WRIGHT PATMAN IS DEAD: SMALL BUSINESS

CONSERVATIVES AND THE POLITICS OF CAPITALISM IN

THE 1980s

Benjamin C. Waterhouse

Johns Hopkins Institute for Applied Economics,

Global Health, and Study of Business Enterprise

American Capitalism

AC/No.5/May 2016

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WrightPatmanIsDead:SmallBusinessConservativesandthePoliticsofCapitalisminthe1980s

PresentedtotheJohnsHopkinsAmericanCapitalismSeminarMarch2,2016

BenjaminC.WaterhouseAssociateProfessorofHistoryandGrauerScholar

UniversityofNorthCarolina,ChapelHill

***Thisisanearlydraft.Pleasedonotcite,quotefrom,orreproduce.***

AswinterturnedtospringayearafterRonaldReagantookoffice,the

economyoftheUnitedStateswasmiredinadeepfunk.Nationwide,unemployment

stoodat8.5percentinthefirstmonthsof1982(itwouldpeakat10.8percentin

Decemberandremainatthatleveluntilthesummerof1983).Inflation,while

falling,wasalsohigh;consumerpricesroseatarateofmorethan6.5percent

annually.Newhomesaleshittheirsecondlowestlevelonrecord,andcarsaleswere

down44percentfromthepreviousyear.Businessesfailed55percentmoreoften

thantheyearbefore.OpeningahearingoftheSenateCommitteeonSmallBusiness

onMarch31,1982,LowellWeickerenteredthesegrimfactsintothepublicrecord.

“Onpaper,”theCommitteechairopined,“statisticsliketheseareknownas

‘unfavorableeconomicindicators.’Intherealworld,everyoneofthemmarksa

living,breathinghumantragedy.”1

1“HearingbeforetheCommitteeonSmallBusiness,UnitedStatesSenate,97thcongress,SecondSessiononTheStateofSmallBusiness:AReportofthePresident,March31,1982,”Washington,D.C.:GovernmentPrintingOffice,1982,p.1.Fornationalinflationandunemploymentdata,seemiseryindex.us.

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TheReaganRecession’sdepressingeffectswerewidespread,castingmillions

outofwork,dilutingconsumers’purchasingpower,andweakeningcorporate

profits.YetSenatorWeicker—aliberalRepublicanwhowouldeventuallyleavethe

GOPandserveasanindependentgovernorofConnecticut—wishedtodraw

attentiontoaparticularconstituencywithinthat“living,breathinghumantragedy”:

smallbusinessowners.Whilethemacroeconomytanked,America’sshopkeepers,

drycleaners,garagetinkerers,upstartentrepreneurs,andotherdenizensof“Main

StreetUSA”borethebruntofthepain.AschairofthestandingCommitteeonSmall

Business,Weickerbelievedthathismissionwastoensurethatthegovernmentpaid

sufficientattentiontothespecificlinksbetweenmacroeconomicpolicyandthe

plightofthesmallbusinessowner.Fortoolong,hecharged,Americanpolicyhad

focusedexclusivelyonthegiantcorporationsthatdominatedtwentiethcentury

capitalism.Yetwhilebigcompanieshadtheresourcestoweathereconomic

doldrumsandawaitaneventualrecovery,smallerfirmsconfrontedreal,existential

threatstotheirverysurvival.Traditionaleconomicpolicy“mightbeverygoodin

theoverallforbigbusiness,”thesenatorwarned,“butissimplyjustdevastatingto

smallbusiness.”2

LowellWeicker’sentreatiesonbehalfofsmallbusinessamideconomichard

timesformedpartofalargershiftinAmericanpoliticsthatputentrepreneurship

andsmallenterprisecenterstage.Indeed,theveryhearinghechairedinMarch

1982existedtodebateandanalyzethefirst“President’sReportontheStateof

SmallBusiness,”itselfaproductoftherenewedattentiontosmallbusinessatthe

2“HearingbeforetheCommitteeonSmallBusiness,”p.18

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highestlevelsofnationalpolitics.Twoyearsprior,theCarterAdministrationhad

convened2000delegatesinWashingtonatthefirst-everWhiteHouseConference

onSmallBusiness.Thateventproduceddozensofspecificpolicyrecommendations,

includingthenewpresidentialreport.3Conveningtodiscussthefirstsuchreport,

SenatorWeickerexplainedthatCongresshadcreatedthenewrequirementinthe

summerof1980as“awayofforcingtheexecutivebranchtofocusitsattentionon

thesmallbusinesscommunityanditsneeds,specifically.”

Scholarshavelongnotedtheuptickinpoliticalattentiontotheconcernsof

smallbusinessthatemergedduringtheeconomiccrisisyearsofthe1970sand

continuedtoshapepoliticsandpolicymakingthroughthefinaltwodecadesofthe

twentiethcentury(andbeyond).Somehaveattributedthisshifttothepopulist

politicsofleaderslikeJimmyCarter,whocasthimselfthefirst“smallbusiness

owner”tooccupytheWhiteHousesinceHarryTrumanandpromisedtohelpsmall

businessesbyrollingbackonerousgovernmentregulations.Carterdirectedthe

SmallBusinessAdministration,createdin1953toprovidepreferentiallending

servicestosmallcompanies,toextenditslendingpracticetoencouragesmall

businessactivityamongwomenandminorities,forexample.4Tobesure,debates

rageaboutthedegreetowhichCarteractuallypracticedwhathepreached,andhis

policypreferences—oninflation,energy,andregulation—shiftedtofavorlarge

corporateandindustrialinterestsduringhisterminoffice.Yetthroughhis

committedpromotionofsmallbusinessinterests,includingspearheadingtheWhite

3PublicLaw96-302,July2,1980.4JonathanBean,Big Government and Affirmative Action: The Scandalous History of the Small Business Administration(Lexington,KY,2001),99–102.

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HouseConferenceonSmallBusinessin1980,Carterplayedanimportantrole

puttingsmallbusinessissuesonthemap.5

Yettherenewedfocusonsmallbusinessinthelate1970salsocoalesced

fromthebottomup.Smallbusinessinterestgroupsformedakeypartofthebroader

politicalmobilizationthatbroughttradeassociations,lobbyists,andcorporateCEOs

moredirectlyintothepolicymakingprocess.Lobbyinggroupsdevoted,either

exclusivelyorinpart,tosmallbusinessconcernsexpandedtheirmembershipand

politicalreach,galvanizedinparticularbythegrowingpowerofanti-statistand

anti-regulatorypolitics.Forexample,theU.S.ChamberofCommerce,—theeditorof

whosemagazinein1950haddeclaredthatarticleson“smallbusinessproblems”

wouldbepublished“Overmydeadbody!”—pivoteddramaticallytowarditssmall

businessbaseasitexpandeditsmembershipandlobbyinginthe1970s.6Andthe

NationalFederationofIndependentBusiness(NFIB),whichsinceitsfoundinginthe

1940sbeenmostlyoccupieditselfwithtakingandsellingmail-ordersurveys,re-

inventeditselfasanespeciallypowerfullobbyingforcebythe1980s.7

Intellectualslikewisejumpedonthesmallbusinessbandwagon. Academic

researchintoentrepreneurshipandtheroleofsmallbusinessintheeconomy

flourished.In1970,eightAmericanuniversitiesofferedcoursesonstartinganew

5ForscholarlydebatesoverCarter’srealpoliticalallegiancesandlegacy,see,forexample,JudithStein,Pivotal Decade: How the United States Traded Factories for Finance in the Seventies (NewHaven,2010).6Onthepoliticalmobilizationofbusinessassociationsinthe1970sand1980s,see,well,me:BenjaminWaterhouse,Lobbying America: The Politics of Business from Nixon to NAFTA(Princeton:2014).7NationalFederationofIndependentBusiness,“NFIB:AHistory,1943–1985,”documentinpossessionofauthor.

