Economy

Mad in the USA

Wal-Mart and its ilk are muscling small businesses aside. But mom and pop are mad as hell and they're not going to take it anymore.
More than 1,000 people attended a rally a few weeks ago in Connecticut to demand fair trade and denounce the sweatshop buying habits of big retailers like Wal-Mart. The speakers were passionate, the crowd pumped. But this rally differed from the usual fair trade gatherings in one key respect: It was not organized by labor, student, or environmental groups. It was organized by an alliance of small and mid-sized manufacturers.

"The major retailers and big manufacturers are doing us in," explained rally-organizer Fred Tedesco, owner of Pa-Ted Spring Co. in Bristol. "They're destroying small- and medium-sized businesses. They're destroying jobs. They're destroying the middle class. . . That's the dirty secret of this whole thing."

Giant retail chains like Wal-Mart, Target, and Home Depot, have been muscling large manufacturers to move their factories overseas, primarily to China. With more than nine percent of U.S. retail sales and a third of the market for numerous products from dog food to diapers, what Wal-Mart says, goes. The company does so much business in China that it ranks as the country's 8th largest trading partner, ahead of Britain and Russia.

The retailers' cost-cutting strategies have precipitated 34 consecutive months of U.S. manufacturing job losses and an unprecedented crisis among thousands of small firms, like Tedesco's, which make parts for large companies that have abandoned their domestic operations. Tedesco believes job losses will accelerate over the next year as corporate decisions made this year cascade through the economy. Next on the chopping block, he says, are more white-collar jobs in computer programming, insurance, and accounting.

The members of Tedesco's coalition are angry -- the group's name is Mad in the U.S.A. -- and they're not alone. The rally was backed by prominent trade associations, including the Manufacturing Alliance of Connecticut, and several local chambers of commerce. Organizers say the turnout included both owners and employees. Several unions have contacted Tedesco to get involved. He has also heard from disgruntled small business owners across the country. Many are now organizing locally and working to build a national network that will culminate in a march on Washington, D.C. -- the "Million Manufacturers March."

None of this is good news for Bush and Party. Tedesco emphasizes that Mad in the U.S.A. is nonpartisan. The coalition's policy agenda includes trade reform and incentives for U.S. investment, and they are reaching out to Congresspeople on both sides of the aisle. Republican House member Nancy Johnson spoke at the rally. But he also notes of his fellow manufacturers, "I've never seen so many diehard Republicans say they are going to vote Democrat."

The Bush Administration has been using small business as cover to push a big business agenda of regressive tax cuts, deregulation, and race-to-the-bottom trade. Just count the number of times Bush says "small business" when defending his tax cut. Right-wing groups like the Federation of Independent Businesses -- which represents less than five percent of all small business owners -- have promoted the notion that what's good for GM is good for small business.

But it's not. The notion of a single, unified business interest -- as in "a pro-business policy" or "business vs. labor" -- is long gone, if it ever existed. The natural allies of small business today are not those advancing corporate interests, but those fighting consolidated economic power: organized labor, environmental groups, and consumer activists. These unfamiliar allies are beginning to work together. And when they do, the combination is potent.

Earlier this year in Taos, New Mexico, a coalition of more than 400 business owners and dozens of unionized grocery store employees orchestrated a successful campaign to block a Wal-Mart supercenter. For Fritz Hahn, owner of the Taos Herb Company, it was an obvious partnership. "They're seeing their wages cut and their jobs thrust out of the country," he explained, "while small businesses are being ground underfoot by the same corporations." Hahn's employees and unionized grocery workers earn about double what Wal-Mart pays. The coalition's message resonated with residents, who voted 61-to-39 percent against the supercenter in an advisory referendum before the Town Council voted it down.

Coalitions of labor, environment, and small businesses are beating Wal-Mart in other cities as well. The activity has opened rifts in traditional business groups. While some chambers of commerce have given heed to the plight of their independent members, many remain mouthpieces for big business. In about a dozen cities, including Austin and Salt Lake City, small businesses have broken ranks and formed their own independent business alliances. They want city officials to stop subsidizing big box stores and adopt land use policies that favor small-scale enterprise. Back at Pa-Ted Spring in Bristol, Fred Tedesco says the growing indignation of small manufactures is causing a "bellyache" for the National Manufacturers Association, which represents both small and large manufacturers.

Democrats in 2004 have a golden opportunity to reestablish themselves as the champions of small business. They will have to prove themselves. After all, many have had their hand in ruinous trade policies and corporate giveaways. What's needed is enough backbone to stand-up to corporate America and its campaign contributions, and a strong small business platform.

Trade reform should be one plank, tax fairness another. Large corporations receive lavish tax benefits unavailable to their smaller rivals. Major retail chains are skirting billions in state corporate income taxes through loopholes that allow them to move profits from local stores to subsidiaries in tax-haven states like Delaware. Federal policy exempts internet retailers from collecting sales tax, giving companies like Amazon.com and Barnesandnoble.com a 4 to 8 percent price advantage over Main Street businesses.

Democrats should call for end to the state and local subsidies that routinely flow to big box retailers. Billions in public dollars have fueled chain store expansion and done little for employment -- other than trade jobs at shuttered small businesses for jobs at Wal-Mart that typically pay less and offer fewer benefits.

We need to revive antitrust enforcement, especially in those long-dormant areas that are of most concern to small businesses: predatory pricing, an accusation commonly made against Wal-Mart, and buyer power, i.e., big retailers pressuring manufacturers for sweetheart deals that ultimately harm both small retailers and small manufacturers.

These are just a few of the policy issues that could inspire small business owners. Their vote is up for grabs to a degree it hasn't been for decades. It's an exceptional opportunity for Democrats, not only to build a new constituency, but to offer an appealing economic plan focused on spurring America's entrepreneurial energies rather than enriching global corporations.

Stacy Mitchell is a researcher with the Institute for Local Self-Reliance and author of "The Home Town Advantage: How to Defend Your Main Street Against Chain Stores and Why It Matters."
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