Friday, 4 September 2009

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.”

51QX4SSRXNL__SS500_ 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.


  1. It seems that Cactus Kate doesn't like (earned) monopoly either. I've just posted a message on her blog post about monopoly here in my full support on earned monopoly (but not on unearned one that is achieved via state approval).

    This is an assault on free-enterprise and the EU is the leading destroyer of that. They did the same thing to Intel last year.

    Intel responds to EU's anti-trust statement : AMD puts the boot in as well

  2. I had posted 2 similar messages on the world's number 1 technology blog, TechCrunch similar messages of disgust about anti-trust laws, where one of its DOJ enforcer is scumbag lawyer Gary Redback.

    This thread:
    My Interview With Antitrust Expert Gary Reback: Google’s Looming Antitrust Issues

    and also on this thread:
    Video: Erick Talks Microsoft/Yahoo On Charlie Rose

    The other point is that these capitalists also play a part in fueling the anti-trust lawsuits, where one party encourages the DOJ to interfere or investigate if they feel that a specific area of their business is going to be threaten by its competitors and this includes Google, Microsoft, Sun, IBM and others. Google will lobby the DOJ to examine closely the Yahoo/Microsoft talk of potential merger or Microsoft will encourage the DOJ to examine closely the Google acquisition of DoubleClick and many other examples.

    These capitalists should just stop playing games with each other but band together to fight their common enemy, which is the DOJ the wealth destroyer. DOJ is the real violator of property rights rather than amongst themselves.

  3. TWR: Yep, it sure was. (Douglas the 'free marketeer' Yeah right.)

    FF: Yep,you're dead right. The leading exampe of anti-competitive behaviour is not the ations of so-called monopolists, but the actions of competitors bleating to DoJ and the Communist Commission about monopolies.

  4. PC, (after blogger chewed my other comment)

    And there I was dreaming that the Libertarianz were strong,solid and non-factional.

    Looks like left hand needs to meet right hand more often.

    I particularly liked this paragraph

    "Libertarianz leader Richard McGrath suggested the Commerce Commission justify its continued existence by stripping the Zespri cartel of its privileged position as a price-fixing coercive monopoly".

  5. If you were to say “I am not a fan of anything to do with coercive monopolies” then I'd be right with you.

    But when you say “I am not a fan of anything to do with monopolies,” then I'm not.

  6. This comment has been removed by the author.

  7. There you go again is quite clear in the sole focus of the post. Clearly not clear enough.

    I am not a fan of Liverpool either. But I do like that Fernando Torres.

    Will explain later.

  8. Cactus: Zespri is a coercive monopoly enforced by the power of government - it is not a free market monopoly - the types of which PC is rightly defending - which has reached its position through intelligent operation in the free market.

    There is a difference.

  9. I would also add that free market monopolies are naturally temporary.

    Witness Telecom's new competition in the form of Vodafone, 2degrees and TelstraClear.

    I think there is definitely a degree of cautiousness that we should take however; many monopolies have shown themselves to be very eager to defend their positions with pet politicians and the power of government.

  10. The Kiwifruit industry are filled with funny chaps; a company called Eastpack Limited, for instance, excludes anyone who is not a grower from buying its shares! (utter madness).

    In a general sense there is a big difference between 'dominating' a market and having a monopoly; Microsoft may dominate the computer operating systems market but does not and never has had a monopoly.

    The chaps at the Commerce Commission (and the US Justice Department) never seem to grasp this point.

    All the Commerce Commission members think is "my broadband is running slowly today, this download is taking forever! - the reason must be because those mountebank chappies at Telecom paid $5 million salaries and huge dividends with the money they should have spent on their network...right...time to wallop them!"

  11. It must be awfully inconvenient that capitalist god Warren Buffett doesn't buy into all the glib 'free market' bullshit.

  12. What a sad LITTLE fraternity of pseudo-intellectual zealots the Libz are.

    36 votes in Mt Albert, 1000 nationwide - Ha Ha Ha. Gee, you're doing so well at getting those great ideas out there.


  13. Anon (1). Warren Buffet is not a "capitalist god", for the reason you state at the conclusion of your comment.

    Anon (2). Is that the best argument you can formulate against the concept of individual rights?


