Small Business Must Get the Breaks

AS CHAIRMAN of the Smaller War Plants Corporation, my job is to head up a Government corporation created by Congress to prevent the destruction of the little businessman in general and the little manufacturer in particular. It seems to me that, next to winning the war, all of us ought to put this down as our No. 1 objective.

America is made up of big business and small business. Our strength and our future as a nation lie in free competition among the bigs and littles and middles. Only if all are free to get in and produce can we have maximum production. And only if there is maximum production will there be enough jobs to keep people working and happy.

The Government is an umpire—but let's get the umpire business straight. It shouldn't let a team of supermen that has a patent pool on its side, plus cartel agreements, take on a team of sand-lot boys. A no-hit game in that case would be unfair. The Government should step in where such inequalities exist, and give the small businessman a chance to compete. Then, if he can't hit the ball, let him be called out.

The evidence all shows that the little man—the employer of 500 or less—suffers inequalities of finance, management advice, availability of raw materials, the use of science and patents. He even suffers from inadequate representation with his Government. He hasn't the money to set up a corps of public-relations men, technicians, experts of all kinds, and bureau watchers in Washington. The big man has the money, and naturally he uses it to protect his position.

In conversion to war production, at the beginning of the war, the little man distinctly got the worst of it. At the outbreak of war, the procuring agencies turned first to the very large factories. To speed the war was uppermost in people's minds. We had to have war goods in a hurry. As a result, the small producer was overlooked—although not intentionally. But the little fellow has never shared to any large extent in war production. Now, right now, is the time to prepare protection for him during reconversion. The little man must have his chance. We must encourage these littles, or there will be nothing but bigs.

America has made up her mind to save free enterprise. At least, everybody says so. Let's prove it. I say the only way to save it is to give the little man first right at reconversion, plus some scientific know-how in his plant, some money loaned him in his pocket, the easing of the tax load on his sore and bending back, and a cartload of raw material with which to start work again.

Then he can resume his peacetime business with the necessary vigor. We can continue to be Republicans and Democrats, or any other political faith; we can talk about each other, we can read, pray, and eat and drink as we please. The big wagons can go along, too, and those that want to can ride them. Otherwise, we are sure to get monopolized. We lose what we Americans have always fought for—liberty and individuality.

At the beginning of the war, the little producer was squeezed unmercifully. Proportionately, he now gets half of the business he got before the war. The bigs—those having over 2500 employees—have swollen to three times what they were before, and the middles—those having 500 to 2500 workers—have increased, but not so much as the bigs. The whole tendency has been toward super concentration and giantism.

Going around shops over America, talking to people big and little, listening to our staff of economists, and poring over statistics, I have worked out a set of rules for the umpire. Some are special and some general. Here are three general ones:

1. We want free enterprise, competition and an unplanned economy. Yes. But war is a planned economy; we've got to plan ourselves, and schedule ourselves, out of it. Also, let us realize now that the only way to get an unplanned peacetime economy is to plan for it. I don't mean at all that we plan for each industry. But I mean we plan, both negatively and affirmatively, as I point out in 2 and 3 to follow.

2. The Sherman Antitrust Act must be enforced—to give the little man a chance. Cartels—which are international combinations in restraint of trade against the people's necessities—and monopolies, must not be tolerated in America.

3. Besides the negative job of enforcing the antitrust laws, the little businessman must have affirmative help, such as the farmer has gotten for fifty years.

Yes, the little man should be allowed to convert first. If materials and labor can be spared, to any extent that won't hurt the war effort, let an appropriate number of littles do it now. There are several thousand fairly simple "gizmos" and gadgets that can be made by little factories.

Reconversion by small plants is easier, quicker, and will break famines in consumer goods that much sooner. The plan uses surplus materials. It puts people to work. It keeps us from a national lag in employment. It gives us experience now—before we feel the full shock of converting from war to peace manufacture. Later, when huge quantities of materials are not necessary to kill Japs and Germans, we can make the more complicated things like automobiles and the various products needing motors, most of which are particularly adapted to big business. To be fair to the bigs, let them make models, let them plan, let them get ready right now. But first the little people should get the production breaks.

In getting reconversion underway, we must apply no prewar quotas. There are industry groups which want to re-strait-jacket us back into what we did before the war. This is not fair—moreover, it's impossible—and it isn't free enterprise. They call such restrictions "grandfather clauses"—which means you can't start up in civilian production now unless you were in this field before the war. For the sake of little business—and honest big business—we must have no grandfather clauses.

Let me talk specifically about what must be done by the umpire to give the little players a fair chance on our national diamond, both now for first chance at reconversion, and afterward, to keep them going:

CONTRACT TERMINATION: When the military stops a contract suddenly, because of a change in design or a new victory, pay off the little manufacturer of war goods in a hurry. His trouble has been that, being in many cases the low man on the contractor's totem pole, he was last to get his money. The Contract Settlement Act of 1944 is one of the major acts of the present Congress. It should be put into full operation at once—and as a matter of fact much constructive work has been done by the services already.