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business;by1980,137did.Magazinesdevotedtoentrepreneurshipemerged.8

Withinafewyears,commentatorsregularlybraggedthattheywerelivinginthe

“eraoftheentrepreneur.”Toquoteone:“Afteryearsofneglect,thosewhostartand

managetheirownbusinessesareviewedaspopularheroes.”9

Smallbusiness,inotherwords,hadbecomeaverybigdeal.

YetdespitetherenewedpoliticalcommitmenttotheneedsofAmerica’s

smallbusinessesthatseemedtoanimatenationalpoliticsbythe1980s,nocoherent

policyprogramemerged.Smallbusinessboostersneverachievedaconsensuson

whatsuchapro-smallbusinesspolicyregimewouldevenlooklike.Progressive

populistslikeCarterpushedforprotectivemeasureslikeguaranteedgovernment

contractsandpreferentialloans.ConservativesattheNFIBandtheChamberof

Commercewantedtoreducetheregulatorypowerofagencieslikethe

EnvironmentalProtectionAgency.Beyondemptyplatitudesaboutvirtue,

independence,andinnovation,nooneagreedwhatitmeanttostickupforsmall

firms.

Thisfailuretoagreeonwhattheinterestsofsmallenterprisesactuallywere,

whytheymeritedacoherentdefense,andagainstwhat,setthestageforthe

contentiouspoliticsofsmallbusinessinthelasttwodecadesofthe20thcentury.Yet

evenasprogressivesandconservativesditheredabouthowbesttopreservesmall

economicactors,anincreasinglyglobalized,financialized,andcorporatizedmodeof

capitalismfundamentallyupendedtheterrainonwhichtheclassicalarguments

8SandraAnglund,Small Business Politics and the American Creed(Westport,Connecticut:2000),122.9RobertGoffeeandRichardScase,Entrepreneurship in Europe: The Social Processes(London,1987),p.1

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aboutbigandsmallbusinessintheUnitedStatestookplace.Inaglobalized

economydefinedbyeconomicbigness,thepolitical“revival”ofsmallbusiness

seemedoutofplace,unfoldingonaculturalandrhetoricalplanethatwasremoved

from,orevenincontradictionwith,therealitiesofeconomiclife.

Thehistoricalscholarshiponthepoliticsofsmallbusinesshasdemonstrated

clearlythat,whiledebatespersisted,theconservativeinterpretationofsmall

businesspoliticslargelytriumphedinthe1980s.Smallbusinessowners(and,far

moreimportantly,theirself-appointedspokespeople)becameacriticalpartofthe

conservativepoliticalproject.Bytakingcommandoftheissue,conservativesmall

businessactivistsfundamentallyrecastthecentralissuesofsmallbusinesspolitics:

Abandoningthehistoricaldefenseofcompetitionandfairness,theyredefinedthe

debateoversmallbusinessasadefenseofinnovationandgrowth.10

Thepresentessay,whichspringsfromalargerandearly-stageresearch

project,reflectsmycontentionthatthisshiftinsmallbusinesspoliticsinthe1980s

hadvitalramificationsforAmericanpoliticsandeconomiclife.First,Isuggestthat

thepolicyagendaofconservativesmallbusinessactivistsdovetailedentirelywith

thepolicyagendaoftheeconomicelite.Bydefiningsmallbusinessinterestsin

termsofderegulation,regulatoryreform,andlowertaxes,thesepolicy

entrepreneurssuccessfullyblurredthedistinctionsbetweenlargeandsmallfirms.

10Fifteenyearsago,politicalscientistSandraAnglundidentifiedthisimportantconceptualshift.Moreover,shearguedthattheideationalconnectsbetweensmallbusinessownershipandtraditional(possibleexceptional)Americanvalues—whatshecalledthe“AmericanCreed”—wasitselftheorganizingforcebehindsmall-businesspoliticalactivisminthelate20thcentury,morethananyrealeconomicinterest.SeeAnglund,Small Business Politics and the American Creed.

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Ultimately,thosepoliciescreatedaneconomicenvironmentthatprivileged

economicelitesandlarge,globalinstitutionsoversmall-scalelocalenterprises.

Thisresearchprojectseekstousethepoliticalhistoryofsmallbusinessasa

windowintothecontestedoperationsoflate-stagecapitalismsincethe1970s.The

lastfourdecadeshavebeenchieflydefinedbytwointer-relatedphenomena:the

triumphofanorganizedconservatismdedicatedtoneoliberalpolicies,andthe

disruptionsofglobalizationandmasstechnologicalchange.Ironically,manyofthe

championsofsmallbusinessideologyplayedvitalrolespushingtheverypolicies—

especiallyfinancialderegulationandtradeliberalization—thathastenedthose

developmentsandmadelifemoreprecariousforsmalloperators.Suchcomplicity

shouldnotsurprisehistorians,whocanpointtoanynumberofinstanceswhere

peoplemobilizedagainsttheireconomicself-interestforculturalandideological

reasons.Yetbyplacingexaminingthepoliticsofsmallbusinessalongsidethe

historyofcapitalism,perhapswecancometoaclearerunderstandingofexactly

howthecentralcreedsoftheAmericantraditionoperated,andhowthe

conservativeeconomicprojecttookshape.

Studying Small Business in America: A Methodological Hot Mess Anyinquiryofthepoliticsofsmallbusinessentailssomerequisitethroat-

clearing.Avarietyofscholars,historiansaswellassocialscientists,haveprovided

helpfulwaysoftheorizingandhistoricizingsmallbusiness,yetimportant

methodologicalhurdlesremain.Smallbusinessisatrickyintellectualtarget,inpart

becauseitsveryimportanceandpowercomefromitsconceptualmalleability.My

analysisoftheconfluenceofsmallbusinessandthepoliticsofcapitalisminthe

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1980sdependsonstakingaparticularpositiononthenatureofthishistorical

subject.Soherewego.Ahem.

Thefirstobstacletostudyingsmallbusinessisthatweliterallydon’tknow

whatwe’retalkingabout.Morespecifically,thereisnoagreed-upondefinition for

whattypeofbusinessactuallycountsas“small.”TheSmallBusinessAdministration

(SBA),createdduringtheEisenhowerAdministrationasasuccessortothe

Depression-eraReconstructionFinanceCorporationtoprovidefundingfor

underserved(i.e.,small)companies,hasdefinedtheterminseveralways

throughoutitsexistence.AccordingtotheoriginallawthatcreatedtheSBA,“a

small-businessconcernshallbeonewhichisindependentlyownedandoperated

andwhichisnotdominantinitsfieldofoperation.”11Today,toqualifyforanSBA

loan,manufacturingandminingfirmsgenerallymustemployfewerthan500

employees,andnon-manufacturersmusthaveannualreceiptsbelow$7.5million,

althoughthegovernmentreservestherighttomakeexceptions.12Inmanycases,

therefore,workforcesizeand/ortotalintakearesufficienttodistinguishasmall

business.

