Small businesses are a vital component of the economy. If the government is hoping to reduce their poverty line and produce thriving middle class and economic prosperity at the same time, then they have to encourage citizens to invest in a business. This is as per the US Department of State. Small businesses and the government has a tendency to have symbiotic relation as small businesses are relying on the government to maintain fair competition among large and established businesses.
According to US DOS, America is dependent on small businesses for creating jobs as 90% all businesses and companies are small.
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Government’s Intervention is Critical
As a matter of fact, there are many benefits associated to the government’s intervention in assisting the launch of small businesses. The federal government uses its power in providing direct support to small businesses. The US has established SBA in 1953 or Small Business Administration. This is all designed to help people get started with small businesses and maintain it. SBA is offering loans, business advice and even financial support to businesses. The federal government spends roughly 425 billion dollars on buying goods and services and 23% of this should go to small and startup companies.
Businesses and government could have passive or active relationship as per Thomas A. Garrett. He is a senior economist with Federal Reserve Bank of St. Louis. An active government policy is helping to specify small business industries, normally by means of offering tax incentives. With a passive government on the other hand, it is helping small businesses as a whole like offering loans.
Points to be Considered
Small business and the government usually have conflicts when it comes to their goals. The government does recognize that it should protect these businesses. However, they must acknowledge as well that big firms are more efficient compared to smaller companies. Not only that, the US has a tendency to veer toward free market aiming to reducing the influence of the government. This forces the government to execute a balancing act between growth promotions before turning everything into monopoly.