  14. Well here you are reading them . . . so who's the fool?

  15. Telecom has been an absolute dog of a company for both customers and shareholders.

    You need to find a better company for antitrust arguments.

  16. Telecom built its monopoly by being a government department, so it's hardly a good example for any anti-trust arguments either way.

  17. What's the bet that "anonymous" is that pustule Red?


  18. Quoth the Raven5 Sep 2009, 19:03:00

    I doubt a single monopoly would exist if it weren't for the state limiting competition. As such I don't think we can say there are earned monopolies now. This is what happens with many so called free-market capitalists they end up being apologists for actually existing capitalism and not consistent advocates of the free market. As to the efficiency of large monopolistic corporations or just large corproations in general the Austrians will tell us their problems are similar to the problems of state socialist central planning.

  19. I see you scurry to censor an honest rebuttal to your cowardly little arse licking mate's false allegations but let his worthless crap stand.

    When you must know his accusations are false.

    On another thread full of equally imperious censorship, you have the damn cheek to waffle about fairness.

    Where is your integrity? Sacrificed at the altar of sycophancy.

    The leadership within the small cult of secular progressives who pose as the NZ Libs must be in a pretty fragile and desperate state if you are compelled to rely on the support of belly crawling deranged idiots like LGM to cling to power.

  20. Rodbeater: We don't do anonymous abuse here.

    Like I've always said, if you're going to abuse someone else then at least put you name to it. (Unless of course your name is Rodbeater, in which case you've been asked several times to go away because a) you don't listen, and b) you offer nothing of value. That's not censorship, by the way, it's good intellectual hygiene.)

  21. QUOTH THE RAVEN: You make a good point, sir - at least for things in this small country.

  22. "Rodbeater: We don't do anonymous abuse here'

    Well, apparently not unless we're some arse licking deranged yellow back..

    See LGM post 9/05/2009 08:09:00 AM

  23. Red

    Come now, that wasn't anonymous abuse- nothing like it! My comment included an accurate identification of you, your ideology & your fundamental nature. It's derived from the content of your own posts. The term abuse implies improprietry. An accurate identification certainly isn't improper.

    BTW, the bet was a safe one. Funny how your silly wee tricks never work and you catch youself out EVERY single time. There's a lesson for you there...

    Seriously, you received some sound advice last time. Time to take it up. You fool no-one but yourself otherwise.


  24. Fuck off you preaching madman. your continuous lies, false allegations and baseless assertions can only be the result of serious insanity.

    You know what is remarkable to me? That I once gave Peter Cresswell and the Libertarians some creedence as a force for liberty. How could I have fallen for this confidence trick? How could I have been so blind??

    Now I realise he is just a posturing elitist, a secular progressive who surrounds himself with low IQ yes men like LGM and Elijah, forming a silly little cult that collectively has about as much impact on liberty in NZ as the breast feather of a wood pigeon falling into Huka falls.

    I'm quite content to allow you to go your own way Mr. Cresswell and I have no wish to comment on the idiotic contortions of your slowly dying party, but if you're going to allow your snivelling ranting insane sycophants to make cowardly false allegations, even when you know they are untrue, I am at least going to write here and challenge them.

    I did not post the anonymous comment and you deleted the follow up comment wherein anonymous made it plain he was not Redbaiter, yet you allow the baying hyena LGM's rubbish to stand.

    Just an utter disgrace and weasel-like behaviour that will bring you and the Libertarians no good repute at all.

  25. Calm down Red, you'll get your bible all covered in spittle.

  26. Rodbeater has demonstrated once again why he's been banned: Because among other things he makes every thread about him and his twisted obsessions.

    Rod: If you have no wish to comment, then I have no wish to host your comments. Goodbye. And don't come back.

  27. "Because among other things he makes every thread about him"

    Utter bullshit. LGM made it about me with his cowardly false allegations. Can't you lot get it through your thick heads? I don't care about you pimple arsed posturing, and if LGM wasn't the falsely accusing coward he is, and if you Mr. Creswell had had the good sense to delete his anonymous abuse, none of these posts would have been made. Good grief, and you posture as someone whose credo is reason.

  28. Gee, this gets old.

    Peter, so much of the tedious personal tit-for-tat commentary arises from irritating anonymous comments. It's still happening in spite of your recent request to leave a name ... and it will continue to do so unless the "anonymous" option is discontinued.

