One the stranger things about the Nazis was their opposition to chain and department stores. Anti-capitalist elements of the party pushed through special taxes on department stores and organized boycotts against the larger retail stores. It was not just Jewish business which came in for these assaults. Large industrial concerns were also attacked by elements in the party who wanted a return to the guild system of their imaginary past.
The Nazis had a lot of nutty ideas about all sorts of things, but they figured out that letting the populists run wild would result in economic chaos so they eventually adopted the ideas of other fascists, namely corporatism. The Nazis were never an intellectually rigorous bunch so it is no surprise that they were not very coherent when it came to economics, but they eventually fell into corporatism, which had been kicking around Europe since the 19th century.
The interesting thing is the Nazis had a romantic view of small business that was integral to their worldview. Yet, once they embraced corporatism, they turned on small business quickly. In 1936 they closed 36,000 small businesses and in 1937 they closed another 63,000. The reason was simply that they thought there were too many small businesses and that complicated their larger economic plans. In other words, the corporate state transcended everything, even ideology.
It’s something to keep in mind as America embraces the corporate state, combining it with the technological state. This interesting piece in 538 a while back provides some useful numbers to understand how this is unfolding.
Talk to anyone in Silicon Valley these days, and it’s hard to go more than two minutes without hearing about “disruption.” Uber is disrupting the taxi business. Airbnb is disrupting the hotel business. Apple’s iTunes disrupted the music industry, but now risks being disrupted by Spotify. Listen long enough, and it’s hard not to conclude that existing companies, no matter how big and powerful, are all but doomed, marking time until their inevitable overthrow by hoodie-wearing innovators.
In fact, the opposite is true. By a wide range of measures, the advantages of incumbency in corporate America have never been greater. “The business sector of the United States,” economists Ian Hathaway and Robert Litan wrote in a recent Brookings Institution paper, “appears to be getting ‘old and fat.’”1
Hathaway and Litan say the trend is worrisome, and other economists who have studied the issue agree. Entrepreneurship is a critical source of jobs in the economy. Perhaps even more importantly, it is a major driver of productivity growth. New companies, after all, often arise from an idea about how to do something better, whether it’s making cars or brewing coffee. Many of those ideas fail to pan out, but the ones that work can change entire industries — can be, in other words, “disruptive.”2
But recent research suggests that established businesses have less and less to fear from would-be disruptors. This is partly because, as I noted this spring, fewer Americans are launching businesses. In the late 1970s, according to data from the Census Bureau, 15 percent of all U.S. businesses were startups, meaning they had been founded in the past year. In 2011, the latest data available, the so-called startup rate had fallen to 8 percent. Measured in terms of employment, the drop has been even steeper.
But the issue isn’t just that there are fewer startups. It’s also that fewer of them are succeeding. In 2011, more than 27 percent of new companies went out of business in their first year, up from about 20 percent two decades earlier.3 Even companies that do make it to their first birthday are failing at higher rates than in the past, though that trend is more recent and hasn’t been as steady. The only groups of companies that haven’t seen their failure rate rise meaningfully, Hathaway and Litan found, were ones that had been in business more than 15 years.
Part of what’s happening is driven by ultra-low interest rates. Big companies can raise enormous amounts of cheap capital. That lowers risk so big business can be hyper aggressive with pricing to wipe out small competitors. It also means they can buy up small competitors. When money costs 10 points you have to buy companies at below market. When money costs two points you can buy above market.
There’s also the matter of access. Not far from where I live WalMart opened a giant store near a busy retail area. The state widened the road, put in some lights and added an extra lane for traffic entering the store parking area. A few clicks down the road a local business has been fighting zoning battles for a year trying to expand into the vacant lot next door. So far it has taken him more time to fight the zoning board than it took Walmart to built their store.
WalMart has an army of lawyers and lobbyists. They can grease all the palms that need to be greased and do so with a sophistication the local guy cannot match. The local guy pays more in taxes than WalMart, but he can’t offer no show jobs and other perks pols can hand out to their people. In the corporate state, the small business man is a nuisance, not an asset.
Something new to our time is the technological revolution. In Nazi Germany and Soviet Russia, surveillance meant following people around and wiretapping their apartments. Today, the government has their corporate partners archive your e-mail, cell phone calls and internet habits. One can’t help but wonder if the erratic behavior of GOP legislators and judges of late has something to do with what the White House knows about their personal lives.
The sad irony of modern America is the technological revolution was kicked off at the same time the culture began to reminisce about the “greatest generation” and how they whipped the Nazis. Just as that generation is fading away, we are adopting the economics of the people they defeated in the war. Even more ironic is the fact that if you believe the things that generation believed, you are called a Nazi.