52% of Small Businesses See Conditions Worsening in Next Six Months « naked capitalism

Monday, January 4, 2010

52% of Small Businesses See Conditions Worsening in Next Six Months

The headline gives one of the results of a Rasmussen survey of small businesses commissioned by Discover (hat tip DoctoRx). Note only 22% expect improvement, with the rest either foreseeing no change or not volunteering a view.

Small businesses are the engine of hiring, and as we noted earlier, they have cut back severely on their hiring plans. The current survey shows only marginal improvement from a depressed level. The most troubling finding is the majority of small businesses plan to cut spending further:

The number of small business owners who think the economy is getting worse was down to 49 percent from 53 percent in November; while 24 percent of small business owners see the economy staying the same, up from 16 percent in November; 25 percent see the economy getting better, down from 28 percent in November; and 2 percent are not sure…

35 percent rate the current economy as fair, up from 30 percent in November; while 61 percent rate it as poor, and 4 percent rate it as good or excellent.

18 percent of owners say they will increase spending on business development activities such as advertising, inventories and capital expenditures in the next six months, 26 percent will make no changes, 51 percent plan to decrease spending, and 5 percent are not sure.

51 percent of owners have experienced cash flow issues in the past 90 days, down one percentage point from last month; 45 percent of owners have not experienced cash flow issues, and 4 percent aren’t sure.

14 Comments:

Jim in MN says:

January 5, 2010 at 12:19 am

It took policymakers in the 1930s about three years to come to grips with bank lending and institute marginally adequate policies by having Reconstruction Finance Corporation officers (AKA The Feds) actually sitting behind ‘private’ bank lending desks writing Yes instead of No on the lending memos.

We are not even halfway to that point in this crisis. I have gotten over getting blue in the face about it on Krugman’s blog and elsewhere. There is simply no analysis and most definitely no policy to address this, the critical link between Wall Street and Main Street.

And this absence of…shall we say thought…is all too obvious to Americans of all stations. And that is deligitimizing government, and the Obama Administration, every single day.

When I got too frustrated to think about this any more, I concluded that the rather lame assortment of ‘Depression economists’ in play has been obsessed with the stimulus-type direct Federal spending angle, and has simply missed even the basic economic history–three phases of Crash, Slump and Depression–and has no interest whatsoever in the crash and slump part (the part we’re in now). The bank lending strike we’re in now is the equivalent of thousands of small bank failures then.

For small business, it is now a question of ‘shutting down in place’ just out of love for one’s creation. The enterprises as economic entities are in most cases already dead. And that is a policy failure, stemming from an analytic failure, stemming in turn from a lack of seriousness about the economic war facing our Nation, and commensurate need to look at history and reality instead of trying to ‘use the crisis’ to prove worn out and uninteresting arguments involving experts’ egos.

Whew. Happy New Year?!?

john newman says:

January 5, 2010 at 11:58 am

In the twenty five years since the Supreme Court made bribery legal by calling it political speech the flow of money to politicians has drowned out any voice with less than $100,000 behind it. You’re free to talk, but your voice will never be heard over the din of megaphones $100,000 can buy.

This has led to subtile and systematic distortions in every piece of legislation passed since. The result is a political wing of a Political Economy from which over half the economy is entirely invisible. I read mainstream economics papers that actually argue that most small businesses should not exist because they are not profitable enough and are thus a misallocation of resources! Can you imagine, actually doing something because it is good and right rather than because it is where you can make the absolute most money?

Of course you can, but nobody in Washington can despite the fact that our elected representatives all tell themselves the lie that they are not in it for the money. The fact is, even those who really aren’t (there must be one?) can only hear the voices of that sector of the economy, corporate and financial mostly, that makes the most money and can afford the most “free speech”.

I like that “shutting down in place”, I’ve been calling it hibernation in the deluded hope that some scrap of business will come back.
- JasonRines says:
  
  January 5, 2010 at 4:36 pm
  
  So very true John. American productivity up 60% since 2000, wages flat for the private sector. I have no doubt the last twenty years of gross mismanagement leading to a collapse of the U.S. economic (and probably political system) will be studied for the next two hundred years. Models must be built after this area that provides the public with indicators that a new crop of sociopaths are forming in government/markets.
- alex says:
  
  January 5, 2010 at 6:05 pm
  
  You hit the nail on the head. Bribery (oops, political speech) is the crux of the problem.
  
