Big is bad for America
Small business is the backbone of the US economy. These firms, employing less than 500 with a majority having fewer than 10 workers, account for more than half of the work force. Yet, the government, with more employees than manufacturing and construction combined, has seemingly ignored these entrepreneurs in favor of a handful of poorly run corporate behemoths that have become dysfunctional bureaucrats themselves.
Citibank, AIG, and two of the big three auto makers would be re-organizing under Chapter 11 if the folks in Washington had not deemed these failing firms as “too big to fail.” Then why are many of us are wondering, how did we get in this predicament in the first place? As pre-boomers we remember when there were lots of large companies, but not the mega-firms we have today.
The big got bigger, because many promising smaller companies were gobbled up by larger ones over the past 30 years. This was a popular move because small firms had either a strong share in some niche categories, good regional distribution for some products, or developed potentially successful products the bigger firms wanted for themselves. It was cheaper to buy the company than to spend the time or money to build market share, get on to store shelves, or go through the R&D process on their own.
At the same time, there were large firms that felt the best way to generate greater profits, and thus dividends for shareholders, was to streamline costs. One way to accomplish this was to find another company, usually in the same or similar industry, looking to cut overhead as well. If they merged, administrative and sales expenses could be halved, even transportation and production costs might be shaved too. This could also give them more power in the marketplace with trade customers and consumers too.
We saw this happen with airlines, the grocery business (marketers as well as the supermarket chains), local banks were bought by regional banks and in turn were taken over by national banks, department stores, insurance companies, and brokerage firms; virtually every business segment experienced merger-mania after 1980.
My question is has this been good for America? Did you benefit? Did business in general find the big is beautiful trend profitable? Or, did all these activities just put us in the position for the whole country to fail? Whatever the case, we’re in it now. I believe it was wrong for the last administration to prop up the poorly managed companies. And I believe it is wrong for the new administration to continue this flawed policy for failing companies.
Business is competitive by nature. The weak ones die, and their place will be filled by hungrier more capable companies. They will employee people to provide the goods and services we want as we help the world economy reboot, starting from the inside out.
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