SURPLUS PROPERTY: See that the little people and the little businesses get their share, whether machine tools or land or buildings or materials of any kind. For the sake of markets, all sales of surpluses should be widely publicized and the buyers widely distributed. This helps everybody. It prevents dumping and inflation. The Government, instead of selling millions of an article to one speculator, should sell in lots small enough for the smallest businessman to bid on.

FINANCE: Here the little man must have financial facilities and services comparable to those enjoyed by his big competitor. I don't mean that he ought to have the equal right of borrowing $10,000,000 at 1 per cent in Wall Street of LaSalle Street. I mean he ought to have the right of borrowing $10,000 from his country banker, at maybe three or four times the rate—say 3 or 4 per cent—the big man pays.

We ought to re-examine the history of borrowing in this country. I can remember down in the goat, sheep and cattle country of Texas how the ranchers would come in to borrow various sums at 8 per cent, in advance. What with the depositors' money, and the fast turnover, the banker could take heavy losses and still make money. This is no longer true.

I propose a credit-insurance plan that is simple, and which has already been tried. It has worked successfully. Let our Smaller War Plants Corporation set up a bank insurance plan similar to the one used by the Federal Housing Authority. The FHA has insured over $6,000,000,000 worth of homes and has lost no money. Consider the guarantee of deposits in banks—a cry was raised in the beginning against this by most bankers. But now every banker is satisfied, and anyone advocating the repeal would be shot.

Let us apply this credit-insurance plan to small business. Then country banks, city banks, could lend from $10,000 to $100,000 without great danger. The bankers could be bold, as they were in pioneer days. This would put free enterprise and new business on the upgrade.

What we need when peace comes is an up spiral, and not a down spiral. If things were spiraling up too fast, we could go slow on the money. And the down spiral would be halted by the insurance.

TAXATION: We can buy a man a shiny new factory, fine machines and tools, and rugs in the office. But if he is to be eaten up by taxes—well, he'll be eaten up, that's all, and out he goes from our economy.

So: Little business must have incentive taxation. He must have a chance to get on his feet, then walk.

How: Increase well beyond $10,000 the excess-profit exemption provided in the Revenue Act of 1943. Make it $50,000 at least. It could, if necessary, be restricted to corporations with excess-profits net income—before exemption—of not over $50,000.

Nor must we overtax divided income. We must allow liberal treatment—carry-overs and carry-backs—of operating losses. Don't force a man to take all the rap on losses one year, but spread it over for, say, three years. And liberal depreciation allowances on new plant and new equipment are essential.

I say this because tens of thousands of business units have passed out of the picture since the war. We want them back; we want intelligent treatment for them. Give them special treatment for three years after the war, at least.

Taxation of small business cannot be viewed as something aside from other aspects of the problem. One great drawback to the expansion of small business has been its inability to get necessary equity capital. Small business must look to earnings; and money can't be paid back to the lender if it all goes into taxes.

PATENTS AND SCIENCE: Who is going to get the benefit of all the gigantic advances of science during the war? Are they to be chucked in the Mississippi, or filed away to be forgotten, or allowed to be monopolized by a very few?

In the last war we know what happened to German patents. The Germans got them back, or certain big or monopoly groups got them. This time we of the Smaller War Plants Corporation through arrangements with the Alien Property Custodian, are bringing to the attention of small business the 45,000 alien patents on a nonexclusive basis for fifteen dollars each. By careful abstracting of the patents we are making it much simpler for the small manufacturer to find those he can use. These patents must be kept for the American people, and little, and big, business.

And there are the American patents. Those held by the Government and those developed at Government expense must surely be available to all the people. We must not allow these astonishing inventions to be corralled by monopoly groups.

As for science, if we don't watch out, we shall leave the little fellow hobbled to antiquated equipment and processes. You can't run a civilized country with the bigs having all the science and the littles scraping along with primitive machinery and handicraft methods. He must have the modern scientific knowhow and, at the same time, mass-production techniques.

So, as I have already said, treat the small businessman as well as you do the farmer. Any farmer can get management advice from Uncle Sam. He can get laboratory help too. And the farmer is nothing but a businessman who lives out in the country. Give the little man in town at least as much encouragement.

The Government should make it possible through co-operative laboratory systems for small producers to secure aid in developing new processes and new products. This can be done with existing private laboratories, the land-grant colleges, universities, and numerous Government laboratories which have a wealth of help that is not being used fully.

In none of these, I claim, is the little man being given an advantage. He now has handicaps, and I propose taking them off. In the main, the big automobile and other heavy plants will be occupied in war production to the end. To prevent postwar convulsions, the little man must get reconverted first.

As for big business, it has the distributive channels; the sales organization, at least on paper; the big money at low rates. Many big businessmen agree that they cannot exist without little business. Little business makes possible big business. It furnishes competition which is good for everyone. It develops new ideas; it seeks new fields of activity. The bigs of today were the littles of yesterday.

Let's get busy now and get our thinking straight about big business, little business and free enterprise. Let's start off right, and that means keeping small business to a position strong enough to keep us from industrial collectivism.

That's what I'm fighting for. It is the only way we can survive as a free nation.

Maury Maverick, Chairman of the SWPC, 'How Shall We Reconvert to Peacetime Work?', The Saturday Evening Post, September 16, 1944

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