A few years ago, economists started making noise about the decline of business dynamism. In the simplest terms, that’s the rate at which American entrepreneurs were launching new enterprises and folding old ones. In the late 1970s, when the U.S. Census started keeping track, almost 15% of businesses were less than a year old. By 2011, that figure had fallen to less than 10%.
One theory championed by Stacy Mitchell, co-director of the Institute for Local Self-Reliance, is that national chains took advantage of lax antitrust enforcement to squeeze out mom-and-pops. “The decline of small business and entrepreneurship is owed,” Mitchell wrote in a report published in August, “to anticompetitive behavior by dominant corporations, which routinely use their size and market power to undermine and exclude their smaller rivals.”
Not everyone thinks that’s a bad thing. Many economists view Main Street retailers as less productive and less stable than big chains; the important business startups, that argument goes, are the young companies that get big fast, creating new jobs that the economy needs.
But Mitchell’s argument is particularly interesting in the context of President-elect Donald Trump’s intention to appoint Linda McMahon, the Connecticut-based businesswoman and two-time Senate candidate, to head the U.S. Small Business Administration. That’s because the decline in business dynamism roughly overlaps with a period during which McMahon and her husband, third-generation promoter Vince McMahon, were using their financial heft to put a figure-four leg lock on the wrestling business.
The last two SBA heads — Obama appointees Maria Contreras-Sweet and Karen Mills — had backgrounds in finance and presided over an expansion in the agency’s lending functions. McMahon, in the years since her last failed Senate bid, has sought to mentor women entrepreneurs. But she and her husband have spent decades consolidating power over a lucrative industry. And now the former CEO of World Wrestling Entertainment may end up running an agency she once suggested should be dissolved. (The Trump transition team did not respond to a request to interview McMahon.)
The history of professional wrestling in the U.S. revolves around a group of regional promoters whose television contracts and relationships with popular performers made it difficult for new competitors to break in. With Vince as the visionary and Linda managing the details, the McMahons spent the 1980s centralizing the industry and the next decade vanquishing their remaining competitors. In 1999, they took their company public; two years later, they bought their last big rival, World Championship Wrestling, from Ted Turner.
Here’s how Vince McMahon described the process to Sports Illustrated: “In the old days, there were wrestling fiefdoms all over the country, each with its own little lord in charge. Each little lord respected the rights of his neighboring little lord. No takeovers or raids were allowed. There were maybe 30 of these tiny kingdoms in the U.S., and if I hadn’t bought out my dad, there would still be 30 of them, fragmented and struggling. I, of course, had no allegiance to those little lords.”
Assuming his wife is still of the same mind, how will that approach play in the Cabinet?
The SBA is an aardvark of a federal agency whose functions include managing a lending guarantee program that funnels cheap loans to small businesses; federal disaster lending to both businesses and homeowners; and programs designed to help Main Street get a fair shake when government agencies are making new rules or meting out contracting dollars.
Not everyone loves the agency. Critics see its lending program as less of a friend to borrowers and more of a cash cow for the banking industry. Championing small business may play well on the campaign trail, but “good for Main Street” has been a weak motivator for getting federal agencies to help small businesses. While President Barack Obama reestablished the agency’s cabinet-level status, he also floated a proposal for eliminating it, too.
McMahon backed that idea when she was running for the U.S. Senate as a Connecticut Republican who pledged to use her business experience to make government more efficient.
What do small businesses really need from the agency? The National Federation of Independent Business, which typically backs Republican candidates and advocates for reducing regulation and lowering taxes, sees her as a natural ally. Main Street Alliance, a left-leaning small-business group, pegs her net worth at $500 million and argues that McMahon’s wealth puts her out of touch with typical small-business owners.
On a more basic level, contracting dollars and loan guarantees certainly help the businesses that get them, though those programs are mostly a function of congressional mandate and budget appropriation. A best-case scenario for small-business owners might be an SBA chief who has real clout with the White House. Short of that, the administrator’s greatest impact might be talismanic: Whether McMahon represents a model of entrepreneurial drive or business consolidation will depend on which small-business owners you ask.
By Patrick Clark
