842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 113

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 213

Hill and Wang A division of Farrar Straus and Giroux18 West 18th Street New York 10011

Copyright copy 2011 by Marc Levinson All rights reserved

Distributed in Canada by DampM Publishers IncPrinted in the United States of America

First edition 2011

Library of Congress Cataloging-in-Publication DataLevinson Marc The great AampP and the struggle for small business in America Marc Levinson p cm Includes bibliographical references and index ISBN 978-0-8090-9543-8 (hardcover alk paper) 1 Great Atlantic amp Paci1047297c Tea Company 2 SupermarketsmdashEast

(US)mdashHistory 3 Grocery trademdashUnited StatesmdashHistory I Title II Title Great A and P and the struggle for small business in America

HD93219G7L48 2011 38145641300973mdashdc22

2011003811

Designed by Jonathan D Lippincott

wwwfsgbookscom

1 3 5 7 9 10 8 6 4 2

This is an independent work of scholarship and is not endorsed byThe Great Atlantic amp Paci1047297c Tea Company

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 313

Judge Walter C Lindley was no onersquos idea of a 1047298aming radical Bornin 1880 in the village of Neoga deep in the corn and soybean coun-try of south-central Illinois Lindley had a reputation as a scholar at

a time when many learned the law as apprentices rather than as stu-dents he earned not only a law degree but also a doctorate in laws fromthe University of Illinois In Danville a commercial hub 150 miles southof Chicago he became a man of prominence He built a law practicewon a seat on the city council and became an attorney for Joseph Can-

non who served eight years as the iron1047297sted Speaker of the US Houseof Representatives and represented Danville in Congress for almost halfa century

Lindley was a Republican and shortly after Warren G Hardingthe great friend of business became president in 1921 he named Lind-ley to the federal bench As a judge he drew more than his share of high-pro1047297le cases In a 1929 jury trial that held Chicago rapt Lindleyrsquos courtconvicted sixteen candy wholesalers of terrorizing storekeepers who re-

fused to buy their candy Two years later he upheld the near-dictatorialpowers of the commissioner of major-league baseball Kenesaw Moun-tain Landis In the early 1930s he oversaw the restructuring of the col-lapsed utilities empire of the Chicago entrepreneur Samuel Insull andsurvived an attempt by Insullrsquos henchmen to have him impeached byCongress Suggested as a possible nominee to the US Supreme Courtin 1929 during Herbert Hooverrsquos presidency Lindley was not beyond

criticizing that court and by implication the Democratic administra-tion of Franklin Roosevelt In 1939 he commented acidly that for somenew Supreme Court justices ldquoprecedents may be of little avail and theirlack no barrdquo1

1

THE VERDICT

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 413

4 THE GREAT AampP

On a sunny Saturday in September 1946mdashthe federal courts workedsix days a week back thenmdashLindley issued what would be the most con-troversial decision of his long judicial career Before a crowded courtroomon the second 1047298oor of Danvillersquos post of1047297ce he declared that George LHartford eighty-one John A Hartford seventy-four their company theGreat Atlantic amp Paci1047297c Tea Company and other company executiveshad conspired to violate the Sherman Antitrust Act The fact that thesecretive Hartford brothers two of the wealthiest men in Americawere deemed criminals was startling but their crime was truly remark-able Rather than being accused of acting like monopolists to keep

prices arti1047297cially high the Hartfords were found to have done the op-posite They and their company Lindley declared had acted illegally inrestraint of trade by using AampPrsquos size and market power to keep pricesarti1047297cially low2

The victims of this unorthodox conspiracy were not families thatpurchased groceries The evidence before Lindleyrsquos court made clearthat prices at AampP were below those at the competition as John A Hart-ford himself had testi1047297ed nearly a year earlier ldquoWe would rather sell

200 pounds of butter at 1 cent pro1047297t than 100 pounds at 2 cents pro1047297trdquoWhile selling food cheaply was good for consumers it was bad for thehundreds of thousands of retailers wholesalers and manufacturers whoneeded high food prices in order to make a living US v AampP was theclimax of decades of effort to cripple chain stores in order to protectmom-and-pop retailers and the companies that supplied them TheHartfordsrsquo real crime was to have endangered mom and pop3

But it was the participants not the legal issues that made the Dan-

ville trial so notorious The Great Atlantic amp Paci1047297c Tea Company wasnot just another grocery chain It was by a wide margin the largest re-tailer in the world Its footprint stretched from coast to coast coveringthirty-nine of the forty-eight states and parts of Canada as well It col-lected more than ten cents of every dollar Americans spent at grocerystores It was an enterprise so familiar that millions of Americans knewit as ldquoGrandmardquo so ubiquitous that when John Updike penned a short

story about the eternal boredom of teenage life a few years later hecalled it simply ldquoAampPrdquo Its in1047298uence over Americarsquos lunch boxes anddinner tables was so overwhelming that when an ambitious young Flor-ida grocer decided to lower prices at his tiny store he received one pieceof advice ldquoDonrsquot make AampP madrdquo4

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 513

THE VERDICT 5

AampP was at the center of a bitter political struggle that lasted fornearly half a centurymdasha struggle that went far beyond economics At itsroot were competing visions of society One vision could be describedwith such words as ldquomodernrdquo and ldquoscienti1047297crdquo favoring the rationalismof cold corporate ef1047297ciency as a way to increase wealth and raise liv-ing standards The other vision could fairly be termed ldquotraditionalrdquoDating to Thomas Jefferson and his contemporaries the traditionalvision harked back to a society of autonomous farmers craftsmenand merchants in which personal independence was the source ofindividual opportunity and collective prosperity The words of Judge

Lindleyrsquos ruling against the Hartfords and AampP embodied the con1047298ictbetween those two visions ldquoTo buy sell and distribute one andthree-quarter billion dollars worth of food annually at a pro1047297t of oneand one-half cents on each dollar is an achievement one may well beproud ofrdquo he acknowledged in a nod to the modern vision Yet thisachievement he decided ran afoul of the Sherman Antitrust Act bymaking it hard for smaller 1047297rms to compete with AampP ldquoThe Sherman

Actrdquo he ruled ldquowas intended to secure equality of opportunityrdquo Equal-

ity of opportunity could not be secured if big 1047297rms were allowed topummel the small5

There may never have been a more improbable pair of convicts thanthe Hartfords The elder of the brothers George L Hartford was aspredictable as they come He lived in the same house for half a centuryand took rooms at the same New Jersey shore resort every summer He

left home at 905 every morning wore a black suit with stiff collar towork every day and made a point of tasting the companyrsquos coffees at200 each afternoon His hobbies when he was a younger man wererepairing cars and building crystal radios activities that required him toutter hardly a word to anyone in later years he did jigsaw puzzles Fewemployees ever laid eyes on the man known throughout the company asMr George The minutes of meetings of AampPrsquos top executives rarely

cite his words One of the few journalists to meet him said he could betaken ldquofor a retired Polish generalmdashbulky stolid rumpled with a for-eign air that his American drawl immediately beliesrdquo No one who en-countered him on the street would have imagined that he headed oneof the largest most powerful enterprises in the world6

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 613

6 THE GREAT AampP

John A Hartford his younger brother had an entirely different per-sonality A dapper dresser who favored custom-tailored gray suits Sulkabow ties and pocket squares he enjoyed traveling visiting stores andpressing the 1047298esh In his thirties and forties he had raised horses thatwon prizes at the National Horse Show a premier event of New Yorksociety He lived in an eight-room suite at the Plaza Hotel and lunchedalone on milk and crackers at the Biltmore On weekends he commutedto his suburban estate a Tudor mansion with a nine-hole golf coursestable and polo 1047297eld and in the winter he went to The Breakers inPalm Beach He was married three times twice to the same woman

and in between to a woman who came into his life modeling clothesfor his wife It was Mr Johnrsquos job to motivate employees spreading thecompanyrsquos paternalistic management gospel through philosophical mis-sives that often referred to ldquomy brother and Irdquo In the 1930s when AampPrsquospolitical troubles became life-threatening John A Hartford reluctantlybecame the companyrsquos public face sporadically meeting with the pressputting his name to the occasional folksy article and making end-of-year pronouncements about the outlook for food prices in the months

ahead7The brothersrsquo distinct personalities were displayed in the way they

ran their company Mr George was cautious favoring a rock-solid bal-ance sheet wanting each store and each product to pay its own waydistrusting new ideas Mr John was more aggressive more open to newideas but always insisting that lower prices would make more money bybringing more customers in the door The brothers met each morningto discuss the smallest details of their business from the price of canned

tomatoes to the pro1047297tability of the stores in Pittsburgh They made aformidable team It was Mr John who engineered the companyrsquos re-markable expansion in the 1910s its climb to be the 1047297rst retailer to sell$1 billion of merchandise in a single year in the 1920s and its quickconversion from grocery stores to supermarkets in the 1930s It wasMr George who kept AampP solvent

The Great Atlantic amp Paci1047297c lay at the center of both menrsquos lives

Neither ever worked anywhere else Neither attended a day of collegein fact neither 1047297nished high school They learned business on the jobfrom their father who ran the company before them and gave themmeaningful responsibilities when they were still in their teens They

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 713

THE VERDICT 7

treated the company as their family almost never dismissing employeescreating one of the 1047297rst company pension plans and shortening workinghours simply because they could afford to do so All managers had movedup the ranks and almost every executive had worked at AampP for de-cades Because they completely controlled the company with no share-holders to please and no creditors to satisfy they could run AampP howeverthey wished and they sometimes ran it in ways that drove their moreshort-term-oriented managers to despair

