John Maynard Keynes appeared to know little about family businesses. Perhaps if he did, he would never have uttered his often-cited words: “In the long run we are all dead”.
The economist was referring to the need for policy makers to move quickly to deal with things like unemployment through his theories on pump priming – pumping government money into public-sector programmes like infrastructure to create employment.
The debate about Keynesian pump priming and today’s economies continues, but governments across the world, weighed down by crippling deficits, are reluctant to find extra money to pump prime. Perhaps they would be better advised to look for policies geared towards long-term economic security rather than for short-term fixes.
And if they were inclined to long-term growth, governments should look at family businesses. That long termism and family businesses go together is a cliche, but it is still true that many long-lived businesses are family owned.
For example, this study published in the Harvard Business Review which looked at 149 publicly traded, family-controlled businesses with revenues of more than $1 billion from 1997 to 2009 found that family-controlled firms were more resilient in downturns than their publicly-owned peers, and were less affected by economic cycles. Here is a graphic that shows the findings:
The authors of the article concluded that “family businesses focus on resilience more than performance. They forgo the excess returns available during good times in order to increase their odds of survival during bad times.”
There may be other benefits to family ownership as well – not necessarily measured by financial or economic factors – that family businesses’ long-termism brings. These include their contribution to the social cohesion of communities they have their businesses in through long-term employment or philanthropy.
Policy makers looking to promote steadier growth should see this as a worthwhile outcome and promote family businesses as a useful policy objective in themselves as a result. Of course, policy makers can’t create family businesses, but they can create conditions they thrive in.
And even for those (few) Keynesians still influencing policy making in the 21st century, they should bear in mind that in the long run family businesses aren’t dead – they are just passed on to the next generation.