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The Small-Business Smokescreen

How the entrepreneurial ethos serves corporate interests

One Day I’ll Work for Myself: The Dream and Delusion that Conquered America by Benjamin C. Waterhouse. W. W. Norton, 304 pages. 2024.

There was a time, long ago, when egalitarians like Thomas Paine put their hopes in America. This new, vast country seemed poised to fulfill that dream of the Enlightenment: a free society of equals. A major reason for their optimism was that, among the free population, self-employment was the norm. America was a nation of farmers and artisans, mechanics and merchants: masterless men, beholden to no one, who could face each other without fear or favor. Slavery was, as the philosopher Elizabeth Anderson writes, a “monstrous blot” on this utopian vision. But in the late eighteenth and early nineteenth centuries, many political observers believed that slavery was economically inefficient and therefore on its way out. Meanwhile, apprenticeships and indentured servitude were growing rare. The future, it seemed, would be one of widespread self-employment.  

Such an economic system augured a new kind of democracy. Depending on someone else for one’s bread? This could only induce cowering, supplication, deference to the whims and priorities of the powerful. For republican thinkers from Thomas Jefferson onward, self-employment and self-government went hand in hand. Political liberty required economic independence. To work for someone else was degrading.

Complaints about the boss are, in our day, familiar enough. But the American ideal of “free labor”—as opposed to “wage labor”—once had a strong political charge that we might now find perplexing. In the mid-nineteenth century, the historian Daniel T. Rodgers recounts, some of the most effective rhetorical attacks hurled by proslavery advocates in the South against abolitionists in the North appealed to free labor. The South might have chattel slavery, but the industrializing North had wage slavery, they argued.

Abraham Lincoln famously attacked both slave labor and wage labor. Working for wages, he believed, ought not to be a permanent condition but a temporary phase of life. Lincoln advanced a view of wage labor as a form of benign apprenticeship, part of a larger arc of upward mobility:

The prudent, penniless beginner in the world labors for wages awhile, saves a surplus with which to buy tools or land for himself, then labors on his own account another while, and at length hires another new beginner to help him.

This free labor ideal, so fiercely prized, eventually collapsed under the pressures of industrialization. America became a nation of hired workers. But self-employment never lost its allure. The ideal lay dormant, waiting to be revived—not as a reflection of the indomitability of the American spirit so much as the power of corporations presiding over an era of degraded work.

From the 1970s onward, the historian Benjamin C. Waterhouse argues in One Day I’ll Work for Myself, the entrepreneurial mythos returned in distorted form. Americans once again resolved to work for themselves, not as free citizens bucking domination but as corporations in miniature. Courses in entrepreneurship emerged as a staple in business schools, which were previously oriented toward training managers. The veneration of small business became an article of faith for Democrats and Republicans alike. In response to an economy grown pitiless—inequality widening, the rich getting richer, and decent jobs becoming harder to find—the heroic figure of the self-made man (and woman) was summoned onstage. Americans could no longer count on good jobs. But if they went into business on their own? Entrepreneurship offered a comforting fantasy, one that made the larger failures of the economic system more tolerable. Small business ownership was, in theory, a path open to everyone, in which hard work would be rewarded.

The renewed luster of self-employment was a reaction, Waterhouse suggests, to the unraveling of the postwar economic consensus. The quarter-century following World War II is commonly regarded as a golden age of American capitalism. By the 1940s, decades of struggle by the American labor movement had achieved a tentative equilibrium between capital and labor. This was an era of big companies, strong unions, steady jobs, and remarkable economic growth. Wages rose, poverty fell, and some economic analysts spoke eagerly of a coming age of leisure, reasoning that industrial automation would permit a shorter workweek.  

This period of stability seems in retrospect like a blip. Since the 1970s, the American economy has undergone many painful upheavals. Recessions, plant closures, inflationary panics, speculative bubbles—a veritable “roller-coaster ride of boom-and-bust cycles,” Waterhouse writes—have occurred against a backdrop of stagnating wages, corporate consolidation, and a labor movement greatly diminished in power.