George and John Hartford were in the grocery trade at a time when sell-ing food was an activity of enormous economic importance There wereliterally grocery stores on every corner in 1926 Kansas City by nomeans the most densely populated of American cities had 30 food mar-kets per square mile The 1047297rst national survey in 1929 found 585980food storesmdashone for every 1047297fty-one American families Richard Nixona future president grew up working in his familyrsquos grocery in WhittierCalifornia in the 1920s and the family of Lady Bird Johnson a future

1047297rst lady sold groceries from a general store in Karnack Texas Thesemom-and-pop stores were serviced by a thick web of suppliers TheUnited States boasted 13618 wholesale distributors of groceries in 1929or one wholesaler for every forty-three food retailers This wholesalenetwork in turn distributed the products of nearly sixty thousand can-neries sugar-beet mills slaughterhouses soap factories and other plantsmaking everything from brooms to baking powder Mom and pop ranmany of these operations too The typical food plant had fewer than

1047297fteen workers8

In 1920s America every town of any consequence had its grocersits food brokers and wholesalers its bottling plants and 1047298our millsThese enterprises provided a tax base for their communities a cadre ofowners and managers to serve as civic leaders and a major source ofjobs Just the retail side of the food business provided livelihoods for12 million workers on the eve of the Great Depression many of them

self-employed proprietors Food retailers wholesalers and processorstogether engaged one out of every eighteen nonfarm workers in theentire countrymdashmore than apparel and textile factories iron and steelplants coal mines or even railroads9

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 813

8 THE GREAT AampP

Americans paid a high price to support this balkanized system forconveying food from farm to table Food was hugely expensive relativeto wages The average working-class family in the 1920s devoted one-third of its budget to groceries the average farm family even more Mosthouseholds spent more to put dinner on the table than for their rentor their mortgage And for the average housewife shopping for foodconsumed a large part of the day This money time and effort boughtplenty of calories but only moderate amounts of nutrition With neitherdisplay space nor refrigeration many neighborhood stores carried onlytoken stocks of fresh fruits and vegetables Fresh 1047297sh and poultry were

rarities The poorest third of American households consumed a sorelyinadequate daily intake of vitamins and minerals because there waslittle of either in the food that their neighborhood shops had for sale10

The Great Atlantic amp Paci1047297c did much to destroy this world TheHartfords were among the most rigorous managers of their day At atime when many grocers consulted self-help books to 1047297gure out how toprice their goods the brothers pored over data to 1047297ne-tune operationsclosing this store relocating that one dropping a product whose sales

languished adding another that promised better margins They totallyreshaped their business at least four times At its peak their companyowned nearly sixteen thousand grocery stores seventy factories andmore than a hundred warehouses It was the countryrsquos largest coffeeimporter the largest wholesale produce dealer and butter buyer thesecond-largest baker Its sales were more than twice those of any otherretailer Their basic strategy was so extraordinarily simple it could becaptured in a single word volume If the company kept its costs down

and its prices low more shoppers would come through its doors pro-ducing more pro1047297t than if it kept prices high

The Great AampP transformed the humble archaic grocery trade intoa modern industry but its relentless expansion posed a mortal threat toa sector of the economy upon which so many families and communitiesdepended Those mom-and-pop grocers local wholesalers and smallmanufacturers understood the threat full well and they fought back

with a vengeance The Hartfords were in no sense robber barons yetthey became the most controversial and most reviled American busi-nessmen of the 1047297rst half of the twentieth century Had Mr George tunedhis crystal radio to Americarsquos most widely heard station in the 1920s he

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

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10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

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THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

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IndieBound

LEARN MORE ABOUT THE BOOK

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THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 213

Hill and Wang A division of Farrar Straus and Giroux18 West 18th Street New York 10011

Copyright copy 2011 by Marc Levinson All rights reserved

Distributed in Canada by DampM Publishers IncPrinted in the United States of America

First edition 2011

Library of Congress Cataloging-in-Publication DataLevinson Marc The great AampP and the struggle for small business in America Marc Levinson p cm Includes bibliographical references and index ISBN 978-0-8090-9543-8 (hardcover alk paper) 1 Great Atlantic amp Paci1047297c Tea Company 2 SupermarketsmdashEast

(US)mdashHistory 3 Grocery trademdashUnited StatesmdashHistory I Title II Title Great A and P and the struggle for small business in America

HD93219G7L48 2011 38145641300973mdashdc22

2011003811

Designed by Jonathan D Lippincott

wwwfsgbookscom

1 3 5 7 9 10 8 6 4 2

This is an independent work of scholarship and is not endorsed byThe Great Atlantic amp Paci1047297c Tea Company

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 313

Judge Walter C Lindley was no onersquos idea of a 1047298aming radical Bornin 1880 in the village of Neoga deep in the corn and soybean coun-try of south-central Illinois Lindley had a reputation as a scholar at

a time when many learned the law as apprentices rather than as stu-dents he earned not only a law degree but also a doctorate in laws fromthe University of Illinois In Danville a commercial hub 150 miles southof Chicago he became a man of prominence He built a law practicewon a seat on the city council and became an attorney for Joseph Can-

non who served eight years as the iron1047297sted Speaker of the US Houseof Representatives and represented Danville in Congress for almost halfa century

Lindley was a Republican and shortly after Warren G Hardingthe great friend of business became president in 1921 he named Lind-ley to the federal bench As a judge he drew more than his share of high-pro1047297le cases In a 1929 jury trial that held Chicago rapt Lindleyrsquos courtconvicted sixteen candy wholesalers of terrorizing storekeepers who re-

fused to buy their candy Two years later he upheld the near-dictatorialpowers of the commissioner of major-league baseball Kenesaw Moun-tain Landis In the early 1930s he oversaw the restructuring of the col-lapsed utilities empire of the Chicago entrepreneur Samuel Insull andsurvived an attempt by Insullrsquos henchmen to have him impeached byCongress Suggested as a possible nominee to the US Supreme Courtin 1929 during Herbert Hooverrsquos presidency Lindley was not beyond

criticizing that court and by implication the Democratic administra-tion of Franklin Roosevelt In 1939 he commented acidly that for somenew Supreme Court justices ldquoprecedents may be of little avail and theirlack no barrdquo1

1

THE VERDICT

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 413

4 THE GREAT AampP

On a sunny Saturday in September 1946mdashthe federal courts workedsix days a week back thenmdashLindley issued what would be the most con-troversial decision of his long judicial career Before a crowded courtroomon the second 1047298oor of Danvillersquos post of1047297ce he declared that George LHartford eighty-one John A Hartford seventy-four their company theGreat Atlantic amp Paci1047297c Tea Company and other company executiveshad conspired to violate the Sherman Antitrust Act The fact that thesecretive Hartford brothers two of the wealthiest men in Americawere deemed criminals was startling but their crime was truly remark-able Rather than being accused of acting like monopolists to keep

prices arti1047297cially high the Hartfords were found to have done the op-posite They and their company Lindley declared had acted illegally inrestraint of trade by using AampPrsquos size and market power to keep pricesarti1047297cially low2

The victims of this unorthodox conspiracy were not families thatpurchased groceries The evidence before Lindleyrsquos court made clearthat prices at AampP were below those at the competition as John A Hart-ford himself had testi1047297ed nearly a year earlier ldquoWe would rather sell

200 pounds of butter at 1 cent pro1047297t than 100 pounds at 2 cents pro1047297trdquoWhile selling food cheaply was good for consumers it was bad for thehundreds of thousands of retailers wholesalers and manufacturers whoneeded high food prices in order to make a living US v AampP was theclimax of decades of effort to cripple chain stores in order to protectmom-and-pop retailers and the companies that supplied them TheHartfordsrsquo real crime was to have endangered mom and pop3

But it was the participants not the legal issues that made the Dan-

ville trial so notorious The Great Atlantic amp Paci1047297c Tea Company wasnot just another grocery chain It was by a wide margin the largest re-tailer in the world Its footprint stretched from coast to coast coveringthirty-nine of the forty-eight states and parts of Canada as well It col-lected more than ten cents of every dollar Americans spent at grocerystores It was an enterprise so familiar that millions of Americans knewit as ldquoGrandmardquo so ubiquitous that when John Updike penned a short

story about the eternal boredom of teenage life a few years later hecalled it simply ldquoAampPrdquo Its in1047298uence over Americarsquos lunch boxes anddinner tables was so overwhelming that when an ambitious young Flor-ida grocer decided to lower prices at his tiny store he received one pieceof advice ldquoDonrsquot make AampP madrdquo4

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 513

THE VERDICT 5

AampP was at the center of a bitter political struggle that lasted fornearly half a centurymdasha struggle that went far beyond economics At itsroot were competing visions of society One vision could be describedwith such words as ldquomodernrdquo and ldquoscienti1047297crdquo favoring the rationalismof cold corporate ef1047297ciency as a way to increase wealth and raise liv-ing standards The other vision could fairly be termed ldquotraditionalrdquoDating to Thomas Jefferson and his contemporaries the traditionalvision harked back to a society of autonomous farmers craftsmenand merchants in which personal independence was the source ofindividual opportunity and collective prosperity The words of Judge

