Twice in the last 100 years, national governmental policy decisions have led to the destruction of a sector of small business. The first instance concerned agriculture. Small farms began their long decline in the late nineteenth century, but the collapse of agriculture in Great Depression convinced New Deal policy makers that small farming was uneconomical and needed to end. Small farmers were unable to adopt the technology and husbandry practices that conserved land, maximized crop production, and achieved economies of scale. In addition, small farmers were often uneducated in agriculture and did not understand the best agricultural methods. In the 1940s, academic economists recommended that the national government adopt policies that would shift agricultural production toward large, commodity farms where industrial methods could be adopted and low prices assured for the nation's consumers. These recommendations were adopted in the following several decades and implemented through regulation. They largely succeeded in their goals. Small farming declined greatly throughout the country and practically disappeared in some areas, such as New England. For instance, small dairy farms could not afford the equipment required by new sanitary regulations and disappeared around the country. Immigrant agricultural labor restrictions deprived fruit growers of laborers and their farms dies when they could not harvest crops. As commodification proceeded, large farms became more economical and land prices rose. Small farmers could not afford to expand and neighboring larger farmers bought them out. As a consequence, rural population declined and small market towns collapsed for lack of customers.
Across the whole nation, rural areas are now populated with the archaeological relics of the small farm era - abandoned shopping main streets, boarded up and dilapitated houses in the surrounding residential blocks, closure of local schools, loss of medical and other professional services. Against this collapse of rural life, in the 1970s and 1980s, some venturous souls, often with no farming experience or education, started farms on the outskirts of prosperous cities, usually to supply upscale restaurants with specialized produce, dairy, and meats. Many women started farms - their successful little businesses the basis of legends today in the goat dairy and produce industries in northern California, Maine and New Hampshire, for instance. The rise of hobby and boutique farming has been inspiring, but it has not halted the demise of the small cultivator.
In looking back over this story, we need to keep in mind that the collapse of rural life in America was not due, as often popularly suggested, by the allure of city life, but by the difficulties of economic success after national market commodification of agriculture by the railroads at the end of the nineteenth century and the deliberate decision by the federal government to force the small farmer out of agriculture in the twentieth century. A whole sector of private, small producer business and an entire historical era ended.
In the past half century, federal policy and the burden of regulation have continued to suppress - rather than encourage growth of - small businesses. If ObamaCare is not repealed or reformed, we will see a similar collapse of the small medical practitioner. The medical regulatory burden - taxes, audit, information collection, squeeze on fees, civil rights definition of patient load - is, even now, destroying the solo practitioner and the small partnership. ObamaCare's disease and treatment reporting requirements are so onerous - over 100,000 categories that doctors are supposed to utilize to report cases to the government - that the small practitioner does not have revenue to pay for the staff needed to meet the requirement. Further, Medicare and Medicaid fee structures reward the specialized mass production medical practice. The primary care physician is already collapsing. Hospitals are rapidly purchasing small medical practices, sending the physicians into retirement and collectivizing their medical care in the hospital clinics.
The result of this trend is the industrialization of medical care. Industrialization of medicine will - absolutely will - lower the quality of medical care. First, more medical examination will be handled by non-physicians, often as preparatory to examination by a physician; but eventually, nurses and paraprofessionals will be making diagnoses and dispensing treatment. Second, when you do see a physician, the physician will not spend much time with you. The 15 minute appointment is common today, but in industrialized medicine, much of that 15 minutes will be spend by the doctor looking at a computer screen, filling out on-line forms, and meeting federal reporting requirements. The doctor will deal with simply the problem you explicity present, but will not provide the kind of examination that would reveal other medical problems you might have. S/he will not be asking probing questions unrelated to the medical condition of which you complain. Many medical tests will be ordered - as federal payment structure rewards testing. But the well-health of the patient will be of subordinate interest. You will notice the decline of medical care. You will complain that you don't think you are being well cared for, and you won't be.
Big regulation requires big corporate businesses, and the continual advancement and expansion of regulations pushes corporate collectivation of business. There are four inevitable results of this trend.
The first result is the cartelization of business sectors. Small business is ground out. Large businesses combine, until there are only a few businesses in a sector. The bulk of Beef processing, investment banking, steel making, aircraft manufacture, are today conducted by a few, meaning less than a half dozen, large companies.
The second result is the discouragement of competitive efficiency. The big businesses must bloat their managements to administer and comply with regulations. Computerization, which should be one basis for productive efficiency, is eaten up by complying with regulatory requirements.
The third result is a struggle for monopoly profits. The high cost regulation can, in the end, be paid for only by some degree of monopolization, in which the company can extract more from the customer than it could if it had competition. The government will permit this monopolization, because government needs those monopoly profits transferred to it to pay for its regulatory bureaucracy and for political favors. As a result, most business sectors in the country will be dominated by businesses too big for government to let fail in a business crisis.
The fourth result is fascism, in the crudest sense. It is the merging of the government regulatory elite with the monopoly business elite, which will function as a single governing elite, under the sway of the governing political party. The businesses will contribute to the politics of the political party that controls the regulatory bureaucracy and the party will shower political favors on the businesses, saving them from failure if needed. This is not a new story. When the Progressives at the turn of the twentieth century began to regulate natural monopolies, as they called them, such as electricity production and distribution, they noticed that the same persons circulated from regulatory commission to governmental administrative bureaucracy to private business. They then realized that this would be an inevitable consequence of regulation, as regulation produced a class of experts, as the only persons who could administer regulations on either side, government or business. In fascist Italy and Germany before World War Two, this situation led to political control of big national businesses by the political parties.
In the end, the historic decline of small business brings the loss of economic freedom, and the loss of economic liberty brings the decline of political freedom. And this shall surely be the result of ObamaCare and the rest of Obama's regulatory agenda, which represent and symbolize this consummation of regulation.
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