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Thursday, July 28, 2011

“Market Man” Consigns the Common Man to the Dustbin of History


When “Market Man” Consigns the Common Man to the Dustbin of History

When “Market Man” Consigns the Common Man to the Dustbin of History

July 28, 2011

Dear Citizens and Elected Officials:

PART I: “We’re All Entrepreneurs Now…”


It’s very hard not to be mesmerized by the dispiriting spectacle now underway in the nation’s capital, with the sans-culottes of capitalism, the Republican Right, dictating terms to the President and the Democratic Party while holding them hostage under the ceilings of debt. What the Right proposes doesn’t surprise us so much; we’ve been students of these revolutionaries for three decades now. What is amazing is watching President Obama and far too much of the Democratic Party be willing to give them 80% of what they want. The President has made it very clear where he thinks the American left can go; in convincing us that we have no future in a Democratic Party that has turned its back on its own best traditions, ones that are still badly needed, and relevant for meeting the current crisis in our economic institutions.

What’s happening in the summer of 2011, the fixation on debts and deficits, is so tragic because it obscures the fact that the old Washington “consensus” between the Right and the Center, going back to Democrats Jimmy Carter and Bill Clinton, presently has no answer for the nation’s unemployment and foreclosure calamities. These in turn are rooted in deep changes in the nature of international finance, trade and labor markets, and the high levels of private citizens’ debts, which were already swelling before the financial crisis, the debts being a form of compensatory consolation for the middle and working class’s stagnating wages. The crisis cannot be solved without a return to full employment, and the truth is the current economic arrangements can’t deliver anything remotely like it.

Had the “grand bargain” been signed off on, we would still be staring at the great, radical experiment of the Right, acquiesced in by the Center, their fondest wish ever since they rose up to fight FDR in the latter half of the 1930’s: they will meet the deep troughs that capitalism historically sinks under by further shrinking the size of government and balancing budgets at all levels, and placing all human faith in the divinity of private markets.

This essay looks at some of the current columns of one of the great cheerleaders for these economic arrangements which have caused such a calamity, Thomas L. Friedman of Bethesda, MD, as well as two of his longer and more famous works from the past ten years. As the title suggests, we are going to look at the role assigned to, and the likely fate of, the “common man” in these new labor markets, so well represented by the rise of Wal-Mart.

When the French Revolution lost its mind, Edmund Burke gave the world a deep explanation for why it happened with his Reflections on the Revolution in France, and when that proved to be too much of an apology for the Ancien Regime, Thomas Paine gave him, and all of us, a spirited reply with The Rights of Man, just one year later, in 1791. What we claim in this essay is that Mr. Friedman has been celebrating the emergence of a “Market Man” who has been “designed” to meet a new revolutionary situation: the frantic demands of globalization and the utopian effort to construct one giant “free-market.” If one pays close attention to Friedman’s metaphors and parables for this “new man” caught up in the “revised” labor markets, as well as his prescriptions for pushing the older human types out of the way – as suggested by his remedy for unemployment – that we all become “start-ups” – it will become apparent that this is going to be more of a nightmare than a dream about human fulfillment.

Indeed, we asked Mr. Friedman back in November of 2005, when he appeared on a panel with Gene Sperling, the current head of President Obama’s National Economic Council, what he thought Edmund Burke would have to say today in response to the demands being made on human beings to bend to the requirements for constant change, mobility and flexibility (and of course, now austerity) by the new labor markets; but we don’t recall getting a very clear reply. Little did we know then, what Karl Polanyi has subsequently taught us, that Mr. Friedman might have retorted that Edmund Burke was one of the architects for the “reform” of the English Poor Laws, along with Malthus, Ricardo and Bentham, that ultimately led to the “Satanic Mills” of the 1840’s, although Burke did not live long enough to witness the full fruits of his handiwork – having died in 1797. This is just one of the ironies which history has in store for us: the “ultra-traditionalist,” horrified when the French embarked on their social engineering project, helping set in motion social engineering forces which would nearly turn Great Britain itself inside-out.

So perhaps that can serve as a bit of a warning to Mr. Friedman still; the best way to get the measure of the Utopian Project you’re urging upon us is to obtain some historical perspective; but to do that, you’ll have to push the relevant origins of our present world troubles back a little further than the fall of the Berlin Wall, just as Karl Polanyi had to do in explaining what unfolded in the 1920’s and 1930’s.

Employers Today: They’re Just Not That into You

When Thomas L. Friedman of Bethesda, MD, says he is on to something “new,” as he did in his July 13, 2011 column at the New York Times – “The Start-Up of You” – then readers should know they are in for quite a ride. The questions, though, are: where has he been, and where is he trying to take us? These are questions we’ve had for some time now, and so we thought we better get around to answering them. (The column is here at http://www.nytimes.com/2011/07/13/opinion/13friedman.html )

His column follows in the wake of the terrible employment news for June, and what Friedman says are the typical responses of the two parties, one rooted in the 1960’s, the other in the 1980’s. Employees are not going to “find” their next job, he says, they’re going to have to “invent” it, after re-inventing themselves. Well, he didn’t quite say “reinvent themselves,” but that’s deeply implied in not only this column, but also in his two “globalization” books, The Lexus and the Olive Tree (1999) and The World is Flat (2005). Companies, therefore, are looking for people “who can invent, adapt and reinvent their jobs every day, in a market that changes faster than ever.”

Friedman is describing the nature of work today, and the nature of the labor market, and we think he is quite right and quite blunt about these matters, unfortunately. In fact, companies were pressured by the recession “to become even more productive by deploying more automation technologies, software, outsourcing, robotics – anything they can use to make better products with reduced head count and health care and pension liabilities. That is not going to change.” Describing a brutal reality is one thing, however; celebrating , justifying and promoting it as the only possibility is quite another. Friedman is so close to and enthralled by the pulse of his times that he has lost, as we will explain, any sense of historical perspective on the deeper implications of these changes for human beings caught up in the new “flexible and resilient” labor markets. Just as in previous deeply ideological eras in Western history - the French and the Russian Revolutions come immediately to mind – there is a powerful dynamic at work here – this time from the Right side of the political spectrum, to fashion a “New Market Man” suited to the demands of the Age of Market Utopianism (1980-….?).