Lindleyrsquos ruling against the Hartfords and AampP embodied the con1047298ictbetween those two visions ldquoTo buy sell and distribute one andthree-quarter billion dollars worth of food annually at a pro1047297t of oneand one-half cents on each dollar is an achievement one may well beproud ofrdquo he acknowledged in a nod to the modern vision Yet thisachievement he decided ran afoul of the Sherman Antitrust Act bymaking it hard for smaller 1047297rms to compete with AampP ldquoThe Sherman

Actrdquo he ruled ldquowas intended to secure equality of opportunityrdquo Equal-

ity of opportunity could not be secured if big 1047297rms were allowed topummel the small5

There may never have been a more improbable pair of convicts thanthe Hartfords The elder of the brothers George L Hartford was aspredictable as they come He lived in the same house for half a centuryand took rooms at the same New Jersey shore resort every summer He

left home at 905 every morning wore a black suit with stiff collar towork every day and made a point of tasting the companyrsquos coffees at200 each afternoon His hobbies when he was a younger man wererepairing cars and building crystal radios activities that required him toutter hardly a word to anyone in later years he did jigsaw puzzles Fewemployees ever laid eyes on the man known throughout the company asMr George The minutes of meetings of AampPrsquos top executives rarely

cite his words One of the few journalists to meet him said he could betaken ldquofor a retired Polish generalmdashbulky stolid rumpled with a for-eign air that his American drawl immediately beliesrdquo No one who en-countered him on the street would have imagined that he headed oneof the largest most powerful enterprises in the world6

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 613

6 THE GREAT AampP

John A Hartford his younger brother had an entirely different per-sonality A dapper dresser who favored custom-tailored gray suits Sulkabow ties and pocket squares he enjoyed traveling visiting stores andpressing the 1047298esh In his thirties and forties he had raised horses thatwon prizes at the National Horse Show a premier event of New Yorksociety He lived in an eight-room suite at the Plaza Hotel and lunchedalone on milk and crackers at the Biltmore On weekends he commutedto his suburban estate a Tudor mansion with a nine-hole golf coursestable and polo 1047297eld and in the winter he went to The Breakers inPalm Beach He was married three times twice to the same woman

and in between to a woman who came into his life modeling clothesfor his wife It was Mr Johnrsquos job to motivate employees spreading thecompanyrsquos paternalistic management gospel through philosophical mis-sives that often referred to ldquomy brother and Irdquo In the 1930s when AampPrsquospolitical troubles became life-threatening John A Hartford reluctantlybecame the companyrsquos public face sporadically meeting with the pressputting his name to the occasional folksy article and making end-of-year pronouncements about the outlook for food prices in the months

ahead7The brothersrsquo distinct personalities were displayed in the way they

ran their company Mr George was cautious favoring a rock-solid bal-ance sheet wanting each store and each product to pay its own waydistrusting new ideas Mr John was more aggressive more open to newideas but always insisting that lower prices would make more money bybringing more customers in the door The brothers met each morningto discuss the smallest details of their business from the price of canned

tomatoes to the pro1047297tability of the stores in Pittsburgh They made aformidable team It was Mr John who engineered the companyrsquos re-markable expansion in the 1910s its climb to be the 1047297rst retailer to sell$1 billion of merchandise in a single year in the 1920s and its quickconversion from grocery stores to supermarkets in the 1930s It wasMr George who kept AampP solvent

The Great Atlantic amp Paci1047297c lay at the center of both menrsquos lives

Neither ever worked anywhere else Neither attended a day of collegein fact neither 1047297nished high school They learned business on the jobfrom their father who ran the company before them and gave themmeaningful responsibilities when they were still in their teens They

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 713

THE VERDICT 7

treated the company as their family almost never dismissing employeescreating one of the 1047297rst company pension plans and shortening workinghours simply because they could afford to do so All managers had movedup the ranks and almost every executive had worked at AampP for de-cades Because they completely controlled the company with no share-holders to please and no creditors to satisfy they could run AampP howeverthey wished and they sometimes ran it in ways that drove their moreshort-term-oriented managers to despair

George and John Hartford were in the grocery trade at a time when sell-ing food was an activity of enormous economic importance There wereliterally grocery stores on every corner in 1926 Kansas City by nomeans the most densely populated of American cities had 30 food mar-kets per square mile The 1047297rst national survey in 1929 found 585980food storesmdashone for every 1047297fty-one American families Richard Nixona future president grew up working in his familyrsquos grocery in WhittierCalifornia in the 1920s and the family of Lady Bird Johnson a future

1047297rst lady sold groceries from a general store in Karnack Texas Thesemom-and-pop stores were serviced by a thick web of suppliers TheUnited States boasted 13618 wholesale distributors of groceries in 1929or one wholesaler for every forty-three food retailers This wholesalenetwork in turn distributed the products of nearly sixty thousand can-neries sugar-beet mills slaughterhouses soap factories and other plantsmaking everything from brooms to baking powder Mom and pop ranmany of these operations too The typical food plant had fewer than

1047297fteen workers8

In 1920s America every town of any consequence had its grocersits food brokers and wholesalers its bottling plants and 1047298our millsThese enterprises provided a tax base for their communities a cadre ofowners and managers to serve as civic leaders and a major source ofjobs Just the retail side of the food business provided livelihoods for12 million workers on the eve of the Great Depression many of them

self-employed proprietors Food retailers wholesalers and processorstogether engaged one out of every eighteen nonfarm workers in theentire countrymdashmore than apparel and textile factories iron and steelplants coal mines or even railroads9

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 813

8 THE GREAT AampP

Americans paid a high price to support this balkanized system forconveying food from farm to table Food was hugely expensive relativeto wages The average working-class family in the 1920s devoted one-third of its budget to groceries the average farm family even more Mosthouseholds spent more to put dinner on the table than for their rentor their mortgage And for the average housewife shopping for foodconsumed a large part of the day This money time and effort boughtplenty of calories but only moderate amounts of nutrition With neitherdisplay space nor refrigeration many neighborhood stores carried onlytoken stocks of fresh fruits and vegetables Fresh 1047297sh and poultry were

rarities The poorest third of American households consumed a sorelyinadequate daily intake of vitamins and minerals because there waslittle of either in the food that their neighborhood shops had for sale10

The Great Atlantic amp Paci1047297c did much to destroy this world TheHartfords were among the most rigorous managers of their day At atime when many grocers consulted self-help books to 1047297gure out how toprice their goods the brothers pored over data to 1047297ne-tune operationsclosing this store relocating that one dropping a product whose sales

languished adding another that promised better margins They totallyreshaped their business at least four times At its peak their companyowned nearly sixteen thousand grocery stores seventy factories andmore than a hundred warehouses It was the countryrsquos largest coffeeimporter the largest wholesale produce dealer and butter buyer thesecond-largest baker Its sales were more than twice those of any otherretailer Their basic strategy was so extraordinarily simple it could becaptured in a single word volume If the company kept its costs down

and its prices low more shoppers would come through its doors pro-ducing more pro1047297t than if it kept prices high

The Great AampP transformed the humble archaic grocery trade intoa modern industry but its relentless expansion posed a mortal threat toa sector of the economy upon which so many families and communitiesdepended Those mom-and-pop grocers local wholesalers and smallmanufacturers understood the threat full well and they fought back

with a vengeance The Hartfords were in no sense robber barons yetthey became the most controversial and most reviled American busi-nessmen of the 1047297rst half of the twentieth century Had Mr George tunedhis crystal radio to Americarsquos most widely heard station in the 1920s he

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

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THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 313

Judge Walter C Lindley was no onersquos idea of a 1047298aming radical Bornin 1880 in the village of Neoga deep in the corn and soybean coun-try of south-central Illinois Lindley had a reputation as a scholar at

a time when many learned the law as apprentices rather than as stu-dents he earned not only a law degree but also a doctorate in laws fromthe University of Illinois In Danville a commercial hub 150 miles southof Chicago he became a man of prominence He built a law practicewon a seat on the city council and became an attorney for Joseph Can-

non who served eight years as the iron1047297sted Speaker of the US Houseof Representatives and represented Danville in Congress for almost halfa century

Lindley was a Republican and shortly after Warren G Hardingthe great friend of business became president in 1921 he named Lind-ley to the federal bench As a judge he drew more than his share of high-pro1047297le cases In a 1929 jury trial that held Chicago rapt Lindleyrsquos courtconvicted sixteen candy wholesalers of terrorizing storekeepers who re-

fused to buy their candy Two years later he upheld the near-dictatorialpowers of the commissioner of major-league baseball Kenesaw Moun-tain Landis In the early 1930s he oversaw the restructuring of the col-lapsed utilities empire of the Chicago entrepreneur Samuel Insull andsurvived an attempt by Insullrsquos henchmen to have him impeached byCongress Suggested as a possible nominee to the US Supreme Courtin 1929 during Herbert Hooverrsquos presidency Lindley was not beyond

criticizing that court and by implication the Democratic administra-tion of Franklin Roosevelt In 1939 he commented acidly that for somenew Supreme Court justices ldquoprecedents may be of little avail and theirlack no barrdquo1

1

THE VERDICT

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 413

4 THE GREAT AampP

On a sunny Saturday in September 1946mdashthe federal courts workedsix days a week back thenmdashLindley issued what would be the most con-troversial decision of his long judicial career Before a crowded courtroomon the second 1047298oor of Danvillersquos post of1047297ce he declared that George LHartford eighty-one John A Hartford seventy-four their company theGreat Atlantic amp Paci1047297c Tea Company and other company executiveshad conspired to violate the Sherman Antitrust Act The fact that thesecretive Hartford brothers two of the wealthiest men in Americawere deemed criminals was startling but their crime was truly remark-able Rather than being accused of acting like monopolists to keep

prices arti1047297cially high the Hartfords were found to have done the op-posite They and their company Lindley declared had acted illegally inrestraint of trade by using AampPrsquos size and market power to keep pricesarti1047297cially low2

