The Political Economy of the Small Firm

Charles Dannreuther, Lew Perren

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781134639830
• Edition: 1
• Topic: Economía
• Subtopic: Teoría económica

For many, small firms are everyday realities of the economy and visible in every high-street and industrial estate. Their existence and importance is unquestionable. Such beliefs are understandable, but the authors of this new book would suggest they are misguided. The Political Economy of the Small Firm challenges the assumptions regarding small firms that pervade society and political representation. Small firms are not organised into a homogenous sector that has a clear constituency or political influence. In fact, the small firm is shown to be an inconstant political construct that is discursively ethereal and vulnerable to political exploitation.

Fusing theories from political science, management and linguistics, Dannreuther and Perren assert that the idea of the small firm is an important discursive resource used by political actors to legitimise their actions, influence their citizens and help sustain regimes of accumulation. On top of this, the authors also empirically test their claims against 200 years of UK parliamentary debate, from the Industrial Revolution to the Blair government.

The political construction of the small firm is shown not only to provide rhetorical mechanisms to maintain periods of capitalist accumulation, but also to increase the relative autonomy of the state and to centralise power to elite politicians. For a period of 150 years up to the 1970s, the small firm was an unexplored presence, below the political radar and resonant with poor working standards and extreme forms of competition. During the so-called Fordist period from the 1930s, the small firm was seen as the dirty, out-dated, contrast to the clean, modern future represented by mass production and corporations. The perceived failure of Fordism led to the invention of the small firm and its presentation as an ideal political construct. By fabricating assertions of what small firms are and what they want, frequently out of conjecture, the authors of this book show how political elites have been able to advocate radical reformist agendas since the 1970s in the name of a phantom constituency.

1 The political construction of the "small firm"¹

Introduction

For many, small firms are everyday realities of the economy and visible in every high street and industrial estate. Their existence and importance is unquestionable. Such beliefs are understandable, but we would suggest misguided. In this text we provide an account of the small firm that questions this "matter of fact" view and challenges the assumptions regarding small firms that pervade society and political representation.

Our agenda is in sympathy with and influenced by the growing body of work on the discursive construction of the entrepreneur and small businesses (epitomised by Jones and Spicer 2005; Nicholson and Anderson 2005; Ogbor 2000; Perren and Dannreuther 2012²)³ and of the ideational turn in political economy (Hay 2004; Hay and Gofas 2009; Schmidt 2008). Small firms will be shown to be far from a representation of a physical and observable reality. Small firms are not organised into a homogenous sector that has a clear constituency or political influence. Rather, small firms will be shown to be a discursive construction, an idea that is abstract and plastic. The small firm will be shown to be a construct that is discursively ethereal, but politically powerful. Its ghost-like nature (Jones and Spicer 2005) makes it malleable to political exploitation and legitimisation (Richie 1991). The notion of the small firm will be shown to be transient and contested, varying by place, time and political purpose.

The small firm has for too long been the functionalist pawn of political and academic discussions.⁴ "Commonsense" beliefs about its utility permeate research agendas and interventions. The mantra that small firms innovate, generate jobs, are vital to competitiveness and growth, are a solution to globalisation or red tape and. above all, need a voice, resonates through peer review articles and government reports. For many this mantra is unquestionable. Why question the small firm when it provides the perfect institutional construct?

For elite politicians it will be shown that the small firm construct provides a fictitious legitimating constituency of everyday actors, the sort of down-to-earth constituency with which people can identify and support. But this legitimating constituency is not organised as a political group, so there is little consequence if promises are not delivered. The small firm construct will also be shown to offer politicians a policy elixir to cure a wide range of thorny issues. The small firm construct provides a distraction, a sort of rhetorical decoy that appears at least to solve political problems. For elite politicians such a policy elixir is ideal, especially during periods of economic and social turbulence. For academics the small firm construct is also ideal as it gives them a research agenda that links them to institutionalised power. It provides a legitimating agenda that appears to make their research "relevant" and focused on the needs of society.

This text will show the construct of the small firm to be central to beliefs about society, the role of the individual, the role of business and the role of the state. Small firms will be shown to be a recently derived symbolic construct that is ideologically charged, swaddled in shifting political beliefs and integrally embedded in the institutions that bring coherence to modern society. The construct will be shown not only to reflect the Zeitgeist of political and business beliefs, but to be central to their construction and central to the discursive legitimatisation strategies of political actors and their attempts to maintain a stable society.

