This week FEE sat down with Carol Roth, an American entrepreneur, TV personality, radio host, investor, and bestselling author.
Roth’s latest book, The War on Small Business: How the Government Used the Pandemic to Crush the Backbone of America, examines the government’s response to the coronavirus pandemic in 2020, which triggered the sharpest economic collapse in American history.
In a wide-ranging interview, we talked about the winners and losers in the 2020 pandemic, lockdowns, and how the American Dream can be saved.*
First, what made you decide to write this book? What led you to realize that this book was needed?
ROTH: I’d written a book ten years ago called The Entrepreneur Equation. It was about all of the risks you take on as a small business owner and how difficult it is to be a small business owner. So I was highly aware of the plight of the small business owner. Little did I realize that the government shutting them down and taking away their business by mandate while leaving their big competitors open was actually their number one risk.
So HarperCollins approached me early in the pandemic. They knew this was going to be historic economically in some way, shape, or form. They wanted someone who had deep economic knowledge to be able to give a fair assessment and get into the nitty gritty, not something based on high level talking points.
So like a crazy person I said, “Oh, that sounds like fun!”
Did anything surprise you during the process?
I didn’t realize at the time this was going to be the herculean task that it was. Obviously things were unfolding in real time, information would dribble out and I’d have to piece it together. So I kind of wrote three and a half different books during the pandemic (laughs).
Ultimately, I knew small business was going to be a big part of the story. I didn’t realize the extent to which it would involve government picking winners and losers—not based on data or science but purely on political clout and connections. Government enabled the most historic wealth transfer we’ve seen in our lifetimes from Main Street to Wall Street.
We were the first person to market really making this case. So we were really excited. Unfortunately, it’s largely falling on deaf ears. It’s striking to me that no one is talking about this.
Former investment banker @CaroljsRoth argues that government bureaucrats used the COVID pandemic to crush small businesses and make Wall Street richer, NOW on @BookTV... pic.twitter.com/4M2nwBMA5i— BookTV on C-SPAN2 (@BookTV) July 11, 2021
You write that government bureaucrats have been looking for the chance to destroy small businesses for years. Why would government declare war on small businesses? As you point out, they are in many ways the backbone of the US economy.
It sounds counterintuitive until you get into the details and see how the government has been slanting the playing field towards big businesses and away from small businesses for years via regulatory capture, anti-competitive regulations, tax structure, and so on.
As I write in the book, really what’s happened over the last twenty years or so is that we’ve moved away from free market capitalism toward central planning.
Many people today would say America is a capitalist country. You seem less sure.
I specifically use the term central planning because I don’t want to get caught up in terms like socialism and communism and democratic socialism. It doesn’t matter. It’s a handful of people who are making decisions for the masses using force and coercion and control. That always benefits the people in the “in club.”
If you think about the way the economy is built—and most people don’t think about it—it’s basically split in half. Half of it is very decentralized and looks more like a free market. Before COVID, it was about 30.2 million small businesses that accounted for about half the GDP and half the jobs and represented about 99.9 percent of all business entities. This half of the economy is very hard to corral and get lobbying dollars from and so forth.
If you’re disrupting wealth creation opportunities for the average American and you’re building this Frankenstein behemoth that is increasing its purview and doing everything inefficiently and ineffectively, that’s havoc in my opinion.
The other half of the economy—next to these 30.2 million or so businesses—you got 10,000 or 15,000 big businesses. If you’re trying to centralize power and make the government more powerful and increase its purview and spending, what are you going to do?
Are you going to focus on the half that’s easy to work with or focus on the decentralized, independent 30.2 million?
When you start thinking in that direction and looking at what they’ve actually done, you just ask yourself: If you were intentionally trying to do this to small business, would you have done anything differently?
You write in the book that even before the pandemic arrived central planning was here and wreaking havoc on the US economy. What kind of havoc. Do you have some examples?
Obviously it depends on your perspective of what you think havoc is, but if you look before COVID, governments at all levels were spending somewhere around $8.1 trillion. That’s insane.
If you look at the number of laws passed—the numbers are cited in the book—it’s more than a million over a fifty-year period. That doesn’t even include the last 20 years. More recently you’ve had 12,000 or 15,000 laws passed at the state level and 15,000 federal regulations passed.
We didn’t have liberty and we didn’t have lockdowns. We targeted individuals who were deemed 'non-essential' and locked them down. But we had a whole host of individuals and businesses who were declared “essential” by politicians.
