The phrase ‘a nation of shopkeepers’ is attributed to Scottish economist Adam Smith. It is a veiled criticism of the English, who, according to Smith in his Wealth of Nations of 1776, have “a government influenced by shopkeepers”.

Of course, this is a most unfair description of the English, even if this phrase is now applied to some countries that rely heavily on wholesale and retail trade and less on entrepreneurial ventures to create better returns for the nation.

Malta was always a small island nation that thrived on commerce. From the time of the Phoenicians, we depended on trade to procure the things we consumed and paid for them by exporting the few products and services we could produce locally. Due to the limited size of the island, we had few industries that produced capital goods and services and employed many workers.

So, for most of our history, we have depended on many micro businesses catering for the consumption of goods and services by locals and visitors and often employing no more than five persons. Our strategic location in the middle of the Mediterranean for centuries ensured that trade was engrained in our business DNA.

The tourism industry is an essential enabler of the success of retail and wholesale micro businesses. Most of these businesses are family-run, with a few local employees and now increasingly low-cost foreign workers. Shops crop up like mushrooms in all our towns and villages, and the small businesses lobby is one of the strongest influencers on economic policymakers. So, do we qualify for the unflattering title of a nation of shopkeepers?

The saying that ‘small is beautiful’ is not necessarily a lasting advantage in business. Micro enterprises often lack sufficient capital. They frequently rely on the government’s support to raise the finances they need. They also lack the right mix of the skills required to thrive in a competitive market and attract and retain a consumer base. Corporate companies with more financial and better human resources can easily squeeze micro businesses out of the market.

Encouraging micro businesses to become SMEs could manage some of the dangers inherent in going it alone to earn a living

Workers employed in micro businesses often lack the opportunities to advance in their careers that others working for larger firms have. On-the-job training is frequently the only opportunity to develop their skills, making it difficult for them to find better job opportunities.

Unfortunately, many micro businesses only offer precarious work conditions to their workers. Large trade unions are less focused on protecting the rights of workers in the retail and wholesale sectors. Traditionally, their membership was dominated by public service employees and those working for large enterprises.

Family-run micro businesses face even more daunting challenges. Successful family businesses often fail to survive beyond the first and second generation of owners because they refuse to relinquish enterprise control. Initially, business decisions are made by the founder, who often excels in multitasking. However, as the enterprise grows, key management positions are shared by family members who enjoy the status and perks of bosses but lack the skills necessary to steer the business successfully.

Micro-business management functions often include marketing, sales, hiring, service delivery, billing and customer care. These functions can rarely be carried out efficiently and effectively by one or two small venture owners.

Management role inbreeding in family-run micro businesses can often lead to investing in the wrong processes, leading the venture into shambles. A particular local weakness is the obsession of owners of small businesses to starve their business of capital as they prefer to invest their profits in real estate.

The EU often encourages its member states to support small and medium enterprises and has various schemes through its different institutions to provide finance on easy terms. Still, most local businesses are micro ventures with added challenges to thrive in an overcrowded goods and services retail market.

Support for micro businesses financed by taxpayers’ money must be conditional on properly scrutinising business plans with built-in shock absorbers in case of a downturn in trade. Not everyone is good at handling immense work pressure.

Micro businesses do need a lot of commitment. When micro ventures prove they cannot survive despite reasonable help from the government, they should be allowed to wind down their activities. Otherwise, they will crowd out other viable businesses from limited financial support resources funded by taxpayers. 

While being small can have advantages in business, the risks of failure are also generally more significant. Encouraging micro businesses to become SMEs could manage some of the dangers inherent in going it alone to earn a living.