Ralph Nader: Why Small Business Owners Are the True Capitalists

For the past four decades, consumer advocate and lawyer Ralph Nader has been instrumental in uncovering government and corporate waste and abuse and has organized millions of citizens to fight for laws and federal standards to protect the public interest. Recently, I heard Nader, in the midst of his third bid for President (votenader.org) speak about small business as the last bastion of true capitalism. Piqued, I called his campaign headquarters to get his views on small business which has suddenly become a hot campaign topic. I spoke with Nader by phone as he was on the road, traveling to colleges to talk to students about the state of democracy. Edited excerpts of our conversation follow.

You have said that small business is the last refuge of real capitalism in America— how so? Because it is the small businesses that have to take the consequences of their failure. They can’t be bailed out like big corporations that operate under the principle that they are too big to be allowed to fail like Citibank and so on. Secondly, small businesses don’t have the power in Washington to distort tax laws and corporate subsidies and other policies that the big business lobbies have shaped in their favor—which are not only to the disadvantage of the taxpayer but to small businesses as well.

Small business owners have been cited extensively by Senator Barack Obama and Senator John McCain on the stump, particularly in regards to the economy. Do you consider one to have a better plan than the other? [The narrative] is pandering, ambiguous, insubstantial, and trivial. Pick your adjectives. Both are just offering press releases of the day. It just depends on who is talking.

If small business is such a cornerstone of the economy, how in your opinion is the federal bailout structured to help those business owners? It isn’t. The bailout first started as a way to download distressed assets--a euphemism of investment banks and insurance companies like AIG. Then it moved to the injection of liquidity into banks in return for proportion of shares. What should have been done was to quarantine the prudent institutions and savings from failing. It is what the head of the Dallas Federal Reserve, Richard Fisher, called: ‘a sustained orgy of reckless and speculative behavior.’ The [government] moved to bail out the super rich gamblers who should take their own medicine.

How would you have structured the bailout to support small businesses then? I would put a huge portion of the $700 billion into public works. Now [that] the recession is deepening with bankruptcies and unemployment, the way to stem that trend down is through widespread decentralized public works repair programs. The American Society of Civil Engineers reported that there is $1.7 trillion of deferred maintenance in public [infrastructure].

There are jobs in that sector that improve communities and create cleaner water and better public transportation. And these are jobs that can’t be exported to China, by definition they are real jobs.

In regards to the bailout, do you think there are ways in which the government could be more supportive of small businesses? The way to really deal with small businesses is to [enforce] competition policy. They never talk about enforcement of antitrust laws. Small business is the principle victim of monopolistic policies and price fixing. The Justice Department is asleep. The second thing that needs to be done is shift the tax burden from labor and small business. Thirdly, full medical[care] for all without having to pay a horrendous amount. It is an efficiency move, not just a humanitarian one. You can get rid of half a trillion dollars of abuse and corporate expenses.

Earlier this month, you suggested that Wall Street could fund its own bailout by creating a one-tenth of one percent tax on $500 trillion in security derivative transactions which would produce $500 billion, what was the reaction? The Republicans and Democrats rejected it just as they rejected regulation and more authority to shareholders. They also didn’t provide for criminal prosecution.

The principle that we [Nader and his running mate Matt Gonzalez} have been talking about all over the country is shifting the tax burden first onto those things we like least in society starting with speculative derivatives, pollution, gambling, and those addictive industries before we tax human labor. We want to diminish those things, not jobs. Isn’t that a rational way to proceed? One thing that corporate capitalism has given us and that we have not taken advantage of is the speculative increase in monetary transactions. They are wonderful subjects for tiny taxes of huge volume.

Then how do you see the existing bailout package, passed by Congress and signed into law by the President, impacting small businesses? Presumably it will save some small businesses by reinvigorating credit extension. That is the hope anyway. Things are deteriorating so fast, though. I am not sure what kind credit they will want if their customers are fleeing out of the door.

Eight years ago you predicted that Fannie Mae and Freddie Mac would follow the savings and loan industry in the 1980s into a financial collapse. Now that we are in the midst of it, what do you consider will be the ultimate fallout? The destruction of shareholder value. Millions of shareholders were induced to invest in the second safest instrument: Freddie Mac and Fannie Mae. We haven’t seen the full consequences of this, those people who bought in at $60 a share and it is now at seven cents. There were university endowments and other investors. The result of the Wall Street collapse is just beginning to kick in.

What role do you see small business playing in the resurrection of the economy? Small businesses will play a bigger role in energy production, going solar and retrofitting buildings to be energy efficient. This will be in every city. That is why solar energy is a better job producer [than] building capital intensive giant oil wells or uranium mines. Energy production is more job intensive and better for the environment, homeowners, and small business, and it takes us out of geo-political conflicts and toward prosperity.

If you were elected President, what would be your prescription for the economy--the first thing that you would do? Invest in public works and cut the bloated military budget that is filled with $300 billion in waste and redundancies. I would also cut subsidies to big corporations. I would take the money from the military budget and get rid of the tax loopholes and put it into public works right away. I say public works not bailouts, infrastructure not insane taxpayer rescues of corporate crooks and speculators.

Conversely, if the next President of the U.S. called you on Nov. 5, would you give him the same advice? Yes. Plus I would call for full medical [coverage] and a living wage. If we had a living wage we’d have more consumer demand. The minimum wage in 1968 adjusted for inflation is $10 an hour. The current federal minimum wage is $6.55. We are going backwards into the future.

Photo: Getty Images

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