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The Center for the Advancement of Capitalism :: www.capitalismcenter.org
The Injustice of Antitrust Laws:
The High-Tech Lynching of Microsoft

The following is adapted from a lecture presented to Harvard University on 06 May, 1999.

Additional sponsors of this lecture included the Ayn Rand Institute and the Harvard Objectivist Club.

By Richard M. Salsman
The Center for the Advancement of Capitalism

Good evening.

Picture for a moment the following setting. You’re in the Deep South. Seated at a bar. Surrounded by friends. Having fun. You’re college educated—you’re intelligent, worldly, enlightened. But you ARE in the Deep South. And it’s 1952. The word on everyone’s lips is not “Y2K”—but KKK. Suddenly there’s a commotion. People are rushing out of the bar. You learn someone’s being lynched. He didn’t do anything wrong; he was just born with black skin. He is hated. He is despised. He is being lynched. For no other reason. What will you do?

Now, come back to Cambridge. It’s the late 1990s. You’re college educated. You’re even more enlightened. The whole world is open to you. You own a personal computer, purchased at a fraction of the cost of a 1952 IBM mainframe and with substantially more power and ease of use. With a few simple key strokes you can write papers, send e-mails, access the Internet, do budgets, start your own business. You can “be all that you can be.” You’re content. Suddenly, there’s a commotion. It seems nasty. You see it among professors and some of your friends, in the news and on the Web. People are rushing around, angry, agitated and vengeful. You sense that someone’s being lynched—but you’re not sure, because that’s not how it’s described. Like the black man, the local victim didn’t do anything wrong; on the contrary, he seems to have done everything just right. And not because he was born to, but because he learned to. Still, he is hated. He is despised. He is being lynched. For no other reason. What will you do?

America’s biggest, most profitable, most successful, most widely-recognized company—a firm whose products are more widely and more productively used, in every line of business, than any other; a firm whose chairman left Harvard early out of boredom and became a multi-billionaire in his 30s; a firm which has spawned thousands of millionaires among its programmers and salesmen; a firm whose stock has soared hundreds of percentage points and fattened the pensions of countless investors—this is the firm that’s been the target of a long, vicious and calculated assault—from academia, from the media, from 19 state Attorneys General, and from antitrust prosecutors in Washington. The assault has been in progress since 1990; it sped up in 1990; it was intensified in a Federal trial beginning last fall.

The title of my talk tonight refers to a “high-tech lynching.” Why do I call it a lynching? After all, aren’t the proceedings taking place in America’s “hallowed halls” of justice?

In October the firm will face a final verdict and if found guilty it’ll face sentencing. Already its enemies have pronounced it guilty before the verdict, just as they did in 1990; just as was done in the Deep South. Fortune magazine, hardly a left-wing rag, says the firm’s CEO is “the information economy’s equivalent of a ‘robber baron.’”[i] From the Green Party’s Ralph Nader on the left to Utah’s Senator Orrin Hatch on the right, the firm’s enemies are already presenting long wish lists and advice to prosecutors and judges about how to penalize, control, regulate, burden, shackle, dismember, divide, slice and dice the hated firm into pathetic little pieces. Nader wants the firm broken up and run by government bureaucrats. Senator Hatch warns that if the trustbusters don’t do some busting real soon he’ll sponsor a bill creating what he calls an Internet Commerce Commission, to regulate the entire computer industry.[ii] And don’t forget the corporate vultures, the computer firms who aided and abetted the assault, the ones standing by, eager to be handed key products, crucial patents and whole divisions for a song.

Of course, the firm I’m alluding to—the one under assault—is Microsoft, of Redmond, Washington. Its chairman is Bill Gates. Why has Microsoft been attacked? What are its sins? What is the evidence? What is its defense? Whatever the verdict, will justice be served? Will rights be preserved and protected? What rights? And what about the antitrust laws, under which Microsoft has been prosecuted? Are they valid? Are they just?

These are the issues I’ll address tonight. But I won’t leave you in suspense—any more than Microsoft’s critics have left you in suspense about their verdict. Unlike Microsoft’s assailants, armed with their envy, their emotionalism and their decrees, I’ll provide rational evidence for the verdict that I pronounce: Microsoft is innocent of all charges. More accurately, it is innocent—with no means of showing it under the antitrust laws. Why? Because, as we’ll see, the antitrust laws presume all businesses to be guilty, no matter what they do. Microsoft has been assaulted and will likely be shackled and/or dismembered in some form not because it’s an “evil predator” or a “contract bully” or a “robber baron” or a “capitalist exploiter” for it’s none of these things—that is, it is none of these smears.

I call Microsoft’s lynching “high-tech” because it’s one in which the firm’s own success and its own products are being used to weave a noose for its own neck. High-tech firms who lagged behind Microsoft’s success encouraged the assault, sending reams of whiny complaints and private documents to antitrust prosecutors. Court exhibits include E-mails, videos and computer demos. Electronic media has been a willing accomplice in what even the presiding judge calls a “show trial.” Anti-Microsoft web sites, accessed by Microsoft’s browser, invite readers to give their opinion, prior to the verdict, on how—not whether—Microsoft should be penalized and dismantled. Even the prosecutors’ legal briefs were processed using Microsoft systems and applications. There’s a lesson in this. Lenin, who hung businessmen, once joked that capitalists would “sell the rope with which their enemies would hang them.” This cynical claim masks the benevolence of most businessmen, who can’t imagine they might be hung for the virtue of being productive.

