The U.S. is experiencing a generational boom in small business startups. The White House announced in January that during the first three years of the Biden administration, Americans filed 16 million new business applications. The top three strongest years of new business application rates on record have all occurred under President Biden.
The strong fiscal stimulus and strong labor market that followed the pandemic prompted a resurgence in entrepreneurship, reversing a decades-long decline. As the top-ranking Democrat on the House Small Business Committee for over two decades, this is particularly exciting. We know the many benefits this creates.
Communities with more small and locally-owned businesses have higher income growth and lower poverty rates, and local businesses return more of their revenue to the local economy (58 percent) than national chains (33 percent). Not only are there positive economic returns, but individuals benefit from the freedom of creating their own income and generating their own wealth.
But while our strong fiscal response to the pandemic may have given individuals the means to take the leap into entrepreneurship, we must now take steps to sustain this boom and ensure these new businesses can thrive for years to come.
In December, my committee published a report detailing the impact of an increasingly concentrated economy on small business owners. The findings confirm what many Americans already understand intuitively: A handful of corporations have come to dominate many aspects of American life, from the food we eat and the places we shop to the people who treat us when we are ill.
Dominant firms, in turn, have used their market power to crush smaller companies and discourage new entrants. As a result, our economy has grown more consolidated, our supply chains less resilient and our communities more dependent on large corporations that often serve to extract more than they contribute to local economies.
The small business boom can potentially restructure our economic reality and create more equitable growth in the future. But to accomplish this, we must recognize the structural barriers to growth that small businesses face in a consolidated economy and continue to take steps to address them. While the Federal Trade Commission and Department of Justice have made considerable progress in shifting the paradigm of antitrust enforcement, economic concentration continues to rise, putting new businesses in danger.
Take, for example, retail, where entrepreneurship saw its biggest surge over the past three years. Many startup small business rely on access to Amazon’s platform as an online marketplace, where they are forced into Amazon’s logistics services in order to better access customers. Amazon then has the power to take advantage of these small businesses, frequently taking up to 50 cents out of every dollar in sales made by small firms selling on its platform.
But Big Tech is just the tip of the iceberg. A survey of our economy reveals monopoly power in nearly every sector. Over the past three years, the largest businesses in those industries have used their pricing power to pad profit margins as costs went up, then maintained high prices even as costs have fallen.
This dynamic is prominent in our food system, which was once largely populated by small operators working in open and competitive markets. Now farmers are being squeezed on all sides, as inputs like seeds, fertilizers, pesticides and machinery are all controlled by a handful of companies that saw record profits in 2021 and 2022. Once the crop is harvested, it gets sold off to one of the few processing middlemen, who often dictate the prices offered to farmers and ranchers.
On the way to the consumer, food makes a brief stop at a supermarket, an industry largely controlled by the likes of Walmart, Kroger and Albertsons; the latter two are now attempting to merge to compete with the former. As a result, farmers receive fewer and fewer cents on the dollar that consumers pay, while independent grocers are unable to compete with the bargaining power of large supermarket chains.
These are just a few examples. One can survey nearly every industry and find that corporate concentration is making it harder for small firms to do business. This pervasive consolidation puts new entrants from the small business boom at risk. The actions of the Federal Trade Commission and Justice Department over the past few years have been laudable and directly benefitted both consumers and small businesses, but there is still work to be done.
In addition to blocking mergers that may harm smaller firms, the Federal Trade Commission should work to revive existing authorities to ensure a level playing field. For example, many big-box stores use their power as buyers to demand lower prices from suppliers than their smaller competitors, putting them at an unfair advantage. Congress long ago banned this practice with the Robinson-Patman Act, and the Federal Trade Commission should move to reinvigorate enforcement to protect small retailers from the buying power of large chains.
Congress can and should advance these goals more broadly, recognizing the important role of fiscal policy in working to create and protect these businesses through progressive taxation and the industrial policies undertaken during the first two years of the Biden administration.
The small-business boom has presented us with a once-in-a-generation opportunity to reorient our economy around local businesses and community development. To achieve that, the federal government must fully use public power to ensure small firms can compete against their large corporate peers.
Nydia M. Velazquez represents New York’s 7th Congressional District in the U.S. House of Representatives.