Our readers will recall that our recommendation of Karl Polanyi’s The Great Transformation (1944) in our essay The Logic of Market Utopianism: When Business Turns Bad for Society (July 2, 2011) described the first time in history that the unfettered market made a bid for complete dominance of society, when the classical economists in England in the 1820’s and 1830’s brutally shaped a labormarket to meet the voracious needs of the emerging factories by turning the social safety nets of late 18th century England into instruments of psychological (and sometimes physical) humiliation, if not outright torture. Long gone were the hearty yeomen of rural England; the common man there was undergoing a forced transformation into the urban, industrial working class so movingly described by historian E.P. Thompson in his renowned book, The Making of the English Working Class ( 1963).

Now in the writings of Thomas Friedman, especially in his two long works mentioned above, but also emphatically in this “We’re all Entrepreneurs Now” column, we’re watching the much fought over (by the two parties) “blue collar” American, or our own old and sturdy “Common Man,” being pushed into extinction by the intellectual and economic forces of the day: free-market Utopianism and Globalization, and its current policy manifestation by the Center and the Right, the austerity politics of balanced budgets and debt obsessions. (And in a future posting we’ll be looking at one of the epitaphs, Jefferson Cowie’s fine 2010 book, Stayin’ Alive: The 1970’s and the Last Days of the Working Class.).

As we will show in greater detail a bit later on in this essay, history is marching in only one direction for Mr. Friedman; labor organizations, leftists, and New Dealers are in the way, or being left behind, like “turtles,” (and any good conservationist can tell you where they are headed: in the East, the Wood, Bog and Box turtles, especially…headed for the same fate as our major ocean fish…and pelagic turtles) “roadkill” or mere “joggers” in the path of the “Formula One racing cars”; that would be the cutting edge entrepreneurs behind the wheel, wouldn’t it, Tom? According to Mr. Friedman, “you can’t escape the system”; and indeed, in reviewing his work, the thought had come to mind that he had created the biggest “ash heap” or “dustbin” of history yet, with all due respect to Leon Trotsky, who allegedly invented the term by hurling the charge at the Mensheviks in 1917 here at http://en.wikipedia.org/wiki/Ash_heap_of_history .

“Mr. Friedman, ‘You’re No Social Democrat.’”

Friedman is willing to toss out not just the obsolete figures mentioned above, but also “economic populists, nationalists, know-nothings, nativist xenophobes and opportunists” as well…all that’s missing from Tom’s dustbin list is any explicit reference to the “Common Man,” but it is, in our opinion, pretty clearly implied, nowhere more so than in this current column. (And Tom, we don’t quite know how Montgomery County, Maryland can cope with two “social democrats,” since you called yourself, rather amazingly, one; let me tell you, Tom: “ ‘You’re no Social Democrat.’” Montgomery County Democrats tossed any such notion into their “dustbin” of history some time ago; about the time they all fell in love with Bill Clinton’s economics…which you so heartily recommend – still).

With Thomas L. Friedman, however, you don’t ever just get the description, you also get the prescription, and sermonizing along the way, and, in this case, a sermonette at the end. So the prescription reads, in the bold letters of the column break – “We’re all entrepreneurs now, or should be.” And so it follows that “you should approach career strategy the same way an entrepreneur approaches starting a business…” Most predictably, Friedman has been talking to the entrepreneurs again, especially out in Silicon Valley, and so he offers us Reid Garrett Hoffman’s (the founder of LinkedIn) advice: “You can’t just say, ‘I have a college degree, I have a right to a job, now someone else should figure out how to hire and train me.’ …For entrepreneurs it’s differentiate or die – that now goes for all of us.’”

And now we have to emphasize the brutal truth, job seekers. Friedman has long been fond of Silicon Valley and its innovations, and he here flaunts the major buzz brands of our day: Facebook, Twitter, Groupon, Zynga, LinkedIn…all doing “fabulously, darling,” in terms of market valuations, that is. Then the “we don’t need you so much” iron curtain drops: “You could easily fit all their employees together into the 20,000 seats in Madison Square Garden…” But despair not, abandoned workers, Mr. Friedman is about to offer you a favorite word that globalizers and Market Utopians use to describe the ideal type of labor market and workforce they want – “resilient” – and then suggest sending us to the gym for additional training: “Finally, you have to strengthen the muscles of resilience.” The proof that it pays off comes from entrepreneurial certifier Hoffman himself, who finishes the column by telling us that “‘online radio service Pandora went public the other week,’” but to get there it had to pitch its concept “‘more than 300 times to V.C.’s with no luck.’” (That’s venture capital firms for the few of you who are not yet in entrepreneurial over-drive.)

Please note Mr. Friedman’s subtlety here; he never says “get off those unemployment benefits and start your own business,” the way Rush Limbaugh has, when speaking about those on extended benefits…but it’s very much the same idea, and once again we call your attention to the overlap between the Right and Center of the public discourse, and the strong tendency, when things are not going well in our economy, to present a diagnosis – “not enough entrepreneurship” – and the remedy – more small business “start-ups” – as the policy treatment. Congress and the President sailed this course “together” in the fall of 2010, passing the Small Business Jobs Act, which the President signed on September 27th. When we looked at the provisions of the bill at the Small Business Administration website, we counted at least $54 billion in potential funding, thanks to the numerous accounting details and provisions, the three largest being $12 billion in upfront tax cuts, $12 billion in lending support for the main 7(a) and 504 loan programs, and a potential for up to $30 billion in low cost capital from the Treasury Department, slated to be given to community banks for small business lending.

