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Big Government and Affirmative Action: The Scandalous History of the Small Business Administration

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"In "Big Government and Affirmative Action," Jonathan J. Bean tells the story of the role of small business in the growth of the American state. This compact account is a fine sequel to the author's award winning "Beyond the Broker State: A History of the Federal Government's Policies Toward Small Business, 1936-61" (Chapel Hill: University of North Carolina Press, 1996). It describes the process by which interest-group actors (business groups, congressional committee, and bureaucrats) operate to build nearly indestructible government programs. In addition, the book adds an important dimension to the story of the development of affirmative action. In manifold ways, congressional and bureaucratic policy toward "disadvantaged" businesses adumbrated later policy toward disadvantaged minorities and myriad of other victim groups, and the Small Business Administration (SBA) itself took up minority preferences as its raison d'etre."

Jonathan Bean pulls no punches in this nonpartisan look at an agency notorious for corruption. Republicans, he explains, have supported the Small Business Administration to deflect criticism that they are beholden to "big" business, whereas Democrats have supported it to show that they are not "anti-business."

"Bean has done a model job in producing a smoothly written and often amusing policy history, and the University Press of Kentucky has done excellent work in editing and publishing it."

The author Jonathan Bean provides an excellent look into the history of the Small Business Administration and how the SBA transformed from a temporary government program established after the abolition of the Reconstruction finance Corporation into a massive bureaucracy promoting affirmative action through credit to "small business" in the inner city. Beginning with President Eisenhower, the administration used the SBA for patronage for Republicans and establish the image that the president was promoting small industry which demonstrated the programs usefulness to congressional leaders who were opposed to ending the agency which marked the transformation from a temporary agency into needed asset to government.

Real changes occurred in the 1960's when the race riots began to break out throughout the country. Many politicians believed that the riots were the result of the disadvantaged inner city minority populations who were unable to access credit to build their own businesses. As a response, many civil rights leaders and politicians backed efforts for affirmative action in lending in the SBA to offset the anger portrayed in the city riots. This also began Nixon's campaign of "black capitalism" advocated in the late sixties/early seventies where they were going to use the SBA to establish quotas through lending to minority businesses. Although racial preferences were established in the 1960's in what was supposed to be a colorblind agency, the policies of the 1970's officially ended the colorblind practice and helped establish affirmative action within government. At first the lending was aimed at the inner city black businesses, but by the 1970's the SBA saw many other minority groups (hispanics, asians, women) entering as part of the disadvantage minority, which many believed that it would cut into the amount to help black businesses and caused a rift within the different communities. The Reagan administration also helped support affirmative action by providing the largest set-aside amount for minority business. The author does a great job in presenting the information on racial lending standards of the SBA which involved both parties trying to gain voters of the different minority groups. The democrats supported the SBA to show they were pro-business and the Republicans supported to show they were pro-minority.

Dr. Bean does a great job in detailing the corruption/failure in the lending policies of the SBA. First, there was no definition of what a small business was and much of the lending taking place in the SBA was to medium to large size companies with political connections. Much of the money lent to many of the disadvantaged borrowers resulted in the companies going bankrupt causing millions in losses. Many minority business were front groups for other businesses, and there were ties to lending money to the mafia. The Wedtech Scandal was a major scandal of the SBA that played out in the Reagan Administration and the Clintons involvement in the Whitewater Scandal had ties to the SBA. The author provides a large amount detail into the scandals involved with the SBA from the beginning into the Clinton years. Much of the SBA lending were subsidies to failed businesses because they couldn't compete many of whom were medium/large companies. The SBA and their commitment to "black capitalism" often left the communities in worse shape because after they failed, they still had to pay off the loans which left large debt burdens on the communities. As Jonathan Bean shows the SBA is a failed institution which promised a commitment to small business and minorities but failed to deliver.

Big Government and Affirmative Action is by far the best book on the history of the the Small Business Administration. There is a lot of information contained in this book than the few examples discused. Jonathan Bean's writing style makes the book really easy to read that shows why it's a scandalous history. The book is well researched/documented and will hopefully make you see the SBA in a new light.