out as a small business.