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Focus on the Family? The Problems with Blaming GOP Radicalism on Family Business

The following is a response to “Family Capitalism and the Small Business Insurrection,” an essay by Melinda Cooper in our Winter 2022 issue.

What’s the matter with the Republican Party? Since 2011 or so, this question has been asked with escalating urgency by observers ranging from centrists like Norman J. Ornstein and Thomas E. Mann to leftists like Mike Davis. Melinda Cooper’s “Family Capitalism and the Small Business Insurrection” is a valuable contribution to this literature for the way it goes beyond the surface-level psephology that defines so many commentaries on the GOP’s trajectory. While students of American politics have tended to assume that the roots of Republican radicalization are to be found in either GOP voters’ demographic characteristics or the way they answer opinion polls, Cooper locates the wellsprings of conservative politics in the evolution of American capitalism. Specifically, she points to the increased prominence of privately held, often family-owned corporations in the economy. With an often dazzling exploration of the elective affinities between this corporate form and reactionary politics, she argues that the Republicans’ rightward march is rooted in the rise of the family firm.

Cooper’s analysis has a great deal to recommend it. In addition to forcefully bringing political economy into discussions of party politics, her argument raises issues in corporate governance that are shockingly under-analyzed in contemporary left thought. However, for all its virtues, I am not sure Cooper’s analysis of the relationship between the family firm and the party of family values is convincing. Three issues stand out: first, I believe Cooper understates the role of traditional big business in pushing the party right; second, I think she overstates the shift toward family firms; and third, I think she overlooks the role of private firms on the other side of the political spectrum. In what follows, I will review Cooper’s argument, explain my reservations, and finally sketch out why I believe the combination of weak parties and disorganized capitalists offers a more promising explanation of the GOP from the Tea Party to Trump.

Big Brothers and the Holding Company

Cooper’s argument begins with the oft-noted role of small business owners in the Tea Party. Yet as she shows, while small business has been crucial to Tea Party rhetoric, changes in American capitalism have rendered that category rather more porous than it once was. As the business offensive that began in the 1970s gathered steam, corporations began restructuring themselves in various ways to weaken labor unions and evade regulation. One way was outsourcing operations to subcontractors, turning firms from bureaucratic behemoths into hierarchical networks of companies. As Cooper notes, these relations between firms contained within them the same relations of dominance and submission encoded into the private family.

At the same time, changes to the tax code created incentives for firms to reorganize as pass-through businesses. A pass-through firm is one whose income is reported on its owners’ personal tax returns and is thus taxed at the personal income rate, rather than the corporate tax rate. The result was a significant shift in the American business financial landscape. In the 1980s, the bulk of all business income was from C corporations, which pay taxes as corporations. Now, a slight majority of business income goes to corporations organized as partnerships, LLCs, or S corporations. Crucially, as Cooper emphasizes, this doesn’t mean that there are a higher proportion of small businesses. The vast majority of this income is concentrated among a tiny number of gargantuan firms that have, for tax advantages, simply reorganized themselves into a legal form that was once more typical of the mom-and-pop corner store.

Read entire article at Dissent