AsbusinesshistorianManselBlackfordhassuccinctlyexplained,however,

manyscholarspreferlessnumeric,moreChandlerianidentifiers.Suchfactors

includetheabsenceofmanagerialhierarchies,lessrigidandbureaucraticsystems

oflaborrelations,andtherelationshipbetweenfirmownersandtheirlocal

11PublicLaw163–July30,1953.12“SummaryofSizeStandardsbyIndustrySector,AsofJuly14,2014,”www.sba.gov.Thedefinitionsshiftregularly.InJanuary2016,forexample,theSBAexpandeditssizerestrictionforcertainwholesalersfrom100to200employees,makingapproximately4000additionalfirmseligibleforSBAfinancing.AaronGregg,“SBAchangesthedefinitionofwhatitmeanstobeasmallwholesaler,”Washington Post,January28,2016.

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communities.Blackfordprefersthis“functional”approach,andcautionsagainst

adheringtohardandfastrequirements.13

Governmentstypicallydon’texercisethefreedomofconceptualambiguityas

scholarsdo,andpolicymakers’inabilitytopreciselydefine“smallbusiness”asan

economicunitisawell-wornclichéthatoftenbreedscomicabsurdity.Inthemid-

1960s,forexample,SBAchairmanBernardBoutindefinedsizeintheautoandtire

industriesbymarketshare—thosewithlessthan5percentoftotalsaleswere

“small.”SuchadefinitionpleasedtheAmericanMotorsCompany,thestruggling

fourth-seedintheautoindustry,whichboastedonly3percentmarketsharebut

employed30,000peopleandsoldabilliondollarsworthofcarseveryyear.14

Asaninterestgroupandeconomicunit,therefore,smallbusinesscanonlybe

pinpointedthewayJusticeStewartidentifiedpornography—whenhesawit.And

evenoncewecontrolforsize,marketshare,orpoliticalpower,“smallbusiness”is

unwieldyinitsdiversity,countingeveryonefromthesmall-towndrycleanertothe

wealthysoftwarestart-up.Yetasaculturalandpoliticalcategory—thefunctionI

findmorehistoricallyimportant—itiseasiertotrack,foritsmythology

recapitulatescentralcomponentsofAmerica’slongstandingpoliticaltradition.From

theearlydaysoftheRepublic,theideaofsmallbusinesshasevokedclassicalvalues

likehardworkandruggedindividualism.Thenotioncallstomindacompelling

narrativeaboutscrappyupstartsintheHoratioAlgermoldthatcarriesnoneofthe

13ManselBlackford,“SmallBusinessinAmerica:AHistoriographicalReview,”Business History Review65:1(Spring1991).Seealso,moregenerally,ManselBlackford,A History of Small Business in America,2nded.(ChapelHill:2003).14ThisanecdotecomesfromJonathanBean,Beyond the Broker State: Federal Policies Toward Small Business, 1936 – 1961 (ChapelHill,1996).

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baggageweassociatewith“BigBusiness.”ItevokesThomasJefferson’svirtuous

yeoman,thesmalltownshopkeeper,andstrivingimmigrants.

Butfocusingsmallbusinessasanidealalsoraisesanalyticalproblems

because,throughouthistory,therhetoricalandemotionaldefensesofsmall

businesshavefrequentlybeenatoddswithsmallbusiness’sactualimportancein

theworld.LikeJefferson’sidealizedfarmer,thesmallbusinessownerhasassumed

anoutsizedplaceasmythandsymbolwithinAmerica’spoliticaltraditionthatis

completelyoutofproportiontoitsrealeconomicvalue.Smallbusinesses,

unsurprisingly,faroutnumberbigbusinesses,andalwayshave.Yettheirreal

economicimportance,evensincetherevivalofsmallbusinesspoliticsinthe1980s,

isvastlyoverstated.

Considerthesestatisticsaboutthesizeofthesmallbusinesseconomy.Both

inrawnumbersandasapercentageofallfirms,smallbusinesshasexplodedinthe

past40years.In1977,theU.S.Censuscountedatotalof5.5millionfirms.Abouthalf

ofthosecompanieshadnoemployees(listedas“nonemployer”firms).Ofthe

remaining2.8million,about2.5millionemployedbetween1and499people.In

otherwords,approximately90percentoffirmswith employeesmettheSBA’s

generalguidelinesforinclusionas“smallbusiness.”By2007,thenumberoftotal

firmshadskyrocketedto28million.Farandaway,themostcommonnumberof

employeesatthosefirmswaszero—nearly22millionwere“nonemployer”firms.15

15Thephenomenalriseinnon-employerfirmsisatopicforadifferentpaper.AccordingtotheSBA,“Anonemployerfirmisdefinedasonethathasnopaidemployees,hasannualbusinessreceiptsof$1,000ormore($1ormoreintheconstructionindustry),andissubjecttofederalincometaxes.Nonemployersaccountforabout3percentofbusinessreceiptsbutareaboutthree-quartersofallbusinesses.”FirmSizeData,https://www.sba.gov/advocacy/firm-size-data.Associateprofessorsof

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Amongemployerfirms,6,031,344outof6,049,655,or99.7%,hadfewerthan500

workers.16

Formanypolicymakers—nottomentionbusinessschools,pundits,and

authorssellingbooksaboutentrepreneurship—thesefiguressuggestthatsmall

businessesareespeciallysignificanttothenationaleconomy.Onecannotthrowa

rockinWashingtonwithouthittingapoliticianproclaimingthat“smallbusinessis

thegrowthengineofoureconomy”(thoughoneshouldcertainlytry).Yetrecent

scholarshiphascastapallonthisreceivedwisdom.Inanimportant2011study,a

teamofeconomistsfound“nosystemicrelationship”betweenthesizeofafirmand

thenumberofnewjobsitcreates.Farmoreimportant,wastheageofafirm:Newer,

start-upcompanies(particularlyinfastgrowthindustries)aredisproportionately

responsiblefornewjobcreation.17Thevastmajorityofsmallbusinessesarenot

“entrepreneurial”—thatis,innovative,growth-orientedventures.Rather,they

engageinlabor-intensiveactivitieslikerunningshops,drivingcabs,doingtaxes,and

paintinghouses.Moreover,evenifnewfirmsaccountformorejobcreationthan

establishedfirms,theyalsofailathigherrates,thusactingasjobdestroyers.Thenet

effectonjobcreationandeconomicgrowthisoftenawash.18

historywhohavea“goodyear”givingpublictalks,sellingafewbooks,andreviewingamessofbookproposalsmayhitthatmarkandthusqualify.16FigurescomefromNumber of Firms, Number of Establishments, Employment, Annual Payroll, and Estimated Receipts by Small Enterprise Employment Sizes for the United States, NAICS Sectors: 2007,http://www.census.gov//econ/susb/data/susb2007.htmland1977 General Report on Industrial Organization: Enterprise Statistics. Table3.CompanyStatisticsbyEmploymentSizeClass,1977,pp.146,http://babel.hathitrust.org/cgi/pt?id=pur1.32754076913023;view=1up;seq=156.17JohnHaltiwanger,RonS.Jarmin,andJavierMiranda,“WhoCreatesJobs?SmallVersusLargeVersusYoung,”The Review of Economics and Statistics,95:2,May2013,347–361.18StevenJ.Davis,JohnHaltiwanger,andScottSchuh,“SmallBusinessandJobCreation:DissectingtheMythandReassessingtheFacts,”Small Business Economics,8(August1996),297–315;ErikHurst,BenjaminWildPugsley,JohnHaltiwanger,andAdamLooney,“WhatDoSmallBusinessesDo?”

