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The Political Roots of Small Business Identity

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Polity

Abstract

A divided and largely hapless small business lobby failed to advocate effectively on behalf of small firms in the post-New Deal era. While interest-group scholars have accepted collective action-based arguments for patterns of under-mobilization, this article challenges conventional wisdom by examining historical and institutional causes of small business political fragmentation. It shows a fractured small business community emerging out of the populist era, and subsequent policy developments institutionalizing divisions and rivalries among competing factions. During the New Deal, when opportunities arose to forge a new consensus among small business groups, policymakers instead followed old scripts and reinforced received identities. Consequently, small business never came to occupy an important space in the post-New Deal political order.

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Notes

  1. Milton Bracker, “‘Small’ Business Baits New Yorkers: Meeting Wrangles at Capital on Eve of Roosevelt Parley and Gets Nowhere,” New York Times, 2 February 1938 (1857–Current file): 1. Retrieved 18 September 2007, from ProQuest Historical Newspapers, The New York Times (1851–2004) database.

  2. Bracker, “‘Small’ Business Baits New Yorkers.”

  3. Felix Belair, Jr., “Roars of Protest: Roper Quickly Breaks Up Session in Groups on Assigned Topics,” New York Times, 3 February 1938, (1857–Current file): 1. Retrieved 18 September 2007, from ProQuest Historical Newspapers, The New York Times (1851–2004) database.

  4. This rumor originated in reports that the White House was planning to revive a post-NRA business advisory council to help set policy. See “A Body of Advisers: University Professors Invited,” New York Times, 13 January 1938 (1857–Current file): 1. Retrieved 18 September 2007, from ProQuest Historical Newspapers, The New York Times (1851–2004) database.

  5. Pepper, Pressure Groups, 16–34.

  6. Pepper, Pressure Groups.

  7. L. Harmon Zeigler, The Politics of Small Business (Washington, DC: Public Affairs Press, 1961).

  8. Zeigler, The Politics of Small Business. Tellingly, the judgment assessed a mere one-dollar penalty.

  9. The Small Business Act of 1953 identified a small business as “one that is independently owned and operated and which is not dominant in its field of operation,” a definition that has left quite a bit of room for interpretation. Small Business Act (67 Stat. 232), 30 July 1953. Historically, retailers, wholesalers, and other independent distributors allied together, thus the term retailers will generally apply to those in the distribution sector.

  10. Addison W. Parris, The Small Business Administration (New York: F.A. Praeger, 1968), 24.

  11. For research that specifically examines small business groups, See Zeigler, The Politics of Small Business; John H. Bunzel, The American Small Businessman (New York: Alfred Knopf, 1962); Pepper, Pressure Groups. For a broad survey of the growth of small business in American society, see Mansel G. Blackford, A History of Small Business in America, 2nd ed. (Chapel Hill: University of North Carolina Press, 2003). On the role of ideas in small business politics, see Sandra Anglund, Small Business Policy and the American Creed (Westport, CT: Greenwood Publishing, 2000). For a history of federal policy towards small business, see Jonathan J. Bean, Beyond the Broker State: Federal Policies toward Small Business, 1936–1961 (Chapel Hill: University of North Carolina Press, 1996) and Jonathan J. Bean, Big Government and Affirmative Action: The Scandalous History of the Small Business Administration (Lexington: University of Kentucky Press, 2001).

  12. Daniel Tichenor and Richard Harris, A Question of Representational Bias: The Dynamics of Interest Group Politics in America (New York: Cambridge University Press, forthcoming); Theda Skocpol, Diminished Democracy (Norman: University of Oklahoma Press, 2003); Elisabeth S. Clemens, The People's Lobby: Organizational Innovation and the Rise of Interest Group Politics in the United States, 1890–1925 (Chicago: University of Chicago Press, 1997); Christopher Bosso, Environment, Inc.: From Grassroots to Beltway (Lawrence: University Press of Kansas, 2005); Maryann Barakso, Governing NOW: Grassroots Activism in the National Organization For Women (Ithaca, NY: Cornell University Press, 2005).