And yet, even with this extra funding, and the knowledge that major established American businesses are sitting on record levels of earnings and cash, and investors are pacing up and down looking for good places to put their money to work (and the U.S. still has plenty of wealthy investors), we still are in a great deal of trouble economically, especially where it matters the most for the common person: the availability of jobs. This strongly suggests to us that something is wrong with the policy prescription that the President, the Congress, and Mr. Friedman have written. We don’t think there is much harm in this Small Business Jobs Act; after all, entrepreneurship is in the American DNA, and it’s been there ever since our founding and its full flowering in the Age of Andrew Jackson. One could argue that start-ups and upward mobility through business success are the largest component of the American Dream, although those on the left currently working on “Rebuilding The Dream” are hereby advised to consultThe Great Gatsby and The Death of a Salesman for some additional perspective, and refinements, and we wonder what that gadfly writer Mike Davis meant by titling his first book, about American labor, and the working class, Prisoners of the American Dream? Yet we don’t intend anything that follows in this little essay to discourage “start-ups” from pursuing their dreams and finding the funding for it, not in the least. (and we’ve been mulling over our own, as a matter of fact; how seriously, we haven’t yet decided). That’s not what we mean by saying the small business approach is the wrong policy prescription.

Some Variations on the American Dream

What we do mean, however, is that “entrepreneurship” or the alleged lack of it isn’t the determining factor in what’s now holding this nation back economically, and that should be clear from our previous writings and the dissenting economists we quote to support our views. What’s holding us back is the lack of balance, and perspective that comes from having spent the last 30 years, at least, bathed in the ideology of the “Age of Entrepreneurial Romanticism,” an age where, despite the fact that 80% or so of the workforce are not business owners/entrepreneurs , the dominant cultural assumption is that almost all want to be, and perhaps more importantly, as Friedman implies, ought to be entrepreneurs, or at least think like one. (Out of a workforce of 157 million, but we’ve seen numbers all over the place on its size – with many now not being counted, having “dropped out”; there are 30 million businesses in the US, just 18,000 of which are “large firms,” employing more than 500 workers).

But this is a terrible narrowing of what “The American Dream,” means, and has meant, even after acknowledging a dominant entrepreneurial strain in it. Teachers, firemen, policemen, artists, writers, government employees, and, at one time, even community organizers all had their own take, and stake, in variations of the American Dream. (We didn’t include environmentalists in pursuit of their own version, because Rush Limbaugh has ruled them entirely out-of-bounds from the get- go, even the ones, like Environmental Defense, who are in love with market-based approaches ; and Rush has the final word on this, of course). And, if the historical truth be told even about the Age of Jackson, when the nation’s towns and fields were filled with the full flowering of small businesses and the “get ahead” attitude, there were religious and secular dissenters organizing the first communitarian responses to what they felt was a suffocating conformity of commercial greed and individual selfishness. They ranged from Owenites, Fourierites, Shakers, and Brook Farmers to John Humphrey Noyes’ Perfectionists at Oneida, New York. Although it might be upsetting to New Jersey’s current Governor Chris Christie, there was even a major effort in New Jersey, about four miles from Red Bank, where the North American Phalanx “ flourished” from 1843-1854. (The fate of the buildings and site would make a good story for one of the “History Detectives” shows on Public Television; and how the Right would howl in response.)

Although it’s hard to believe now, even union organizers in the 1930’s were asking for admission to a blue-collar version of the dream, at the bottom step of the middle class, beginning with the right to be treated like full human beings by the foremen on the assembly line floors (and before getting to the issue of living wages) – a question of basic dignity, not ten year business plans. But let’s set the variations on the American Dream aside for now, because it’s a story that is at least as wide as the literary imagination of Walt Whitman – and that encompasses quite a broad American vista . Let’s stick to the “Age” we’re still in, where the flow of dreams and policy has been for so long “swept away” by entrepreneurial needs and, to put the best possible light on it, visions.

Awash in Capital and MBA’s, Why Can’t Small Businesses Get Funded?

How can it be then, in the world’s greatest capitalist nation, with the world’s “deepest and most liquid capital markets” (as Wall Street keeps saying to anyone who will still listen to them), and one with a strong venture capital tradition, that so many start-ups and would be entrepreneurs say they can’t get a loan, can’t get the capital they need, even with so many states, including Maryland, having entered into the venture funding game, saying the private sector hasn’t been doing enough?

And how can it be in this same nation, which has, for decade after decade, especially since the 1980’s, been churning out tens of thousands of MBA’s each year (currently, about 156,000 per year), meaning we have at least two million (we’ve never seen a cumulative figure) - people who know how to write a start- up business plan and analyze one – we are still lacking in “entrepreneurship,” or the capacity to put these trained minds to work to match start-ups with all the money corporate America is sitting on, and the trillions slushing back and forth daily in the speculative markets worldwide? In New Jersey, we watched oil companies, pharmaceutical companies and other types of Fortune 500 companies start real estate arms for speculative earning potential outside their main areas of expertise; so why is it so hard match this talent surplus of MBA’s to all this money, in response to the societal chant of “helping small businesses”? What’s keeping the supposedly “self-organizing” properties of complex systems and networks, which the Santa Fe Institute specializes in, from dramatically increasing the number of small businesses, and therefore, hopefully, the number of new jobs?

