Entrepreneurialism is what builds vibrant local economies and a strong middle class, but ever since major changes in the enforcement of anti-trust laws as part of the Reagan Revolution in the 1980s, entrepreneurialism has been dying. The Biden administration now has a chance to fix this.
For most of the history of our nation – and even the centuries before the American Revolution – one dimension of “the American Dream” was to start a small local business like a cleaners, clothing store, hotel, restaurant, hardware store, theater, gift store, travel agency, etc., and then not only run it for the rest of your life but be able to pass it along to your children and grandchildren.
These companies generally paid well and, in part (along with unions in larger businesses) created the American middle class.
Today, instead, the few entrepreneurs left follow a very different business model: start a company and build it as fast as you can so you can sell it to a corporate giant before they squash you like a bug. This is an entirely new thing in American history.
I’ve been an entrepreneur my entire life. My dad (who worked in a locally-owned Tool & Die shop) had an entrepreneurial dream: he and his best friend, Jerry Miller, started a vitamin company they called Millhart Laboratories. I remember as a little kid sitting in our basement filling vitamin bottles from giant bags of big brown pills.
Dad and Jerry lost their shirts on that business, but I learned a lot. I started my first business 10 years later when I was 17, a TV/stereo repair shop in the back of a Head Shop in East Lansing across the street from MSU. Within a few years I employed five people and had a thriving business, but then made the typical beginners’ mistake of trying to grow too fast and killed the business.
Since then I’ve started 9 other businesses, and four of them did quite well. This is a common entrepreneur’s story; most serial entrepreneurs have had at least as many failures as successes.
But entrepreneurs today are struggling like never before in our nation’s history, and that’s a very dangerous thing for our communities and our economy.
Today’s landscape is dotted with low-wage big chains and boarded-up small towns; it was once local and vibrant. Prior to the Reagan Revolution, you could see that vibrancy in every town in America.
Small businesses, being close to their community and employees, almost universally pay better, have better benefits, and a better relationship with their employees and customers. They’re not just in the local community; they’re part of it.
Local entrepreneurs don’t become morbidly rich but they do well and their companies becomes part of the wealth of the community as they pay their property taxes, business taxes and engage in the entire local economic ecosystem.
When Louise and I owned an advertising agency in Atlanta, our employees formed a baseball team and competed against other small, local companies. Our herbal tea company employees in Michigan back in the early 1970s formed their own union, and eventually took over the company when we sold it to them (as we later did with the advertising agency) and retired to New Hampshire. Life was good for all, unlike the poor wage slaves at Amazon warehouses.
This was once the norm in America.
The first four years of the 1960s saw a brand new TV show — first in black & white and then in color — starring Martin Milner and George Maharis. The two guys drove their sports-car on the nation’s only coast-to-coast highway, Route 66, every week, stopping in small towns and mixing it up with the locals.
In the trailer for the classic DVD set of the show, Maharis asks Milner, “How many guys do you know who have knocked around as much as we have, and still made it pay?”
“Oh, we sure make it pay,” Milner replies. “Almost lynched in Gareth, drowned in Grand Isle, and beat up in New Orleans…”
I was nine years old when the show hit the air, and still remember being fascinated by the geographic, cultural, and linguistic diversity of the towns they visited.
Every town was unique and was generally identified by the names of the local businesses, which often provided a job for a few days for Tod and Buz as they explored our country.
Today, you could parachute out of an airplane from a few miles up, land in any city in America, and be totally unable to figure out where you are.
Instead of the “Peoria Diner,” it’s Olive Garden or Ruby Tuesdays. Instead of the “Lansing Hotel” it’s Marriott. Instead of local stores named after local families, it’s Walmart or Amazon that’s providing the goods Americans want.
But with the giant chains workers become cogs in a multinational machine, losing their humanity and individuality. And these corporate giants have also spent the past 40 years strip-mining the wealth from our towns and neighborhoods.
