The Development Paradox When Everyone Is A Small Business Owner

The Development Paradox When Everyone Is A Small Business Owner

Across many developing parts of the world, development experts like to push numbers on how these regions are more ‘entrepreneurial” than the advanced parts of the world. Of course, I do not see a roadside corn seller as an entrepreneur; you can go with a small business owner, as the distinction between the two is evident.

When everyone is a small business owner, it means a system is not working as productivity, and the capacity to utilize, and organize, the factors of production at scale are not optimized. Yes, you have many small business owners because no company is expanding to provide jobs for people. So, everyone goes into the game, for survival!

Nigeria has more than 60% of its working population employed in agriculture, producing mass hunger across the nation; the U.S. uses less than 5% and can technically feed the world. In the U.S., economies of scale work and productivity in agriculture is higher. But when that process begins to struggle, Americans do what Nigerians do: many join the small business owner wagon.

Chart: New Business Applications have surged in recent months in US

Yes, during this pandemic when many Americans lost their jobs, the number of new formed companies has risen. Not many of those firms were formed on the positions of strengths; many came largely for survival, just as many do in Nigeria. This shows us one thing: humans are the same.

The combination of necessity and opportunity during the pandemic has ignited a rush of new small businesses. The Wall Street Journal, citing U.S. Census Bureau data, reports that more than 3.2 million employer ID applications have been submitted so far this year, compared with 2.7 million a year ago, which includes gig-economy workers and other independent contractors taking the plunge after being laid off. An economist points out that more than half of these startups close within five years, but the crisis may speed up “creative destruction,” where new, innovative businesses displace older, less-efficient ones.

Nigeria needs ways to build large companies, and having many small business owners should not be seen as a good thing. Indeed, Nigeria needs to find a way to avoid celebrating what should not be celebrated – when you have many small business owners, your economy is not firing at all cylinders.

Why Nigeria Must Not Be Celebrating Having Millions of Business Owners

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2 thoughts on “The Development Paradox When Everyone Is A Small Business Owner

  1. If treating equals as unequal is considered injustice, then treating unequal as equal is also injustice; but many people are not aware of this second part.

    You have ten million naira to share and there are ten people to get the money, how do you distribute? What many will see as justice is giving each person a million naira; but if you dig deeper, the effective distribution could be to give just one person five million naira, three million to the second, the remaining eight will share the two million naira left.

    It’s only when we know how to organise an economy at this level of thinking, then we can reap the benefits. For now Nigeria is working to satisfy everyone, only to end up making everyone miserable.

    Small minds are never structured to do big things, because big things need big minded people to simplify the seeming complexities.

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