  I should note thought that some states (e.g. Arizona) have found ways around the Supreme’s bizarre interpretation. Until we have that on a federal level all other reforms are moot.
john newman says:

January 5, 2010 at 11:59 am

In the twenty five years since the Supreme Court made bribery legal by calling it political speech the flow of money to politicians has drowned out any voice with less than $100,000 behind it. You’re free to talk, but your voice will never be heard over the din of megaphones $100,000 can buy.

This has led to subtile and systematic distortions in every piece of legislation passed since. The result is a political wing of a Political Economy from which over half the economy is entirely invisible. I read mainstream economics papers that actually argue that most small businesses should not exist because they are not profitable enough and are thus a misallocation of resources! Can you imagine, actually doing something because it is good and right rather than because it is where you can make the absolute most money?

Of course you can, but nobody in Washington can despite the fact that our elected representatives all tell themselves the lie that they are not in it for the money. The fact is, even those who really aren’t (there must be one?) can only hear the voices of that sector of the economy, corporate and financial mostly, that makes the most money and can afford the most “free speech”.

I like that “shutting down in place”, I’ve been calling it hibernation in the deluded hope that some scrap of business will come back.

This did not post when I hit submit comment

Advocatus Diaboli says:

January 5, 2010 at 2:37 am

Copied from somewhere else
__________________________
One day a fourth-grade teacher asked the children what their fathers did for a living. All the typical answers came up — fireman, mechanic, businessman, salesman, doctor, lawyer, and so forth.

However, little Justin was being uncharacteristically quiet, so when the teacher prodded him about his father, he finally replied, ‘Okay…my father’s an exotic dancer in a gay cabaret and takes off all his clothes in front of other men and they put money in his underwear. Sometimes, if the offer is really good, he will go home with some guy and stay with him all night for money.’

The teacher, obviously shaken by this statement, hurriedly set the other children to work on some exercises and then took little Justin aside to ask him, ‘Is that really true about your father?’

‘No’, the boy said, ‘He actually works for the Democratic National Committee and helped get Barack Obama elected President last year, but I was too embarrassed to say that in front of the class.’

Vinny G. says:

January 5, 2010 at 10:37 am

Good one. I just copied it and sent it to a few friends.

Vinny

52% of small businesses see conditions worsening in next six months - Viewsflow says:

January 5, 2010 at 3:23 am

[...] Small businesses are still unhappy about the prospects of the economy.Close [...]

steveo77 says:

January 5, 2010 at 4:26 am

Small business may not be the engine of hiring as the big gov money is by design given to big business, that can in turn support big gov, through whatever means….this is very negative for future prospects!

52% of Small Businesses See Conditions Worsening in Next Six Months | oolaah says:

January 5, 2010 at 5:00 pm

[...] owners have not experienced cash flow issues, and 4 percent aren’t sure. Originally published at Naked Capitalism and reproduced here with the author’s permission. Opinions and comments on RGE [...]

Bob Alexander says:

January 5, 2010 at 8:21 pm

on the political blogs, there has been a great discussion recently — in the last couple of weeks — about the strong “Republican” bias in Rasmussen surveys. These criticisms have to do the details of how his samples are chosen, and then “balanced” to “model” the electorate. I would imagine that many of the same problems are inherent in any sample of small business owners that Rasmussen might make. The bias is so large that an average of other firms researching the same topic could easily be in the 46-48 percent range. I would not lean too heavily on this finding.

Doc Holiday says:

January 5, 2010 at 10:08 pm

Small business is almost 100% dead, so come back next year and get a dose of new world reality with the post-internet economy. Mom and Pop shops and little non-essential shops are the modern day equivalent of elevator operators, telephone operators, cigarette girls,butchers shops, bakers, candle makers, DOJ, FTC, SEC, Homeland Security …. I’m running out of F’ing examples here, any suggestions?

Jim in MN says:

January 6, 2010 at 1:15 am

TV actors
News correspondents
Responsible money managers
Bookies
Pimps
Ward heelers
Auto mechanics
TV repairmen
Nonviolent heros
Leaders of moral stature
Philosophers that matter
(Real) rock stars

Did I miss any?

Daddy Paul says:

January 6, 2010 at 9:09 pm

Not good news is it!

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