  13. William P. Browne, “Organized Interests and Their Issue Niches: A Search for Pluralism in a Policy Domain,” Journal of Politics 52 (May 1990): 502.

  14. William P. Browne, Private Interests, Public Policy, and American Agriculture (Lawrence: University Press of Kansas, 1988); Browne, “Organized Interests and Their Issue Niches;” David Lowery and Virginia Gray, “The Population Ecology of Gucci Gulch, or the Natural Regulation of Interest Group Numbers in American States,” American Journal of Political Science 39 (February 1995): 1–29; Virginia Gray and David Lowery, “A Niche Theory of Interest Representation,” Journal of Politics 59 (1996): 91–111; Virginia Gray and David Lowery, The Population Ecology of Interest Representation (Ann Arbor: University of Michigan Press, 1996). See also Michael T. Heaney, “Outside the Issue Niche: The Multidimensionality of Interest Group Identity,” American Politics Research 32 (November 2004): 611–51; Bosso, Environment, Inc; Donald P. Haider-Markel, “Interest Group Survival: Shared Interests Versus Competition for Resources,” Journal of Politics 59 (August 1997): 903–12.

  15. Browne, “Organized Interests and Their Issue Niches,” 501.

  16. Gray and Lowery, “A Niche Theory of Representation,” 95.

  17. Bean, Beyond the Broker State.

  18. Zeigler, The Politics of Small Business.

  19. Theodore Lowi, The End of Liberalism (New York: Norton, 1969). While Browne would agree that absent these types of relationships a niche would fail to materialize, he has no explanation for why these types of relationships would fail to develop. See Browne, “Organized Interests and their Issue Niches.”

  20. For a synopsis of these intellectual developments, see Paul Pierson, Politics in Time (Princeton: Princeton University Press, 2004).

  21. See Theda Skocpol, Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States (Cambridge, MA: Belknap, 1992); Anne Costain, Inviting Women's Rebellion: A Political Interpretation of the Women's Movement (Baltimore: Johns Hopkins University Press, 1992); Stephen Engel, “Organizational Identity as a Constraint on Strategic Action,” Studies in American Political Development 21 (Spring 2007): 66–91.

  22. Richard Franklin Bensel, The Political Economy of American Industrialization, 1877–1900 (New York: Cambridge University Press, 2001); John Mark Hansen, Gaining Access: Congress and the Farm Lobby, 1919–1981 (Chicago: University of Chicago Press, 1991); James Livingston, Origins of the Federal Reserve System: Money, Class, and Corporate Capitalism, 1890–1913 (Ithaca, NY: Cornell University Press, 1989); Gretchen Ritter, Goldbugs and Greenbacks: The Antimonopoly Tradition and the Politics of Finance in America, 1865–1896 (New York: Cambridge University Press, 1997); David Brian Robertson, Capital, Labor, and State: The Battle for American Labor Markets from the Civil War to the New Deal (Lanham, MD: Rowman and Littlefield, 2000); Elizabeth Sanders, Roots of Reform: Farmers, Workers, and the American State, 1877–1917 (Chicago: University of Chicago Press, 1998); Martin Sklar, The Corporate Reconstruction of American Capitalism, 1890–1916: The Market, the Law, and Politics (New York: Cambridge University Press, 1988); Stephen Skowronek, Building a New American State: The Expansion of National Administrative Capacities, 1877–1920 (New York: Cambridge University Press, 1982); Robert H. Wiebe, The Search for Order, 1877–1920 (New York: Hill and Wang, 1967).