If you look at these laws and how they’ve disrupted wealth-creating opportunities for the average American, it’s very real. They’ve made it harder to get appropriate health care. I know people will argue about the ACA, but I can tell you most people are paying more and getting less. It’s become harder to generate wealth in the stock market or even off a money market because the Fed has disrupted risk in the market. It’s become more expensive and difficult to purchase a home and create a small business.
These are all the ways that people create wealth in this country. If you’re disrupting wealth creation opportunities for the average American and you’re building this Frankenstein behemoth that is increasing its purview and doing everything inefficiently and ineffectively, that’s havoc in my opinion.
(laughs) You know, I’ve given this a little thought.
Let’s talk about lockdowns a minute. At FEE, we spent much of the last year writing about the unintended consequences of lockdowns, which have been severe. I’ll ask you point blank. Were the lockdowns the right move?
We didn’t have lockdowns. This is the big issue. We didn’t have liberty and we didn’t have lockdowns. We targeted individuals who were deemed “non-essential” and locked them down. But we had a whole host of individuals and businesses who were declared “essential” by politicians. Whether it was an Amazon warehouse or a weed dispensary that had been illegal just a few years ago, we all had these businesses that were magically declared essential.
So we didn’t have lockdowns. We didn't have everyone sharing equally in the pain. And because of the Fed’s actions, we didn’t have sustained pain the market. So I can’t say if the lockdowns were the right move, because we didn’t have one.
If your strategy is to do this to just part of the people—based on whim, not science—then you need to appropriately compensate them. And to that point, it’s not like we didn’t spend $6 trillion, we just didn’t spend it on the people who deserved due compensation.
Let’s talk about that. You write that when the federal government stepped in with its “assistance” during the pandemic—$1.9 trillion CARES Act—it clearly favored the wealthy and well connected. You offer numerous examples. The Kennedy Center got a $25 million grant (even though it furloughed most of its staff). The country’s wealthiest universities were allocated millions of dollars even though they had multibillion dollar endowments.
Why was so much of this money flowing to the Kennedy Center and universities and not to small businesses that were ordered closed?
Cash for cronies. This is the whole issue. When there is an opportunity to do the right thing, the people are not angels who are going to organize society for us, as Milton Friedman quipped.
They are power-hungry, greedy individuals who are going to give favors to the people that they know. And they never let a good crisis go to waste. That’s what we saw last year.
The Kennedy Center had hundreds of millions in assets. It received all kinds of funding, this random arts center for the hoity toity. And they weren’t even open! They were given $25 million and one of the stated reasons was deep cleaning of the building? Are you kidding me?
It’s funny, but it’s not funny. Same thing with the universities, who by the way already get tax advantages and have been able to drive up their prices because of the government effectively nationalizing most of the student lending business. They had already been paid for the semester by their students. They were losing zero revenue and had a lower operating cost structure because no one was there. Frankly, they should have been refunding their students’ money, not receiving money from us.
The worst part is that nobody reported on it. I tried to keep this on the DL because I don’t want to get targeted, but I was the one who brought up the Harvard thing on Twitter that went viral and eventually forced them to give the money back.
You as a saver or a retiree are earning next to nothing on your savings that are being lended out and then multiplied by free Fed money to give to big companies who are using that to get a competitive advantage and get bigger.
One of my followers brought the table to my attention. I started making it a big deal that Harvard—which I always call a hedge fund with a university attached to it—got millions of dollars for nothing. They didn’t have to jump through hoops or do anything. They were just gonna get it handed to them.
Meanwhile, my local dry cleaner, pizza parlor, and hair dresser were duking it out with everyone over what was a couple hundred billion dollars. What does that say? You tell small businesses they’re non-essential, and then you back it up with how you allocate the money.
It’s the government picking winners and losers. It always works out well for those who are connected. It doesn’t work out for those who aren’t in the inner circle.
It was recently pointed out that the top 1 percent in America hold more wealth at any time in history since the Federal Reserve has tracked the statistic. Are you suggesting it’s not a coincidence this happened during the greatest expansion of government in modern history?
Their increase in wealth closely matches what the Fed has printed over the last twelve to fifteen months! It’s no surprise, but it comes at the expense of Main Street and the average American.
You as a saver or a retiree are earning next to nothing on your savings that are being lended out and then multiplied by free Fed money to give to big companies who are using that to get a competitive advantage and get bigger. I talk in the book about how the money is used to prop up zombie companies that probably shouldn’t even exist anymore. It’s all to the detriment of innovation and small businesses and fair competition.
Black Rock going in and buying up residential housing is a direct result of these policies. Artificially low interest rates that need to go and find yields because risk has been completely disrupted, and all of this government money is coming to compete with the average American.
