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“We support small businesses,” says nearly every political party, organization, or candidate for office.

This sentiment crosses party lines and political persuasions, so we have to assume that such a phrase means different things to different people.  Indeed it does.  For some, it means reducing government, both in terms of red tape and funding (i.e. taxes).   For others, it means increasing government:  more training, more infrastructure, and more direct involvement with business practices and their employees.

In both cases, this increases the likelihood that one’s jurisdiction (State, Town, etc) will “attract” new businesses.  So why do we care?   Why are most of us who are concerned about policy so please when a new business comes to our town.

Well, new businesses bring three things.

  1. Create jobs.
  2. Generate economic activity.
  3. Provide goods and services.

Usually, when celebrating these benefits, it is in that order.  Politicians like creating jobs for their constituents.   Getting a new or better job definitely makes someone happy and, hopefully even, grateful.  Economic activity is touted, but that is harder to quantify. It means new taxes, surely, so that generally helps. It also often refers to things like construction, where identifiable projects (and countable jobs) are created, with the corresponding happy and grateful voters in tow. Naturally, we are also referring simply to incremental additions to the economy.These may be difficult to measure, much less perceive, unless the effects are very large. A major new manufacturing facility will result in a noticeable increase in restaurant receipts.  A new 10-person technology firm, not so much.

But what about #3?  It would generally be mentioned last, if at all.   In fact, this is sometimes even the con to the #1 and #2 pros.  A new national store “puts local stores out of business,” and so on.

But isn’t this strange.   Isn’t #3 what business do?   Isn’t this why we should like them?   Isn’t growing the economy all about “providing new and better goods and services?”

When our expectations, from anything, is different from the nature of that thing, aren’t we often setting our selves up for failure or, at the least, disappointment?

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