The victims of this unorthodox conspiracy were not families thatpurchased groceries The evidence before Lindleyrsquos court made clearthat prices at AampP were below those at the competition as John A Hart-ford himself had testi1047297ed nearly a year earlier ldquoWe would rather sell

200 pounds of butter at 1 cent pro1047297t than 100 pounds at 2 cents pro1047297trdquoWhile selling food cheaply was good for consumers it was bad for thehundreds of thousands of retailers wholesalers and manufacturers whoneeded high food prices in order to make a living US v AampP was theclimax of decades of effort to cripple chain stores in order to protectmom-and-pop retailers and the companies that supplied them TheHartfordsrsquo real crime was to have endangered mom and pop3

But it was the participants not the legal issues that made the Dan-

ville trial so notorious The Great Atlantic amp Paci1047297c Tea Company wasnot just another grocery chain It was by a wide margin the largest re-tailer in the world Its footprint stretched from coast to coast coveringthirty-nine of the forty-eight states and parts of Canada as well It col-lected more than ten cents of every dollar Americans spent at grocerystores It was an enterprise so familiar that millions of Americans knewit as ldquoGrandmardquo so ubiquitous that when John Updike penned a short

story about the eternal boredom of teenage life a few years later hecalled it simply ldquoAampPrdquo Its in1047298uence over Americarsquos lunch boxes anddinner tables was so overwhelming that when an ambitious young Flor-ida grocer decided to lower prices at his tiny store he received one pieceof advice ldquoDonrsquot make AampP madrdquo4

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 513

THE VERDICT 5

AampP was at the center of a bitter political struggle that lasted fornearly half a centurymdasha struggle that went far beyond economics At itsroot were competing visions of society One vision could be describedwith such words as ldquomodernrdquo and ldquoscienti1047297crdquo favoring the rationalismof cold corporate ef1047297ciency as a way to increase wealth and raise liv-ing standards The other vision could fairly be termed ldquotraditionalrdquoDating to Thomas Jefferson and his contemporaries the traditionalvision harked back to a society of autonomous farmers craftsmenand merchants in which personal independence was the source ofindividual opportunity and collective prosperity The words of Judge

Lindleyrsquos ruling against the Hartfords and AampP embodied the con1047298ictbetween those two visions ldquoTo buy sell and distribute one andthree-quarter billion dollars worth of food annually at a pro1047297t of oneand one-half cents on each dollar is an achievement one may well beproud ofrdquo he acknowledged in a nod to the modern vision Yet thisachievement he decided ran afoul of the Sherman Antitrust Act bymaking it hard for smaller 1047297rms to compete with AampP ldquoThe Sherman

Actrdquo he ruled ldquowas intended to secure equality of opportunityrdquo Equal-

ity of opportunity could not be secured if big 1047297rms were allowed topummel the small5

There may never have been a more improbable pair of convicts thanthe Hartfords The elder of the brothers George L Hartford was aspredictable as they come He lived in the same house for half a centuryand took rooms at the same New Jersey shore resort every summer He

left home at 905 every morning wore a black suit with stiff collar towork every day and made a point of tasting the companyrsquos coffees at200 each afternoon His hobbies when he was a younger man wererepairing cars and building crystal radios activities that required him toutter hardly a word to anyone in later years he did jigsaw puzzles Fewemployees ever laid eyes on the man known throughout the company asMr George The minutes of meetings of AampPrsquos top executives rarely

cite his words One of the few journalists to meet him said he could betaken ldquofor a retired Polish generalmdashbulky stolid rumpled with a for-eign air that his American drawl immediately beliesrdquo No one who en-countered him on the street would have imagined that he headed oneof the largest most powerful enterprises in the world6

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 613

6 THE GREAT AampP

John A Hartford his younger brother had an entirely different per-sonality A dapper dresser who favored custom-tailored gray suits Sulkabow ties and pocket squares he enjoyed traveling visiting stores andpressing the 1047298esh In his thirties and forties he had raised horses thatwon prizes at the National Horse Show a premier event of New Yorksociety He lived in an eight-room suite at the Plaza Hotel and lunchedalone on milk and crackers at the Biltmore On weekends he commutedto his suburban estate a Tudor mansion with a nine-hole golf coursestable and polo 1047297eld and in the winter he went to The Breakers inPalm Beach He was married three times twice to the same woman

and in between to a woman who came into his life modeling clothesfor his wife It was Mr Johnrsquos job to motivate employees spreading thecompanyrsquos paternalistic management gospel through philosophical mis-sives that often referred to ldquomy brother and Irdquo In the 1930s when AampPrsquospolitical troubles became life-threatening John A Hartford reluctantlybecame the companyrsquos public face sporadically meeting with the pressputting his name to the occasional folksy article and making end-of-year pronouncements about the outlook for food prices in the months

ahead7The brothersrsquo distinct personalities were displayed in the way they

ran their company Mr George was cautious favoring a rock-solid bal-ance sheet wanting each store and each product to pay its own waydistrusting new ideas Mr John was more aggressive more open to newideas but always insisting that lower prices would make more money bybringing more customers in the door The brothers met each morningto discuss the smallest details of their business from the price of canned

tomatoes to the pro1047297tability of the stores in Pittsburgh They made aformidable team It was Mr John who engineered the companyrsquos re-markable expansion in the 1910s its climb to be the 1047297rst retailer to sell$1 billion of merchandise in a single year in the 1920s and its quickconversion from grocery stores to supermarkets in the 1930s It wasMr George who kept AampP solvent

The Great Atlantic amp Paci1047297c lay at the center of both menrsquos lives

Neither ever worked anywhere else Neither attended a day of collegein fact neither 1047297nished high school They learned business on the jobfrom their father who ran the company before them and gave themmeaningful responsibilities when they were still in their teens They

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 713

THE VERDICT 7

treated the company as their family almost never dismissing employeescreating one of the 1047297rst company pension plans and shortening workinghours simply because they could afford to do so All managers had movedup the ranks and almost every executive had worked at AampP for de-cades Because they completely controlled the company with no share-holders to please and no creditors to satisfy they could run AampP howeverthey wished and they sometimes ran it in ways that drove their moreshort-term-oriented managers to despair

George and John Hartford were in the grocery trade at a time when sell-ing food was an activity of enormous economic importance There wereliterally grocery stores on every corner in 1926 Kansas City by nomeans the most densely populated of American cities had 30 food mar-kets per square mile The 1047297rst national survey in 1929 found 585980food storesmdashone for every 1047297fty-one American families Richard Nixona future president grew up working in his familyrsquos grocery in WhittierCalifornia in the 1920s and the family of Lady Bird Johnson a future

1047297rst lady sold groceries from a general store in Karnack Texas Thesemom-and-pop stores were serviced by a thick web of suppliers TheUnited States boasted 13618 wholesale distributors of groceries in 1929or one wholesaler for every forty-three food retailers This wholesalenetwork in turn distributed the products of nearly sixty thousand can-neries sugar-beet mills slaughterhouses soap factories and other plantsmaking everything from brooms to baking powder Mom and pop ranmany of these operations too The typical food plant had fewer than

1047297fteen workers8

In 1920s America every town of any consequence had its grocersits food brokers and wholesalers its bottling plants and 1047298our millsThese enterprises provided a tax base for their communities a cadre ofowners and managers to serve as civic leaders and a major source ofjobs Just the retail side of the food business provided livelihoods for12 million workers on the eve of the Great Depression many of them

self-employed proprietors Food retailers wholesalers and processorstogether engaged one out of every eighteen nonfarm workers in theentire countrymdashmore than apparel and textile factories iron and steelplants coal mines or even railroads9

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 813

8 THE GREAT AampP

Americans paid a high price to support this balkanized system forconveying food from farm to table Food was hugely expensive relativeto wages The average working-class family in the 1920s devoted one-third of its budget to groceries the average farm family even more Mosthouseholds spent more to put dinner on the table than for their rentor their mortgage And for the average housewife shopping for foodconsumed a large part of the day This money time and effort boughtplenty of calories but only moderate amounts of nutrition With neitherdisplay space nor refrigeration many neighborhood stores carried onlytoken stocks of fresh fruits and vegetables Fresh 1047297sh and poultry were

rarities The poorest third of American households consumed a sorelyinadequate daily intake of vitamins and minerals because there waslittle of either in the food that their neighborhood shops had for sale10

The Great Atlantic amp Paci1047297c did much to destroy this world TheHartfords were among the most rigorous managers of their day At atime when many grocers consulted self-help books to 1047297gure out how toprice their goods the brothers pored over data to 1047297ne-tune operationsclosing this store relocating that one dropping a product whose sales

languished adding another that promised better margins They totallyreshaped their business at least four times At its peak their companyowned nearly sixteen thousand grocery stores seventy factories andmore than a hundred warehouses It was the countryrsquos largest coffeeimporter the largest wholesale produce dealer and butter buyer thesecond-largest baker Its sales were more than twice those of any otherretailer Their basic strategy was so extraordinarily simple it could becaptured in a single word volume If the company kept its costs down

and its prices low more shoppers would come through its doors pro-ducing more pro1047297t than if it kept prices high

