Big guys empowering little guys is not a new idea

I went from Instapundit to this this presumably not-so-instant pundidtry by Glenn Reynolds called The old industrial state, and from there, via an eBay reference, to another Glenn Reynolds piece called Is small the new big?.

The idea here is that that new big businesses – eBay, Amazon – are getting big by helping the small guy to do his thing, unlike the old big business, which was an economically deluded tyrant.

But did not the big, bad old industrial system – which only became a “state” in the years of its dotage – also empower people? For as long as it was properly run, it did.

The Model T and the Sears Roebuck Catalogue empowered the little guy, just like eBay and Amazon now. The Model T was the basis of many a small business. Sears Roebuck made it possible for smaller operators outside the big cities to function on level terms with the city folks by letting them buy the same stuff and get their money back if not satisfied, just as if they were buying it from a big city store. Most of the USA still lives in small towns, I am constantly told. The old industrial “state” is what enabled them to do so, comfortably.

More recently, the personal computer industry – now dominated by big, bad, old Intel and Microsoft – has empowered millions of individuals, and made possible the growth of enterprises like eBay and Amazon. Empowering the little guy is not a new idea. I can still remember the thrill of empowerment that I felt from my first computer, an Osborne 1.

There are two quite distinct ideas rubbing together here. One is bigness, and its alleged badness. The other is the genuinely bad idea that it is both smart to try to – and actually possible to – insulate huge numbers of people from market pressures, indefinitely. J. K. Galbraith, quoted by Reynolds, thought that this could happen, and his big idea, if you can call it that, was that business bigness meant being above and beyond market realities. The truth is that a big business that ignores market realities is heading for a big fall.

But the little guy is just as prone to economic delusion as the big guy. That is often why he is so little. Like the guy making a small fortune in sport, he started out with a large fortune.

The ultimate embodiment of the Galbraith delusion was of course the USSR, which copied the bigness of US business without copying any of the market responsiveness that brought the USA’s business bigness into being in the first place. The USSR just stole bigness from others, and eventually the loot ran out.

What is true is that formerly successful and still established ways of doing things can get into serious trouble, and because they once were so successful, they can last way beyond their days of success. There is a lot of ruin in them. Big and successful businesses become Galbraithian. They become, on a tiny scale, economically speaking, the USSR. But they cannot last, any longer than the USSR could. Not being able to murder all their rivals and critics, they last a lot less long.

Business bigness is the consequence of a new business idea becoming thoroughly understood by a few exceptional people, who proceed to organise it, and then to triumph over almost all of their rivals. Then, times change, and that kind of bigness needs to change too, but by then millions have got used to it and cling to it. That is the problem of the old “industrial state”. What we are living through is neither the end of bigness nor the beginning of individual empowerment by bigness. It is a transitional period, between one lot of bignesses and other sorts of bigness. And these new bignesses will be just as like to give rise to new Galbraithian delusions as the earlier ones were.

And let us also give credit where credit is still due. Those big old businesses got big in the first place by doing lots of empowering of the little guy. To put it in Reynolds-ese: the old big also did small.