Michael Medved and The 5 Big Lies About American Business (part 5)

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[Continued from Lie #3: Business Executives are Overpaid and Corrupt.]

Lie #4: Big Business is Bad, Small Business is Good

Companies that refute the Lie: Ford Motor Company (NYSE: F), The New York Times Company (NYSE: NYT), Toyota Motor Corporation (NYSE: TM), Wal-Mart Stores, Inc. (NYSE: WMT), Whole Foods Market (NASDAQ: WFM)

Media that challenges the Lie: Wonder Years, "The Hardware Store" (season 5, episode 3) (1991); You’ve Got Mail (1998)

<img src="/media/images/user_115/part-5-lie-4-lolanimals-cat-vs-dog_large.jpg" />

“I want to love you, and hug you, and call you George.”

Of all the Lies, Michael Medved believes this is the one that so many movies promote. “There are virtually no films that challenge this Lie. Not only is there not much, there just ain’t nuthin’.”

However, there is an episode of the Wonder Years that explores the drudgery of Kevin Arnold’s first job at a corner hardware store. At the end of the show, after a lecture about responsibilities and community – Kevin wanted to be working at the exciting mall so he could be talking with girls (and making 20-cents more per hour!) – Kevin’s father decides to drive to a new big box store to make his purchase because it’s cheaper and he just doesn’t have time to chit-chat all day with the local tool peddler.

Medved writes in The 5 Big Lies About American Business:

A recent Harris poll (March 2007) reflected this schizophrenic approach to the free-market system. The pollsters asked respondents to assess their confidence level in the “people in charge of running” various institutions. “Small business” easily topped the poll, with 54 percent expressing a “great deal of confidence” in their leaders, and only 3 percent indicating “hardly any confidence at all.” According to the survey, Americans look up to small business more than the military, the medical profession, organized religion, or any other segment of society. This raises an obvious question: if those who run small businesses truly deserve this sort of confidence, then why are their enterprises still small? The same survey, by the way, rated “major companies” near the bottom of the list (along with “organized labor” and “Congress”), with a scant 16 percent suggesting they felt a “great deal of confidence” in the big corporations that dominate our economy.

Many other polls produce similar results. In February 2009, Zogby International asked, “Who will lead us to a better future?” and “small business and entrepreneurs” led the way (with a resounding 63 percent), handily outpolling “government” (just 31 percent) and “large corporations and business leaders” (a meagre 21 percent). Another Harris poll (March 2009) asked the public to classify those groups or institutions with “too much” or “too little” “power and influence in Washington, DC.” Once again, “small business” placed at the very top of the list of fourteen categories, with an amazing 90 percent suggesting that these minor enterprises wielded “too little” influence. At the other extreme, “big companies” finished at rock bottom among the representative sample, with 85 percent declaring that they exerted “too much” power on the federal government.

While Medved admits that the majority of small businesses are not ruthless scams like Bernie Madoff’s 24-employee investment division that ran the infamous $50 billion Ponzi scheme, he has no reservation saying:

Most businesses that stay small are awful. If you are any damn good, you’re going to get big. I know that sounds brutal. I think there are some neighborhood businesses that do a nice job, like Seattle’s Elliott Bay Book Company or Portland’s Powell's Books, but they are border line between big and small. I don’t think there is any reason other than sentimentality for people to think that the ma-and-pa grocery store down the street is any better than a 7-11.

I think Walmart does a superb job. Whole Foods does a good job – here in Hawaii it is one of our few sources of kosher food. I think most big businesses do an incredible job, an amazing job. I actually think The New York Times is a big business that does a pretty great job. My ability to get The New York Times in Hawaii is astounding.

A substantial portion of this chapter is used by Medved to demolish the arguments of the anti-globalization crowd. In particular, he illustrates how more diversity is achieved by multinationals, and that industries become less concentrated, not more. Relying on research in the Harvard Business Review, he writes:

They also reported that “the oil industry is actually far less concentrated today than it was 50 years ago, with more than 20 equal-sized competitors in the field today...Analysis of industries such as zinc, bauxite and copper also reveals decreased global concentration since World War II...GM, Ford and Toyota together control less of the world’s care market today than GM alone controlled in 1950.”

[Continued in Lie #5: Government is More Fair and Reliable Than Business.]





Nick Slepko has no position in any company mentioned here at the time of publication.

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