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I'M A BIG FAN OF THE FINANCIAL WRITER ANDREW Tobias. He writes about money more engagingly and more clearly than anybody else. But when he blows it, he blows it big. I'm thinking of a little piece Tobias did in the mid-1970s. It was called "The Day They Couldn't Fill the Fortune 500."
The tongue-in-cheek concept was indisputably clever. Large companies were getting so big and were combining into so many conglomerates, argued Tobias, that by 1998 there would be only 479 giant corporations left. They would utterly dominate the economy. All the other companies --the mom-and-pop tradespeople, the Main Street merchants, and the rest of the left-behinds--would be so small that to put them on the magazine's famous list would be ludicrous. How could you rank even a $250-million company number 480, when number 479 was up around $7 billion?
I bring up this misguided missile not to taunt Tobias. I mention it only to show just how recently most of us took for granted three seemingly obvious truths about the U.S. economy. Bigness was inevitable. Ever-larger corporations would inexorably rule the marketplace. And small business, to put it bluntly, simply didn't matter. The "giant corporate sector" would balloon, predicted Tobias. The "independent entrepreneurial sector" would shrink to the vanishing point. At the time the facts were on his side. As a group the Fortune 500 had been growing steadily ever since the list was created in 1954. By 1979 their total sales amounted to 58% of Americas gross national product, up from 37% 25 years earlier. They employed more than three-quarters of the manufacturing work force, up from half. Every so often a frenzy of conglomeratization would seize them, and the giants would snap each other up--thereby growing bigger still.
Received wisdom was on Tobias's side, too: for decades, scholars and policy makers had been worrying about the health, even the survival, of small business. Senator William Proxmire wrote a book in 1964 called Can Small Business Survive? John Kenneth Galbraith (and nearly every other economist) advised us that small companies would forever be consigned to the fringes of the modern economy. George S. Odiorne, then a professor at the University of Michigan, may now seem to be a contender (with Tobias!) for...