Break the chains

We recently received word that two of the few bookstores that sell the Progressive Populist were going out of business due, in part, to the encroachment of chain bookstores. We have watched with growing concern and frustration as independent bookstores around the country are replaced by chain-owned discount bookstores while small publishers are squeezed out by the large corporate imprints.

As Karl Pallmeyer writes on page 16, Austin and other Texas cities have lost several good independent bookstores that finally could not compete with the discount stores. Larger cities that have a Borders, or a Barnes & Noble, may still have a large selection of books to choose from, but the situation gets critical in smaller towns, where Wal-Mart or Kmart may end up as the only bookseller.

Charlotte Mautner, the owner of New Leaf Bookstore in Warrenton, Va., explained in the local Fauquier Citizen this past October that small bookstores rely on sales of the "frontlist," the best-sellers and books that are being promoted by publishers, in order to carry the "backlist," literary, non-fiction and reference books and books by independent publishers. Now the discount stores undercut them on the best-sellers. In most cases the New York-based buyers for the chains don't bother with books from small or regional presses, which the independents are more likely to carry.

Dwindling bookstores is a symptom of a fundamental problem with free-market capitalism, which is reaching a critical stage in many small towns as discount stores and "category killers" endanger hometown businesses.

The past generation has grown accustomed to think of small businesses and farmers as conservative bastions. Many "liberals" sneer at farmers and businesses, as if their interests were inimical to the Left. It is true that their trade organizations, particularly the National Federation of Independent Business and the U.S. Chamber of Commerce, have been identified as reactionary forces in Washington. But if we are to build sustainable communities, we must support the right of small businesses to compete fairly against big businesses. And if the progressive community wants to regain a majority position, it ought to build coalitions with farmers and small businesses.

Part of the problem is that the term "small business" covers a multitude of sinners. The Small Business Administration reports there are 22.5 million businesses in the United States, of which 99.7% are said to be small businesses. Generally, the feds consider any firm with fewer than 500 employees to be a small business. That allows for some middling to big businesses as far as I'm concerned.

Just as the Department of Agriculture has been unable to distinguish between small, family-owned farms and huge agribusinesses -- and when they do, it hardly benefits the family farms -- the departments of Commerce and Justice and the Small Business Administration appear to have a hard time distinguishing between small business and big business -- and when they do, it is to pronounce the small business operator an inefficient anachronism who ought to step aside.

The Republican Party has softened the rhetoric since the 1980s, when party leaders were calling for the abolition of the Small Business Administration.

The GOP Congress has paid lip service to small businesses while attending to the demands of big business. The House still has a Committee on Small Business, but in the 104th Congress it was mainly used as a base to mount attacks on the Clinton Administration. In "The Small Business Job Protection Act." Congress increased the minimum wage, but it also reinstated tax breaks for the costs of leveraged buyouts, provided more tax breaks for multinational corporations, gave insurance companies immunity from liability for mishandling of pension funds, removed surtaxes on purchases of luxury cars and on diesel fuel for yachts, and allowed newspaper publishers to treat their distributors and carriers as independent carriers rather than employees. John Judis, writing in The New Republic October 28, 1996, notes that although "Republicans took the lead" in enacting these provisions, "all these measures enjoyed bipartisan support."

The Clinton Administration has tried to reduce the regulatory burden on small businesses -- a laudable goal, as long as it does not harm workers, neighbors or consumers (which is a pretty big caveat). But the Administration has virtually ignored ways to level the playing field between small businesses and mammoth corporate chains.

Neither the National Federation of Independent Business nor the U.S. Chamber of Commerce have expressed much interest in the small business complaints of unfair competition from chains, although nearly one-half of the 1,900 delegates to the White House Conference on Small Business in 1995 called for antitrust reform. "Small business cannot compete with large businesses who use their economic power to extract unfair competitive pricing from manufacturers and service providers," they resolved. "Antitrust laws should be strengthened and enforced to prohibit abuses including unfair vertical integration, tying of pricing and product purchases, and predatory pricing tactics. The President should appoint a Presidential Commission on competition to study the enforcement and impact of the federal antitrust laws on ensuring the survival and diversity of small businesses." Little of substance has been accomplished since then.