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YetthemythofMainStreetremainspervasive,largelybecauseofthepower

itacquiredduringtheresurgenceinpoliticalinterestinsmallbusinessstartingin

thelate1970s.In1978,economistDavidBirchcreatedanationalstirwhenhe

testifiedbeforeCongressthatsmallfirmshadbeeninstrumentaltorecenteconomic

growth.Between1968and1976,Birchclaimed,smallfirmshadbeenresponsible

for80percentofallnewemploymentopportunities.WhileBirch’sresearchwasnot

solelyresponsiblefortheoutpouringofpoliticalattentiontosmallbusiness,it

providedclearempiricalammunitionforthecause.Unfortunately,itwasalso

profoundlywrong,ascriticsquicklypointedout.19Birchhimselflateradmittedthat

his80percentstatisticwasa“sillynumber,”thatmostjobcreationcamefromfast-

growingsmallfirms(adistinctminority),andthatsmallbusiness’sfortune

dependedmostlyonhowbigbusinesswasdoing.20

ThewildpopularityandlonglifeofBirch’sdataindicatetheimportantrole

thatAmerica’spoliticaltraditionplayedinshapingdebateoversmallbusiness,

particularlyasthe1980sbegan.Americanslovedthenotionthatsmallbusiness,not

thebigindustrialclunkersofthe20thcentury,wasreallythedrivingforceofthe

economybothbecausethatmythreflectedtheancientJeffersonianfaithand

becauseitdovetailedperfectlywiththerenewedpopulistcritiquethatwas

Brookings Papers on Economic Activity(BrookingsInstitutionPress,2011):73–142.ThesedebatesarewellsummarizedandanalyzedinPaulNightingaleandAlexCoad,“MuppetsandGazelles:PoliticalandMethodologicalBiasesinEntrepreneurshipResearch,”Industrial and Corporate Change23:1,December2013:113–143.19ThesecriticsincludedBarryBluestoneandBennettHarrisoninThe Deindustrialization of America: Plant Closings, Community Abandonment, and the Dismantling of Basic Industry (1982),whichattackedthedeliberatere-appropriationofcapitalawayfromtraditionalmanufacturingenterprisesandthebroaderpoliticalsystem’ssupportforsuchapolicy.20ForanaccountoftheBirchdataanditsimportanceforreshapingthewaythepoliticalclassframedthesmallbusinessissue,seeAnglund,Small Business Policy and the American Creed,123–132.

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animatingpubliclife.Moreover,thisrevivedcampaignagainstbigness—

Jeffersonianismforthemodernage—blossomedonbothsidesofthepartisan

divide.Realitynotwithstanding,smallbusinessmythologygrippedAmerican

politicstightlyfromallsides.

Small Business Politics and American Capitalism: Best of Frenemies

Inthepastgenerationorso,historiansandpoliticalscientistshave

successfullydemonstratedthataclearsmallbusinesspoliticalconstituency

developedinthefirsthalfofthe20thcentury.Priortotheadventoflarge,multi-unit,

verticallyintegrated,anddiversifiedcorporationsinthelate19thcentury,“small

business”wassimultaneouslyeverywhereandnowhere.Thatis,becausenearlyall

businesswas“small,”littleinthewayofaself-consciouspoliticalidentity

emerged.21Theadventofmassindustryinthe1870sand1880shadamodest

mobilizingeffect.In1890,theShermanActinauguratedfederalanti-trustpolicyin

responsetothemonopolisticpracticesinindustrieslikesteel,oil,sugar,and

cigarettemanufacturing.(Amere21yearslater,theSupremeCourtenforcedthe

broadprovisionsofthelegislation,forciblybreakingupJohnRockefeller’sStandard

OiltrustandJamesDuke’sAmericanTobaccoCompany.)

Thestirringsoforganizationforsmallbusinessdevelopedinthoseearly

yearsaswell.In1895,forexample,RepublicanpoliticalstrategistMarcusHanna

andhisprotégé,OhioGovernorWilliamMcKinley,soughttoshoreupsupportfor

21Onthepersistenceofsmallbusiness,particularlythemethodsofsmall-batchproduction,duringthe“ageofbigbusiness,”seePhilipScranton,Endless Novelty: Specialty Production and American Industrialization, 1865–1925 (Princeton,1997).

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theGOP’sbig-businesspositionsontariffsamongmid-sizedmanufacturers

(especiallyintheDemocraticSouth).TheireffortsledtothecreationoftheNational

AssociationofManufacturers,thefirstnationalemployers’(orpeak)business

association.Importantly,though,theNAMcastitselffromthebeginningasthevoice

oftheentire manufacturingcommunity.WhilethelikesofCarnegieandRockefeller

didn’tespeciallyneedthegroup’slobbyingsupport,itsmembers(throughtheir

affiliationwiththeRepublicanparty)definedtheirinterestsasaunitedclassof

businesspeople.Theiropponentswerethesameasbigbusiness’s:first,anti-tariff

agrarians,and,withinafewyears,organizedlabor.22

Therealboominsmallbusinesspoliticalconsciousnesscameageneration

later,asthelogicandstructureofindustrialbigbusinessesreshapedtheworldof

retail.AshistorianslikeManselBlackfordandhisstudentJonathanBeanhave

demonstrated,theriseofthechainstoremodelintheearly1900sprompteda

powerfulpushbackfromsmallshopownersthatgalvanizedapoliticalmovementin

the1920sand1930s.Theanti-chaintraditionwasrootedintheantitrusttradition,

andhaditsoriginsintheconcernsofsmallretailerswhofacedincreased

competitionfrommailorderhousesanddepartmentstoresinthelate19thcentury.

WiththecreationoftheFederalTradeCommission,whichinstitutionalized

antitrustpolicyinthefederalgovernment,in1914,callsforprotectiveregulations

expanded.Bythe1920s,statelawsemergedtoplacelimitationsonthespreadof

chainstores,oftenthroughpunitivetaxesbasedonthenumberofretailoutletsa

givenfirmoperated.In1931,theSupremeCourtupheldsuchtaxpoliciesonthe 22SeeCathieJ.Martin,“SectionalParties,DividedBusiness,”Studies in American Political Development20:2(October2006):160–184.