Well now, let’s let a bit of reality set in. We know that the highest rates of return on investing have been earned in emerging markets, something that has a long track record in the history of capitalism, especially as established industrial powers age, as Britain did after the 1860’s, and the US is doing now. So the focus has been shifted overseas, to China, India and Brazil, the successors to the smaller Asian Tigers. And we know from the work of the late John Kenneth Galbraith on the US and the French historian Fernand Braudel on the 15th-18th centuries in Europe that economies have a strong tendency to separate themselves into two spheres of organization, one consisting of large firms capable of setting prices, doing systematic planning, marketing, and dominating their markets, and the other one consisting of large numbers of smaller firms which don’t have that power but none-the-less carry out much basic, “ground floor” economic activity. (And we are about to read Galbraith’s Economics and the Public Purpose, from 1973, which was perhaps his most important, but now neglected work, dealing with the problems caused by this two-tier economy.)

So with the two parties, and Thomas L. Friedman of Bethesda, MD. and indeed, all the restless eyes of the nation turned to our small businesses in the hope of job creation, what can we expect in light of all the claims made for them generating such a substantial share of the nation’s jobs since the 1990’s?

Well, we’ve spent a considerable amount of time at the Small Business Administration website, the U.S. Census Bureau’s, and the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), and hours Googling for the answers to the question of how many “small businesses we have,” and inferentially, as an offshoot of the “Age of Entrepreneurial Romanticism,” how much their numbers have grown, if not majestically, then surely steadily, decade by decade since 1980; at least, that’s what one would imagine would have happened given the cultural and ideological dynamics since 1980.

A Closer Look at America’s Small Businesses

Here’s what we found so far, starting with the claims for the jobs they have created: “Firms with fewer than 500 employees accounted for 64% (or 14.5 million) of the 22.5 million net new jobs (gains minus losses) between 1993 and the third quarter of 2008. Continuing firms accounted for 68 percent of net new jobs, and the other 32 percent reflect net new jobs from firm births minus those lost in firm closures.” The quote is from the Small Business Administration, here at http://www.sba.gov/advocacy/7495 but the source of the data is the U.S. Department of Labor’s BLS. And then we have to add in a third agency collecting data about small businesses and “start-ups,” the U.S. Census Bureau. The problem, when you mix all three together, is inconsistent definitions of small businesses, some relying on number of employees, others on level of sales and placement within the extensive industry code system of the BLS, and whether the data is annual, by quarters and so forth. One can make a career, apparently, out of trying to interpret the overlapping/conflicting data, but we don’t intent to do that.

21.3 Million “Non-employer” Firms…with just 3.4% of business receipts…

But we will give you a closer look at the universe of businesses in 2008, as tabulated by the U.S. Census Bureau, where one statistic in particular jumped out at us: the nation had 27,281,452 businesses, but the vast majority were “non-employer” firms with “no payroll,” largely consisting of the self-employed, who may or may not have other sources of income; they are a staggering 21,351,320 out of the 27.2 million total businesses, but generate only 3.4% of the business receipts. Although the data sources are too polite or politic to say so – after all, we’re dealing with a slice of apple-pie/slice of the American Dream here – let’s be clear about this segment, which is vast: this is not the dynamic part of the small business economy, and is usually excluded from the data analyses.

Just Six Million Firms with Payrolls…

So when our culture pins so many hopes on small businesses, we’re really focusing on some 5.9 million “employer firms” with payrolls, and here’s the surprising size breakdown within them: 3.6 million firms with 1-4 employees; 1.04 million with 5-9; 633,00 with 10-19; 526,000 with 20-99, and then, notice the very sharp drop-off to just 90,000 in the 100-499 size range, a category which says to us, at least, we’ve left the realm of “small business,” and entered “medium,” with another sharp drop off to just 18,469 firms with 500 or more employees, indicating that’s where the “large firm” boundary begins. (Here’s the data set at http://www.census.gov/econ/smallbus.html )

Small Business Churning…and Creative Destruction

We also found an interesting study, by Brian Headd, of the Office of Advocacy at the Small Business Administration, published in March of 2010, which takes an even closer look at the internal dynamics for those job creation claims between 1993-2008, and contained some observations which tend to temper Thomas Friedman’s yearning for us all becoming “start-ups” in the entrepreneurial nation. Here it is at http://archive.sba.gov/advo/research/rs359tot.pdf . Headd calls this work “a primer for understanding some basic facts about small businesses’ role in employment and the data that are available to form opinions and develop hypotheses…” He acknowledges the spit economy between large and small firms; “…in 2006, 60 million people were employed by smalls, and 60 million by large.” The main intent, and thrust of his study, however, seems to be to buttress the role of start-ups in job creation: “The Census Bureau’s Business Dynamics Statistics (BDS) show that firms created 70.5 million jobs in their first year of existence between 1977 and 2000; 57 million jobs remained by the time these firms reached their fifth birthday,” qualified by the notation that the bulk of job flows {creation vs. destruction} take place in existing firms expansions and contractions. In addition, the bulk of job flows are in small firms.” And perhaps sensing that the constant tension between job creation and destruction by firms being born and dying might leave a bit of a Darwinian aftertaste, he comments that “although job turnover can be an emotional roller coaster for individuals, small firm job flows are a boon to the economy; this churning represents the economy’s constant evolution from outmoded processes and industries to more productive ones, or ‘creative destruction.’”

Yet we came away with a somewhat more ambiguous take on all this straining to learn what small business have or haven’t done for the overall economy, especially in terms of job creation, based on this comment from early in the paper: “The share of employment in small firms has been relatively stable over the past few decades. It has fluctuated slightly in response to economic conditions, declining slightly when the economy is doing well and increasing when the economy struggles.”

Which Firms Are Creating the most Jobs?

And we also detected, in the overall “flow” of Headd’s paper, that it might have been at least partly driven by the desire to respond to another paper, one from June of 2008, and also appearing on the Office of Advocacy’s (Small Business Administration) website, Zoltan Acs’, William Parsons’ and Spencer Tracy’s High-Impact Firms: Gazelles Revisited, which in turn built upon the pioneering work done by David Birch in the early 1980’s.

