Toward the end of my recent lecture at the Oklahoma City Mises Circle, I mentioned that one peculiar aspect of small businesses, as a group, is that they are very bad at lobbying the government for special favors. We can contrast this, for example, with the financial sector and commercial airlines, or with large manufacturers in areas like steel, aerospace, and automobiles. All of these industries have received major bailouts or subsidies in recent decades, or have been direct recipients of government spending and protectionist policy.
“Small business”—if we can call it a “sector” at all—has rarely been on the receiving end of policies that directly benefit small business qua small business. As numerous historians and researchers in the area of small business have noted, this is partly because the thing we call “the small business economy” is extremely diverse, and extends to all sectors, including services, manufacturing, and retail, with products ranging from tax preparation to custom-built homes, and everything in between.
In the realm of special-interest politics, this has meant it is very easy to divide small business owners against themselves. After all, protectionism or subsidies that might benefit small firms in professional services in one sector could also be damaging for another group of small businesses in, say, construction. The end result has been that small businesses have been peripheral to special-interest lobbying overall, with few special favors won through state action.
Anecdotally, this has been noted by a number of observers who have described the inability or unwillingness among small business owners to coalesce around a small-business version of the corporate welfare enjoyed by many large firms.
This is not a recent phenomenon, and we can go back to 1817, to find this assessment from the early Jeffersonian political economist John Taylor. Speaking as a spokesman for farmers and artisans facing up against financial and manufacturing interests, Taylor writes: ”We are the least successful courtiers of any rank in society, and of course have the worst prospect of sharing in any species of wealth, bestowed by governments. ...We farmers and mechanics have been political slaves in all countries, because we are political fools.”1
Recent appraisals are more clinical in tone, but come to similar conclusions. In a 2014 paper for Business and Politics, political scientist James Babb writes “due to the heterogeneity of small-business preferences, it is difficult for small business to organize, and when they do, there is a tendency for small business to attach, at their origin, to out-parties. Small business gravitates to a party in opposition to a dominant government party which favors big business.”2
That is, even when small business finds an institutional place in the political arena, it still ends up with the “out party,” and this is likely because the dominant party is already locked into a quid pro quo relationship with big business.
Moreover, Babb found that “There is a tense relationship between small business and government even when its champion party is in power.”3 Why? This is likely because when it is in power, the party attached to the small business lobby fails to deliver any significant benefits.
Similarly, in a 2008 article by McGee Young, he finds “small business never came to occupy an important space in the post-New Deal.”4
Young finds that small business in the early twentieth century historically suffered, politically speaking from an “increasing disparity between small and large firms in the manufacturing sector” which ended up neutralizing small business as a distinct group.5 By the time of the New Deal, some policymakers attempted to incorporate small business into existing networks of interest groups that employed logrolling and quid pro quo agreements to forward a wide variety of policies in “If you scratch my back, I’ll scratch yours” policy relationships. Small businesses, however, were hampered by “multiple, competing, and sometimes antagonistic political identities.”6 Young concludes: “It is not surprising that scholars seeking to understand the politics of small business in the 1950s found little evidence of the cozy “whirlpools of influence” that characterized other policy areas.”7
Every discussion of small business politics must also note the Small Business Administration (SBA), which makes subsidized loans to small businesses. Here there are three things to note. The first is that the amounts of loans made by the SBA are very small when compared to the enormous amounts of government spending, subsidies, and protectionist privilege extended to large firms through federal policy. The SBA has always been a small-potatoes program. Second, the SBA no longer focuses on supporting small business per se, but has instead become another DEI agency. That is, the SBA is now largely concerned with making loans to women-owned and “minority” -owned businesses, rather than making loans on the bases of “will this help small businesses in general.”
And finally, small businesses, as a group, have never been particularly concerned with supporting the SBA, perhaps reflecting the fact that the SBA brings little impact or advantage to small businesses in general. Indeed, the SBA was not created as a result of any demands from small businesses. Rather, the SBA was created as part of a scheme by Washington insiders during the Eisenhower administration to abolish the Reconstruction Finance Corporation (RFC) in 1953. The SBA was created to win over some holdouts in Congress who thought that an agency like the SBA could help to politically justify the abolition of the RFC. While a few small-business lobby groups supported the legislation, there was hardly any groundswell of support from small businesses in general.
Being largely indifferent to federal programs designed to funnel tax money to small business, the more common position of small business people has apparently been little more than “leave us alone.” Or as Babb found, in the United States, in general, “state interference is opposed by small business,”8
This assumed general tendency among small business owners was reinforced by a 2025 article in the British Journal of Political Science titled “The Politics of Small Business Owners.”9 The authors conclude:
Leveraging diverse sources of data—representative surveys from around the world, campaign finance records, voter files, and a first-of-its-kind, bespoke survey of small business owners – we find consistent evidence that small business owners are more likely to identify with and vote for right-wing parties. We find that this tendency cannot be fully explained by factors that cause people to select into being small business owners. Rather, we identify a key operational channel: the experience of being a small business owner leads people to adopt conservative views on government regulation.
This reliance on experience, rather than on theoretical or academic knowledge is notable. The authors find that small business owners diverge from long-established relationships between economic conservatism, earnings, and education level. As the authors note, these connections began to first break down in the 1970s:
Up until the 1970s, income and education used to be highly correlated empirically, with a clear pattern whereby high-income, educated elites were supportive of the right while the lower-income, lesser-educated classes were the core constituency of the left. ... Yet structural changes to the economy, in particular, globalization and the transition to a knowledge economy, have brought about substantial divergence in the political leanings of the educated and the high earners. In what the authors describe as ‘multi-elite politics’, the vote of the highly educated and that of the high earners have diverged, with the former leaning politically to the left and the latter to the right.
Small business owners have unique place in the new arrangement because many are high earners, but are “low-educated”—a term that really just means “spent less time being indoctrinated at colleges and universities.”
So, small business owners are often “HILE”—”high-income-low-educated”—and their political positions are less determined by schooling than by experience with the marketplace and government regulation.
Small business owners are unlikely to be shocked by this conclusion.
The way in which small business owners tend to lean against government intervention overall may also reflect the fact that small business owners can access few “proactive” government programs that benefit them specifically. Without much hope for any of the sorts of policies that favor too-big-to-fail corporations and economic sectors, small business are more likely to conclude that their best path of action is to simply oppose government intervention in general.
- 1
John Taylor of Caroline, Arator (Indianapolis: Liberty Fund, 1977) p. 94, 96.
- 2
James Babb, “The politics of small business organization, partisanship and institutionalization, similarities in the contrasting cases of Japan and the US,” Business and Politics 15, no. 1, (2014): 2.
- 3
Ibid.
- 4
McGee Young, “The Political Roots of Small Business Identity,” Polity 40, No. 4, (Oct. 2008): 436.
- 5
Ibid., p. 452.
- 6
Ibid. p. 461.
- 7
Ibid., p. 451.
- 8
Babb., p. 27.
- 9
Malhotra N, Margalit Y, Shi S. “The Politics of Small Business Owners,” British Journal of Political Science 55, e94, (2025).