Among other Main Street concerns, conference participants asked Congress to remove barriers that prevent small business people from mediating, arbitrating, or litigating with large national and multi-national corporations in their own home state. Some provisions were contained in H.R. 1717.

The delegates also proposed a National Disaster Protection Act, which would provide for a private, non-profit "all-risk" property insurance program to reinsure catastrophic losses. And more than one-third of the delegates called for creation of a Small Business Relief Fund to assist small businesses that are displaced by the establishment of a big business in their localities. Big businesses would contribute an annual fee for the fund. This issue has not been addressed by Congress or the Administration.

Charles Mueller, editor of the Antitrust Law & Economics Review, said the antitrust laws, as originally enacted, were designed to protect the efficient small competitor from the big predators. A big chain that "induces" lower prices, without showing cost savings to the supplier that are roughly equal to the differential, is in violation of the Clayton Act of 1914, as amended by the Robinson-Patman Price Discrimination Act of 1936, if that discrimination causes injury to competitors or to the competitive process.

"The law is still on the books but ... alas, the federal judges have been refusing to enforce it for two decades now," Mueller said. "Unfortunately, the country's federal judges have been persuaded, since the mid-'70s, to essentially overrule Congress and refuse to enforce them.

Mueller, who was an attorney with the Federal Trade Commission from 1960 to 1975, believes small retailers could compete successfully against the giants if they could buy at the same prices. He noted that giant firms, far from being the model of efficiency, tend to accumulate bureaucratic bloat (which translates into inflated costs, i.e. inefficiency)." They survive and prosper, he said, by bullying competitors, suppliers, and, eventually, customers.

(For an antitrust overview, see Mueller's web site: <HTTP://www.metrolink.net/~cmueller/>.)

What can we do? Support those progressive small business people who are resisting the chaining of America. Even William Bennett, the conservative values spokesman, has admitted that unbridled capitalism is a problem. "It may not be a problem for production, but it's a problem for human beings," he said last November, and other conservative communitarians are taking up the cause that big business is as problematic as big government. (See "Rethinking Capitalism," National Journal, 1/18/97).

It's hard to ask a working-class family to pass over discounts, but they can and should shop with independent retailers when those shops are competitive. And the government should enforce antitrust and predatory-pricing laws to make sure the mom-and-pop stores get a fair shake.

Sovereignty MIA

If you are unsettled at the changes wrought by NAFTA and GATT, then start worrying about the next international agreement designed to strip governments of their authority to regulate multinational corporations. Scott Nova and Michelle Sforza-Roderick warn in the Jan. 13/20 issue of The Nation that the Multilateral Investment Agreement (MIA), now under consideration at the Organization for Economic Cooperation and Development, would grant transnational investors the unrestricted "right" to buy, sell and move businesses -- and other assets -- wherever they want, whenever they want.

The pact would ban a wide range of regulatory laws and pre-empt future efforts to hold transnationals accountable to the public. MIA's backers include the Clinton Administration and the European Union. Among other things, MIA would force countries to treat foreign investors as favorably as domestic companies, prohibit conditions on foreign investment and threaten statutes that link public subsidies, tax breaks and other benefits to a corporation's behavior. It would let any corporation that objects to a city, state or national law bring suit before an international MIA panel -- which could order the law overturned, as a violation of the pact. Governments would have no reciprocal right to sue corporations on the public's behalf.

"The full extent of the drafter's ambitions is reflected in WTO director general Renato Ruggiero's recent characterization of the MIA negotiations: 'We are writing the constitution of a single global economy," Nova and Sforza-Roderick write. "If the MIA is a 'constitution,' its bill of rights is for investors only. The agreement does nothing to protect workers or consumers or to shield small businesses from anti-competitive practices by transnationals."

Negotiations are expected to be completed by June and the treaty could come before the Senate this fall. For more information call the Preamble Center for Public Policy, 202-265-3263. Let your senators know that if they vote for MIA they will be missing in action next election.

-- Jim Cullen

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