Now this type of academic work is directly concerned with the questions of which size and type of firm is the most dynamic in creating jobs, and more indirectly, how public policy might encourage them. And the studies are important to us because they are the necessary follow-up and reality check upon the expectations of elected officials at all levels that the cultivation of small businesses and entrepreneurship is the answer to our current economic woes. So what did Acs, Parsons and Tracy find from their examination of new private sector data bases, and their methodology, which looked for the firms which both doubled sales and increased employment (along two different measurements) over the study periods 1994-2006? They found that “high-impact firms are relatively old, rare and contribute to the majority of overall economic growth. On average they are 25 years old and they represent between 2 and 3 percent of all firms, and they account for almost all of the private sector employment and revenue growth in the economy.”

While recognizing that firms with “fewer than 20 employees represented 93.8 percent of the high impact firms and 33.5 percent of the job growth” among them, they also concluded that “job creation is almost evenly split among small high-impact firms (fewer than 500 employees) and large ones (500 plus employees) with small firms creating about half the jobs and large ones creating the other half.”

When it came to policy advice for public officials, their findings were apparently alarming enough to the Small Business Administration so that it placed a disclaimer at the bottom of that page, stating that the “…report was developed under a contract with the Small Business Administration, Office of Advocacy, and contains information and analysis that was reviewed and edited by Officials of the Office of Advocacy. However, the final conclusions of the report do not necessarily reflect the views of the Office of Advocacy.” So what might have been troubling to the Office? Perhaps this: “The data suggest that local economic development officials would benefit from recognizing the value of cultivating high-growth firms versus trying to increase entrepreneurship overall or trying to attract relocating companies when utilizing their resources.” (Our emphasis.) Here’s the link for this fascinating study at http://archive.sba.gov/advo/research/rs328tot.pdf

So, of Course We Have a Lot More Small Businesses Now, Don’t We…???

Before we leave these considerations about the role and achievements of small businesses in job creation, we must mention something that we only hinted at earlier. What we didn’t find was any statement, or data, which indicated that the number of small businesses (whether one includes the “non-employer/self-employed” category or not) was growing steadily compared to either the overall workforce or the number of large firms, those 18,000 or so firms with more than 500 employees. Whether this is by oversight or by implicit recognition that indeed the number has not greatly increased since 1980, despite the ideological and cultural role assigned to small businesses, we don’t know. But it’s hard to imagine, given what we have witnessed over the past two years in terms of political yearning to nominate small businesses as the pathfinders to lead us out of the economic wilderness, that if the trend was there, someone wouldn’t be headlining it. After all, when Bill Clinton was in the White House, he released his Presidential Report: The State of Small Business on May 5, 1998, which noted “for the fourth year in a row, new business formation reached a record high: 842, 357 new firms were formed in 1996.” Now Bill didn’t say how many had “passed away,” but as we’ve already noted, there is an enormous amount of “churning” in the world of small business, many births, but also many deaths; the Office of Advocacy in the SBA wrote that in 2008, there were 627,00 new businesses, but 595, 600 closed.

So this omission, along with that finding by Brian Headd that small business’s share of national employment has been fairly steady over the years and varies slightly with the overall trends in the economy, leads us to this important conclusion, one quite out of favor with the Right-Center’s obsession for budget balancing: when the nation, indeed, much of the Western world, is in the grips of large and malevolent macro-economic trends, as in 1929-1932, and 2008…2011…then policy makers shouldn’t be looking to this or that business sector to idealize…they should be paying deep attention to what is or isn’t in the pockets of the “common man,” aka as the customer, or consumer, if you would prefer. And they might also want to pay attention to his/her debt levels, and frequency of foreclosure notices, and percentage of mortgages “underwater.” But we know now that isn’t going to happen in a political world where for more than 30 years the “common man” has lost standing in both parties, as the fate of the labor movement so well illustrates, and where the entrepreneur, both large and small, has been moved to center stage, if not placed on a pedestal, which is right where they were, come to think of it, all during the 1920’s. Although Bill Clinton was said to have the common touch, and he is giving President Obama pretty good advice today on the Constitutional question of raising the federal debt ceiling, he still has to shoulder some of the blame for swimming with the broad ideological currents which have led this nation to its very, very unhappy state in the sweltering July of 2011. After all, it was President Clinton’s own report on the “State of Small Business” in 1998 which noted that “at each of the White House Conferences… – in 1980, 1986, and 1995 – small businesses included on their agenda a recommendation to balance the Federal budget.”

Part II: Keeping Up with “The Friedman’s.”

Of Roadkills, Have-nots, Know-nots, and Turtles

When we first read Thomas Friedman’s The Lexus and the Olive Tree early in the first decade of the 21st century, we have to admit that it left us with an ominous sense about the economic world he was describing – and our place in it. Perhaps that was because we had already passed the age of 50, and our work experience had been in government, which included a stint as the chief steward and lead negotiator for a public sector union (AFSCME 2285) in a social service agency serving the urban ghetto in Trenton, NJ (which we freely confess we did not quite visualize in “Tom’s” felicitous terms as an “emerging market”); and then as the Director of Conservation for a state-wide environmental organization, which placed us at public policy tables in front of the NJ legislature, in Governors’ offices (except Gov. Whitman’s) , and sitting across from some very formidable private sector powers, like the NJ Builder’s Association and the real estate industry, and even household names like Ocean Spray (a cooperative which tried to become a Fortune 500 company). It was while standing near Ocean Spray in the late 1990’s that we got to witness our first “speculative” commodity bubble bursting – involving the price of cranberries.

