This is the first of a series of articles that will appear from time to time in this space on the general subject of "The Federal Turnaround We Need." In them, we'll review some of the issues underlying federal policies on a wide range of subjects: taxes, capital, credit, government competition, data collection, mergers, technology and patent policy (see National Affairs, page 35), and procurement, among others.
There are several reasons for this series:
First, the cumulative impact of federal policies -- and lack of policies -- has made our national government a dangerously strong force for domestic economic concentration. It needs to be turned into a force for economic diversity.
Second, this trend in government policy has come about, in part, because of a failure of small business advocates to make their case as clearly as possible, and to show that it's in the national interest to promote the welfare of small business.
Third, small business has fallen prey to the illusion that it must ignore government because it can't influence what government does, and that economic policies that seem good for all business will automatically take care of small business's needs.
Fourth, the leaders of America's large companies have not yet read the clearest lesson of modern Western Europe's economic history: The shrinkage of the small business sector is generally (from my reading, invariably) followed by strong moves toward the governmentalization of the remaining largebusiness sector. "What's good for small business is good for all business" has turned out to be a truer maxim than "What's good for all business is good for small business."
Fifth, the self-righting process of the American government's system of checks and balances still isn't working well enough for small business. Neither liberals nor conservatives, Republicans nor Democrats, have yet been made responsive to the needs of small business. Neither the Congress nor the courts, nor, least of all, the executive branch, has moved to arrest the swing of federal policy away from small business and toward both government and governmentsized business. All the branches of our government, and both political parties, have been content to deal with national policy as a choice between public bureaucracy and corporate bureaucracy. But there are essential national goals that can best be met by a larger independent, entrepreneurial small business sector.
The best place to see what these goals are, and to understand the issue between small business and government, is right at the beginning of our country. Let's start with these words:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.
Among the many personal rights that I want to preserve and expand for myself, my children, and my grandchildren are two that are particularly relevant to the survival of independent small business.
The first is simply the right to start, own, manage, and make my living from my own business if I want to do so.
The second is the right to live in the most diverse economy possible, with the largest possible number of employers, and the widest possible range of owners and jobs.
These two rights, if I have them, go far toward strengthening my ability to enjoy many other rights. They give me a feeling of personal independence, a sense of having real freedom. If these rights are maintained, I know that whether I work for a big business, a big government agency, a big university, a big union or charitable institution, or a small company owned by someone else, I can always quit and do something else. The larger the number of employing units, the greater my freedom will probably be. (I say "probably" only because there are other things to take into account, such as the possibility that there will be too many people competing for too few jobs.)
The two rights I have just stated have been pretty much taken for granted throughout our history. Yet I have not found a statement of them as rights that has been given the dignity of express legal protection by either the Constitution or the laws of the federal government and the states. Nor is there any theory I know of that finds them clearly and necessarily implied by any other legally protected and acknowledged right. If any lawyers or other readers can enlighten me further, I'd be delighted.
The larger the share of the economy that is not divided between government and government-sized business, the more meaningful both of these rights will be. The more prosperous, profitable, and numerous private small and medium-sized businesses are, the more people there will be for whom the sense of freedom is real. The more room there is in the economy for new businesses to start and succeed, the less we will need to worry that economic concentration will lead to the loss of personal liberties.
At the federal level, there seems to be more and more dangerous insensitivity to these rights both in the career bureaucracy and among political appointees. As federal preoccupation with foreign policy, defense, and the world economy increases, less and less attention is being paid to the impact of federal actions on the small business sector. During the Carter Administration, only the vigilance of a congressional committee and small business advocates in the private sector prevented a proposed foreign trade agreement from stripping domestic small business of important federal procurement rights. The most shocking thing about the incident was that those concerned with making the policy were not even aware that they should have been thinking about its effect on small business.
The current administration has been urged to oppose the bill I have discussed here several times -- S. 881, which is sponsored by Sen. Warren Rudman (R-N.H.) and 81 other senators, and which requires certain federal agencies that finance nationally needed research and development in the private sector to spend minimal amounts with small business. Every opposition argument is specious or conjectural in the extreme. At bottom, the bureaucracy is saying that it has a "right" to spend this money exactly as it damn well pleases, and that this "right" of theirs is more important than the most minimal assurance that there will be some effort to encourage diversity in technology.
The case for small business -- and for federal policies more favorable to it -- does not rest on my assertion of theoretical personal rights alone. It rests also on "hard" arguments like the importance of technological innovation, of strengthening competition, of creating jobs, improving the balance of payments, and expanding the size and diversity of our industrial base for defense protection.
In future issues, we'll take some of these arguments and try to define further the two rights I've outlined. In December, Robert Berney will deal in our Economic Issues department with the problem of the federal government's data collection and reporting on small business. In that same issue, I'll discuss further in this space the problem of holding elected and appointed officials accountable for securing these two rights. We should ask of every federal program that affects small business, "Will it help to secure or will it weaken these rights?" We need our government to acknowledge its obligation to small business -- not to guarantee that everyone who tries to run a small company will succeed, but to see to it that its economic policies give as many of us as possible the opportunity to try
PRINT THIS ARTICLE