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groundsthatchainstoreswerequalitativelydistinctfromsmall“momandpop”

outlets.23

Thenationalfaceoftheanti-chainmovementwasthedoughyandbalding

visageofRepresentativeWrightPatman,populistandsegregationistDemocratof

Texas.FirstelectedtoCongressin1928,Patmanmadehisnameinthe1930sasan

avid—thetypicaladjectiveis“fiery”—defenderofsmallcompaniesinthefaceof

monopolisticbehemoths.ThesonofpoortenantfarmersinruralTexas,Patman

fashionedhimselfadefenderofthe“littleman”againstthepredationsofeastern

bankers,industrialists,andchainstores.In1935,Patmansucceededinshepherding

throughCongressapieceoflegislationproposedbygrocerywholesalerstoseverely

limitthediscountslargeretailerscouldoffer.Soonhailedasthe“MagnaChartaof

SmallBusiness,”theRobinson-PatmanAct(SenateMajorityLeaderJosephRobinson

(D-AR)wastheco-sponsor)becamelawdespitePresidentRoosevelt’spersonal

misgivingsthatthelawwouldhampereconomicrecovery.Patman’sprinciple

defenseofthenewmeasurewasitscommitmentto“fairness”—bymakingthesame

discountsavailabletoallbuyers(whetheratachainstoreorasmallgrocer),thelaw

struckablowagainstconcentratedwealthandprivilegewhilestillpreservingthe

consumercostadvantagesthatmassdistributionhadcreated.

Asnumerousscholarshaveshown,however,theRobinson-PatmanAct

markedtheend,notthebeginning,ofacoherentandsystematicpolicyregimethat

23Bean’sBeyond the Broker Statecoversthepoliticsofthechainstoredebatewell.Foramorenarrativeaccountoftheretailingindustry—withafocusongrocerystores—intheageoftheChainStore,seeMarcLevinson,The Great A&P and the Struggle for Small Business in America(NewYork:HillandWang),2012.Onthelegalandpoliticalcontestsovercompetitioninthefirsthalfofthetwentiethcentury,seeLauraPhillipsSawyer,American Fair Trade: Proprietary Capitalism, Networks, and the New Competition, 1890-1940(Cambridge:forthcoming).

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privilegedsmallfirmsandusedanti-trustpolicytoweakenlargeeconomic

interests.24Thepost-NewDealandpost-WorldWarIIperiodbroughtthefervorof

smallbusinesspoliticstonearcollapse.AsthepoliticalscientistMcGeeYounghas

demonstrated,thesmallbusinesscommunitywas“dividedandlargelyhapless”by

thelate1940s,wrackedbyinternaldissentandfactionalism.25Moreover,bigness

reignedinthepostwarworld.Bothpoliticalcultureandthestructureofthenational

economyhailedthevirtuesofscaleandscope.Bigcorporations,boastingbig

researchgrantsfrombiggovernmentagenciesandincollaborationwithbig

universities,begatmodernlife—frompharmaceuticalstoaerospace,from

computerstocommunications.Theclassicaldebatebetweenconcentratedand

dispersedpowerwasreplacedbyJohnKennethGalbraith’snotionofcountervailing

power.Inaworldofmassiveinstitutions,thepopulistcampaignsbehindthe

Robinson-PatmanActandothersmall-businesspolicyinitiativesallbutdisappeared

fromthenation’spoliticalmenu.

Lobbying for the Little Guy in Reagan’s America

BythetimeWrightPatmandiedofpneumoniain1976,atage83,hisreal

politicalinfluencehadbeenburiedyearsbefore.Hadhelivedafewyearsmore,

however,hewouldhavewitnessedapronouncedrevivalinpoliticalattentionto

smallbusiness.Yetinkeyways,Patmanwouldnothaverecognizednewways 24Beyondthesmallbusinesscontest,AlanBrinkleyarguesthateconomicpolicymakingingeneralabandonedtheanti-trustpositionbytheendofthe1930s.SeeBrinkley,The End of Reform: New Deal Liberalism in Recession and War(NewYork:Vintage,1995).Onthefateofgrocersandwholesalers,andtheoriginsofthe“Walmartification”oftheretailindustry,seeShaneHamilton,“Supermarkets,FreeMarkets,andtheProblemofBuyingPowerinthePostwarUnitedStates,”inWhat’s Good for Business: Business and American Politics since World War II,eds.KimPhillips-FeinandJulianZelizer(Oxford:2012).25McGeeYoung,“ThePoliticalRootsofSmallBusinessIdentity,”Polity40:4,October2008,436–463.

17

conservativesinthe1980sembracedanddefendedthepoliticalinterestsof“the

littleman.”Throughouthispoliticalcareer,Patmanrelentlesslydefendedthe

economicallymarginalizedagainstpredationbylargeconcentrationsofwealth.

Indeed,hebecameanimportantpoliticalallyofRalphNader’sconsumerrights

movementinthefinalyearsofhislife.26Yetthenewsmallbusinesspoliticsofthe

CarterandReaganpresidenciesfundamentallyrecasttheissue.Patman’s

Brandeisiandefenseofsmallnessasavirtueuntoitselfgavewaytoamore

recognizablymodernframework:smallnessbecametheantidotetothe

inefficienciesofbloat,andindependencethesourceofinnovationinatappedout,

stagflatingeconomy.Mostimportantly,duringthe1980s,thepoliticsofsmall

businessbecame,inthehandsofconservativepoliticalactivists,aweaponwith

whichtoattacknotbigbusiness,butbiggovernment.Wrappingthemselvesinthe

cloakofsmallbusinessmythology,thoseconservativessuccessfullyredefineda

hundredyearsofdebateovereconomicsize.

Asthepostwargrowtheconomybegantocrumble,ancientdevotionstothe

gloriouspastre-emergedwithincreasedvigor.Theapparentfailureofpostwar

liberalismcreatedpoliticalopeningsonbothleftandright.Anti-bignessactivistson

theleftfoundaheroinRalphNaderandotherpopulistcrusaderswhodeployed

classicalanti-trustrhetoricagainstlargecorporations,callingnotonlyforexpanded

regulationinthepublicinterest,butalsofederal-levelcorporatechartersandthe

break-upofpowerfulfinancialinstitutionsintheWrightPatman(nottomention

LouisBrandeis)mode.Yetfarmorepowerfulwerethevoicesoforganized

26SeeWaterhouse,Lobbying America,chapter5.

18

conservatism,whoturnedpublicdistrustwithlargeinstitutionsintoaspecific

rebukeoftheNewDealstate.

ThecentralcontradictionofmodernAmericanconservatismisthatitis

classicallyliberalatitscore—dedicatedtothemeritocraticsystemthatleadstoand

perpetuatesinequalitiesofpower.Thisdefenseofindividuallibertiesputs

conservatismatoddswiththepopulisturgetodevolvepowerandpromotethe

small.Asscholarsofconservatismhavedemonstratedinmyriadcontexts,modern

Americanconservative’ssuccessesnearlyalwaysflowfromasuccessfulstrategyto

redress,resolve,orpaperoverthosedifferences,whetherthroughinvocationsofa

commonenemyorthemaintenanceofaracialpowerstructure.Inasimilarvein,the

conservativetake-overofsmallbusinesspoliticsinthe1980slikewisereflecteda

successfulobfuscationofkeyinterestsandaredefinitionofthedebate.