The Great AampP transformed the humble archaic grocery trade intoa modern industry but its relentless expansion posed a mortal threat toa sector of the economy upon which so many families and communitiesdepended Those mom-and-pop grocers local wholesalers and smallmanufacturers understood the threat full well and they fought back

with a vengeance The Hartfords were in no sense robber barons yetthey became the most controversial and most reviled American busi-nessmen of the 1047297rst half of the twentieth century Had Mr George tunedhis crystal radio to Americarsquos most widely heard station in the 1920s he

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 413

4 THE GREAT AampP

On a sunny Saturday in September 1946mdashthe federal courts workedsix days a week back thenmdashLindley issued what would be the most con-troversial decision of his long judicial career Before a crowded courtroomon the second 1047298oor of Danvillersquos post of1047297ce he declared that George LHartford eighty-one John A Hartford seventy-four their company theGreat Atlantic amp Paci1047297c Tea Company and other company executiveshad conspired to violate the Sherman Antitrust Act The fact that thesecretive Hartford brothers two of the wealthiest men in Americawere deemed criminals was startling but their crime was truly remark-able Rather than being accused of acting like monopolists to keep

prices arti1047297cially high the Hartfords were found to have done the op-posite They and their company Lindley declared had acted illegally inrestraint of trade by using AampPrsquos size and market power to keep pricesarti1047297cially low2

The victims of this unorthodox conspiracy were not families thatpurchased groceries The evidence before Lindleyrsquos court made clearthat prices at AampP were below those at the competition as John A Hart-ford himself had testi1047297ed nearly a year earlier ldquoWe would rather sell

200 pounds of butter at 1 cent pro1047297t than 100 pounds at 2 cents pro1047297trdquoWhile selling food cheaply was good for consumers it was bad for thehundreds of thousands of retailers wholesalers and manufacturers whoneeded high food prices in order to make a living US v AampP was theclimax of decades of effort to cripple chain stores in order to protectmom-and-pop retailers and the companies that supplied them TheHartfordsrsquo real crime was to have endangered mom and pop3

But it was the participants not the legal issues that made the Dan-

ville trial so notorious The Great Atlantic amp Paci1047297c Tea Company wasnot just another grocery chain It was by a wide margin the largest re-tailer in the world Its footprint stretched from coast to coast coveringthirty-nine of the forty-eight states and parts of Canada as well It col-lected more than ten cents of every dollar Americans spent at grocerystores It was an enterprise so familiar that millions of Americans knewit as ldquoGrandmardquo so ubiquitous that when John Updike penned a short

story about the eternal boredom of teenage life a few years later hecalled it simply ldquoAampPrdquo Its in1047298uence over Americarsquos lunch boxes anddinner tables was so overwhelming that when an ambitious young Flor-ida grocer decided to lower prices at his tiny store he received one pieceof advice ldquoDonrsquot make AampP madrdquo4

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 513

THE VERDICT 5

AampP was at the center of a bitter political struggle that lasted fornearly half a centurymdasha struggle that went far beyond economics At itsroot were competing visions of society One vision could be describedwith such words as ldquomodernrdquo and ldquoscienti1047297crdquo favoring the rationalismof cold corporate ef1047297ciency as a way to increase wealth and raise liv-ing standards The other vision could fairly be termed ldquotraditionalrdquoDating to Thomas Jefferson and his contemporaries the traditionalvision harked back to a society of autonomous farmers craftsmenand merchants in which personal independence was the source ofindividual opportunity and collective prosperity The words of Judge

Lindleyrsquos ruling against the Hartfords and AampP embodied the con1047298ictbetween those two visions ldquoTo buy sell and distribute one andthree-quarter billion dollars worth of food annually at a pro1047297t of oneand one-half cents on each dollar is an achievement one may well beproud ofrdquo he acknowledged in a nod to the modern vision Yet thisachievement he decided ran afoul of the Sherman Antitrust Act bymaking it hard for smaller 1047297rms to compete with AampP ldquoThe Sherman

Actrdquo he ruled ldquowas intended to secure equality of opportunityrdquo Equal-

ity of opportunity could not be secured if big 1047297rms were allowed topummel the small5

There may never have been a more improbable pair of convicts thanthe Hartfords The elder of the brothers George L Hartford was aspredictable as they come He lived in the same house for half a centuryand took rooms at the same New Jersey shore resort every summer He

left home at 905 every morning wore a black suit with stiff collar towork every day and made a point of tasting the companyrsquos coffees at200 each afternoon His hobbies when he was a younger man wererepairing cars and building crystal radios activities that required him toutter hardly a word to anyone in later years he did jigsaw puzzles Fewemployees ever laid eyes on the man known throughout the company asMr George The minutes of meetings of AampPrsquos top executives rarely

cite his words One of the few journalists to meet him said he could betaken ldquofor a retired Polish generalmdashbulky stolid rumpled with a for-eign air that his American drawl immediately beliesrdquo No one who en-countered him on the street would have imagined that he headed oneof the largest most powerful enterprises in the world6

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 613

6 THE GREAT AampP

John A Hartford his younger brother had an entirely different per-sonality A dapper dresser who favored custom-tailored gray suits Sulkabow ties and pocket squares he enjoyed traveling visiting stores andpressing the 1047298esh In his thirties and forties he had raised horses thatwon prizes at the National Horse Show a premier event of New Yorksociety He lived in an eight-room suite at the Plaza Hotel and lunchedalone on milk and crackers at the Biltmore On weekends he commutedto his suburban estate a Tudor mansion with a nine-hole golf coursestable and polo 1047297eld and in the winter he went to The Breakers inPalm Beach He was married three times twice to the same woman

and in between to a woman who came into his life modeling clothesfor his wife It was Mr Johnrsquos job to motivate employees spreading thecompanyrsquos paternalistic management gospel through philosophical mis-sives that often referred to ldquomy brother and Irdquo In the 1930s when AampPrsquospolitical troubles became life-threatening John A Hartford reluctantlybecame the companyrsquos public face sporadically meeting with the pressputting his name to the occasional folksy article and making end-of-year pronouncements about the outlook for food prices in the months

ahead7The brothersrsquo distinct personalities were displayed in the way they

ran their company Mr George was cautious favoring a rock-solid bal-ance sheet wanting each store and each product to pay its own waydistrusting new ideas Mr John was more aggressive more open to newideas but always insisting that lower prices would make more money bybringing more customers in the door The brothers met each morningto discuss the smallest details of their business from the price of canned

tomatoes to the pro1047297tability of the stores in Pittsburgh They made aformidable team It was Mr John who engineered the companyrsquos re-markable expansion in the 1910s its climb to be the 1047297rst retailer to sell$1 billion of merchandise in a single year in the 1920s and its quickconversion from grocery stores to supermarkets in the 1930s It wasMr George who kept AampP solvent

The Great Atlantic amp Paci1047297c lay at the center of both menrsquos lives

Neither ever worked anywhere else Neither attended a day of collegein fact neither 1047297nished high school They learned business on the jobfrom their father who ran the company before them and gave themmeaningful responsibilities when they were still in their teens They

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 713

THE VERDICT 7

treated the company as their family almost never dismissing employeescreating one of the 1047297rst company pension plans and shortening workinghours simply because they could afford to do so All managers had movedup the ranks and almost every executive had worked at AampP for de-cades Because they completely controlled the company with no share-holders to please and no creditors to satisfy they could run AampP howeverthey wished and they sometimes ran it in ways that drove their moreshort-term-oriented managers to despair

George and John Hartford were in the grocery trade at a time when sell-ing food was an activity of enormous economic importance There wereliterally grocery stores on every corner in 1926 Kansas City by nomeans the most densely populated of American cities had 30 food mar-kets per square mile The 1047297rst national survey in 1929 found 585980food storesmdashone for every 1047297fty-one American families Richard Nixona future president grew up working in his familyrsquos grocery in WhittierCalifornia in the 1920s and the family of Lady Bird Johnson a future

1047297rst lady sold groceries from a general store in Karnack Texas Thesemom-and-pop stores were serviced by a thick web of suppliers TheUnited States boasted 13618 wholesale distributors of groceries in 1929or one wholesaler for every forty-three food retailers This wholesalenetwork in turn distributed the products of nearly sixty thousand can-neries sugar-beet mills slaughterhouses soap factories and other plantsmaking everything from brooms to baking powder Mom and pop ranmany of these operations too The typical food plant had fewer than

1047297fteen workers8

In 1920s America every town of any consequence had its grocersits food brokers and wholesalers its bottling plants and 1047298our millsThese enterprises provided a tax base for their communities a cadre ofowners and managers to serve as civic leaders and a major source ofjobs Just the retail side of the food business provided livelihoods for12 million workers on the eve of the Great Depression many of them

self-employed proprietors Food retailers wholesalers and processorstogether engaged one out of every eighteen nonfarm workers in theentire countrymdashmore than apparel and textile factories iron and steelplants coal mines or even railroads9

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 813

8 THE GREAT AampP

Americans paid a high price to support this balkanized system forconveying food from farm to table Food was hugely expensive relativeto wages The average working-class family in the 1920s devoted one-third of its budget to groceries the average farm family even more Mosthouseholds spent more to put dinner on the table than for their rentor their mortgage And for the average housewife shopping for foodconsumed a large part of the day This money time and effort boughtplenty of calories but only moderate amounts of nutrition With neitherdisplay space nor refrigeration many neighborhood stores carried onlytoken stocks of fresh fruits and vegetables Fresh 1047297sh and poultry were

rarities The poorest third of American households consumed a sorelyinadequate daily intake of vitamins and minerals because there waslittle of either in the food that their neighborhood shops had for sale10

