by Lillian Salerno | April 20, 2017
Globalization and technology aren’t the only factors crushing the heartland.
Since President Trump’s election, much has been made of his rural, heartland voters, and how politicians can better serve them, with most discussion centering on international trade and globalization. But there is another political and economic disaster crushing the heartland — one politicians could solve now, if they chose to.
For decades, rural America has been punished by bad policy that places too much power in the hands of distant financiers and middlemen through the formation of monopolies, which undermines small, local businesses and drains communities of resources. I know, because I started a company in rural Texas, and the challenges I faced illustrate the problem.
In 1994, at the height of the AIDS crisis, in which I lost several friends and a beloved employee to the disease, I started a manufacturing company in Little Elm, about 35 miles north of Dallas, to produce the first-ever automatically retracting syringe to eliminate the risk of nurses contracting HIV through accidental needle sticks. The syringe received rave reviews from nurses, hospital executives and public health officials, a major grant from the National Institutes of Health and robust private investment. But when my partners and I tried to sell it to hospitals, we were told time and time again that even though it was a better product — a lifesaving product — they weren’t able to purchase it. The primary supplier of syringes, which controlled 80 percent of the market, structured an arrangement with a vast network of hospitals that essentially closed our industry to new firms for good.
The environment in rural Texas was perfect for our company. We had a talented workforce, the means to build and ship our products, and a community that supported our work. But because the hospital and medical device market was intensely concentrated, our company didn’t reach its full potential. Our business became mired in litigation rather than innovation. And the entire community of Little Elm suffered as a result.
Ours is a common story. For years, rural and small-town America have fought an uphill battle for economic survival. Many in the halls of power viewed the shuttered storefronts and desolate downtowns as the inevitable consequence of globalization and technology, about which little can (or even should) be done. But one major force behind the steep economic decline is something that, until very recently, has received virtually no attention: the unprecedented level of corporate monopoly power that has been concentrated throughout the American economy.
The consequences are wide-ranging and dramatic (one new research paper found that the increase in corporate consolidation effectively transfers $14,000 a year from workers’ wages to corporate profits). But nowhere are the effects more visible than in rural and small-town America. In these communities, corporations dominate local economies to such an extent that people are unable to start their own businesses or sell into markets. They are no longer free to take their labor elsewhere for better pay. Small town businesses and the communities they serve no longer have the power to shape their own economic destinies, which were once vigorously protected by federal antimonopoly laws.
Let’s look at just one indicator — new business formation. From 2010 to 2014, 60 percent of counties nationwide saw more businesses close than open, compared with just 17 percent during the four years following the 1990s slowdown. During the 1990s recovery, smaller communities — counties with less than half a million people — generated 71 percent of all net new businesses, with counties under 100,000 people accounting for a full third. During the 2010 to 2014 recovery, however, the figure for counties with fewer than half a million people was 19 percent. For counties with less than 100,000 people, it was zero.
How did we get here? After the Great Depression, the government used antimonopoly laws to keep markets open and fair for smaller, independent businesses — in other words, to keep mom-and-pop shops open and Main Street buzzing. These were businesses run by people who cared about and understood their communities, that kept wealth circulating locally, that created the vast majority of new jobs and that were often the source of game-changing innovation.
But in the 1980s, folks in power decided bigger was better, and conventional political wisdom followed suit. For the federal officials charged with protecting competition, that meant that cheap consumer prices trumped all other values, including the preservation of American jobs, open and competitive markets where innovation could flourish, and maintaining level playing fields for start-ups and small businesses. To this day, when government officials evaluate mergers, it’s considered a good thing when they result in job losses — because that means, in the twisted reasoning we still use, gains in economic efficiency. The hard-working Americans turned out on the street corner to look for new jobs are the human sacrifices to the insatiable beast of corporate concentration.
This slow-rolling wave of corporate mergers has left almost all major markets — airlines, telecommunications, health care, retail, milk, seeds for growing crops, hardware, even cowboy boots — dominated by a cluster of mega-corporations, cloaked behind a plethora of brand names. These behemoths now hold unprecedented power over thousands of once-thriving community economies.
Corporate concentration has hit farmers, ranchers and agricultural workers especially hard. Many markets are entirely monopolized by a single company that dictates the terms of business to suppliers. Two decades ago, in the seed industry alone, 600 independent companies existed. Today there are six giants, several of which are pursuing high-profile mergers that will result in even more radical concentration. Similar levels of concentration exist for the beef, pork, chicken and dairy industries. The result is that the farmer’s share of each retail dollar of food has been collapsing, while consumers pay either the same or higher prices. Mega-corporations in the middle exploit their dominant market positions to reap all the profits.
It is a myth that the economic challenges that rural and small-town America face are caused by forces largely outside our control, like globalization or improvements in technology. We have the ability to help restore competition and economic vibrancy in rural America and beyond. The government has the authority to ensure markets are once again open and competitive so that communities have a chance to shape their own economic destinies. The question is whether we will recognize the error of our ways and put taking on monopolies high on the economic agenda — for rural and small-town America, and for everyone who wants to ensure our country can once again be the land of opportunity.