Butthattransitionwasfarfromseamlessinconservativecircles.The

RepublicanPartyretaineditsimageasthepartyofBigBusiness,andsmallbusiness

activistsventedtheirfrustration.Earlyinhispresidency,forexample,Ronald

ReaganfacedsterncondemnationfromsmallbusinessactivistsovertheEconomic

RecoveryandTaxActof1981.AlthoughconservativebusinessgroupsliketheNFIB

andtheU.S.Chamberhadplayedcriticalrolesinthelobbyingeffortsthatresultedin

thatlaw,manysmallbusinessownerscomplainedthatthelegislationunduly

favoredlargerfirms,particularlythroughitsfocusonaccelerateddepreciation.In

addition,astheeconomydeterioratedin1982andtherosybudgetprojectionsthe

ReaganAdministrationhadpredictedfailedtomaterialize,smallbusinessgroups

19

complainedthatthefederalgovernment’sdeficitwascreatingahigh-interestrate

environmentthathurtthemmostseverely.27

MembersoftheReaganAdministrationbegantoworrythattheirpopularity

amongsmallbusinessowners,rhetoricnotwithstanding,wasatrisk.“Small

businessisbedrockRepublican,”WhiteHousedirectorofPublicLiaisonElizabeth

DoletoldVicePresidentGeorgeBushinthefallof1981.That“smallbusiness

constituency”supported“theRepublicanticketinoverwhelmingnumbersin1980,

andisvitaltoourpoliticalandlegislativesuccessfor1982and1984.”Yet,she

warned,“segmentsofthesmallbusinesscommunityhavethegeneralperception

thatthisAdministrationfavorsbigbusinessandcorporateAmerica.”28Twoyears

later,WhiteHousestafferRedCaveneywarnedthattheDemocraticNational

Committeeplannedtomakeoverturestothesmallbusinesscommunity.“[I]fweare

unabletokeepourpopulistunderpinningsandbecometooheavilyassociatedwith

the‘big’attheexpenseofthe‘small,’thisthreatcouldposesomeseriousproblems,”

heexplained.29Moreover,in1982,theheadoftheSmallBusinessAssociation

complainedthathehadneverhadaone-on-onesit-downwithReagan,andrepeated

thewarningthat,despitesmallbusinessowners’traditionalsupportforthebroad

contoursofReagan’seconomicvision—i.e.,lowertaxes,lessspending,less

regulation—theirloyaltywasnotalock.30

27OnthepoliticsofERTA,seeWaterhouse,Lobbying America,chapter7.28ElizabethH.Dole,“MemorandumfortheVicePresident:ConsolidatingOurSmallBusinessConstituency,”October28,1981,Dole,Elizabeth,SeriesI:Subject81-83Box16,RonaldReaganPresidentialLibrary.29RedCavaneytoEdRollinsandEdHarper,February16,1983,Box102,WHORMSubjectFilesBE,RonaldReaganLibrary.30JamesC.SanderstoWayneValis,May6,1982,“NewSmallBusinessStrategyfortheWhiteHouse,”Box100,WHORMSubjectFilesBE,RonaldReaganLibrary.

20

ThereissomeevidencethattheAdministrationtookthesewarningstoheart.

ThroughthedeliberateeffortsofpeoplelikeDole,small-businessgroupslikethe

NFIBandanothercalledtheAmericanBusinessConference,madeupoffast-

growingmid-sizedcompanies,gotabetterseatatthetable.Moreover,in1985,the

Reaganadministrationfloatedandthendroppedaproposaltoabolishmostofthe

SmallBusinessAdministrationlendingprogramsandtransferringtheresttothe

DepartmentofCommerceinthenameofcostcutting.TheNationalFederationof

IndependentBusinesscameouttepidlyagainsttheplan,butitsoppositionwasmild

comparedtothevehementdenunciationofCongressionalDemocratsand

Republicans,aswellasthebankingcommunity.Indeed,thechairoftheSenate’s

SmallBusinessCommittee,LowellWeickerofConnecticut,tookcreditforsavingthe

SBA.31

Yetoncriticalpolicyissues,theReaganAdministrationdidnotchangeits

viewofeconomicconservatismtocatertosmallbusiness.Rather,conservativesin

the1980schangedwhatitmeanttospeakupforsmallbusiness.Forthebetterpart

ofacentury,proponentsofsmallbusinesshadstressedtheinherentvirtuesof

competition.Smallbusinesses,theyargued,demandedlegalsupport—through

punitivetaxesonmarketdominatorsorthebreak-upofmonopolies—becausetheir

veryexistencecreatedamorecompetitivemarketplace.Latter-dayantitrustrelics

likeNaderperpetuatedthislineofreasoning.LowellWeicker,assessingtheReagan

administration’seconomicpolicyinthehearingsonthefirstPresident’sReporton

SmallBusinessin1982,worriedopenlythattheeconomicwreckageoftherecession 31Anglund,Small Business Policy and the American Creed,128;Bean,Big Government and Affirmative Action,131.

21

andapurelymacro-economicfocuswouldmeanthat“smallbusinessesarenot

goingtobethere,”andthattheUnitedStateswouldneveragainsee“thedegreeof

competition”thatithadinthepast.32

Economicconservativesrejectedthisdefenseofsmallbusinessandpusheda

counter-narrative.ArguingdirectlywithWeicker,theconservativeeconomist

MurrayWeidenbaum—firstchairofReagan’sCouncilofEconomicAdvisor—

claimedthateconomicgrowth,notcompetitionforitsownsake,shouldbethe

centralgoalofpolicymakers.Certainsectorsoftheeconomy,includingtherapidly

growingservicesector,lentthemselvesmoreproductivelytosmall-scale

enterprises.Others,suchasdefenseorindustrialmanufacturing,operatedmore

efficientlywitheconomiesofscale.Classicalanti-trusterslikeWeicker,he

maintained,confusedcauseandeffectintheirdefenseofsmallbusiness.Agrowing

economywouldcreatenewjobopportunities.“Ifthatgrowthisinareaswheresmall

businesseshaveuniqueadvantages,thenthenewjobswillbeinsmallbusiness.It is

not the small businesses that created the jobs,buttheeconomicgrowth,”he

concluded(emphasisadded).33TheReaganAdministrationthusproposedtodefend

smallbusinessbydefendingbigbusiness,pursuingpolicycommitmentto

deregulatingthefinancialsystem,limitingtheregulatoryrequirementsoffederal

agencies,andreducingbothindividualandcorporatetaxrates,allinthenameof

economicgrowth.

32HearingbeforetheCommitteeonSmallBusiness,March31,1982,18.33MurrayWeidenbaum,“WeidenbaumQuestionsandResponsesforSenateSmallBusinessCommittee,”June14,1982,inThe State of Small Business: A Report of the President.

22

IftheRepublicanpolicyagendainthe1980sblurredthehistoricaland

structuraldifferencesbetweensmallandlargefirms,sotoodidconservatives

themselvesperpetuateadistinctunderstandingofsmallbusinesstoreinforcetheir

policyposition.Inreality,mostsmallbusinessownersremaininthatcategoryforas

longastheystayinbusiness,andearlysmallbusinessproponentsintheWright

Patmanmoldrecognizedthepermanencyoftheirconstituency.Theevolving

conservativepoliticsofthe1980s,however,stressedaparticular—andnotably

small—subsetofthesmallbusinesscommunity:entrepreneurs.

