The trickle-down effect: how politics influence small businesses

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Owning a small business in this day and age requires a certain amount of courage, as political landscapes grow ever more unpredictable. Politics, it should be noted, affect all businesses, regardless of size, but the smaller ones are most susceptible to being swept by the tide of trends and restrictions. To that end, let’s try and identify the main ways in which politics interact with the interests of small business owners worldwide:

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1. Direct policies

Governments tend to enact a variety of laws in their attempts to boost the economy. Everything from small business grants to tax breaks and various other programs are destined to incentivize entrepreneurs and lead to the creation of prosperous businesses that can increase the country’s bottom line. Nevertheless, certain policies can be rather misguided, while others have unforeseen consequences that can actually lead to financial failure for small operations. For instance, raising the minimum wage may lead to happier workers, but it can cripple companies that are barely getting by as it is.

2. Indirect policies

Not all the measures enacted by a government are intended to have an influence on small businesses, but many of them still do by sheer virtue of their impact. To give just one example, stricter regulations in the field of banking can lead to increased security in the financial sector, an idea that’s generally regarded as a good after the crisis of the late 2000s. But these kinds of regulations may also lead to things like higher interest rates and an increased difficulty in securing small business loans, two things that can have an adverse effect on economic growth if left unchecked.

3. Macropolitical factors

With isolationist policies for the most part being a thing of the past in today’s globalized world, countries seem to have realized that they cannot make it on their own. Every nation across the planet has to rely on trade agreements and various types of cooperative arrangements in order to get by. That’s why the economic ecosystem of any nation is strongly tied to the conditions of the world at large. A period of political tension can easily translate into economic turbulence, as investors will be more reluctant to funnel their money when faced with insecure circumstances. Likewise, a strong bond between two or more countries can result in greater economic prosperity for all involved. One only needs to take a look at the UK, which developed exponentially as a member of the European Union, only to face its prospects for further growth threatened under the weight of a possible exit from the union.

In conclusion, it’s clear to see how small businesses are influenced by various political factors and trends. While it may be impossible to accurately predict all the changes that shape the world in this regard, small business owners can take steps towards consolidating their businesses by engaging in solid practices and having a fallback plan for several scenarios. Life is full of surprises, both good and bad, but when it comes to business it’s always wise to prepare for the worst but hope for the best.

Michael Sanduso lives in Toronto, Canada. He is a freelance writer and editor, tech geek, and stay at home father.

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