That should have been some preparation for us - although we were on the “safe side” of that one – for the collapse of the Internet Bubble and stock prices in 2000-2001, and the effects were particularly severe in high tech Massachusetts, where we had just moved in 2002. Perhaps because of our age, our previous experience, and the fact that we were then looking for work, we were extra attentive to Mr. Friedman’s none-too-delicate choice of words, as well as his admonitions to climb aboard the “life- long learning” bus so that we wouldn’t end up as “roadkill,” or like that “jogger” about to be passed by the entrepreneurs behind the wheels of those “Formula One” racing cars. Or perhaps it was because “Tom” frankly spelled out the “power shifts” involved: “Like all revolutions, globalization involves a shift in power from one group to another. In most countries it involves a power shift from the state and its bureaucrats to the private sector and entrepreneurs.” And maybe that’s why we either missed, or forgot, that Friedman called himself a “social democrat,” until we went back just recently and re-read portions of his books in the wake of his July 2011 column. But we’re not going to be too hard on ourselves in having forgotten this; after all, how many “social democrats” do you know who lump the “laggards” under globalization into a camp called “have-nots, know-nots and turtles,” who have to be “equipped to survive” so that they don’t “choke off your country from the world.” (All quotes in this section are from The Lexus and The Olive Tree unless otherwise noted.)

Workers in the True Revolutionary Nation

But now we approach Mr. Friedman with quite a different set of eyes, and those eyes have taken in a different spectrum of humanity than the upper-middle class dominated one of Mr. Friedman, who seems to have dined with nearly every business person of note in this vast globalizing world, and listened to their message so well that he could in turn ably bequeath to us his bloody and fatalistic metaphors and parables. Although we confess to not having lived our life through the eyes of the “common man,” nor thought of ourselves entirely as one, it is by our own lived experience, and the recollections of some wise ones who have gone well before us, that we now look upon Friedman’s work with exactly those eyes; those eyes bequeathed to us all by Lincoln, by U.S. Grant, by Whitman, by Walter Reuther and yes, by that Hudson Valley squire, FDR, whose inspired language reached, and touched the “commonman, despite being delivered with clear upper-class accents. They all, as Eleanor Roosevelt did too, met the common folk of American at least half way, neither condescending to them nor expecting them all to turn into Thomas Edison’s or Henry Ford’s, or, less dramatically, into “start-ups,” in order to earn their daily bread.

To put it another way, all of these leaders were very uncommon people who did not lose sight of the merits and dignity of the “common man” of America, like Thomas Friedman has, who expects that average person to continually re-educate themselves, re-invent themselves, and to do so under the manic pace of technological change that he has laid out for us in his major books. And make no mistake about it in the world he has set before us: no one is going to meet these common folks of America half-way, neither “their own” government nor business leaders; they are going to chase the diminishing number of jobs in the private sector by carrying 99.9 percent of the burden of change, and “pursuit,” in a world that is moving at an unprecedented historical pace.

So what is to become of the working class, and a good portion of the middle class, in a world where it is announced that “we’re all entrepreneurs now, or should be?” Well, the implications are nothing less than “revolutionary,” are they not? Here’s how Friedman puts it, quoting historian Ronald Steel: “‘it was never the Soviet Union but the United States itself that is the true revolutionary power. We believe that our institutions must confine all others to the ash heap of history.’”

It’s interesting, don’t you think, that here is, once again, that word “revolutionary,” the one Paul Krugman used to describe the Republican Right in his book The Great Unraveling, in 2003. Now it seems to us that all the great revolutionary periods of modern world history, starting with the American, have created conditions where it was almost required that a “New Man” emerge to express the ideals of The Revolution, whether it be the democratic small farmer of the American – Jefferson’s “Agrarian Man,” the Parisian sans-culottes of the French – the “Jacobin Man of Revolutionary ‘Virtue’” or the “New SovietMan” of the Russian; enjoy the section on “him” and “her” at Wikipedia, here athttp://en.wikipedia.org/wiki/New_Soviet_man , especially his rejection of nationalism – being “Soviet,” not Russian … and whose work “required exertion and austerity, to show the new man triumphing over his base instincts.

Meet Thomas Friedman’s “New Market Man”

And thus, dear readers, we introduce Thomas Friedman’s “New Market Man,” who is always, apparently, a full-time student, and, it almost goes without saying, an entrepreneur; one repeatedly having to re-inventing himself, and one under the constant pressure of the deadlines from “just-in-time” inventory management. Faster and more Efficient are the dominant words in his vocabulary, along with “Flexibility.” For the diminishing number of workers on “Market Man’s” team, the guidewords are “Deferential, Diligent and Destitute.”

Even to casual observers of American history, this introduction should result in many asking how this is new at all, since, from the “Age of Jackson,” if not before, Americans have been strongly inclined to entrepreneurship, and to “re-inventing themselves,” as the career of General U.S. Grant so poignantly illustrates. It also leaves us wondering, if these be the requirements of the “New Market Man,” how the 80% of the workforce who are not yet fully blown entrepreneurs will become so, given the constant pre-occupation of so many of their fellow citizens, not to mention millions of MBA’s, in trying to do exactly the same thing – “invent, innovate, incorporate,” ever since Reagan fired all those air-traffic controllers in 1981, and especially since the baseline – the numbers of firms and small businesses in the country – stubbornly resists climbing very much, despite all the yearning and striving?

“‘Where Does the little guy fit into the great World Market?’”

You can hear some of the doubts and worries of the American “common man,” even from those who have strong entrepreneurial instincts, breaking into this shining ideal of Mr. Friedman’s. Thus a couple, obviously from the Midwest, wrote to Tom:

I hope this letter finds you…I have read the book several times but have not found the answer to my question: where do I fit in to today’s market? My husband and I have always been self-employed without success…We know all the essential elements of business, including the Internet and computers, but do not see our place in the global market. We know ‘how to sell’ but we do not know ‘what to sell…’ When the millionaires planted their seeds in the stock market we were broke. Where does the little guy fit into this great worldmarket? …We have many friends sitting on the same fence, wondering what happened to us and where we should go next. Perhaps you could address this issue in your next personal appearance.

