The United States is much less a nation of entrepreneurs than it was a generation ago. Small, independent businesses have declined sharply in both numbers and market share across many sectors of the economy. Between 1997 and 2012, the number of small manufacturers fell by more 70,000, local retailers saw their ranks diminish by about 108,000, and the number of community banks and credit unions dropped by half, from about 26,000 to 13,000. At the same time, starting a new business appears to have become harder than ever. The number of startups launched annually has fallen by nearly half since the 1970s.
As stunning as these figures are, there has been remarkably little public debate about this profound structural shift taking place in the U.S. economy. We tend to accept the decline of small business as the inevitable result of market forces. Big companies are thought to be more efficient and productive; therefore, although we may miss the corner drugstore or the family-owned auto repair shop, their demise is unavoidable, and it’s economically beneficial.
But our new report suggests a different, and very troubling, explanation for the dwindling ranks of small businesses. It presents evidence that their decline is owed, at least in part, to anticompetitive behavior by large, dominant corporations. Drawing on examples in pharmacy, banking, telecommunications, and retail, it finds that big companies routinely use their size and their economic and political power to undermine their smaller rivals and exclude them from markets.
These abuses have gone unchecked because of a radical change in the ideological framework that guides anti-monopoly policy. About thirty-five years ago, policy-makers came to view maximizing efficiency — rather than maintaining fair and open markets for all competitors — as the primary aim of antitrust enforcement. This was a profound departure from previous policy and America’s long-standing anti-monopoly tradition. Over time, this ideological shift impacted more than antitrust enforcement. It infused much of public policy with a bias in favor of big business, creating an environment less and less hospitable to entrepreneurs.
This report presents three compelling reasons to bring a commitment to fair and open markets for small businesses back into antitrust enforcement and public policy more broadly: