Recent history is punctuated with a lot of not-so-great economic “greats” from the Great Depression to the Great Recession. Now we have a new one: When historians look back on the decisions made beginning in March 2020 and still going strong, this period will be remembered as the “Great Consolidation”—the acceleration of a historic wealth transfer and power concentration out of the hands of the middle class and into those with political power and connections.
The “connected” form a powerful bloc comprised of big government, big business and big special interests. And though their monikers label them “big,” they are comprised of relatively small elites. And they are seeking to use their power to benefit themselves at your expense.
Prior to COVID, more than 30 million small businesses accounted for about half the GDP and jobs in America; the other half of the economy was concentrated in 20,000 big companies. So you might have expected that small businesses would have had an equal amount of negotiating power when the pandemic hit as big companies. You would be wrong.
Big companies have more lobbying dollars and more connections, and thus more ability to play the political game. Their big pockets are balanced with a small enough scope to make them a government ally, compared to the highly decentralized small business landscape.
As a result, big firms were deemed “essential” and allowed to stay open during the pandemic, while small businesses were subjected to punishing lockdown orders and forced to close, in part or completely. Many of the examples were doubly infuriating given the absurd hypocrisies they presented. For example, big box pet retailers like PetSmart that groomed pet hair and nails were deemed essential—while salons owned by small business owners that served humans were not.
The LA-area Pineapple Hill Saloon and Grill was forced to close their outdoor dining—while a movie production not only operated but hosted a catering tent serving food to crew in the same parking lot that the restaurant had been forced to abandon. Weed dispensaries, illegal just a handful of years ago in many jurisdictions, were suddenly deemed essential.
And the results of this are fairly easy to follow: Spending that couldn’t be done at closed businesses was shifted to the ones that were open, which were by and large big businesses, many of which naturally saw a substantial increase in their revenue.
Meanwhile, the Federal Reserve was pumping trillions of dollars into the markets, helping to inflate stock valuations. Hundreds of thousands of small businesses were murdered in just a few short months—by government edict—while seven tech companies gained $3.4 trillion in market value. If you were able to access capital—which is code for already being big or wealthy, even if you weren’t in some cases financially sound—it was plentiful and, for debt capital, available at historically low interest rates. 2020 became a record year for IPOs and for other capital-raising vehicles like special purpose acquisition companies. And some of this capital was likely used to compete with your local small businesses.
The one-two punch of government fiscal and Fed monetary policy continued to destroy the fabric of the economy for the average American. It dislocated the labor markets and the supply chain and it has ultimately led to inflation, which is making the basic cost of living much more expensive for Americans all across the country.
In short, while your dollars today purchase fewer goods and services and your lives are more expensive and disrupted, those who are well-connected and asset-rich benefitted from outsized wealth increases driven by government policy.
This all leads to fewer wealth-creation opportunities for every day Americans. It is harder and riskier to start and own a business. It is more challenging to save money, and when you do, you are facing inflated asset prices and more risk to earn what would normally be considered an appropriate return.
And there’s no end in sight. There are new proposals, backed by the Treasury Secretary, to report on the inflows and outflows of bank accounts. The first proposal was set at a $600 threshold, and the latest is at a $10,000 threshold, of course with exemptions for those connected to influential unions, like teachers.
There is also a proposal to hire 87,000 new IRS agents. These proposals are being sold as a way to ensure billionaires pay their “fair share.” But given that there are fewer than 1,000 billionaires in the U.S. (the estimate is between 600 and 800) and with legislation going into effect for 1099-K reporting at hobby sites like eBay and Etsy, it should be clear they are coming after the middle class.
The trillions of dollars being sought for “infrastructure” and social spending are also by and large a cash grab that would benefit those connected and potentially create further inflation, perhaps even combined with slower growth. There is nothing that seeks to expand wealth-creation opportunities and make it easier for middle class Americans to thrive. It’s nothing more than a cloak of promises that will ultimately lead to further wealth creation barriers.
Consolidation of the economy only benefits those in the club. And even though it will likely destroy prosperity, the power-hungry often don’t care; big business benefits from the decimation of competition, special interests benefit from favors granted by big government and big government benefits by having these powerful consolidated allies to keep its power and purview growing.
The only antidote is decentralization, which means supporting small businesses and the middle class through smaller government and the removal of the barriers to wealth creation.
Originally appeared on Newsweek