The Regulation Approach

We argue that the small firm has played a central role in the maintenance of long-run periods of economic growth. This may seem obvious from the end of the 1970s since when there has been a broad consensus of support for the small firm. But we argue that the role is more nuanced than the pervading functionalist interpretation. We also argue that the idea of the small firm was important in the period portrayed as Fordist mass production.⁵ During this period, small firm local production represented the past left behind and so legitimated modern strategies of economic rationalisation, labour protection and collective state-led welfare responses. The exception to this rule was the shopkeeper, which frequently emerged in relation to core issues but never transcended into the dominant political debates.

The Regulation Approach (RA), epitomised by Aglietta (1976), Boyer (2002) and Jessop (2001), provides an overarching framework throughout the text. Figure 1.1 illustrates this framework, showing how the political construction of the small firm helped to sustain long periods of economic growth, or accumulation regimes. The way that the small firm was represented in political debates gave it a particular role in the construction of solutions to economic crisis and change. As social and technological changes converged to produce political conflict. they were debated as economic problems that could be resolved through technical responses. In the Fordist era the small firm was a source of this problem and had to be removed: small firms were excluded as an avenue for government support because they did not achieve scale, failed to protect workers and were parochial in their outlook. During the post-Fordist era the small firm was presented as the solution: small firms were constructed as sources of innovation employment and competitiveness, and so garnered broad political support. In both eras these political constructions of the small firm permeated much further than Whitehall. They linked social and technological changes to new forms of economic and social organisation that allowed capital accumulation to occur, initially through mass production technologies and later through innovations in financial technologies.

Chapter 2 expands upon the Regulation Approach that will be carried through the rest of the text and weaves it into related debates, particularly institutional approaches to varieties of capitalism, epitomised by analyses such as Schmidt's (2002. 2008) discursive institutionalism. The chapter starts by introducing the main question of the book: how has the political construction of the small firm empowered political elites? It is argued that maintaining an "autonomous space" between citizens and the state is the core dilemma for modern states. The political construct of the small firm has played a critical role in creating and maintaining this space. Institutional analysis provides a helpful middle-range theory for understanding how and why ideas are important in political change, but it will be argued that it presents ideas as too coherent and too related to decisions by elites. The political construct of the small firm shows that ideas do both less and more than this. By not defining a small firm as something specific, the idea of the small firm remains a powerful symbol that political elites can call upon, but its plasticity means that policy decisions made in its name can remain fluid. Such ambiguity is helpful to policy makers as it gives them space to transform agendas and deal with uncertainty.

It is argued that the political construction of the small firm is located in a set of social relations that sustain a particular regime of the capitalist economic

Figure 1.1 The Regulation Approach and political construction of the small firm.

relation and help deal with transformations to new forms of capitalist accumulation. Chapter 2 continues by arguing that to understand the role that the small firm plays in the reproduction of these relations, a long historical timeframe needs to be explored with a coherent theoretical frame of the social forces at work. The Varieties of Capitalism (VoC) approach provides such coherence over an extended timeframe. The Regulation Approach extends the theoretical framework to show how the construction of the small firm has shifted over time and the role it plays in the maintenance of key social relations.

Chapter 3 acknowledges that the idea of the small firm is a conceptual artifice that can be exploited by political agents to legitimate their actions and to help sustain the regime of accumulation, especially during periods of flux and uncertainty. Building upon these observations the chapter explores the discursive construction of the small firm. The chapter starts by examining political attempts to influence institutional structures by capturing the concept of the small firm through definitions. This leads on to exploring more subtle constructions of the small firm in everyday discourse. This reveals interesting insights into the nuance of discursive construction in various contexts, but also shows there to be a gap in our understanding of such subtlety within political discourse. Bridging this gap in understanding and considering the political significance is the objective of the rest of the text.