As far as the 1 percent, I’m a free market capitalist. There’s always going to be a top 1 percent. I don’t care. If you innovate and the market determines you should get all this wealth, great! But I have a huge problem when that comes as the result of government mandate and action.
During this spending bonanza, untold numbers of Americans who owned small businesses were being crushed. We’ve all seen the Yelp figures, but those only scratch the surface. Do we have any hard data on how many small businesses went under over the last 15 months?
Different sets of data say different things. The Biden administration has said more than 400,000. We know that’s a floor for sure. They wouldn’t say it if it was less than that.
That figure was reported by Opportunity Insights and the Hamilton Project out of Harvard in June 2020. I know for a fact that many small businesses have closed since then.
The Opportunity Insights data also say 38 or 39 percent of all small businesses across the country have closed permanently. I do not believe that figure is correct. But it could be true of employer small businesses—that number was 6 million of the 30.2 million small businesses pre COVID—which would put the total at about 2 million.
I don’t think people really understand how staggering that is. And that number is going to be obfuscated because an epic number of small businesses were also started last year.
I don’t know about you, but I had a good year in 2020. Stocks were great. Value of my home increased a lot. A lot of people like me did really well. How do we convince these people that what government did in 2020 was really bad?
You have them read The War on Small Business (laughs). That’s why I wrote the book.
Look, we’ve seen what I’ve called an E shaped recovery. A capital letter E has three tiers. This very top level just killed it; they consolidated wealth and power and value. The bottom tier did not do well. It’s not okay to say, “Well, I’m not in that part, so I shouldn’t care about it.”
The business survived Prohibition—as a bar. But it could not survive the mandates and the long tail effects of the mandates.
It was done by government choice. This isn’t the natural outcome of someone not working hard or making the wrong decisions. This was by choice and by mandate. That is scary.
And what if you don’t get the golden ticket next time? You need to care about these principles. If you give up on the principles, they’re just going to move everyone toward socialism and the government mandates and soon there will not be wealth creating opportunities in this country.
We’ll turn into France or the UK, and that’s the best case scenario. The worst is we turn into Venezuela.
Was there someone you interviewed or a story you heard that drove home just how damaging lockdowns were for families that owned small businesses?
Two stick out. I’ll share the less grim one first.
I live in Chicago. There’s a place called South Port Lanes. It’s in the Lakeview neighborhood.
It’s a bar that had been in Chicago forever under a couple different names. It was a year away from celebrating its 100-year anniversary. It survived Prohibition—as a bar. But it could not survive the mandates and the long tail effects of the mandates. It’s closing after nearly a hundred years as a bar. That gives you the scope of this.
And the other one?
Right. This one broke my heart.
There’s a gentleman who I’ve known for a long time. He had a friend who cleaned carpets in northwest Chicago. His business was one of the first forced to shut down and he didn't qualify for PPP because he’d had some debt issues in the past. He was in a bad financial situation and he turned to drinking more. He ended up taking his own life.
You’re told first, 'You didn’t build that.' Then you’re told you’re not 'essential.' What does that say to people?
It was a direct outgrowth of the mandate and not getting the compensation. That shifted his life. And by the way, there are many examples like that. I just happened to know a guy who was friends with this individual.
That’s what people don't understand. When someone has a business and they risk their own money, a lot of times it becomes their identity and their reason for being. And how are they treated?
You’re told first, “You didn’t build that.” Then you’re told you’re not “essential.” What does that say to people? How is it that we’re supposed to be the bastion of free markets and the American Dream and you got the government coming down to the place where businesses are built telling people those kinds of things? It’s disgusting.
And frankly the organizations who should be standing up for small businesses just weren’t there.
You write that decentralization is the key to saving small business and preserving American prosperity. How does that happen?
It happens with people pushing back. You’re seeing the movement organically. You’re seeing people start businesses. You’re seeing workers turn to gig work instead of corporate work. You’re seeing people turn to cryptocurrencies instead of trusting the Fed and the government. You’re seeing media creators turn to the creator economy and to report and share outlets on different platforms outside the corporate press.
The reality is every decision a business is making right now is political whether we like it or not. We don’t have to discuss this in terms of parties though. And I don’t. This is a non-partisan issue.
People are naturally doing all this. Consider how you spend your dollars. We have choice in how we spend our dollars, and I think people should also really consider that. I saw a statistic yesterday that said 85 percent of back to school shopping is going to be done on Amazon. That’s a choice people can make or not make.
We have some responsibility to vote with our dollars. We have some responsibility to stand up to bad legislation.