From this scorched earth, there arose a new enthusiasm for what Waterhouse dubs “the do-it-yourself economy.” (Although his account of the entrepreneurial revival tracks the emergence of what many historians have called “neoliberalism,” he studiously avoids this term.) Though influenced by the economic convulsions of the late twentieth century, the cultural elevation of entrepreneurship was not simply born out of necessity; it was cultivated by ideologues. This fervor for striking out on one’s own was ginned up by consultants, politicians, business theorists, lobbying associations, and self-help authors, who argued for small-business ownership as a cure for the economy’s ills and a liberatory alternative to the soul-crushing pressures of working for a big company.

Today, one rule of American politics remains: never say anything bad about small business. Criticizing the titanic corporations that oversee our lives is one thing. But to bad-mouth hard-working shopkeepers trying, against the odds, to make their own way? What could be more callous, elitist, un-American? Waterhouse finds, across the political spectrum, a striking piousness about small business. Since the Reagan presidency, small-business owners have been an important part of the Republican constituency. But Democrats, too, have issued careful appeals to “the image of the virtuous, striving business owner,” as in Bill Clinton’s attempt to frame his health care reform plan as a boon to small firms, or Barack Obama’s effort to impress Joe the Plumber. The price of beef rises and falls, but the small-town butcher remains a sacred cow.

By selling an illusion of entrepreneurial self-sufficiency, companies found new ways to boost their bottom lines.

This reverence underwrites a certain political agenda. Small business must be promoted and celebrated. The entrepreneur, more so than any other economic actor, epitomizes the virtues of hard work and self-reliance. Therefore, and with no sense of contradiction, the small-business owner must be treated gingerly, even deferentially, by the government. Regulation should be minimized, to avoid putting hurdles in the way of small firms. The minimum wage must be kept low. Tax advantages and labor-law exemptions must be readily forthcoming for the superbly independent proprietor, who by making his or her own way, instead of relying on government handouts, sets a good example for all of us.

Early lobbying efforts on behalf of small business tried to help small firms compete against large ones, for example by limiting preferential discounts from suppliers that enabled large stores to undercut smaller competitors on price. Leveling the playing field between small and large companies remains the stated mandate of leading small-business lobbies such as the National Federation of Independent Business. Yet in truth the small-business lobby is less underdog than attack dog, and “small business” itself is a smokescreen used by the rich—and by large corporations—to advance their own interests. The NFIB has become, in Waterhouse’s assessment, “a bastion of conservative anti-regulatory politics,” joining forces with big-business groups (such as the National Association of Manufacturers) to oppose regulations and worker protections. Small-business groups have fought against universal health coverage, the capital-gains tax, and minimum wage increases. The prerogatives of “small business” appear to converge, to a startling degree, with those of their lumbering and colossal rivals.

Nowhere is this convergence more plain than in the glossy world of franchising. Are franchises like Subway or Dunkin’ Donuts small businesses? Or satellites of large ones? The metaphysics of fast food is hard to digest, but the law is clear: franchise establishments are regulated like small businesses. Labor-law exemptions that apply to small businesses apply to franchises as well. McDonald’s controls the nature of the work performed in its franchise establishments, down to the number of onions placed on each hamburger, but in the eyes of the state, the employees work only for the franchisee, not the franchisor.

This sleight of hand is also a selling point for would-be proprietors seeking economic independence. What Waterhouse calls the “franchise boom”—the expansion of franchising from the 1970s onward—was assisted by a “tremendous public-relations campaign” by corporations, as well as by the International Franchise Association. The IFA pitched franchising as a low-risk way of becoming your own boss, enlisting the rhetoric of independent enterprise to help corporations sell franchising agreements. (Propaganda is an understated element in Waterhouse’s narrative, but it is repeatedly present, for example in an IFA-sponsored book that calls owning a franchise “the epitome of the American dream,” or in attempts by the NFIB’s “education department” to target schools and universities, or in a board game called “An Income of Her Own” aimed at instilling in young girls the virtues of corporate feminism.) Franchising allows corporations to expand, Waterhouse observes, “using someone else’s money,” shifting risk downward. By selling an illusion of entrepreneurial self-sufficiency, companies found new ways to boost their bottom lines.