Friedman “wished he had a simple answer” back then in 1999 – but he didn’t. However, with economic conditions much worse in 2011, he’s got one today: “We’re All Entrepreneurs Now, or Should Be.” Thanks, Tom. With such good advice for these would-be entrepreneurs from the Midwest, what bright futures does Tom have in store for those who might remain as mere workers? You can get more than a hint of his answers in Chapter 18, “Revolution is U.S.,” in The Lexus and the Olive Tree. It comes from his “five gas stations theory of the world,” each a little parable about different national economic models. It goes like this, but we’ll spare you economies 3-5, and limit it to the first two:

First there is the Japanese gas station. Gas is $5 a gallon. Four men in uniforms and white gloves, with lifetime employment contracts, wait on you. They pump your gas. They change your oil. They wash your windows, and they wave at you with a friendly smile as you drive away in peace. Second is the American gas station. Gas costs only $1 a gallon, but you pump it yourself. You wash your own windows. You fill your own tires. And when you drive around the corner four homeless people try to steal your hub caps.

Remember now, this is from good “social democrat” Tom Friedman; all he seems to have gotten wrong is the fact that American gas is up to $3-4 dollars per gallon. And he didn’t soften things up too much in his book six years later, in The World is Flat; for the common man, or even the “average” entrepreneur struggling like the couple from the Midwest, “there is only one message: You have to constantly upgrade your skills. ..In a flatter world, you really do not want to be mediocre.”

If union members still had any illusions about where labor stands in Friedman’s view of the world, they only have to consider his view of the drift within the political spectrum, since the Cold War ended, and his rather utilitarian view of workers during that struggle. Apparently, their golden days during the 1950’s and 1960’s didn’t have much to do with what they fought so long to win by their own efforts from the 1880’s to the 1930’s, and there wasn’t even any Keynesian necessity to those better wages to keep the “demand side” of slumping capitalism afloat during its depressed days:

Clearly, that equilibrium point has been and will continue moving to the right of center, from the left-center where it was during the Cold War, when government felt it was both necessary and possible, in a world of walls, to prevent workers from being attracted to communism by maintaining elaborate welfare-state programs. Those days are over. But it doesn’t mean simply surrendering everything to the market.

In reality, it has meant surrendering nearly everything to the market, and it is indeed in the conditions of the labor market that we see the starkest terms for the “New Market Man” laid out before our eyes. Just after sharing his “five gas stations theory of the world” with his readers, Friedman comments that if the gas can be pumped “with no employees at all – well, all the better. A flexible labor market will find them work somewhere else. Too cruel? Maybe so. But ready or not, this is the model that the rest of the world is increasingly being pressured to emulate.” (Editor’s Note: perhaps a sly reference to Bill Greider’s One World Ready or Not, which doesn’t get mentioned – nor Greider – in either of Friedman’s two most famous books?)

But for those who are lucky enough to achieve employment in this brave new world’s marketplace, there is something eerie for them, and for everyone else caught up in the tightening worldwide web of electronic communication. In Friedman’s view – and he doesn’t seem too upset by it – there is an ever encroaching web of measurement and surveillance looming over every one’s shoulder, every second; in the Times’ column we began this essay with, employers are conducting quarterly evaluations of employees, not annual ones, because of their insistence that workers be constantly creative and more productive; as at Goldman Sachs, there will be a continuing weeding out process.

In The World is Flat, Friedman presents us with the Wal-Mart distribution center in Bentonville, Arkansas, where “… a computerized voice tells each of them (the forklift drivers) whether he is ahead of schedule or behind schedule” directly through their own earphones. It’s just part of that famous Wal-Mart supply chain “greased by information and humming down to the last atom of efficiency.” It’s not that Friedman is completely oblivious as to where this marketplace is headed in deleterious human terms – he had a chapter in Lexus… entitled “If You Want to Speak to Human Being, Press 1” – and in The World is Flat he realizes that Wal-Mart’s “Sam Walton bred not only a kind of ruthless quest for efficiency in improving Wal-Mart’s supply chain but also a degree of ruthlessness period.” Good for Friedman; yet he still warns us, in true Matrix fashion: “You can’t escape the system.”

Victorian Visions and Google’s Panopticon

Indeed, in his presentation of Google in The World is Flat, Friedman waves the flag of Victorian morals over us, a blend of Jeremy Bentham’s omniscient, ever watchful prison eye, the Panoptican, and an electronic St. Peter, standing at Heaven’s Gate with your personal report card, and perhaps an Apple: “Live your life honestly, because whatever you do, whatever mistakes you make, will be searchable one day. The flatter the world becomes, the more ordinary people become transparent – and available.” Quoting from one of his favorite businessmen, Dov Seidman, “who runs a legal compliance and business ethics consulting firm, LRN,” Friedman says he cautions us that “‘in the world of Google, your reputation will follow you and precede you on your next stop.’” Another businessman, Alan Cohen, says “ ‘Google is like God. God is wireless, God is everywhere, and God sees everything.’” We can only wonder whether they spent any time advising Rupert Murdoch, whose enterprises have seemed to carry out some of the other also rather logical implications of these technologies. So welcome to the brave new world of the “New Market Man.”

Human Dignity in the Age of the “New Market Man”

It was in this spirit, and upon further reflecting upon the world Thomas Friedman lays out before us, that we went to searching our library for a book we hadn’t looked at in years, and had a little trouble finding, one entitled The Image of Man, by Herschel Baker, which first appeared in 1947, (just three years after Karl Polanyi’s The Great Transformation) under a different title: “The Dignity of Man.” So you get the idea here: that’s how troubling the brave new world of Thomas Friedman is to us, and why we went back to Baker’s examination of “the idea of human dignity in Classical Antiquity, the Middle Ages, and the Renaissance.” And we also couldn’t help but thinking of Polanyi’s main theme on the very first page of his magisterial book: “Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Inevitably, society took measures to protect itself…”

We also were reminded of one of the other aspects of Polanyi’s analysis ,which we presented to our readers in our last essay (The Logic of Market Utopianism), what he called the “double-movement”: themarket’s attempt to dominate every aspect of human society – something new with the Industrial Revolution’s introduction of a universal labor “market” – heartily recommended by the “classical economists” – and then the “counter” movements, the pushback to defend the hard-pressed idea of “‘The Dignity of Man.’”

