You're Probably Getting Screwed by Main Street Decline
The loss of small businesses in America.
Welcome to You’re Probably Getting Screwed, a weekly newsletter and video series from J.D. Scholten and Justin Stofferahn about the Second Gilded Age and the ways economic concentration is putting politics and profits over working people.
Is the demise of small business a good thing? At least one prominent economist thinks so. Jason Furman, a Harvard economics professor and former chair of the Council of Economic Advisors under President Obama had this to say in response to a Washington Post story about the shrinking of small businesses in America.
The Washington Post story reviewed Census data that found the number of Americans working at small businesses (500 employees or less) has been declining for decades. In the 1980s a majority of Americans (around 54%) worked at small businesses, but today just 47% do. The numbers are even starker when looking at businesses with less than 100 employees which used to employ 41% of Americans and today only employ 33%. The Washington Post analysis also highlights a growing disparity in the growth rates between the biggest and smallest companies. Just like with wealth, the gap between the haves and have-nots is expanding.
While it is easy to pick on Furman, other economic thought leaders across the ideological spectrum have for years made similar arguments for why we should not help small businesses. Matt Yglesias has written that “small businesses are not the answer” and argued Walmart deserves to be defended. Economist Robert Atkinson who founded a pro-Big Tech group called the Information Technology and Innovation Foundation, co-wrote a book called Big is Beautiful: Debunking the Myth of Small Business. Matt Bruenig argued that promoting small business is “mostly a bad idea.” Small businesses are not perfect of course, but an economy dominated by giants is hardly going to have progressive outcomes.
Let’s start with the claim big businesses pay better. While there long has been a “large-employer wage premium” it has been shrinking since the 1980s, a timeline that tracks America’s abandonment of antimonopoly policy. The Treasury Department has also found that the average workers wages are 20 percent lower than they would be if there was more competition in the economy. When it comes to wage theft, Good Jobs First found that in their database of wage theft penalties, companies on the Fortune 500 and Global Fortune 500 lists accounted for 74% of the value of those penalties. You might see some familiar names on this list.
This also ignores the cost pressures consolidation puts on small companies. There is the nearly 50% cut Amazon takes from third-party sellers. Independent pharmacies can barely stay afloat because of low reimbursement from consolidated PBMs. Small companies are unable to get the special deals from suppliers their larger competitors receive. Manufacturers of everything from smart phones to tractors make it impossible to operate an independent repair business, and so on.
Beyond these economic points, small businesses are part of the fabric of our communities. They give them character and vibrancy. In my professional life I hear all the time from people lamenting that their main streets have been hollowed out over the years and replaced with massive corporations with faraway headquarters. Small businesses also play an important political role in helping root power in communities. For example, small businesses played key roles in social movements from civil rights to suffrage. These intangible benefits might not show up in a regression model but are critical to making sure we don’t get screwed.
JD has often said “American needs farmers and farmers need antitrust.” The same could be said of our local businesses. Enforcing price discrimination laws, eliminating PBMs from public healthcare programs, passing right to repair legislation and bolstering the resources of antitrust enforcers are all things policymakers can do to help protect small businesses.
YOU’RE PROBABLY (ALSO) GETTING SCREWED BY:
Trump Administration Going After the Consumer Financial Protection Bureau (CFPB)
The CFPB is one of the best examples of when the government works for the people. In its existence, it has secured almost $20 billion in relief for an estimated 195 million consumers.
The agency that has restricted credit card fees, capped overdraft fees and has removed medical debt from credit (among many other things), is being attacked by the Trump administration. (The Minnesota Senate is holding an informational hearing on the impacts of this shutdown, something you can ask your state legislator to do).
Here’s what it means to people if it were to shut down:
Banks - Overdraft Fees
“As predicted, Republicans in Congress are going after a CFPB rule that protects consumers from predatory overdraft fees that can cost hundreds of dollars a year. Lawmakers introduced a Congressional Review Act (CRA) resolution of disapproval on Wednesday that, if passed and signed by the president, will reverse the rule and hand a win to banks.”
Airplanes!
America has a new problem, keeping flights from crashing.
On January 29, the first commercial plane crash in 16 years took place in DC.
On January 31, a Learjet crashed in Philadelphia.
On February 5, a Japan Airlines plane struck a Delta flight on a runway in Seattle.
On February 6, a Bering Air flight wrecked in Nome, Alaska
On February 10, a plane crashed in Scottsdale, Arizona.
On February 12, a military fighter jet crashed into the San Diego Bay.
On February 16, a plane crashed in Covington, Georgia.
And on February 17, a Delta flight from Minnesota crash landed in Toronto.
This is all before nearly 300 Federal Aviation Administration employees were fired this weekend.
Food Labels
America has a labeling problem. Here’s Alex Falcone talking about it:
Government Being Ran as a Business
Here’s an honest thread from Jesse Brenneman.
Elon Musk
Continues to suck… First, what is he hiding?
Second, this…
Third, Professor Galloway calls him a Welfare Queen…
Tech Giants
We have a major problem in this country when the Tech Giants think they’re bigger than the United States and don’t believe in democracy. The Network State is something we should be worried about.
Action Item
Important Questionnaire
From Matt Stoller: “If you work for the government, a government contractor, or a government-funded entity, please send your thoughts my way. The basic question I'm trying to answer is what kinds of services will be affected with this restructuring of government. The answers are anonymous, unless you indicate otherwise.”
Good News
Break Up Big Medicine
The American Economic Liberties Project is launching a new initiative to take on healthcare monopolies are holding a virtual kickoff tomorrow. You can register here.
Book Club is Back!!!
February’s book is “Monopolized: Life in the Age of Corporate Power” by David Dayen, the executive editor of The American Prospect.
You can purchase “Monopolized” here. And be sure to send in your questions for David by commenting below.
BEFORE YOU GO
Before you go, I need two things from you: 1) if you like something, please share it on social media or the next time you have coffee with a friend. 2) Ideas, if you have any ideas for future newsletter content please comment below. Thank you.
Break ‘Em Up,
Justin Stofferahn
I wonder if part of the reason Americans have been so easily brainwashed is that they rarely are exposed to opposing views. We used to have a Fairness Doctrine wherein when a political point of view was expressed, it was required that an opposing view be allowed to be expressed right afterwards. In this way people were able to view both sides of an issue, not just be brainwashed hearing the same view over & over. Maybe it's time to bring back something like the Fairness Doctrine.
Small business is community. Big business is transient.