Doing bad for doing well
At a time when businesses are reeling, the business of punishing success is on the uptick.
As European antitrust investigations against Oracle-Sun swing into action, US antitrust action against a Microsoft-Yahoo merger look almost certain, and here at home ‘Communist Commission’ action against Telecom is under way, perhaps it’s time to look again at whether antitrust and anti-monopoly actions actions are even justified, or if they simply punish success.
Clearly they’re not justified morally. What a business does is its own business, and certainly not the business of busybody jobsworths who’ve never run a business in their own lives.
And they’re hardly justified economically either, as Bryan Caplan succinctly points out:
“If the monopoly came from government, then it's silly to fret about market failure and muse about antitrust remedies; you've got to unleash your inner libertarian and call for free competition.
“If the monopoly came from superior efficiency, broadly defined, you've got to realize that antitrust "remedies" penalize excellence - which almost any economic theory admits is a bad idea in the long-run.”
Antitrust laws punish successful businesses by branding them "monopolists" regardless of how they achieved that success – they fail to perceive the difference between a monopoly, and a coercive monopoly, i.e., between:
Monopoly: exclusive domain over the production or provision of a given good or service.
Coercive monopoly: exclusive domain over the production or provision of a given good or service that is maintained by government force.
And as Caplan says, the result of anti-monopoly/antitrust legislation is that excellence is penalised, something praised these days in almost every school classroom and on every political stump, which is just one reason anti-monopoly legislation is so popular. The anti-success sentiment well summarised by the US Court of Appeals when they ordered the break-up of ALCOA some years ago, saying:
“It was not inevitable that it should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every new- comer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.”
You can easily see the Supreme Court’s attitude to business success when you realise this was not written as an endorsement of ALCOA’s excellence, but as a condemnation of it! As a reward for success, they were punished with an order for dissolution (an order made nugatory when three competitors sprang into action in the booming post-war economy). As Alan Greenspan described, back when he was an economist, businesses are
“condemned [by antitrust laws] for being too successful, too efficient, and too good a competitor. Whatever damage the antitrust laws may have done to our economy, whatever distortions of the structure of the nation's capital they may have created, these are less disastrous than the fact that the effective purpose, the hidden intent, and the actual practice of the antitrust laws in the United States have led to the condemnation of the productive and efficient members of our society because they are productive and efficient."
And contra Caplan, this penalisation of excellence is undertaken with the full support of almost every economist – all of them in thrall to what George Reisman calls a “platonic” notion of competition, a notion used to put a figleaf on what is effectively envy-ridden intervention for the sake of envy-ridden intervention –an emotion that comes from the same place as demands to soak the rich.
And contrary too to what’s commonly thought, antitrust beats down success even when the trust-busters lose in court, as David R. Henderson points out in his review of Gary Hull’s book The Abolition of Antitrust:
“The book is at its most effective when the authors distinguish clearly between force and voluntary action and when they tell horror stories about antitrust. Exhibit A of the latter is the DuPont cellophane story. The book's editor, philosopher Gary Hull, tells of clear-eyed DuPont chemists perfecting cellophane in the 1920s and creative marketers marketing it in the 1930s, revolutionizing the sale of bread, cake and other items. By 1940, a national poll found that Americans' most cherished words were, in order, "mother," "memory," and "cellophane."
“Then came antitrust. The government charged that DuPont had "monopolized" the cellophane market. Most antitrust texts point out that the government lost the case. But Hull points out something that I had never read in 35 years of reading about antitrust: DuPont helped assure its "victory" by canceling its expansion plans and actually building a cellophane plant for a competitor, Olin Industries.”
Face it: there is no justification for anti-monopoly legislation ethically, economically, or historically.
If anyone is looking at making tax savings, they could do a lot worse than to add the
Commerce Communist Commission to their list. Promoting 'free competition' at gunpoint is not just uncivilised, unethical and unsuccessful, it's also utterly illogical.
If it’s non-coercive and providing a service people want, which is what gives it a monopoly position, then where’s the sense in punishment? And no non-coercive monopoly lasts for ever anyway, as the likes of ALCO, IBM and even Microsoft tend to show. (Indeed, the picture of Microsoft as an unstoppable monopolistic behemoth that cried out for antitrust Nazis to bring to book just a few years ago is now a very different puppy -- as the Los Angeles Times noted yesterday, “ it now looks as though the Internet has accomplished something that antitrust regulators failed to do -- break Microsoft's ability to monopolize software markets.”)
So I say it’s time to shut down what should never have been opened. Or as the man might have said, how come there's only one Commerce Commission?
NB: For a free chocolate fish, can anyone tell me which particular political pillock it was who set up NZ’s Commerce Commission just over two decades ago? I’ll give you a clue: he thinks you should pay for all his overseas holidays.
UPDATE: Cactus Kate joins those who fail to fully distinguish between coercive monopolies and the other sort. Saying her “next target” is going to be monopolies, she declares, “I am not a fan of anything to do with monopolies” Frankly, my dear, I am not a fan of anyone who bashes businesses who’ve earned their dominance in the marketplace.