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Microsoft Breakup is a Throwback to Socialism

By Robert W. Tracinski

Today, the Justice Department filed its motion that the Microsoft Corporation be broken into pieces as a “remedy” under the antitrust laws. The government wants to split the company into two pieces, one to make the Windows operating system, the other to develop the specific software applications that run on that system.

What this means is that the federal government is taking it upon itself to seize one of the world’s largest corporations and to restructure the entire computer industry. It amounts to the declaration that Microsoft, and any other successful company, is state property, to be carved up and disposed of at the whim of bureaucrats and judges.

What are the damages that are being “remedied”? According to Judge Jackson’s findings of fact, Microsoft has created an unspecified “confusion” among consumers. And by adding new features to its operating system—clearly a nefarious practice—Microsoft has caused computers to run more slowly and have more bugs. (Haven’t you noticed how much slower your computer is than it was five years ago?) And thrown in with these claims are such minor complaints as the charge that integrating a browser into Windows makes it harder for employers to keep their workers from surfing the Web.

There are no dead bodies, no wrecked companies—under Microsoft’s allegedly “stifling” reign, the software industry has grown by leaps and bounds—and no world-changing innovations that have been quashed. The “damages” claimed by the judge range from the vague, to the ridiculous, to the trivial.

Is this any kind of justification for tearing the nation’s most successful company into pieces? Of course not.

To find the deeper motive behind the Microsoft breakup, you have to look earlier in Judge Jackson’s findings. The judge noted that changes in the computer industry often cause “inflection points,” times when new companies take the lead while older firms fall behind. In Judge Jackson’s opinion, the explosion of the Internet should have been one of these times; Netscape, or Sun, or Oracle—he didn’t say exactly which company he favored—should have taken the lead from Microsoft. The fact that they didn’t, Judge Jackson concluded, must be because Bill Gates was defying the rules of the marketplace.

But the only thing Bill Gates was defying was the judgment of bureaucrats who think they have the right to dictate what the market “ought” to do. Microsoft kept its leadership position by competing in the marketplace. Gates invested enormous sums in Internet research and development; Microsoft produced a browser capable of matching Netscape’s; it offered better customer service and made it cheaper and easier for Internet access providers to use Microsoft’s product. And, of course, the company integrated Internet functions into Windows—just one of a continual series of improvements to Microsoft’s operating system. This is what competition on the free market is supposed to look like: A competitor posed a challenge, and Microsoft responded by producing a better product.

But Microsoft’s very success offended all of the armchair industrialists—Joel Klein and Judge Jackson apparently among them—who believed that they knew better what the market “ought” to have done. The actual judgment of the marketplace had already been rendered; Microsoft had maintained its lead and created hundreds of billions of dollars of wealth in the process. But now the resentful bureaucrats are using the federal government to reverse the judgment of the market and to impose their own plan for the computer industry—to impose it by the brute force of a government edict.

Klein and Jackson have been abetted by Silicon Valley CEOs like Scott McNealy and Larry Ellison, who think that the market “should” have picked their own companies—and who ran to Washington to convince federal cops to enforce that wish.

Is it any wonder that technology stocks are being hammered? Investors are discovering that the rules of the industry have changed. It used to be that a company could succeed if it made the most useful product—as judged by its customers on the free market. Now, however, the results of the market can be overturned if a federal judge or a jealous competitor thinks that customers “should” have favored another company.

The Microsoft case, at its heart, is an attempt to impose socialist central planning on the computer industry—and worse, to do so in an anarchic, ad-hoc manner, one federal court ruling at a time.

The computer industry has driven our economic growth because its leaders and innovators have been left relatively free from government regulation. Let’s not let the Justice Department establish a state-managed economy in Silicon Valley.

Robert W. Tracinski is editor of The Intellectual Activist. 

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