The Great Atlantic amp Paci1047297c did much to destroy this world TheHartfords were among the most rigorous managers of their day At atime when many grocers consulted self-help books to 1047297gure out how toprice their goods the brothers pored over data to 1047297ne-tune operationsclosing this store relocating that one dropping a product whose sales

languished adding another that promised better margins They totallyreshaped their business at least four times At its peak their companyowned nearly sixteen thousand grocery stores seventy factories andmore than a hundred warehouses It was the countryrsquos largest coffeeimporter the largest wholesale produce dealer and butter buyer thesecond-largest baker Its sales were more than twice those of any otherretailer Their basic strategy was so extraordinarily simple it could becaptured in a single word volume If the company kept its costs down

and its prices low more shoppers would come through its doors pro-ducing more pro1047297t than if it kept prices high

The Great AampP transformed the humble archaic grocery trade intoa modern industry but its relentless expansion posed a mortal threat toa sector of the economy upon which so many families and communitiesdepended Those mom-and-pop grocers local wholesalers and smallmanufacturers understood the threat full well and they fought back

with a vengeance The Hartfords were in no sense robber barons yetthey became the most controversial and most reviled American busi-nessmen of the 1047297rst half of the twentieth century Had Mr George tunedhis crystal radio to Americarsquos most widely heard station in the 1920s he

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 513

THE VERDICT 5

AampP was at the center of a bitter political struggle that lasted fornearly half a centurymdasha struggle that went far beyond economics At itsroot were competing visions of society One vision could be describedwith such words as ldquomodernrdquo and ldquoscienti1047297crdquo favoring the rationalismof cold corporate ef1047297ciency as a way to increase wealth and raise liv-ing standards The other vision could fairly be termed ldquotraditionalrdquoDating to Thomas Jefferson and his contemporaries the traditionalvision harked back to a society of autonomous farmers craftsmenand merchants in which personal independence was the source ofindividual opportunity and collective prosperity The words of Judge

Lindleyrsquos ruling against the Hartfords and AampP embodied the con1047298ictbetween those two visions ldquoTo buy sell and distribute one andthree-quarter billion dollars worth of food annually at a pro1047297t of oneand one-half cents on each dollar is an achievement one may well beproud ofrdquo he acknowledged in a nod to the modern vision Yet thisachievement he decided ran afoul of the Sherman Antitrust Act bymaking it hard for smaller 1047297rms to compete with AampP ldquoThe Sherman

Actrdquo he ruled ldquowas intended to secure equality of opportunityrdquo Equal-

ity of opportunity could not be secured if big 1047297rms were allowed topummel the small5

There may never have been a more improbable pair of convicts thanthe Hartfords The elder of the brothers George L Hartford was aspredictable as they come He lived in the same house for half a centuryand took rooms at the same New Jersey shore resort every summer He

left home at 905 every morning wore a black suit with stiff collar towork every day and made a point of tasting the companyrsquos coffees at200 each afternoon His hobbies when he was a younger man wererepairing cars and building crystal radios activities that required him toutter hardly a word to anyone in later years he did jigsaw puzzles Fewemployees ever laid eyes on the man known throughout the company asMr George The minutes of meetings of AampPrsquos top executives rarely

cite his words One of the few journalists to meet him said he could betaken ldquofor a retired Polish generalmdashbulky stolid rumpled with a for-eign air that his American drawl immediately beliesrdquo No one who en-countered him on the street would have imagined that he headed oneof the largest most powerful enterprises in the world6

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 613

6 THE GREAT AampP

John A Hartford his younger brother had an entirely different per-sonality A dapper dresser who favored custom-tailored gray suits Sulkabow ties and pocket squares he enjoyed traveling visiting stores andpressing the 1047298esh In his thirties and forties he had raised horses thatwon prizes at the National Horse Show a premier event of New Yorksociety He lived in an eight-room suite at the Plaza Hotel and lunchedalone on milk and crackers at the Biltmore On weekends he commutedto his suburban estate a Tudor mansion with a nine-hole golf coursestable and polo 1047297eld and in the winter he went to The Breakers inPalm Beach He was married three times twice to the same woman

and in between to a woman who came into his life modeling clothesfor his wife It was Mr Johnrsquos job to motivate employees spreading thecompanyrsquos paternalistic management gospel through philosophical mis-sives that often referred to ldquomy brother and Irdquo In the 1930s when AampPrsquospolitical troubles became life-threatening John A Hartford reluctantlybecame the companyrsquos public face sporadically meeting with the pressputting his name to the occasional folksy article and making end-of-year pronouncements about the outlook for food prices in the months

ahead7The brothersrsquo distinct personalities were displayed in the way they

ran their company Mr George was cautious favoring a rock-solid bal-ance sheet wanting each store and each product to pay its own waydistrusting new ideas Mr John was more aggressive more open to newideas but always insisting that lower prices would make more money bybringing more customers in the door The brothers met each morningto discuss the smallest details of their business from the price of canned

tomatoes to the pro1047297tability of the stores in Pittsburgh They made aformidable team It was Mr John who engineered the companyrsquos re-markable expansion in the 1910s its climb to be the 1047297rst retailer to sell$1 billion of merchandise in a single year in the 1920s and its quickconversion from grocery stores to supermarkets in the 1930s It wasMr George who kept AampP solvent

The Great Atlantic amp Paci1047297c lay at the center of both menrsquos lives

Neither ever worked anywhere else Neither attended a day of collegein fact neither 1047297nished high school They learned business on the jobfrom their father who ran the company before them and gave themmeaningful responsibilities when they were still in their teens They

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 713

THE VERDICT 7

treated the company as their family almost never dismissing employeescreating one of the 1047297rst company pension plans and shortening workinghours simply because they could afford to do so All managers had movedup the ranks and almost every executive had worked at AampP for de-cades Because they completely controlled the company with no share-holders to please and no creditors to satisfy they could run AampP howeverthey wished and they sometimes ran it in ways that drove their moreshort-term-oriented managers to despair

George and John Hartford were in the grocery trade at a time when sell-ing food was an activity of enormous economic importance There wereliterally grocery stores on every corner in 1926 Kansas City by nomeans the most densely populated of American cities had 30 food mar-kets per square mile The 1047297rst national survey in 1929 found 585980food storesmdashone for every 1047297fty-one American families Richard Nixona future president grew up working in his familyrsquos grocery in WhittierCalifornia in the 1920s and the family of Lady Bird Johnson a future

1047297rst lady sold groceries from a general store in Karnack Texas Thesemom-and-pop stores were serviced by a thick web of suppliers TheUnited States boasted 13618 wholesale distributors of groceries in 1929or one wholesaler for every forty-three food retailers This wholesalenetwork in turn distributed the products of nearly sixty thousand can-neries sugar-beet mills slaughterhouses soap factories and other plantsmaking everything from brooms to baking powder Mom and pop ranmany of these operations too The typical food plant had fewer than

1047297fteen workers8

In 1920s America every town of any consequence had its grocersits food brokers and wholesalers its bottling plants and 1047298our millsThese enterprises provided a tax base for their communities a cadre ofowners and managers to serve as civic leaders and a major source ofjobs Just the retail side of the food business provided livelihoods for12 million workers on the eve of the Great Depression many of them

self-employed proprietors Food retailers wholesalers and processorstogether engaged one out of every eighteen nonfarm workers in theentire countrymdashmore than apparel and textile factories iron and steelplants coal mines or even railroads9

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 813

8 THE GREAT AampP

Americans paid a high price to support this balkanized system forconveying food from farm to table Food was hugely expensive relativeto wages The average working-class family in the 1920s devoted one-third of its budget to groceries the average farm family even more Mosthouseholds spent more to put dinner on the table than for their rentor their mortgage And for the average housewife shopping for foodconsumed a large part of the day This money time and effort boughtplenty of calories but only moderate amounts of nutrition With neitherdisplay space nor refrigeration many neighborhood stores carried onlytoken stocks of fresh fruits and vegetables Fresh 1047297sh and poultry were

rarities The poorest third of American households consumed a sorelyinadequate daily intake of vitamins and minerals because there waslittle of either in the food that their neighborhood shops had for sale10

The Great Atlantic amp Paci1047297c did much to destroy this world TheHartfords were among the most rigorous managers of their day At atime when many grocers consulted self-help books to 1047297gure out how toprice their goods the brothers pored over data to 1047297ne-tune operationsclosing this store relocating that one dropping a product whose sales

languished adding another that promised better margins They totallyreshaped their business at least four times At its peak their companyowned nearly sixteen thousand grocery stores seventy factories andmore than a hundred warehouses It was the countryrsquos largest coffeeimporter the largest wholesale produce dealer and butter buyer thesecond-largest baker Its sales were more than twice those of any otherretailer Their basic strategy was so extraordinarily simple it could becaptured in a single word volume If the company kept its costs down

and its prices low more shoppers would come through its doors pro-ducing more pro1047297t than if it kept prices high