The false promises of the gig economy provide another instance of how the ideology of entrepreneurship can be made to serve corporate ends. Uber recruited drivers, Waterhouse notes, “by redefining labor as entrepreneurship,” with slogans such as “No shifts. No boss. No limits.” Other gig-economy firms similarly rely on “independent contractors” to carry out their labor. One company, a customer-service phone-support firm called Arise, euphemistically referred to its workers as “agents” (because “it could not legally call them employees”) and exuberantly claimed to “provide entrepreneurial opportunities to many underserved populations.” The company is currently facing lawsuits alleging wage theft. Earlier this month, the Labor Department issued a rule making it more difficult for corporations to classify workers as independent contractors, overturning a Trump-era rule under which the “entrepreneurial opportunity” offered by a job was a key factor in determining a worker’s status. In all, Waterhouse concludes, gig-economy contract work is another example of downward risk shift—and a way of skirting labor protections. Gig-economy workers are still dependent on big corporations; it’s just that now their jobs are worse.

There are more than thirty-three million businesses in the United States today. More than 99.9 percent of them, Waterhouse reports, are “small,” defined as having fewer than five hundred employees. Most—about 81 percent, or twenty-seven million—have no employees at all. Roughly one in nine people in the American workforce, according to government estimates, are self-employed. This “vast and unorganized community of business owners” is a heterogeneous group. Some are rich; others are poor. Some enjoy leisure and flexible hours; others work overtime on piece-rate systems, getting paid by the ride, the call, or the article.

The corporate sector has been savvy about painting precarity as opportunity while disparaging good jobs as institutional dependency. But the sacralization of entrepreneurship, Waterhouse argues, is a Band-Aid for larger economic dysfunction. Immigrant entrepreneurship, for example, is much lauded, but as Waterhouse points out, many immigrants open motels or nail salons or dry cleaners not because this choice is consistent with their education or interests, but because they have no better options.

The real problem is the assimilation of magical thinking about self-employment and small business into politics and law.

One Day I’ll Work for Myself aims to deflate the mythos of self-employment. Our belief in the “magic of entrepreneurship,” Waterhouse argues, reflects “a political culture that puts the burden of economic survival squarely on the individual.” What’s more, the romance of self-employment pushed by business interests in the last half century retains only the dregs of the old free labor ideal. The notion that self-employment might strengthen democratic citizenship now seems archaic or irrelevant. Meanwhile, the imperative to celebrate entrepreneurship conceals the plight of many “entrepreneurs” who, facing scant job opportunities, are forced to improvise under desperate conditions.

Waterhouse is probably right to suggest that the boosterism surrounding self-employment harms vulnerable people with false promises. Yet as I was reading his book, I thought of a conversation I had not long ago with an Uber driver, a man in his twenties figuring out what to do with his life. Driving for Uber, he informed me, was a stopgap. He had been a construction worker but wanted to avoid the fate of his cousin, who had badly injured his back on a construction site. He smiled when I told him I was a teacher and said he’d never liked school. He preferred to be outside, with the sun on his face. He wanted to start his own landscaping business.

As he turned the steering wheel and pressed lightly on the brakes, I thought about how distant this dream seemed, about all the trouble of securing loans, equipment, licenses, insurance, clients, and about how young this man was, driving me in the night. He saw a future for himself away from the clutches of Uber or the hazards of construction. A life filled with labor, but one that would let him plunge his hands in the soil. The thought that such modest hopes might never be realized filled me with sorrow.

Self-employment, declares the subtitle of Waterhouse’s book, is both “dream and delusion.” But who among us can live without dreams? Our cultural attitudes about self-employment are unmoored from material realities, but they also express hopes that the most vulnerable among us may find difficult to do without. That this young man yearned to run his own business, rather than, say, find some good union job, illustrates the reach of the entrepreneurial mythos. But such life-sustaining private fantasies are the wrong target of critique. The real problem is the assimilation of magical thinking about self-employment and small business into politics and law. The meaningful impediments to labor reform are the legal and political structures that disempower workers and bestow advantages on corporations in the name of entrepreneurship. Until our lawmakers learn to think for themselves, we’ll all be working for someone else.