From the ground up: the new grassroots economy

It’s time to reclaim the meaning of ‘entrepreneur’ and make it more inclusive, says David Sax. As the pandemic has rippled through the world, he argues that the greatest pain, and hope, has been found in the grassroots economy.
ground up

In 1970, US economist Milton Friedman published an unambiguous defence of laissez-faire capitalism in New York Times Magazine called, ‘The Social Responsibility of Business is to Increase its Profits’.

‘The businessmen [who] believe […] that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers,’ were ‘preaching pure and unadulterated socialism’, Friedman wrote. At the height of the Cold War, the civil rights movement, women’s liberation and other transformative global social movements, Friedman’s line in the sand was clear: you are either in business to make as much money as possible, or you’re a filthy communist.

Looking back on the 50 years since those words were written, it is easy to hand Friedman an easy victory. Reagan and Thatcher (and Michael Douglas) made greed good, then globalisation made it universal. Profits and markets soared, pausing briefly in recessions, only to soar again. Wall Street financialised everything, Silicon Valley disrupted the rest, and entrepreneurs like Jeff Bezos emerged as a new class of Ayn Randian superhero. Big firms grew bigger, because global corporations allowed for more of that profit. For many of us, ‘business’ became a profoundly evil word.

But out in the streets of our cities, towns and rural communities, the entrepreneurs who own and operate the businesses that make up the grassroots economy see things differently. They own the butchers and hardware stores, the auto garages and potato farms, the dental clinics and five person advertising firms. These small and medium-sized businesses not only make up the vast majority of business activity, employment and wealth creation in every sector, but they represent the deeper significance of business, beyond profits, that we tend to overlook.

One is inclusivity. Yes, vast systemic inequalities persist in a free-market economy. Investment funding for entrepreneurs, like corporate board seats, disproportionately flows to white men from top schools. But for those starting out at a disadvantage – immigrants, women, racialised and LGBTQ individuals – setting up a business remains a way to not only make a living, but the best method to carve out a space of your own. Anyone can start a business at the grassroots level. All it takes is a product or a service to sell, and someone willing to bear the risk to bring it to market. Just by doing so, these entrepreneurs crack open the very doors that hold them back. In the US, the fastest-growing group of entrepreneurs is Black women. They not only start businesses for economic opportunity, but as a way to grasp the power that has been denied to them.

Beyond the houses, schools and residents of the places where we live, a community is the sum of the businesses that call it home. They grow, cook and sell our food, repair and renovate our homes, and provide the sights, sounds and interactions of the streets we walk on every day. These businesses can deepen the roots of existing communities, such as immigrants living in a particular neighbourhood, who open shops, restaurants, banks and social clubs, building an economic and cultural link to wider society, while giving its residents a stronger voice.

The grassroots economy allows the personal values of the entrepreneur to turn into action. The products they chose to sell. The way they chose to serve people. How they spend, and hire, and invest the money they make. This isn’t exclusively benign or altruistic (there’s just as many scorched earth market fundamentalists as servant-leaders out there), but on the grassroots level, those values can’t hide amid the structures of a large corporation. It is the raised fist of a Black Lives Matter sticker pasted on the door of the coffee shop, the solar panels on the roof of the industrial tubing factory, the donation to the school fundraiser, and the free meals for frontline workers at the height of the pandemic.

Over the past few months, as the devastation of Covid-19 has rippled through the economy, grassroots businesses have been the first to close, but they were also the first to reach out to help their neighbours. And now, as the slow road to recovery begins, it is the grassroots where we see the most hope. The wedding planners with creative solutions for distant celebrations, the restaurants figuring out how to serve safely, the reluctant entrepreneurs, freshly out of work, with no choice but to take their best idea and plant the seed of a new business.

Amazon won’t save us. Nor will BP, Mercedes, or the other totems of business that embody Friedman’s ideal. The future of business, just like the past, will remain strongest on the ground. Our hope rests in the aspirations, dreams and hard work of individuals who commit to build something. In his 1973 book Small is Beautiful, the economist E F Schumacher lovingly summarised our communal desire for a grassroots economy. ‘While many theoreticians – who may not be too closely in touch with real life – are still engaging in the idolatry of large size, with practical people in the actual world there is a tremendous longing and striving to profit, if at all possible, from the convenience, humanity and manageability of smallness.’

Advocates of entrepreneurship love to talk about the ‘ecosystem’ of startups, but most focus their efforts on cultivating a handful of alpha predators. But an economy, like the ecology of a savannah, cannot sustain itself for long with only large carnivores. It needs interconnected systems of individuals and their businesses that work together to function. A healthy economy starts from the ground and grows up, replenishing and nurturing itself with opportunity for everyone, in a way that supersedes the zero-sum maxim of kill or be killed. The most important creature in the savannah isn’t the lion. It’s the blade of grass.

Listen to more entrepreneurial insights from David Sax.

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