The Great AampP transformed the humble archaic grocery trade intoa modern industry but its relentless expansion posed a mortal threat toa sector of the economy upon which so many families and communitiesdepended Those mom-and-pop grocers local wholesalers and smallmanufacturers understood the threat full well and they fought back

with a vengeance The Hartfords were in no sense robber barons yetthey became the most controversial and most reviled American busi-nessmen of the 1047297rst half of the twentieth century Had Mr George tunedhis crystal radio to Americarsquos most widely heard station in the 1920s he

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 613

6 THE GREAT AampP

John A Hartford his younger brother had an entirely different per-sonality A dapper dresser who favored custom-tailored gray suits Sulkabow ties and pocket squares he enjoyed traveling visiting stores andpressing the 1047298esh In his thirties and forties he had raised horses thatwon prizes at the National Horse Show a premier event of New Yorksociety He lived in an eight-room suite at the Plaza Hotel and lunchedalone on milk and crackers at the Biltmore On weekends he commutedto his suburban estate a Tudor mansion with a nine-hole golf coursestable and polo 1047297eld and in the winter he went to The Breakers inPalm Beach He was married three times twice to the same woman

and in between to a woman who came into his life modeling clothesfor his wife It was Mr Johnrsquos job to motivate employees spreading thecompanyrsquos paternalistic management gospel through philosophical mis-sives that often referred to ldquomy brother and Irdquo In the 1930s when AampPrsquospolitical troubles became life-threatening John A Hartford reluctantlybecame the companyrsquos public face sporadically meeting with the pressputting his name to the occasional folksy article and making end-of-year pronouncements about the outlook for food prices in the months

ahead7The brothersrsquo distinct personalities were displayed in the way they

ran their company Mr George was cautious favoring a rock-solid bal-ance sheet wanting each store and each product to pay its own waydistrusting new ideas Mr John was more aggressive more open to newideas but always insisting that lower prices would make more money bybringing more customers in the door The brothers met each morningto discuss the smallest details of their business from the price of canned

tomatoes to the pro1047297tability of the stores in Pittsburgh They made aformidable team It was Mr John who engineered the companyrsquos re-markable expansion in the 1910s its climb to be the 1047297rst retailer to sell$1 billion of merchandise in a single year in the 1920s and its quickconversion from grocery stores to supermarkets in the 1930s It wasMr George who kept AampP solvent

The Great Atlantic amp Paci1047297c lay at the center of both menrsquos lives

Neither ever worked anywhere else Neither attended a day of collegein fact neither 1047297nished high school They learned business on the jobfrom their father who ran the company before them and gave themmeaningful responsibilities when they were still in their teens They

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 713

THE VERDICT 7

treated the company as their family almost never dismissing employeescreating one of the 1047297rst company pension plans and shortening workinghours simply because they could afford to do so All managers had movedup the ranks and almost every executive had worked at AampP for de-cades Because they completely controlled the company with no share-holders to please and no creditors to satisfy they could run AampP howeverthey wished and they sometimes ran it in ways that drove their moreshort-term-oriented managers to despair

George and John Hartford were in the grocery trade at a time when sell-ing food was an activity of enormous economic importance There wereliterally grocery stores on every corner in 1926 Kansas City by nomeans the most densely populated of American cities had 30 food mar-kets per square mile The 1047297rst national survey in 1929 found 585980food storesmdashone for every 1047297fty-one American families Richard Nixona future president grew up working in his familyrsquos grocery in WhittierCalifornia in the 1920s and the family of Lady Bird Johnson a future

1047297rst lady sold groceries from a general store in Karnack Texas Thesemom-and-pop stores were serviced by a thick web of suppliers TheUnited States boasted 13618 wholesale distributors of groceries in 1929or one wholesaler for every forty-three food retailers This wholesalenetwork in turn distributed the products of nearly sixty thousand can-neries sugar-beet mills slaughterhouses soap factories and other plantsmaking everything from brooms to baking powder Mom and pop ranmany of these operations too The typical food plant had fewer than

1047297fteen workers8

In 1920s America every town of any consequence had its grocersits food brokers and wholesalers its bottling plants and 1047298our millsThese enterprises provided a tax base for their communities a cadre ofowners and managers to serve as civic leaders and a major source ofjobs Just the retail side of the food business provided livelihoods for12 million workers on the eve of the Great Depression many of them

self-employed proprietors Food retailers wholesalers and processorstogether engaged one out of every eighteen nonfarm workers in theentire countrymdashmore than apparel and textile factories iron and steelplants coal mines or even railroads9

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 813

8 THE GREAT AampP

Americans paid a high price to support this balkanized system forconveying food from farm to table Food was hugely expensive relativeto wages The average working-class family in the 1920s devoted one-third of its budget to groceries the average farm family even more Mosthouseholds spent more to put dinner on the table than for their rentor their mortgage And for the average housewife shopping for foodconsumed a large part of the day This money time and effort boughtplenty of calories but only moderate amounts of nutrition With neitherdisplay space nor refrigeration many neighborhood stores carried onlytoken stocks of fresh fruits and vegetables Fresh 1047297sh and poultry were

rarities The poorest third of American households consumed a sorelyinadequate daily intake of vitamins and minerals because there waslittle of either in the food that their neighborhood shops had for sale10

The Great Atlantic amp Paci1047297c did much to destroy this world TheHartfords were among the most rigorous managers of their day At atime when many grocers consulted self-help books to 1047297gure out how toprice their goods the brothers pored over data to 1047297ne-tune operationsclosing this store relocating that one dropping a product whose sales

languished adding another that promised better margins They totallyreshaped their business at least four times At its peak their companyowned nearly sixteen thousand grocery stores seventy factories andmore than a hundred warehouses It was the countryrsquos largest coffeeimporter the largest wholesale produce dealer and butter buyer thesecond-largest baker Its sales were more than twice those of any otherretailer Their basic strategy was so extraordinarily simple it could becaptured in a single word volume If the company kept its costs down

and its prices low more shoppers would come through its doors pro-ducing more pro1047297t than if it kept prices high

The Great AampP transformed the humble archaic grocery trade intoa modern industry but its relentless expansion posed a mortal threat toa sector of the economy upon which so many families and communitiesdepended Those mom-and-pop grocers local wholesalers and smallmanufacturers understood the threat full well and they fought back

with a vengeance The Hartfords were in no sense robber barons yetthey became the most controversial and most reviled American busi-nessmen of the 1047297rst half of the twentieth century Had Mr George tunedhis crystal radio to Americarsquos most widely heard station in the 1920s he

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 713

THE VERDICT 7

treated the company as their family almost never dismissing employeescreating one of the 1047297rst company pension plans and shortening workinghours simply because they could afford to do so All managers had movedup the ranks and almost every executive had worked at AampP for de-cades Because they completely controlled the company with no share-holders to please and no creditors to satisfy they could run AampP howeverthey wished and they sometimes ran it in ways that drove their moreshort-term-oriented managers to despair

George and John Hartford were in the grocery trade at a time when sell-ing food was an activity of enormous economic importance There wereliterally grocery stores on every corner in 1926 Kansas City by nomeans the most densely populated of American cities had 30 food mar-kets per square mile The 1047297rst national survey in 1929 found 585980food storesmdashone for every 1047297fty-one American families Richard Nixona future president grew up working in his familyrsquos grocery in WhittierCalifornia in the 1920s and the family of Lady Bird Johnson a future

1047297rst lady sold groceries from a general store in Karnack Texas Thesemom-and-pop stores were serviced by a thick web of suppliers TheUnited States boasted 13618 wholesale distributors of groceries in 1929or one wholesaler for every forty-three food retailers This wholesalenetwork in turn distributed the products of nearly sixty thousand can-neries sugar-beet mills slaughterhouses soap factories and other plantsmaking everything from brooms to baking powder Mom and pop ranmany of these operations too The typical food plant had fewer than

1047297fteen workers8

In 1920s America every town of any consequence had its grocersits food brokers and wholesalers its bottling plants and 1047298our millsThese enterprises provided a tax base for their communities a cadre ofowners and managers to serve as civic leaders and a major source ofjobs Just the retail side of the food business provided livelihoods for12 million workers on the eve of the Great Depression many of them

self-employed proprietors Food retailers wholesalers and processorstogether engaged one out of every eighteen nonfarm workers in theentire countrymdashmore than apparel and textile factories iron and steelplants coal mines or even railroads9

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 813

8 THE GREAT AampP

Americans paid a high price to support this balkanized system forconveying food from farm to table Food was hugely expensive relativeto wages The average working-class family in the 1920s devoted one-third of its budget to groceries the average farm family even more Mosthouseholds spent more to put dinner on the table than for their rentor their mortgage And for the average housewife shopping for foodconsumed a large part of the day This money time and effort boughtplenty of calories but only moderate amounts of nutrition With neitherdisplay space nor refrigeration many neighborhood stores carried onlytoken stocks of fresh fruits and vegetables Fresh 1047297sh and poultry were

rarities The poorest third of American households consumed a sorelyinadequate daily intake of vitamins and minerals because there waslittle of either in the food that their neighborhood shops had for sale10

The Great Atlantic amp Paci1047297c did much to destroy this world TheHartfords were among the most rigorous managers of their day At atime when many grocers consulted self-help books to 1047297gure out how toprice their goods the brothers pored over data to 1047297ne-tune operationsclosing this store relocating that one dropping a product whose sales

languished adding another that promised better margins They totallyreshaped their business at least four times At its peak their companyowned nearly sixteen thousand grocery stores seventy factories andmore than a hundred warehouses It was the countryrsquos largest coffeeimporter the largest wholesale produce dealer and butter buyer thesecond-largest baker Its sales were more than twice those of any otherretailer Their basic strategy was so extraordinarily simple it could becaptured in a single word volume If the company kept its costs down

and its prices low more shoppers would come through its doors pro-ducing more pro1047297t than if it kept prices high

