There’s no doubt in anyone’s mind that the COVID-19 pandemic devastated many small businesses across the country and left the smallest businesses in Massachusetts hurting the most. In 2020 nearly 100,000 independent businesses closed permanently in the US and according to a report in November 2020, small business revenue was down 31 percent, and among independent restaurants and other hospitality businesses, revenue fell 58 percent. It was an unfortunate wake-up call to many places like Cape Cod that we could lose our local businesses and that that loss would have a profound impact on our communities.
The reality is small businesses were facing extraordinary challenges to their survival long before the pandemic. Over the past five decades businesses across the country have been struggling due to a variety of market forces centered around public policy decisions made at the local, state, and federal level; policies that have enabled corporations to get bigger and more powerful in almost every economic sector.
The “bigger is better” bias that has been cultivated, grown and supported in our economic system is exhibited in the form of government subsidies like tax incentives, loans, and other types of giveaways to large corporations or through lack of oversight that has led to corporate consolidation and appropriation.
This is the reason local newspapers are failing across the country, that we have terrible internet connectivity, there are fewer local banks to make small business loans, grocery prices continue to go up, small farmers are over $400 billion in debt, and deep-pocketed tech companies like Grubhub and Amazon have been able to extract wealth and consumer data from small restaurants and retailers to pad their bottom lines and distribute dividends to their Wall Street investors.
In the state of Massachusetts, we saw it play out in real time during the pandemic when big box stores like Walmart and Target were allowed to stay fully open while small retailers had to shut their doors because they didn’t sell essential items like groceries. So, you could pop over to Walmart to grab toilet paper (they likely had some because of their control over the global supply chain) and while you were at it pick up a new pair of sweatpants or a new rug. But you couldn’t even set foot inside a local clothing or home goods shop. And when the vaccines were rolled out, local pharmacies were shut out of the process for months in favor of chains like CVS and Walgreens. Because of policy decisions like these, local businesses were once again left at a distinct disadvantage to their corporate competitors, during one of the most challenging economic times in our history.
At the national level, many deserving small businesses were left out of the first round of the Paycheck Protection Program as the money disappeared quickly into the pockets of big corporations like the Hilton, Marriott and Hyatt Hotels. And the federal government funneled billions of dollars to oil companies and the airline industry.
It’s not surprising that during the pandemic we have seen America’s biggest companies like Amazon and Walmart make record profits. Deference to large corporations hasn’t always been the case in this country.
After the Gilded Age, a period in the late nineteenth century of rapid economic growth and concentration of wealth, champions of antitrust like Theodore Roosevelt, Louis Brandeis and Robert Patman lead a period in United States history where, as Tim Wu writes in his book The Curse of Bigness, “the nation rejected a monopolized economy and chose repeatedly over the decades to preserve its tradition of an open and competitive market.”
The Sherman Act of 1890 prohibits activities that restrict interstate commerce and competition in the marketplace. The Clayton Act of 1914 defines unethical business practices, such as price fixing and monopolies, and upholds various rights of labor. The Federal Trade Commission, an independent agency whose principal mission is the enforcement of civil U.S. antitrust law and the promotion of consumer protection, was also established in 1914. And the Robinson Patman Act of 1936 (also called the Anti-Price Discrimination Act) protects small businesses from being driven out of the marketplace by prohibiting discrimination in pricing, promotional allowances, and advertising by large franchised companies. These anti-trust laws supported the U.S. government as they took on the concentrated power of big oil, the railroads and big steel and were a part of the reason American small businesses flourished and the middle class grew during the twentieth century; they helped form and foster the idea of the “American Dream.”
“Yet,” Wu points out, “over the span of a generation, the law has shrunk to a shadow of itself” as one school of thought ushered in in the 1970s by University of Chicago professor Robert Bork contended that the only harm that should be examined is higher prices to consumers. This is when the very damaging myths that small businesses are more expensive, less efficient, and produce less began to weave their way into the economic narrative, and when the American public and government began to forget just how important small businesses are to the economy and to our local communities. It’s no surprise that the rate of small businesses started and sustained in the United States has been on a steady decline since the 1970s.
This should be extremely concerning to both consumers and policymakers, as small businesses provide a tremendous amount of tax revenue to municipalities. A study done in Asheville, North Carolina showed that a typical mixed-use acre of downtown Asheville yields $150,000 more in annual tax revenue to the local government than an acre of strip malls or big-box stores.
They also provide jobs. According to the U.S. Small Business Administration small businesses have created two out of every three net new jobs since 2014. They support local nonprofits financially and with their time. Local business owners and their employees are more likely to be invested in the community in which they live and work, and motivated to give their time and resources to make it better. They keep communities unique. Most people don’t want to live somewhere that looks just like everywhere else. A strong small business presence is what gives a community its character. It creates that sense of “place” that attracts tourists, young people, and a talented workforce.
Perhaps the most compelling reason lawmakers should be concerned about corporate concentration, consolidation and power is that small businesses keep significantly more money in their local communities as compared to their corporate competitors. Love Live Local’s own research shows that local retailers and restaurants keep 2-4x as much money in the local economy as their national chain competitors. It also showed that both local retailers and restaurants need less space and sprawl to generate more revenue per square foot than their chain competitors. Furthermore, in every industry sector comparison – retail, restaurants, and hotels – locally-owned businesses employ more people per square foot and per $1 million revenue than their corporate competitors. Retailers provide 75% more jobs per square foot and restaurants 20% more per square foot than nationally owned businesses; and Cape Cod hotels employ 11% more people than their corporate counterparts per $1 million in revenue. And when we put this into real dollars in the retail market: a market shift of just 10% from chains stores to independent stores would retain an additional $112 million in the local economy every year.
On Cape Cod where 90% of businesses have 1-19 year-round employees and 99% have 50 or fewer, keeping our small businesses strong and vibrant is directly tied to our community’s well-being.
It’s time for every level of government to enact policies that are designed to help small businesses survive and thrive, as well as examine existing policies, procedures, and programs to ensure that small businesses are on a level playing field with national corporations, and to enforce laws that were put in pace to guard against outsized corporate power. The survival of our local economies and communities depends on it.
This article is part of a year-long investigative series performed by CEO Amanda Converse that will explore how corporate concentration has affected various industries across the country and what impact that can and does have on Cape Cod’s local economy.