One of the reasons small towns are dying all across America is because of this death of local retail entrepreneurialism. In the pre-Reagan days you’d go downtown and visit the Armchair Bookstore, Jacobson‘s clothing store, and the Schneiderman Brothers corner drugstore to do your shopping.
Each being a locally-owned business, they would deposit the money from their sales that day in the locally-owned bank. The bank, in turn, would loan some of that money out to newer, smaller businesses, as well as local folks who wanted to buy a home.
A dollar spent in a community like that could circulate for months before it left town, producing multiple dollars in local value, economically enriching the community and everybody in it.
A major part of the Reagan revolution was establishing new rules for our economy that allowed giant, multi-state and multinational companies to come into local communities and wipe out their local businesses.
The rationalizations and details of how they pulled this off are fascinating and, if you’re interested in the deep dive, I wrote an entire book about it: The Hidden History of American Monopolies.
In summary, though, the big change now is that at the end of the business day the manager of the local Walmart or other multinational chain store, gas station, restaurant or hotel simply pushes a button and all the money from all the customers in that local community is immediately transferred from the local town and off to Walmart headquarters in Arkansas, etc..
Outside of a few paltry wages, none of that money stays in the local community any more: giant interstate chains like this act like a massive vacuum cleaner system sucking up cash from towns all across America and depositing it in the bank accounts of distant, giant corporations.
In many cases these massive companies don’t even pay property taxes because they promised “jobs” to the local community to get 10- or 20-year tax abatements and often even free land.
While the wealth of the morbidly rich Walton family has bloated to around $250 billion, towns all across America are now left as dead, dry husks. During the time of Walmart’s greatest expansion, in the 90s and early 2000s, it was estimated around 100 small, local businesses would go out of business for every big-box retailer that opened their doors.
And it’s not just Walmart, of course. Restaurants, hotels, fast food joints, drugstores, furniture stores, groceries, banks, clothiers, furniture stores, gift shops, jewelers, pharmacists, toy stores, and even the local hospital have all been replaced by giant chains.
None of them circulate money in local communities; all of them extract massive amounts of cash and transfer it every night to their far-away corporate headquarters for eventual distribution to overpaid executives and fat-cat shareholders.
Like giant suckers from an alien, octopus-like spaceship, when you see a national chain in your local neighborhood know that they are extracting wealth from you and your community that will never return.
One of the most ironic aspects of this is the impact it has had on politics. Republicans have relentlessly promoted this business aspect of Reaganomics which, in turn, has blighted rural and small-town America. Poverty in these areas has exploded, leading to increased levels of crime, suicide, addiction and general insecurity.
Insecure people often look to authority figures to “save the day” for them, and that’s what the GOP has been selling since the era of Barry Goldwater. “We’re the business experts and tough guys; we’re on your side,” they lie as they brand themselves with hunting rifles, Country music and NASCAR.
So the very communities wiped out by Republican economic policies become the hottest of Red-state Republican hotbeds. As Thomas Frank famously said, it’s “What’s The Matter With Kansas.”
Now that Democrats control the White House and both branches of Congress, if we’re really going are to “Build Back Better” we can break this cycle of local economic devastation.
The Biden administration and Congress can now repudiate and discard the discredited economic ideas that Milton Friedman and Robert Bork sold to the GOP and Ronald Reagan and he, in turn, imposed on the American business landscape.
Vigorous use of the anti-trust legislation that Reagan formally and explicitly stopped enforcing in 1983 — and hasn’t been meaningfully enforced since then — can be brought back to the fore. It’s all still on the books!
Poor communities, from rural West Virginia to urban Chicago and Oakland, need investment in local businesses that will keep money circulating in the local economies. Breaking up the big monopolies and oligopolies is step one.
Entrepreneurialism could become possible and fashionable again, and America’s communities can begin a serious, long-term recovery to the vibrancy those of us around before the Reagan Revolution remember well and you can still watch today on reruns of Route 66.
Originally posted at The Hartmann Report