In a political landscape often defined by ideological rigidity, Noah Smith identifies a surprising convergence: the revitalized socialist movement and centrist urban governance are both rallying behind a traditionally conservative cause—small business. This piece cuts through the noise of recent progressive missteps to argue that deregulating local retail isn't just an economic fix, but a crucial strategy for restoring the middle class and the very soul of American cities.
The Unlikely Alliance
Smith begins by acknowledging the flaws in recent progressive urban governance, from Zohran Mamdani's controversial transit plans in New York City to the broader trend of "cumbersome regulations that slow construction and raise costs." Yet, he pivots sharply to highlight a specific policy shift that transcends the usual left-right divide. He notes that while many progressive ideas have faltered, "Mamdani's push to support small business is part of a larger overall theme within America's revitalized socialist movement... a deep suspicion of big corporations and an instinctive support for mom & pops."
This framing is effective because it isolates a policy win from a generally critical assessment of the current political climate. Smith points to San Francisco Mayor Daniel Lurie, a self-described centrist, who has implemented similar reforms to cut red tape. As Smith observes, Lurie's approach includes eliminating fees for sidewalk tables and storefront signage, effectively "putting $2,500 back in the pockets of small businesses and saving them valuable time." The argument here is that the instinct to protect small retailers has become a rare bipartisan bright spot in a decade of urban policy failures.
Progressives talk endlessly about "resources", but the pool of resources in a city is not fixed.
Smith's core economic argument challenges the notion that resources are a zero-sum game. He contends that while some progressive policies may shrink the total economic pie by discouraging construction or enabling disorder, "small businesses increase a city's total resources, because they are productive enterprises." This distinction is vital; it moves the conversation from redistribution to generation. However, critics might note that this optimistic view of small business productivity often clashes with the reality of market consolidation, where efficiency gains from large chains can indeed lower consumer prices in ways small shops cannot match.
The Efficiency Trade-Off
Smith does not shy away from the economic counter-argument. He acknowledges that "economies of scale are a real thing" and that big chains often drive out smaller competitors by offering lower prices. He cites research by Foster, Haltiwanger, and Krizan (2006) which estimated that the displacement of small retailers by chains was the "main source of productivity growth for the U.S. retail industry in the late 20th century." This historical context is crucial, reminding readers that the efficiency gains of the 1990s came at a specific cost to the structure of local commerce.
Yet, Smith argues that the loss of small business closes a vital "path to the middle class." He leans on a 2014 Urban Institute report to show that family-business ownership had a "positive and significant [causal effect] on upward income mobility" during the 1980s and 1990s. The author draws a compelling parallel to Japan, where the government actively shields small retailers through subsidies and protectionist policies. While this has arguably held back Japan's aggregate productivity, Smith suggests it was a "sacrifice the country has been willing to make" to preserve a robust middle class, noting that small businesses there account for 70% of employment.
Owning or having a management stake in a small business had an unambiguously positive effect on upward income mobility during the 1980s and 1990s.
The piece then pivots to a political-economic insight that is often overlooked: small business owners are the bedrock of support for capitalism itself. Smith argues that unlike employees of massive corporations, small owners "eat what you kill," making them intimately familiar with market principles and hostile to government overreach. He cites recent data from Malhotra, Margalit, and Shi (2025) showing that small business owners "systematically lean to the right," driven by their direct experience with the regulatory state. This suggests that a decline in small business ownership doesn't just hurt the economy; it erodes the political constituency for free markets.
Urban Vitality and the Third Space
Beyond economics and politics, Smith makes a passionate case for the aesthetic and social value of small businesses. He argues that the "isolation of the suburbs" is not merely about low density, but about the lack of "third spaces where people might meet and mingle." He posits that great cities are defined by "commercial density"—the ability to walk out your door and find a variety of shops, cafes, and restaurants.
Smith writes, "Having a huge variety of stores and restaurants and bars and cafes within easy walking distance is that compensation" for the sacrifice of suburban comfort. This connects the economic policy of deregulation directly to the quality of urban life. He suggests that the "missteps of the last few years" in urban policy, which often prioritized abstract equity over practical livability, can be corrected by empowering the very entrepreneurs who populate the streets. The argument implies that a city with thriving mom-and-pop shops is inherently more resilient and livable than one dominated by corporate chains or empty storefronts.
The more that small businesses get strengthened in American cities, I predict, the faster sanity can be restored to urban policy after the missteps of the last few years.
Bottom Line
Noah Smith's strongest contribution here is reframing small business support not as a nostalgic retreat, but as a pragmatic strategy for political stability and urban renewal. The argument's vulnerability lies in its potential underestimation of how difficult it is to compete with the pricing power of global supply chains without significant, sustained government intervention. Nevertheless, the piece offers a compelling verdict: empowering local entrepreneurs is the most effective way to rebuild the middle class and restore the human scale to American cities.