SMALL BUSINESS PROBLEMS AND POLICY IN THE UNITED STATES DURING THE 1930s

The American small-business policy in the 1930s was intended to protect small business, which was believed to be disappearing and much weaker than big business. There were two types of small business, as only a few researchers have noticed. One type had a competitive character, while the other had an anti-competitive character that accorded with the activities of trade associations and had common interests with big business. This difference in behavior between the two arose from the change in the industrial structure that brought about the decline of old capital-goods industries and the growth of new consumer-goods industries. The aim of this paper is to examine that true purpose of American small business policy by looking at the small-business problems and policy in the 1930s from the viewpoint of the two types of small business.The NIRA (National Industrial Recovery Act) Code system prevented many small businesses from failing by organizing the market on the initiative of trade associations, which implied a protective policy for anti-competitive small business. However, the code system aggravated the business conditions of competitive small business, preventing new businesses from joining the market, so that many complaints from small business poured into the administration. After the NIRA Code system ended, the policy for small business totally changed. The administration undertook a policy to correct the concentration of economic power, since anti-monopolists, who believed such an anti-monopoly policy would save small business from withdrawing American economy, persuaded President Franklin D. Roosevelt to do so.In spite of the change in policy for small business, complaints from small businesses did not stop. That was because the two types of small business existed. Then Roosevelt convened a small business conference in Washington in order to ask small businessmen what their problems were. The conference produced a resolution that consisted of contradictory recommendations. The contradiction was derived from the two types of small business : the competitive recommending financing and establishment of an organization for small business by the government, the anti-competitive a balanced budget and no intervention in business by the government.With all the contradictory recommendations in the resolution, the administration undertook a small-business policy based on recommendations of the competitive small business. The policy was to be established as the small-business policy in World War II and the post-World War II period. Thus, it dawns on us that the American small-business policy is not to protect weak small business but to ensure fair conditions of competition where small business can compete with big business as well as with each other.