  23. Jacob S. Hacker and Paul Pierson, “Business Power and Social Policy: Employers and the Formation of the American Welfare State,” Politics and Society 30 (2002): 277–325; Peter A. Swenson, “Varieties of Capitalist Interests: Power, Institutions, and the Regulatory Welfare State in the United States and Sweden,” Studies in American Political Development 18 (April 2004): 1–29; Jacob S. Hacker and Paul Pierson, “Varieties of Capitalist Interests and Capitalist Power: A Response to Swenson,” Studies in American Political Development 18 (April 2004): 186–95; Peter A. Swenson, “Yes, and Comparative Analysis Too: A Rejoinder to Hacker and Pierson,” Studies in American Political Development 18 (October 2004): 196–200.

  24. Swenson, “Varieties of Capitalist Interests.”

  25. Swenson, “Varieties of Capitalist Interests,” 3.

  26. Alfred Chandler, The Visible Hand (Cambridge, MA: Belknap, 1977).

  27. A definitive history of the term “small business” does not yet exist. However, in the context of nineteenth-century discourse, a “small business” typically referred to the amount of business that a firm would do. For example, an entrepreneur might say, “I do a small business.” As a category of business, “small concern” was a more typical descriptor. See, for example, “Article 6—No Title,” New York Daily Times, 24 November 1852, (1851–1857), 4. Retrieved 20 August 2007, from ProQuest Historical Newspapers The New York Times (1851–2003) database.

  28. Chandler, The Visible Hand; Wiebe, The Search for Order; Blackford, A History of Small Business in America.

  29. Maryann Feldman and Yda Schreuder, “Initial Advantage: The Origins of the Geographic Concentration of the Pharmaceutical Industry in the Mid-Atlantic Region,” Industrial and Corporate Change 5 (June 1996): 839–62. There were some earlier trade associations, although they were not necessarily targeted at small businesses within a sector. These included the United States Brewers Association (1862), The Carriage Builders National Association (1872), The American Paper and Pulp Association (1878), the Laundrymens National Association of America (1883), the National Association of Brass Manufacturers (1886), the National Wholesale Lumber Dealers Association (1894), and the National Association of Retail Grocers (1896).

  30. Albert Steigerwalt, The National Association of Manufacturers (Ann Arbor: University of Michigan Press, 1964); Cathie Jo Martin, “Sectional Parties, Divided Business,” Studies in American Political Development, 20 (Fall 2006): 160–84.

  31. Blackford, A History of Small Business.

  32. Martin, “Sectional Parties”; Philip Burch, “The NAM as an Interest Group” Politics and Society 4 (1973): 97–130. Martin's analysis emphasizes the importance of the party system for the failure of NAM to achieve status as a peak association for manufacturing interests. Yet, Martin also discounts the fact that NAM was primarily comprised of small- and medium-sized manufacturers and that such a goal was more aspirational than practical. That small- and medium-sized manufacturers faced a more immediate threat from organized labor can also explain the impetus behind the shift to an explicit anti-labor agenda. That shift was certainly critical to the survival of NAM in the early twentieth century.

  33. David Brian Robertson, “Voluntarism Against the Open Shop: Labor and Business Strategies in the Battle for American Business Markets,” Studies in American Political Development 13 (Spring 1999): 146–85.

  34. Daniel Ernst, Lawyers Against Labor (Urbana: University of Illinois Press, 1995).

  35. See Sklar, The Corporate Reconstruction of American Capitalism, Chapter 3; William Letwin, Law and Economic Policy in America, the Evolution of the Sherman Antitrust Act (New York: Random House, 1965); Lawrence Friedman, “Law and Small Business,” in Small Business in American Life, ed. Stuart Bruchey (New York: Columbia University Press, 1980), 310.

  36. Chandler, The Visible Hand.

  37. Harold C. Livesay, “Lilliputians in Brobdingnag,” in Small Business in American Life, ed. Bruchey, 342.

  38. United States Federal Trade Commission, “Chain Stores: Final Report” (Washington, DC: Government Printing Office, 1935), ix. The opening of new stores was responsible for 89 percent of chain store growth.