The Great AampP transformed the humble archaic grocery trade intoa modern industry but its relentless expansion posed a mortal threat toa sector of the economy upon which so many families and communitiesdepended Those mom-and-pop grocers local wholesalers and smallmanufacturers understood the threat full well and they fought back

with a vengeance The Hartfords were in no sense robber barons yetthey became the most controversial and most reviled American busi-nessmen of the 1047297rst half of the twentieth century Had Mr George tunedhis crystal radio to Americarsquos most widely heard station in the 1920s he

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 813

8 THE GREAT AampP

Americans paid a high price to support this balkanized system forconveying food from farm to table Food was hugely expensive relativeto wages The average working-class family in the 1920s devoted one-third of its budget to groceries the average farm family even more Mosthouseholds spent more to put dinner on the table than for their rentor their mortgage And for the average housewife shopping for foodconsumed a large part of the day This money time and effort boughtplenty of calories but only moderate amounts of nutrition With neitherdisplay space nor refrigeration many neighborhood stores carried onlytoken stocks of fresh fruits and vegetables Fresh 1047297sh and poultry were

rarities The poorest third of American households consumed a sorelyinadequate daily intake of vitamins and minerals because there waslittle of either in the food that their neighborhood shops had for sale10

The Great Atlantic amp Paci1047297c did much to destroy this world TheHartfords were among the most rigorous managers of their day At atime when many grocers consulted self-help books to 1047297gure out how toprice their goods the brothers pored over data to 1047297ne-tune operationsclosing this store relocating that one dropping a product whose sales

languished adding another that promised better margins They totallyreshaped their business at least four times At its peak their companyowned nearly sixteen thousand grocery stores seventy factories andmore than a hundred warehouses It was the countryrsquos largest coffeeimporter the largest wholesale produce dealer and butter buyer thesecond-largest baker Its sales were more than twice those of any otherretailer Their basic strategy was so extraordinarily simple it could becaptured in a single word volume If the company kept its costs down

and its prices low more shoppers would come through its doors pro-ducing more pro1047297t than if it kept prices high

The Great AampP transformed the humble archaic grocery trade intoa modern industry but its relentless expansion posed a mortal threat toa sector of the economy upon which so many families and communitiesdepended Those mom-and-pop grocers local wholesalers and smallmanufacturers understood the threat full well and they fought back

with a vengeance The Hartfords were in no sense robber barons yetthey became the most controversial and most reviled American busi-nessmen of the 1047297rst half of the twentieth century Had Mr George tunedhis crystal radio to Americarsquos most widely heard station in the 1920s he

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 913

THE VERDICT 9

would have heard diatribes against the ldquochildless brothersrdquo who mo-nopolized food retailing When Senator Huey Long warned in 1934that ldquoabout ten menrdquo have ldquochained the country from one end to theotherrdquo he was talking about Mr George and Mr John When a lawyerworking for the administration of Franklin Roosevelt called the coun-tryrsquos largest retailer ldquoa gigantic blood suckerrdquo there was no question hehad the Hartfords in mind it was he who convinced Judge Lindley toconvict them

A contemporary of the Hartfords the economist Joseph Schumpetercoined the phrase ldquocreative destructionrdquo in 1942 to describe the painfulprocess by which innovation and technological advance make an indus-try more ef1047297cient while leaving older less adaptable businesses by thewayside For the economy as a whole creative destruction is enormouslybene1047297cial permitting a shift of labor and capital from sectors where lessis required into areas where new products and services are in demand Itis precisely such shifts that make economies grow For many individuals

and many communities on the other hand creative destruction is pain-ful entailing business restructuring job elimination and the disap-pearance of companies and industries that have provided the economicbase for a particular town or an entire region Whatever its advantageseconomic change inevitably leaves major losses in its wake11

When creative destruction brings layoffs to autoworkers or closescoal mines across an entire region the world pays close attention Whenit means the closure of a family-run grocery store or the replacement of

a failing supermarket by another store down the street though creativedestruction does its work unremarked This invisibility re1047298ects the sheerlack of drama in the retail trade a shuttered store leaves no gargantuanmachinery standing idle no angry workers milling around outside a pad-locked gate The building torn down for parking or converted to someother use will quickly fade from memory The workers will be expectedto 1047297nd other jobs wherever they can Displaced industrial workers

tough rugged and usually male are presumed to have had importantdreams and plans tragically destroyed by the vagaries of economicchange and to merit public sympathy Displaced grocery clerks rarely getsuch respect

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1013

10 THE GREAT AampP

That neglect speaks to the prejudices of social thinkers of manyideologies Thomas Jefferson along with his contemporaries in the En-lightenment saw special merit in the toil of the farmer but very little inthe work of the merchants who dealt in the farmerrsquos produce Karl Marxand Friedrich Engels judged that the course of history would be shapedin vast factories by workers engaged in physical production the laborof the merchant they wrote ldquois not labor that creates valuerdquo Their nearcontemporary William Graham Sumner one of the most in1047298uential

American social thinkers of the late nineteenth century but decidedlyno Marxist fully agreed with their point ldquoWealth comes only from

production and all that the wrangling grabbers loafers and jobbersget to deal with comes from somebodyrsquos toil and sacri1047297cerdquo Sumnerwrote12

The effect of economic change on store owners occasions particu-lar ideological confusion After all the independent grocers displacedby the growth of the Great Atlantic amp Paci1047297c were capitalists even iftheir capital was only a few hundred dollars Their wives by extensionwere capitalists too even if being capitalists did not absolve them from

twelve-hour days totting up purchases and keeping the books Whenlarger competitors undercut their prices and decimated their businessesthese small-time capitalists received neither sympathy nor a mention inthe unemployment statistics They simply vanished

In the 1047297rst half of the twentieth century the Hartfords turned theircompany into one of the greatest agents of creative destruction in theUnited States Although shifts in the way the world buys food are far lessheralded than innovations such as cars and computers few economic

changes have mattered more to the average family Thanks to the man-agement techniques the Great AampP brought into widespread use foodshopping once a heavy burden became a minor concern for all but thepoorest households as grocery operators increased productivity andsqueezed out costs The proportion of workers involved in selling gro-ceries plummeted freeing up labor to help the economy grow And thecompanyrsquos innovations are still evident in the supply chains that link the

business world together Although the Hartfords died decades beforethe invention of supercenters and hypermarkets they employed manyof the strategiesmdash1047297ghting unions demanding lower prices from suppli-ers cutting out middlemen slashing inventories lowering prices to build

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1113

THE VERDICT 11

volume using volume to gain yet more economies of scalemdashthat Walmartrsquosfounder Sam Walton would later make famous

The bitter political and legal battles surrounding the Great Atlanticamp Paci1047297c Tea Company were limited to North America but they pre-saged similar con1047298icts around the globe Under Japanrsquos ldquobig store lawrdquoin force from the 1970s anyone seeking to open even a modest super-market had to gain local competitorsrsquo approval by paying them com-pensation West Germany protected mom-and-pop retailers in 1956 byallowing stores to open only from 700 am to 630 pm Monday throughFriday and until 200 pm on Saturday a worker with a daytime job was

essentially forced to patronize grocery stores and butcher shops nearhome or workplace because there was no time to shop elsewhere InFrance a 1973 law to aid artisans and small merchants restricted theopening of large stores and prohibited manufacturers from selling morecheaply to big merchants than to small ones Everywhere the com-plaint was the same as it had been in America the unchecked growth oflarge retailers threatened the traditional role of local merchants anddestroyed opportunities for economic independence13

Such restraints faded toward the end of the twentieth century inpart because consumers demanded lower prices in part because asworking hours grew more diverse more people needed to shop at non-traditional times Yet the century-old battle between independent mer-chants and large retailers was by no means over In the United Statesand Western Europe critics of ldquoindustrial foodrdquo advised consumers toavoid the processed goods at the supermarket and purchase locallygrown foods from farmers and independent retailers the Hartfordsrsquo

great achievement making food affordable was now looked upon withdisdain Merchantsrsquo protests led Thailandrsquos government to halt expan-sion by grocery chains in 2006 In 2010 the Czech Republic requiredminimum price markups in order to keep chains from undercuttingmom-and-pop storesmdashprecisely the same obstacle AampP confronted inthe United States in the 1930s14

The Hartfordsrsquo enterprise did not prosper without its founders

Within a few years of their deaths the once-mighty AampP was a basketcase staggering from one failed strategy to another as better-run com-panies passed it by Soon enough the company that had decimatedindependent stores by the thousands became a victim of the creative

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1213

12 THE GREAT AampP

destruction it had once meted out But while AampPrsquos fortunes wanedthe economic forces it helped unleash only grew stronger It made theprocess of moving goods from producer to consumer impersonal andindustrial but also cheap and ef1047297cient a job for the big not for thesmall

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA

842019 The Great AampP and the Struggle for Small Business in America

httpslidepdfcomreaderfullthe-great-ap-and-the-struggle-for-small-business-in-america 1313

BUY THE BOOK NOW

AmazonBarnes amp Noble

IndieBound

LEARN MORE ABOUT THE BOOK

macmillancom

THE GREAT AampP AND THE

STRUGGLE FOR SMALL BUSINESS

IN AMERICA