Mythical Roots of Antitrust: Economic Power vs Political Power

by | Jul 12, 2000 | Antitrust

From the time great business leaders were first maligned as “Robber Barons,” socialists have tried to obscure the difference between economic power and political power. They’ve insisted, against all evidence, that productive giants such as Andrew Carnegie, John D. Rockefeller, J.P. Morgan, Henry Ford, Mike Milken and Bill Gates were every bit as “powerful,” when […]

From the time great business leaders were first maligned as “Robber Barons,” socialists have tried to obscure the difference between economic power and political power. They’ve insisted, against all evidence, that productive giants such as Andrew Carnegie, John D. Rockefeller, J.P. Morgan, Henry Ford, Mike Milken and Bill Gates were every bit as “powerful,” when left free to “reign,” as Europe’s kings and feudal land barons, that these business creators were every bit as “dangerous” as political tyrants. Big government is bad, but so is big business, claim the anti-capitalists. Both can “oppress” us all the same.

Read any book on the great industrialists and financiers of history–or any anti-trust article from long ago or today–and you’ll see repeated references to allegedly “predatory” behavior, to the “grabbing” of market share, to “dominance” or “dog-eat-dog” or else “cut-throat” competition, to “zero-sum games,” “hostile” takeovers, “price-gouging,” “bullying” tactics, insurmountable “barriers to entry,” “corporate raiders,” “headhunting,” “poison pills,” and “greenmail.” How often do we hear it said that some company “controls” some percent of a market?–as if that control represents some land grab that must, in justice, be reversed. How often do we here business leaders accepting the same premises–insisting that they’ll “give something back to the community”–as if their life’s work consisted of robbing it.

Do such terms describe voluntary production and trade? No, they do not. But you see such terms tossed around as if there was no question that economic power is essentially equivalent to political power. Such terms are used to describe business activity precisely because the distinction between political power and economic power has been obscured. Take, for instance, the concept of “controlling” some market. That really means that a company is the supplier of the goods in a market–but that’s only the case because it’s the owner of the goods. It has private property rights in those goods. This is the “control” the socialists hate.

When Microsoft issued Windows 95 in spring of that year, it did so with a free, new feature: a “web” browser. And it freely signed contracts with personal computers makers like Dell and Compaq to include the browser, along with many other applications it had added to the Windows platform over the years, when PCs were assembled. A rival browser made by Netscape was losing market share. But instead of improving its product, Netscape and others rivals ganged up on Microsoft, ran to Washington and got the trust-busters to launch an attack. That’s how 90% of all antitrust cases are initiated–by disgruntled rivals to secure by coercive means what they can’t achieve voluntarily on a free market.

At a press conference in the spring of 1995 Janet Reno announced that the Justice Department would fine Microsoft $1 million per day unless it unbundled its browser from Windows 95. She accused Microsoft of “coercion” and told reporters: “forcing PC manufacturers to take one of Microsoft’s product as a condition of buying a monopoly product like Windows 95 is . . . plain wrong. We won’t tolerate any coercion by dominant companies in any way that distorts competition.” (emphasis added).

What an obscene travesty. Microsoft, a leading producer using voluntary cooperation is derided as a coercive thug. Meanwhile its puny rivals–puny because they couldn’t sell their inferior products–are permitted to wield actual coercive power, with the full backing of the world’s most powerful government–worse, from that government’s “Justice” Department. This is injustice in the name of justice. The fact is, when firms like Microsoft sell a winning product there are no victims–not among suppliers or customers. There are only eclipsed rivals. Victims arise only when rivals try to gain something by coercion. The plaintiffs are the real “robber barons” in the realm of anti-trust. Microsoft is the victim.

Let’s be clear. Economic power is the power to create and produce. Political power is the power to coerce and punish. Economic power entails intellectual achievement. Political power entails physical aggrandizement. Economic power involves voluntary trade to mutual advantage, trade with whomever you choose to deal and with whoever chooses to deal with you. Unlike political power, which entails fear and punishment, economic power means the offering of incentives and rewards. Economic power is the power of a dollar–how many you earn and how many you can spend determines the extent of your “power.” Political power involves involuntary subjugation to the state, which has sole discretion over the use of force.

In a free society government may only use its power in retaliation against those who initiate force or fraud. Unless it seeks tyranny, no government may use such power to itself initiate force or fraud against innocent parties. To the extent it does, it acts as a robber or a gang–but far worse: a robber or gang with no higher, legal authority above, controlling it. Economic power is wholly innocent of any hint of the initiation of force–or even of retaliatory force. Productive giants such as Carnegie, Ford and Gates don’t just have less power than politicians or pose less danger than tyrants. They have no political power at all and present no danger whatsoever. Political power, at root, is the power of a gun–of the police, the military, the taxman and the jailer. If you flout the law, whether a just law or an anti-trust law, you must submit. But no one “must” submit to a business proposition–not even from Bill Gates.

Adapted from a press conference at the National Press Club on 29 June, 2000.

Related Articles:

  • Why Can’t the media see the injustice done by Reno’s DOJ to Microsoft: The Three Myths of Antitrust, Part 1
  • Economic Power vs. Political Power: The Three Myths of Antitrust, Part 2
  • Perfect Competition: The Three Myths of Antitrust, Part 3
  • Arbitrary Law: The Three Myths of Antitrust, Part 4

    Made available by the Center for the Advancement of Capitalism.

  • Dr. Salsman is president of InterMarket Forecasting, Inc., an assistant professor of political economy at Duke University and a senior fellow at the American Institute for Economic Research. Previously he was an economist at Wainwright Economics, Inc. and a banker at the Bank of New York and Citibank. Dr. Salsman has authored three books: Breaking the Banks: Central Banking Problems and Free Banking Solutions (AIER, 1990), Gold and Liberty (AIER, 1995), and The Political Economy of Public Debt: Three Centuries of Theory and Evidence (Edward Elgar Publishing, 2017). In 2021 his fourth book – Where Have all the Capitalist Gone? – will be published by the American Institute for Economic Research. He is also author of a dozen chapters and scores of articles. His work has appeared in the Georgetown Journal of Law and Public Policy, Reason Papers, the Wall Street Journal, the New York Times, Forbes, the Economist, the Financial Post, the Intellectual Activist, and The Objective Standard. Dr. Salsman earned his B.A. in economics from Bowdoin College (1981), his M.A. in economics from New York University (1988), and his Ph.D. in political economy from Duke University (2012). His personal website is richardsalsman.com.

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