It’s an assumption accepted almost universally in public discourse: Small businesses are the drivers of economic growth and job creation. But as Robert D. Atkinson and Michael Lind argue in their provocative new book Big Is Beautiful: Debunking the Myth of Small Business (The MIT Press, April 2018) the received wisdom is a myth that governments go out of their way to promote based on a confused mix of populist and free market ideology.
On April 16, 2018, Atkinson and Lind discussed Big is Beautiful with Financial Times Washington commentator Edward Luce at an event at the National Press Club.
At the basic level, the book is a rebuke to the twenty-first century’s growing anti-monopolist fervor. To begin, Atkinson, President of the Information Technology and Innovation Foundation, gave an overview of the social and economic benefits of big business. According to him, big businesses treat workers better—in general, workers at large firms make 50 percent more, receive better benefits, and are less likely to get injured than those at small firms. In fact, if American firms were the same general size as Canadian ones, individuals would earn about 3 to 4 percent less. Big businesses also have superior track records on job creation, productivity, innovation, and virtually all other economic benefits—including such progressive policy goals as diversity, wages, and environmental protection.
One of the most pervasive selling points for small businesses is the idea that they are major job creators. According to Atkinson, that is true—to a point. While small businesses may create a lot of jobs in their first year, they actually lose a lot of jobs in the 19 or so years following; in other words, they hire a lot of people to begin and gradually let employees go.
Lind and Atkinson believe the phenomenon of distrusting big business—which they call “megalophobia” in their book—started at the founding of the United States. As Lind pointed out, the American republic was founded before the Industrial Revolution; in fact, the nation revered the Jeffersonian ideal that small businesses should operate in the heroic mold of the yeoman farmers. This idea persisted throughout the centuries, with twentieth century Supreme Court Justice Louis Brandeis calling large businesses’ size the “mark of Cain,” meaning that they could only grow so big through malicious actions. Lind pointed out that while today’s progressives are decidedly anti-big business, that wasn’t the case in the early twentieth century. In fact, progressives and socialists then were supporters of large firms—even President Theodore Roosevelt, who is credited for the breaking up of Standard Oil, admired big businesses privately, according to Lind.
Atkinson said that the system has been favoring small businesses for too long. Rather, the authors argue for shifting to a “size neutral” approach to economic development policy, which would give exemptions or other advantages to companies based on their age—no matter how many people they employ. Any advantages would roll back after a certain time period, such as five years.
In general, the government should encourage the growth of large businesses, since U.S. firms must be big in order to compete on the global playing field. According to Atkinson, large industries—such as the automobile and manufacturing sectors—should be aggressively competitive (but not unfair). When there is a prevalent message that companies shouldn’t be aggressive, it means the United States won’t be able to compete with China, and that will ultimately end with lost market share.
Ultimately, big businesses better serve consumers, workers, and society as a whole through helping the country compete on the international scale—and according to Lind and Atkinson, that’s a beautiful thing.
Follow the discussion on Twitter using the hashtag #BigBizisBeautiful.