Euquant

Stimulus Package:Pro:Let Cities Spend The Funds with Local Businesses

 By:Dr. Thomas Boston

The stimulus package can spur employment, but to create jobs now we must boost the economic sector where most jobs have been generated over the last two decades--small business. Ironically, the infrastructure proposals that are on the table would channel a disproportionate share of assistance to large, capital-intensive firms rather than to small businesses.

The reason we have so many infrastructure proposals and so few short-run job-creating proposals is because policy-makers are still searching for a solution through the lenses of the New Deal. Yet, the economy has changed drastically.

Trillions of dollars of assistance have been awarded to companies that are "too big to fail" and the very same companies have been shedding jobs by the tens of thousands-- even before the current economic crisis started. Globalization has forced gigantic enterprises to downsize as a matter of pure survival.

On the other hand, a recent report found that between 1998 and 2004 small businesses, meaning those with 500 or fewer employees, accounted for over half of all jobs and created 51 percent of total U.S. gross domestic product. A 2005 study led by distinguished economist William Baumol reported that when innovation is measured by the number of employees, small firms are 13 times more innovative than large firms are, and their patents are twice as likely to have the highest impact.

The dot-com era ushered in a new entrepreneurial economy where job growth, innovation and economic output are driven increasingly by young, small entrepreneurial growth companies. If job creation, innovation, and economic growth are the aims of an economic stimulus plan, then we should not propose strategies that are suitable for large enterprises.