The case study

Chapters 2 and 3 draw upon well established theory to propose that the idea of the small firm is an important discursive resource for political actors to legitimise their actions, influence their citizens and help sustain regimes of accumulation. The small firm construct is an important part of the social compromise that underpins equilibrium within liberal market economies (LMEs). yet it is surprisingly under researched. Making such theoretical propositions is relatively easy; the more difficult task of empirically testing the claims starts in Chapter 4. This explains the research philosophy, which combines case study method. RA and critical realism from the social sciences with corpus analysis techniques from linguistics. It justifies UK Parliamentary debate from the Industrial Revolution to the present as a particularly appropriate case to investigate the theoretical assertions. Some functionalists may find this work challenging and attempt to write it off as biased anti-empirical post-structuralism. Our extensive data-set and robust approach to analysis will make such off-hand dismissal unjustified. The rest of the text presents this case study, enfolds the theoretical debates and explores the consequences for past and future regimes of accumulation. Three small firm eras are identified, each associated with a particular regime of accumulation. These form the structure of the rest of the book.

Chapter 5 explores the era of the shopkeeper and exclusion of the small firm construct (1803-1969). In this chapter it is argued that the small firm construct especially the shopkeeper, was at the core of British politics during the evolution of political democracy. Present at each key moment from the Reform Act to the Second World War, the small firm has been "the elephant in the room, a crucial but unexplored presence. This chapter explains both why the small firm was present in UK political debate as a shopkeeper and also why it was essentially excluded for so much of the era. It explains how the exclusion of the small firm in nineteenth-century Parliamentary debate was in harmony with the laissez faire political landscape that resulted from the technological and societal pressures of the Industrial Revolution and its aftermath. The move into Fordism in the later part of the era surfaced class inequalities that threatened the regime of accumulation and were alleviated by the regulation of large corporations that again excluded the small firm. Conversely, shopkeepers were a form of the small firm construct that was included in Parliamentary discourse. Shops became a visible context of national and religious conflicts that threatened the regime of accumulation during the period and as such a collective response was made through debate and legislation.

Chapter 6 explores the era where the small firm construct came on to the British political agenda (1970 to 1980). This explains the role of the Bolton Committee and the institutional process that allowed the idea of the small firm to become a discursive political resource. It explains how the failure in Fordism and the economic decline threatened the prevailing regime of accumulation and how individualisation espitomised by the small firm construct provided a rhetorical "solution". It also explains why this malleable ideological construct was so ripe for exploitation in the subsequent period.

Chapter 7 explores the inventions and exploitation of the small firm construct within British politics (1980 to 2004). This explains why and how this ideological legacy of Bolton was exploited by subsequent administrations from Thatcher to Blair. It explains how the construct has morphed to match political expediency needed to mitigate against the economic and social turbulence of the post Fordism era. Most importantly it explains how the idea of the small firm became a core discursive resource in politcal debates as diverse as globalisation, class conflict, employment and economic downturn: truly the swiss army knife of political discourse.

Chapter 8 brings together the previous debates. It enfolds theory and empirical evidence to pull out cross-cutting themes. Drawing upon the RA framework it explains how the small firm construct has been at the heart of the political response to temper the irreducible societal contradictions that threatened different regimes of accumulation. It explains how the small firm construct was central to periods of regime change from the Industrial Revolution, to Fordism and post-Fordism. It also explains how the small firm construct has become a mechanism of distraction away from the irreducible contradictions that threaten the current regime of accumulation. This provides a helpful political decoy for temporarily dealing with the economic and social turbulence that bubble up during economic crises, but the fundamental tensions still remain.

2 Theorising the political economy of the "small firm"

Introduction

This book aims to explore how the political construction of the small firm has regulated the boundary between the state and the economy. Policies to support small firms have been used to affect great changes in how legislation is made, how society is organised and how states relate to each other. The language that has been used in small firm policy debates has been charged with notions of inequality and hierarchy, natural justice and liberty and reflected the great ideological divisions of the twentieth century (Hobsbawm 1994).

This contestability was until recently broadly acknowledged in the social science literature. Goss (1991), for example, began his literature review by presenting the "small business and free market theory" before moving straight on to the opposite extreme of the "small business and Marxian analysis" (Goss 1991). In this chapter we sketch out an approach that positions the small firm at the centre of these debates in a longitudinal context. In doing so we aim to position the small firm in relation to some of the other key debates in contemporary political economy...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures
• List of Tables
• Acknowledgements
• 1 The political construction of the "small firm"
• 2 Theorising the political economy of the "small firm"
• 3 Constructing the "small firm"
• 4 The case study: The "small firm" construct in UK Parliamentary debate
• 5 The exclusion of the "small firm"
• 6 The "small firm" onto the British political agenda
• 7 The invention and exploitation of the "small firm"
• 8 Conclusions
• Notes
• References
• Index