  39. U.S. Federal Trade Commission, “Chain Stores: Final Report.”

  40. The 1913 Underwood Tariff took out the other leg. See Alfred Eckes, Opening America's Market (Chapel Hill: University of North Carolina Press, 1995).

  41. Ernst, Lawyers Against Labor, 186.

  42. Albert K. Steigerwalt, “The NAM and the Congressional Investigations of 1913: A Case Study in the Suppression of Evidence,” The Business History Review 34 (Autumn, 1960): 335–44.

  43. Sanders, Roots of Reform, 293.

  44. Allen Wakestein, “The NAM and Labor Relations in the 1920s,” Labor History 10 (1969): 163–76.

  45. Joseph Palamountain, The Politics of Distribution (Cambridge: Harvard University Press, 1955), 189–90.

  46. Chandler, The Visible Hand.

  47. Palamountain, The Politics of Distribution, 7.

  48. Bean, Beyond the Broker State, 26.

  49. Palamountain, The Politics of Distribution, 160.

  50. Ellis W. Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (Princeton: Princeton University Press, 1966), 261.

  51. Paul Ingram and Hayagreeva Rao, “Store Wars,” American Journal of Sociology 110 (September 2004): 478.

  52. Thomas Ross, “Store Wars: The Chain Store Movement,” Journal of Law and Economics 29 (April 1986): 125–37.

  53. Sanders, Roots of Reform; Carl Ryant, “The South and the Movement against Chain Stores,” Journal of Southern History 39 (May 1973): 207–22.

  54. Palamountain, The Politics of Distribution, 176–80.

  55. Robert F. Himmelberg, The Origins of the National Recovery Administration: Business, Government, and the Trade Association Issue, 1921–1933 (New York: Fordham University Press, 1976).

  56. Olson, The Logic of Collective Action.

  57. See Hawley's discussion of “chiselers” in The New Deal and the Problem of Monopoly, 37.

  58. J. David Greenstone, Labor in American Politics (New York: Knopf, 1969), 28–29.

  59. Colin Gordon, New Deals: Business, Labor, and Politics in America, 1920–1935 (New York: Cambridge University Press, 1994), 142.

  60. Howell John Harris, Bloodless Victories: The Rise and Fall of the Open Shop in the Philadelphia Metal Trades, 1890–1940 (New York: Cambridge University Press, 2000).

  61. Meg Jacobs, Pocketbook Politics: Economic Citizenship in Twentieth-Century America (Princeton: Princeton University Press, 2005).

  62. Blackford, A History of Small Business, 95.

  63. Herbert Hoover's “associative state” stands out as a particularly important example of the way in which government policies reinforced sectoral alignments among all businesses. See Ellis W. Hawley, “Herbert Hoover, the Commerce Secretariat, and the Vision of an ‘Associative State,’” Journal of American History 61 (June 1974): 116–40; Brian Balogh, “‘Mirrors of Desires:’ Interest Groups, Elections, and the Targeted Style in Twentieth Century America,” in The Democratic Experiment: New Directions in American Political History, eds. Meg Jacobs, William J. Novak and Julian E. Zelizer (Princeton: Princeton University Press, 2003), 230.

  64. Hansen, Gaining Access.

  65. Ruth O'Brien, Worker's Paradox: The Republican Origins of New Deal Labor Policy, 1886–1935 (Chapel Hill: University of North Carolina Press, 1998).

  66. Clemens, The People's Lobby.

  67. Pepper, Pressure Groups.

  68. Bunzel, The American Small Businessman; Ziegler, The Politics of Small Business.

  69. Hugh Hansen, “Robinson-Patman Law: A Review and Analysis,” Fordham Law Review 51 (May 1983): 1113–1216; Bean, Beyond the Broker State, 38.