Althoughtheclassicaldefinitionof“entrepreneur”simplyinvokedsomeone

whostartedanewbusiness(theFrench,paceGeorgeW.Bush,means“undertake”),

thewordacquiredanewconnotationinthelatetwentiethcentury.34

“Entrepreneur”inthemodernsenseconnotesgrowthorientation;whileamere

smallbusinessownermaypersistinremainingsmall,anentrepreneurseeksto

strikeitrichandbecomeapowerfuleconomicplayer.Inshort,entrepreneursare

smallbusinessownersthatdon’twanttoremainsmallbusinessowners.

Althoughfarmoreresearchisneededtotraceouttheevolutionofthis

concept,Isuggestasapreliminarycontentionthattherisingpopularityofthe

conceptofentrepreneurshipformedanintegralpartoftheconservativeintellectual

projecttoblurthedistinctionsbetweensmallandlargefirms.Rhetorically,

PresidentReaganhimselfhelpedperpetuatethisshift.Reagan—whosepre-political

privatesectorexperienceslayinHollywoodandatGeneralElectric,twoexemplars

34Althoughfirmevidenceislacking,BushisallegedtohavetoldBritishPrimeMinisterTonyBlairthat“thetroublewiththeFrenchisthattheydon’thaveawordforentrepreneur.”SeeAlisonColeman,“Entrepreneur:TheFrenchDoHaveaWordforIt,”Forbes,February14,2014.

23

ofmid-20thcenturybigbusinesses—positionedhimselfasapopulistdefenderofthe

peopleevenwhilepromotinganeconomicvisionrootedintheinterestsof

concentratedwealth.Hailingtherecoveredeconomyinhissixth“President’sReport

ontheStateofSmallBusiness”in1987,heinsistedthatAmerica’s“smallbusinesses

farebestwithstableprices,lowinterestrates,andsteadygrowth.”Moreover,

“America’sentrepreneursarecontinuallyexperimentingwithnewproducts,new

technologies,andnewchannelsofdistribution.”Smallbusinesses,inotherwords,

achievedtheirvaluethroughtheirinnovativecontributions,ratherthanservicingor

maintaininganexistingsystem.35

YetReagangaveupthegameashecontinuedtopraisethecriticalrolesmall

businessesplayedinAmericaneconomiclife.“Thegreatindustrialandcommercial

centersofourNationwerebuiltbyinnovatorslikeHenryFordandAlexander

GrahamBell,”heannounced,“whosesmallbusinessesgrewtohelpshapeanew

economy.”36Atastroke,Reagan—perhapsunintentionally—betrayedthe

conservativepositiononsmallbusiness:smallfirms’inherentworthcamenotfrom

promotingcompetitionorpreservinglocalvalues,butratherfromtheirpotentialto

cease to be small businesses.Leftoutofthisformulation,ofcourse,werethe

millionsofdrycleaners,fastfoodfranchisees,accountants,housekeepers,cosmetics

sellers,photographystudios,restaurantowners,boutiqueoperators,smalltown

35Recently,historiansandotherscholarsconcernedwithscience,technology,andtheroleofthestateinthosedomainshaveurgedarefocuson“maintainers”ratherthan“innovators.”Foranexampleofthisnewscholarlyturn,seehttp://leevinsel.com/blog/2015/11/30/the-maintainers-a-conference-april-8-2016-stevens-institute-of-technology.36RonaldReagan,“1986StateofSmallBusiness:AReportofthePresident.”

24

lawyers,andfloristswhowouldneverbecomethenextFordMotorCompanyor

AT&T.

Reaganmaymakeforanespeciallyappealingpunchingbag,buttheprocess

extendedfarbeyondhim.Themostpowerfulandwell-organizedlobbyistsforsmall

businessconcernsinthe1980s,includingespeciallytheNFIBandtheChamberof

Commerce,likewiseperpetuatedtheconservativevisionofsmallbusinessandthe

fixationoneconomicgrowthandinnovation.Ironically,then,assmallbusiness

becameincreasinglyimportantinAmericanpolitics,themostdominantplayers

reflectedaviewofsmallbusinessthatexcludedthevastmajorityofitsputative

members.

Thehistoryofsmallbusinessisteachesus,inpart,thatthereisreallynosuch

thingasacoherent“smallbusinessinterest,”sincesmallbusinessesthemselvesare

fartoovariedandidiosyncratic.Whatmattersinsteadisthecontestforwhogetsto

speakforsmallbusiness,anditisonthatterrainthatthepoliticsofsmallbusiness

playout.Inthe1980s,small-governmentconservatism—mobilizedthroughthe

anti-liberal,anti-NewDealpolitics—becametheprinciplepoliticalmouthpiecefor

smallbusiness,andself-consciouslydeployedtheimageryofsmallbusinessinthe

serviceofthatagenda.

Small Business and the Politics of Capitalism (a sort of Coda)

JustasthecycleofAmericanhistoryrunningfromtheNewDealtothe1970s

canbethoughtofchieflyasaperiodofbureaucraticexpansionandpolitical

liberalism,sotheagethathasjustpassed,runningfromabout1970totheGreat

25

FinancialCrisisandRecession,canbeconsideredanageofmaniccontradiction:

globalizedatomization.Commerce,production,capitalflows,andinformation

transferalloccurredatlevelsofcomplexityunparalleledinhumanhistory,yet

Americanpoliticalculturebecameincreasinglyfragmentedintosmallerandsmaller

group.Fromthebreakdownofpartyauthoritytotheriseofhyperpartisanship,from

residentialandeducationalre-segregationtotheculturaldivergenceswroughtby

mediasegmentation,fracturewasking.37Thebiggerthingsgot,themorepowerful

cametheclamortogetsmall.

Importantly,thismaniccontradictionbetweenthemassivescaleofmodern

lifeandthepowerfulsirencalloftheatomizedlocalityextendedbeyondciviclife

andhighpoliticalculture.Infact,itlayattheheartofafundamentaland

destabilizingtransformationintheoperationsofcapitalismitself.

Thisperiodinthehistoryofcapitalismentailed,amongotherthings,the

breakdownofwhatisfrequentlydescribedasthe“BerleandMeans”corporation—

shareholder-ownedbutmanager-controlled,highlybureaucratic,anddeeply

interconnectedmassiveorganizations.Sincetheendoftheconglomeratewaveof

thelate1960s,corporatestructuresgrewincreasinglyatomized.Thehippestand

mostinnovativefirmsturnedtheirfocustocorecompetencies,amajortheme

duringtheM&Amovementofthe1980s,andembracedoutsourcingwithgreater

37RobertPutnamdiagnosedthisrelativelyearlyoninBowling Alone: The Collapse and Revival of American Community(NewYork:SimonandSchuster,2000),andplentyofcommentatorsbuiltonthenotion.DanielRodgersprovidedthemostsophisticatedhistoricalandintellectualsynthesisoffractureasanorganizingfeatureoflate20thcenturylifeinAge of Fracture (Cambridge:HarvardUniversityPress,2012).Butdiagnosingthesymptomsisnotthesameaslocatingthesourceofthepathogen.Morescholarlyworkisneededtoexplainhowpoliticalfractureandcivicisolationspreadfromthedisintegrationofunifyingsocialandbureaucraticstructures.A“historyofcapitalism”approachcouldbeespeciallyhelpful.