    Can it be dismantled? I notice that it's not available on all blogs ...

    Oh, and Red? Sticks & stones for goodness sake. Jeez.

  29. It is not sticks and stones. As I have said so many times, (and why it fails to penetrate Mr. Cresswells thick skull I cannot explain) but I have lost interest in the NZ Libz, I also have no interest in commenting here, and it is only LGM's false allegations that prompted this exchange.

    Sus, my Roman Catholic parents taught me that you never accuse anyone of dishonesty unless you are 100% sure of your grounds.

    Once again, it seems the Libz could learn something from the Christians. Except it is pretty much apparent that so many of the Libs are so full of themselves and their own religious doctrine, there's little room left any others.

    Mr. Cresswell wants me to stop posting comments here, and I have no wish to do so. It's only that he permits LGM's insane attacks on Redbaiter and his entirely false allegations (that PC knows are false) that has drawn me to comment here once more.

  30. "...Roman Catholic..."

    That explains it.

  31. Not necessarily, TW. Some of my best friends are Catholic. ;)

    Don't fall into the collectivist trap. It's not a pleasant place to be.

  32. "I have no interest in commenting here."

    Good. So bugger off then.

  33. Hmm. There's a difference between being pig-headedly collectivist, and noticing certain traits that certain groups of people tend to share. While I also have some good friends that are Catholic, I have reluctantly had to agree with my mother who has long pointed out that Catholics do often tend to be quite dogmatic and less likely to listen to anyone else's opinion as they know best. Of course it's not 100% of them, but they do seem to be brought up like that in many cases, especially this one.

  34. PC, I think that Redbaiter has a point here. LGM accused Redbaiter of posting anonymous, which he has no evidence. In fact, I think Red supports private industries/businesses (without government interference) as the topic of this blog post. LGM should retract his accusation against Red and admit that he was wrong and it's simple really.

  35. "There's a difference between being pig-headedly collectivist, and noticing certain traits that certain groups of people tend to share."

    True. It's fair to say that groups of people share similar traits, but there are always exceptions.

    I should have said 'presumptive' trap.

  36. To get back to the original post...the support of such odious instos as Commerce and Securities Commission is a litmus test for one's free market values.

    The men and women who run these commissions are the most dangerous and powerful people in the country.

    The Right as well as the Left is fully in favor of regulating anything/anyone they don't like - a quick look at "Cactus Kates'" blog confirms that.

    And the Right are *just* as envious of success in the financial world as the Left.

    Look at those on the Right who love to dig up dirt and launch jihad on prime movers such as Ralph Norris, Mark Weldon, and Alan Gibbs to name but a few.

  37. Ruth said "The Right as well as the Left is fully in favor of regulating anything/anyone they don't like - a quick look at "Cactus Kates'" blog confirms that."

    Well said Ruth. Cannot disagree with your comments.


  38. Thanks Julian.

    And when it all turns to custard - and make no mistake Seccom will step into the NZX and destroy all value - these folk are the first to blame 'socialists'. As if that doesn't include themselves.

  39. Kurt

    Try reading.


  40. "Don't fall into the collectivist trap. It's not a pleasant place to be"

    That's right. INDIVIDUALISTS UNITE ! Stick together. Form a political party. No wait.

    What an oxymoron Libertarianism is.

    Ha Ha Ha

    PS. Doesn't the lib candidate for Northcote look like a real-life Thunderbird puppet?

  41. "Doesn't the lib candidate for Northcote look like ..."

    Coming from a faceless source, that's deliciously ironic!

    I think you've upset some little green fascists again, PC ... :)

  42. Ruth, I agreed. I am appalled at Cactus Kate's anti-business attitude. That's not what ACT party stands for. I think that she is in a wrong party. She should join up with the tories and John Key.

  43. Sus

    "I think you've upset some little green fascists again, PC ... :)"

    Indeed. Likely the same one as before.

    BTW, Sus by green do you mean an enviro-facsist or merely an envious one?


  44. Yep, Ruth, you're dead right (just to get the discussion back on track).

    The support of such odious entities as Commerce and Securities Commission is a litmus test for one's free market values.

    The men and women who run these commissions are among the most dangerous and powerful people in the country.

    Well said.


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