I’ve been telling small business owners to sue. I think we need to say, you used eminent domain to subjugate our rights. We didn’t get appropriate compensation. Pay us. If we don’t challenge this unconstitutional behavior, we’re going to have more of it.
Let’s talk about you a little bit. What was your process for writing the book?
I’m super anal retentive. So I took my deadline for the manuscript and gave myself a buffer of a month. Then I broke it down and said, how many words do I need to write each day to make sure I get my work done.
I did have a couple people helping me with research. But then you have to go back and verify all that.
Overall, it was a pretty methodical approach.
What do you find more fun: Writing the book or doing the tour and the promotion and that stuff?
Totally different experiences from this book and my first two. With my first book, which I wrote in like six weeks, I enjoyed the writing process a lot more. It was a lot of opinion writing and stories.
In this one, oh lord. It was much harder. It took so much sourcing. It was insane. And given the fact that this is such an underreported and important story, I obviously enjoy spreading the message. I hate to be the messenger about it, but it has to be said.
So it’s been a mission getting people engaged with this information so they themselves can turn into messengers.
I follow you on Twitter, so I saw that at least one speaking engagement you had scheduled was canceled after someone expressed concern that your book was “too controversial.” What’s controversial about defending small business? Last I checked, Americans of every color, creed, gender, etc. owned and operated them. Few things are more diverse and universal today than small business. Where’s the controversy?
Your timing is great. I had a follow up call with them this morning and said the same thing to them. I’m like, “I don’t understand why we can’t take a side.” I mean, what’s the side to killing small business?
As I mentioned on Twitter, it was one outside PR consultant who raised all these questions and concerns and didn’t like one of the six people I had on the back of the book. I tried to explain, look I know you’re trying to not be political right now. But the reality is every decision a business is making right now is political whether we like it or not. We don’t have to discuss this in terms of parties though. And I don’t. This is a non-partisan issue; it’s a systemic political issue.
I had a Twitter follower who recently was my bellhop in Vegas when I was there speaking. He was like, “Are you Carol Roth from Twitter? I follow you!”
Everybody is afraid of one squeaky wheel who probably doesn’t even buy from them. It’s a sad state of affairs. I have a lot of friends from other countries who live here. They think we are the most ridiculous and insane people ever.
Anyway, the marketing person told me he hadn’t actually read the book. He said he’s going to. I’m back in the game in a sense. I don’t know. We’ll wait and see.
Your fans seem to love you and your book. It seems to be doing very well. I’m seeing you in the New York Post and on Fox News and in other media. So are you famous now? Are people starting to recognize you when you go out for coffee?
Alton Brown called it modern famous. It’s like one percent of the people think you’re the Beatles, and 99 percent don’t know who you are.
I’ve been stopped at hockey games. I’ve been stopped in airports. It used to happen a lot more when I was traveling back and forth from New York for CNBC. I’d be on a plane with my hair and makeup done and someone had just watched the show.
I’m naturally crazy. My husband says I have a low bar for humor. I spend my days cracking myself up. I find humor in life and situations.
I had a Twitter follower who recently was my bellhop in Vegas when I was there speaking. He was like, “Are you Carol Roth from Twitter? I follow you!”
So it happens. But I always say I’m like a luxury brand. I’m very well curated. I’m somewhat popular but definitely not for everybody. I don’t have the personality or the desire to be a mass brand. I’m not controversial for the sake of being controversial. I try to be nice to people, unless they’re jerks to me first, and then I’ll light them up.
I have a very specific set of knowledge and humor and either you get it or you don’t, and I’m okay with that.
On Twitter you told a fan you don’t drink or smoke marijuana. So what do you do for fun when you’re not writing bestselling books?
I’m naturally crazy. My husband says I have a low bar for humor. I spend my days cracking myself up. I find humor in life and situations. I have a pinball machine in my living room—that is broken at the moment. The flipper is burned out. I’m trying to get the pinball guys out here to fix it.
I’m a big sports fan. My Blackhawks didn’t make the Stanley Cup playoffs this year, but I’m still rooting for them.
I like to create. I like to read and hang out with family. I spend like 90 percent of my time completely amused.
That’s a good way to live.
I think so.
Final question: It’s March 2020. Carol Roth is president of the United States. Does Dr. Anthony Fauci keep his job?
Nope. In fact, Anthony Fauci probably wouldn’t have had a job to begin with. And he definitely doesn’t get on TV to do the whole little tour to begin with.
*Editor’s note: This interview has been edited and condensed for clarity and brevity.