26

gusto.Liberalizedpoliciestowardinternationaltradeandcross-bordercapitalflows

acceleratedwhatisoftentermedthe“Nike-fication”ofproduction.Thesetrends

birthedaworldwhereunknownandunderregulatedsweatshopsindeveloping

countriespaypaltrywagestoworkerswhomanufactureitemsadornedwitha

globalbrand.Finally,theInternetrevolutionsincethe1990shascreatedpreviously

unfathomableopportunitiesforimmediateglobalcommunication,andfirmshave

respondedbyoutsourcingandoff-shoringfarmorethanproduction.Spinningoff

theirfinancing,distribution,advertising,humanresources,andcustomerservice

functionstothelowestbidder,manyoftheworld’sleadingcompaniesappeartoday

aslittlemorethancoordinatorsofamassivenetworkofnodes.38

Theatomizationofbusinessoperationsandthedissolutionoftheclassical

corporationemergedalongsideanewbusinessfocusonportfoliomanagementand

short-termvaluation.Suchmanagerialprioritiesreflectedtherisingideologicaland

economiccloutofthe“shareholder-value”movementaswellasabroader,and

perhapsmoreephemeral,commitmenttoaneoliberalvisionofvalue.Together,

thesetrendsmarkedtheascentofthefinancializedeconomy.39

Thisbreakdownofthecorporationasaneconomicandsocialinstitutionwas

acriticalfeatureoftheageoffracture,butalsotheageofmaniccontradiction.These

giganticcorporatebureaucracieshadstructuredAmericanbusinesslifefor

38See,forexample,GeraldF.Davis,“AftertheCorporation,”Politics & Society41(2),June2013,283–308.39Onthepoliciesandpoliticsoffinancialization,seeGretaR.Krippner,Capitalizing on Crisis: The Political Origins of the Rise of Finance(Cambridge:HarvardUniversityPress,2011).

27

generations,howevermuchbemoanedbymid-centurysocialcritics.40The

disintegrationofthisoldorder,althoughcouchedinpopulistlanguageof

“shareholderdemocracy,”generateduncertaintyanddislocationaswellasfreedom

andopportunity,andthoseupsanddownswerenotdistributedevenly.Tobesure,

thewell-educatedwithprivilegedaccesscouldtakeadvantageofthenewniches

thatopenedup.Thoseinthelowertiers,however,confrontedadeteriorating

employmentlandscapepockmarkedbywagestagnation,decreasedmobility,and

lower-paidandlow-benefitservicejobs.Socialsafetynetsevaporated,andwealth

inequalityexpanded.

Itisinthismacro-economicenvironmentthatthenewpoliticsofsmall

businesshasdeveloped,shapedbyconservativenostrumsaboutgrowth,

innovation,andindividuality.Smallbusiness—redefinedaroundthehopeof

entrepreneurialsuccesses—tookonanewsalience,bothasaculturalidealandasa

lifeoption.

Wecanseethelinksbetweenlate-stagecapitalismandthedrawofsmall

businessinanumberofcontexts,somemorefavorablethanothers.Thetechboom

ofthe1990s,forexample,spawnedanentrepreneurialcultureoftechstart-ups—

fetishizedadnauseumandlaterburiedwithwidespreadschadenfreudeduringthe

dot-comcollapse.Inthefinancialservicesworld,daytradersandindependent

financialconsultantsheededthecallofabandoninglargecorporatestructuresto

strikeoutonasmallscaletomaketheirfortunes.

40See,forexample,WilliamH.Whyte,The Organization Man(1956),SloanWilson,The Man in the Gray Flannel Suit(1955),or,like,anythingbyC.WrightMills.

28

Atthesametime,non-entrepreneurialsmallbusinessownershiphasalso

takenonanewlevelofimportance.Thedeclineofolder,moretraditional

opportunitiesisthecompellingstoryoftheageofmaniccontradiction,andmore

Americansturntoself-employmentasameansofsurvival.Self-sufficiencyhas

alwaysbeenpartoftheallureofopeningone’sownbusiness.Intheglobalized,

atomizedeconomy,ithasalsobecomeanunstablelifeline.

Suchuncertaintiesandcontradictionsalsomanifestintheriseoftheso-

called“sharingeconomy,”throughwhichunderemployedAmericanstrytobolster

theirstandardoflivingbymonetizingpreviouslystaticassets—rentingaroom

throughAirBnB,forexample.Atthesametime,thepoliticsofsmallbusiness

animatethatcompany’santi-regulationcampaign,whichitsleadersjustifyonthe

groundsthatAirBnB“isexpandingtheeconomicpieforordinaryAmericansata

timeofrisingincomeinequality.”Therhetoricofsmallbusinessonceagain

reassertsclassicallyconservative—neoliberal,actually—economicnostrums,even

implyingthatincomeinequalityisanimmutablefactoflife,ratherthanaresultof

policydecisions.

Thehistoryofcapitalismprovidesahelpfulprismforunderstandingthe

politicsofsmallbusiness.Indeed,smallbusinessownersthemselvesareacritical

theoreticalcomponentofthecapitalistorder—thepetitebourgeoisieofclassical

Marxismwhosepositionblursthedistinctionsbetweenworkerandowner.

Capitalismhasalwayscenteredontheunpleasantparadoxof“creativedestruction.”

Addingtothatcontradictioninthelate20thcenturywasanewone—theglobal

atomizationthathasdefinedthecultural,political,andeconomicexperienceoflate-

29

stagecapitalism.A“flatter”world(toinvokeThomasFriedman’sby-nowclichéd

formulation)turnedouttobeabigger,nastier,andscarierworld.

Mypointistosuggestthatthepolitics of capitalism—thecontoursand

dynamicsofdebatesamonginterestedpartiesinresponsetorapidandunstable

economicchanges—werecriticaltothepolicydecisionsthatultimatelydetermined

how thosechangesincapitalismactuallymanifested.Capitalism,historically

speaking,isnotanall-powerfulforcethatsteamrollsoverhumanaffairs,subject

onlytoitsimmutablelogic.Rather,itisasetoflogics,beliefs,assumptions,and

incentivesthatoperateinaveryhumanmilieu.Ashistoriansofcapitalism,ourtask

isnottobearwitnesstocapitalism’suncheckeddestruction(nomatterhow

creative),butrathertounderstandtheveryhumanactorsattheheartofmaking

capitalism.

Byelidingthepoliticalagendaofsmallbusinessandlargebusiness,

conservativesinthe1980slaidthefoundationforasetofpolicydevelopmentsthat

hastenedtheglobalizingforcesoflate-stagecapitalismandfailedtomitigateits

effects.ReaganAdministrationofficialsandlobbyistsfortheNFIBeffectively

capturedsmallbusinesspoliticsinthenameofmarketfundamentalism,directing

theirfireatgovernmentregulationandfiscalpolicy.Bypresumingthatsmall

businesswasuniquely,orexceptionally,innovative,theyignoredtherealworldof

smallbusinessownersandperpetuatedadevastatingmyththatjudgedsmall

companiesbytheirabilitytobecomebigbusinesses.Insodoing,theymissedthe

mostcriticaldevelopmentsinglobalcapitalism:thesimultaneousdeclineof“big

30

businesses”astheyhadhistoricallyexistedandtheriseofanisolated,privileged

globalelitethatmarginalizedandweakenedthevastmajorityofsmallbusinesses.