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
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
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
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,
(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.
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
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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