It is more or less inevitable that, at some point or another, every politician will make a public declaration that “small businesses are the backbone of the American economy.” And, although politicians are often perceived as having a somewhat complicated relationship with the truth, business owners indeed play a crucial role in shaping the economy at large.
Of course, market-based economies do not function according to the whim of any central authority, as even the economic levers available to the government do not provide the measure of control necessary to truly drive the economy one way or the other. This is by design, as a market-based economy is far better than granting a single person or entity complete control over a nation’s economy.
Since market-based economies are decentralized to such a degree that it operates on an almost autonomous level, it’s quite natural to conclude that the choices made by individual business owners ultimately have little to no effect on the economy at large. Whether this conclusion is accurate, however, is a matter of perspective, and a broader economic perspective demonstrates how, in aggregate, the individual actions taken by business owners have the potential to influence the economy in a significant way.
It is especially critical to note that there is little that can be achieved through policymaking decisions aimed at boosting economic growth during a time in which gross domestic product growth, workforce growth, and productivity growth are often described as slow, stagnant, or dormant. The situation is not exactly dire, but certain parts of the country are facing difficulties as a result of the relatively slow pace of economic growth.
With no magic wand that can be used to spur instantaneous economic growth, the individual business owners that represent the “backbone of the American economy” must recognize that the business decisions they make and the actions they take are not restricted by a vacuum; each decision and each action exerts some level of influence over others and therefore holds the potential to spark a series of chain reactions that ultimately benefit the broader economy.
Confidence only breeds more confidence, so the prevailing sense of optimism evident in the decisions made by individual business owners will inspire a greater level of optimism among other members of the business community. Rather than chalking up the mediocre performance of a business to a lack of broader economic growth — and thus indirectly contributing to the economy’s relatively uninspiring performance — individual business owners are better served by exerting the power they wield and taking steps to inspire greater levels of productivity growth, workforce growth, and gross domestic product growth.