  70. Bean, Beyond the Broker State, 35–36.

  71. Hansen, “Robinson-Patman Law,” 1117.

  72. Huey Long proclaimed that he “would rather have thieves and gangsters in Louisiana” than chain stores. Hansen, “Robinson-Patman Law,” 1118.

  73. Palamountain, The Politics of Distribution, 228.

  74. Palamountain, The Politics of Distribution.

  75. Bunzel, The American Small Businessman, 120.

  76. William F. Ogburn, “The Future of the New Deal,” American Journal of Sociology, 39 (May 1934): 844.

  77. Hawley, The New Deal and the Problem of Monopoly; Gordon, New Deals.

  78. Palamountain, The Politics of Distribution, 193.

  79. Gordon, New Deals, 173.

  80. Gordon, New Deals, 178. For a different interpretation of the NRA see Donald R. Brand, Corporatism and the Rule of Law: A Study of the National Recovery Administration (Ithaca, NY: Cornell University Press, 1988).

  81. Hawley, The New Deal.

  82. Hawley, The New Deal, 320.

  83. Blackford, A History of Small Business.

  84. Blackford, A History of Small Business.

  85. Bean, Beyond the Broker State, 77, 96. O'Mahoney was an important Democratic figure in the Senate, and a vocal opponent of FDR's court packing plan.

  86. Bean, Beyond the Broker State, 101.

  87. Bean, Beyond the Broker State, 105.

  88. Bartholemew Sparrow, From the Outside In (Princeton: Princeton University Press, 1996).

  89. Addison W. Parris, The Small Business Administration (New York: F. A. Praeger, 1968), 6.

  90. Parris, The Small Business Administration, 8.

  91. Bean, Big Government and Affirmative Action.

  92. See Theodore Lowi, “American Business, Public Policy, Case-Studies, and Political Theory,” World Politics 16 (July 1964): 677–715.

  93. See Hawley, The New Deal; Gordon, New Deals; Ross, “Winners and Losers under the Robinson Patman Act,” Journal of Law and Economics 27 (October 1984): 243–71.

  94. Richard Gable, “NAM: Influential Lobby or Kiss of Death?” Journal of Politics 15 (May 1953): 254–73; Larry J. Griffin, Michael E. Wallace and Beth A. Rubin, “Capitalist Influence to the Organization of Labor Before the New Deal: Why? How? Success?” American Sociological Review 51 (April 1986): 147–67.

  95. The one notable exception was the Smaller Business Association of New England (SBANE), which primarily comprised small manufacturing firms. However, SBANE was a relatively small organization with few ambitions to grow and was rooted in the local political economy of the Northeast.

  96. Memo from J.M. Frier to George F. Meredith, “Proposed Programs for Small Business,” 2 September 1947. National Archives, RG 46, Box 34, Select Committee on Small Business, Correspondence and Data (Newsprint to Progress Reports), Folder marked “Progress Reports.”

  97. See, for example, Zeigler, The Politics of Small Business; Bunzel, The American Small Businessman.

  98. David Lowery and Virginia Gray, “A Neopluralist Perspective on Research on Organized Interests,” Political Research Quarterly 57 (March 2004): 163–75.

  99. Douglass North, Institutions, Institutional Change, and Economic Performance (New York: Cambridge University Press, 1990); Jacob Hacker, The Divided Welfare State (New York: Cambridge University Press, 2002); Pierson, Politics in Time.

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    McGee Young

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A previous version of this paper was presented at the 2007 Annual Meeting of the American Political Science Association, Chicago, IL. I thank Julia Azari, Jeffrey Drope, Kathleen Rehbein, three anonymous reviewers for Polity, and the editor, Andrew Polsky, for helpful comments on earlier drafts.

Roger Pepper, Pressure Groups among “Small Business Men” (New York: Arno Press, 1979 [1940]), 16.

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Young, M. The Political Roots of Small Business Identity. Polity 40, 436–463 (2008). https://doi.org/10.1057/pol.2008.20

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