“When Big Majorities in Big Countries Feel Abused…”

Thomas Friedman is not unaware of what he is condoning, what has been unleashed with the secondMarket Utopian version of Globalization (the first version was the “long” 19th century’s which first imploded, and then exploded between 1929 and 1933.) Thus he writes in that chapter entitled “If You Want to Speak to a Human Being, Press 1,” that “if there is a common denominator that runs through this book (The Lexus and the Olive Tree) it is the notion that globalization is everything and its opposite. It can be incredibly empowering and incredibly coercive. ..” Earlier in the book he had a chapter called “The Backlash”; now, towards the end he concedes that “it is possible if the system gets so out of whack that not only disadvantaged minorities feel abused by it but also big majorities, in big countries…” then there could be trouble: “…it contains within it traits and tendencies that, if allowed to run riot, could become so oppressive that large majorities in a large number of countries would start to feel like losers, and therefore rebel against the system or try to erect new walls.”

Now we want to be tough on Friedman, tough but fair, and so we have to say that when we finished giving these two books a re-read in light of the “Start-Up of You” column, we also had in mind that he had written another more recent book about Global Warming, called Hot, Flat and Crowded: Why We Need a Green Revolution – and How it can renew America – in 2008. Although we haven’t had a chance to read it, we did manage to read quite a few reviews , and noticed the generally positive reaction, but also were glad when Jonathan Freedland, writing in his October 3, 2008 review in the New York Times, caught the irony of what Friedman was now insisting upon: that the old celebrator of the government-weakening market-driven forces of globalization, was now calling upon those same governments to take the lead in shaping the cure for Global Warming – which of course, in the United States, they have been unable to do. And, in our opinion, Friedman has to shoulder some of the blame for encouraging those blocking forces, indeed, cheerleading them on throughout the past six years or so.

But no one can say Tom Friedman is sitting on his hands as American politics continues its descent into the utter economic futility of 1929-1932. Back on October 2, 2010 he warned us of a “Third Party Rising,” opening the column with one of his few sallies into history; history before the fall of the Berlin Wall, that is, sharing a military man’s warning about Rome’s decline, interpreted through Lewis Mumford’s bookThe Condition of Man. The quoted passage is pure Market Man red meat, still elbowing all those turtles out of the way; when the going gets tough, the entrepreneurs get going: “ ‘Rome’s life was now an imitation of life: a mere holding on. Security was the watch word – as if life knew any other stability than through constant change, or any form of security except through a constant willingness to take risks.’” That’s the direct connection from the fall of 2010, to “The Start-Up of You,” and the latest on the start-up of that third party, “Make Way for the Radical Center,” which appeared in the New York Times on Sunday, July 23, 2011.

By now, despite the gathering backlash footsteps Friedman once heard behind him, we should pretty much know what to expect from someone who spends most of his time talking to other members of the economic elite and the upper middle-class, and who can find no room for any formal dissent in his books*…know what to expect from a “quiet political start-up” – Americans Elect - whose C.E.O., Kahlil Byrd, was speaking to us “from its swank offices, financed with some serious hedge-fund money, a stone’s throw from the White House.” We can’t wait Tom, to see what emerges in the eventual platform. (* Check Friedman’s indexes for Karl Polanyi, John Gray, William Greider, Joseph Stiglitz …for a discussion of income inequality, wealth distribution…all the worries from Christopher Lasch about The Revolt of the Elites and the Betrayal of Democracy, so similar in feel, except its focus on psychology, to Kevin Phillips’ Arrogant Capital…and you won’t find of trace of them or the topics they wrote about…)

Certainly, after all these years, readers know to what to expect from Tom Friedman; from a perspective which emerges from within the historical confines of that 30 year’s run of the Right-Center operating coalition, from the twilight years of the Age of Market Utopianism, where the returns to the “common man” here in America have just about run out, and we’re all holding our breath to see what Wagnerian climatic is in store for us, sitting on the edge of our seats in the vast Austerity Theatre, still wearing the rapidly thinning threads of our once “Golden Straightjackets.”

You did once quote, Tom, from a critic of “work in the new capitalism,” someone whom we also quoted from, extensively, in our essay Sinners in the Hands of an Angry Market (January, 2010) – from Richard Sennett’s The Corrosion of Character: The Personal Consequences of Work in the New Capitalism, citing his warnings about the effects of the new “rootless flexibility.” But then you balanced it out, commenting that “the very rootless flexibility that Sennett decries, though unnerving at times, can also be liberating.” But what you left out of Sennett’s account were his musings after hearing “your folks,” the “rulers of the flexible regime,” presiding over their annual conference at Davos, Switzerland.

In the final two paragraphs, on the very last page of Sennett’s book, he left us all with a warning:

But the flexibility they celebrate does not give, it cannot give, any guidance for the conduct of an ordinary life. The new masters have rejected careers in the old English sense of the word, as pathways along which people can travel; durable and sustained paths of action are foreign territories. It therefore seemed to me, as I wandered in and out of the conference halls, weaved through the tangle of limousines and police on the mountainous village streets, that this regime might at least lose its current hold over the imagination and sentiments of those down below. ..what political programs follow…I simply don’t know. But I do know a regime which provides human beings no deep reasons to care about one another cannot long preserve its legitimacy. (Our emphasis.)

Bill Neil Rockville, MD

tags: Economy/Poverty/Wealth

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