Origins of Antitrust

Let’s look at the origins of the U.S. antitrust laws. It may surprise you to learn these laws were passed a century ago, in the 1890s—in large part to pre-empt the onslaught of then widespread and dire Marxist predictions about concentrations of wealth. Farmers and populists alleged that the big railroads were charging excessive rates and that big city bankers were charging them excessive interest. The conservatives of the time—the alleged defenders of capitalism—became convinced, as Marx had, that great wealth, unevenly concentrated, was evil and socially destabilizing. Karl Marx, of course, wanted wealth to concentrate still further, to foment discontent and hasten capitalism’s “inevitable” demise.

America’s first antitrust law, the Sherman Act (1890), was sponsored by a Republican Senator from Ohio. He admitted that big business was productive and lowered costs, but complained that “this saving of cost goes to the pockets of the producer.” He ignored the fact that the producers were responsible for the cost savings, that such savings were made possible by their substitutions of capital for labor and their large-scale, low-cost forms of ownership, called trusts. He was blind to consumers enjoying more products at lower prices. He derided the profits of those responsible for it. In fact, profit is the net creation of wealth in excess of the costs incurred to create it. Profits means production. A loss is the destruction of wealth. Theft is the stealing of wealth. But none of this was understood by Sherman and his colleagues, just as it is not understood today. Where did they get their views? Recall Marxist view of profit: it’s a theft from manual laborers. When profits accumulate, that’s called wealth, or property. What do the Marxists call it? According to Pierre Proudhon, an early 19th-Century French socialist, “property is theft.”

Sherman and his Congressional cohorts—no less than their modern versions today—mimicked the Marxists when they insisted profits and wealth should not accumulate. “The popular mind is agitated with problems that may disturb the social order,” Sherman said at the time. Heed these fears and pass my antitrust law, he warned, or else “be ready for the socialist, the communist and the nihilist.”[iii] We all know how, in the early decades of this century, Republican President Teddy Roosevelt pushed for aggressive “trust-busting.” Roosevelt and the conservatives united with the farmers, small merchants, populists and the so-called progressive reformers, all of whom regurgitated the Marxist myth that wealth is created by physical labor, by muscles—and that intelligence—the mind—does nothing in the process, that the mind is parasitical and exploitative. Big business, these socialist reformers claimed, has no inalienable rights—not to property, not to anything else; they operate not by right but by the permission of state bureaucrats. Businessmen must serve the so-called “popular will,” “the public interest,” “the common good,” and “consumer’s welfare.” But these notions of duty-bound self-sacrifice and service to others are blatantly antithetical to the concept of individual rights and freedom. They are the notions undergirding systems of communal misery and slavery—and the antitrust laws.

In short, the conservatives initiated the antitrust laws. Today they remain some of the biggest supporters of antitrust (see Orrin Hatch). As an alleged answer to Marx, they preserved and codified Marxism in the antitrust laws and did so only a century after the founding of America, then the freest country in all world history—and only three decades before the Russian Revolution of 1917 formally codified Marxism in that nation. By promoting the antitrust laws the conservatives have always claimed that they’re “saving” capitalism from itself—that is, from its alleged “excesses.” In so claiming they exhibit an ignorance of capitalism unmatched by anyone, anywhere—except by Marxists themselves.

Economic Power versus Political Power

Just as Marxists do, the proponents of antitrust laws—a century ago and today—actively seek to obscure the crucial distinction between economic power and political power. They insist, against all evidence, that productive giants such as Andrew Carnegie, John D. Rockefeller, J.P. Morgan, Henry Ford, Mike Milken and Bill Gates are every bit as “powerful,” especially if left free to reign, as Europe’s kings and feudal land barons; that these business creators are every bit is dangerous as tyrants like Napoleon and Hitler. Big government is bad, but so is big business, they claim. Both can “oppress” us all the same.

When the difference between political and economic power is obscured, it’s easily claimed that big business consists of an army of ruthless “Robber Barons,” bent on destruction unless they’re stopped, so as to reduce their power (their ability to produce), take their weapons (their products), disperse their conscripted troops (their employees), attack their supply routes (customer contracts), rout their divisions (their corporate divisions), and destroy their command structures (their executive suites, trust holdings).

I don’t use these war-like terms to exaggerate my point. Read any textbook on the great industrialists and financiers of history—or any antitrust article from long ago or today—and you’ll see such terms tossed around as if there was no question that economic power is essentially equivalent to political or military power. There are repeated references to allegedly “predatory” behavior, to the “grabbing” of market share, to “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.” Do such terms describe voluntary production and trade? No, they do not. And such terms are used in describing business activity precisely because the distinction between political power and economic power is being obscured.

When Microsoft issued Windows 95 in the spring of that year, it did so with a new feature, a “web” browser called Explorer. And it freely signed contracts with personal computers makers such as Dell and Compaq to include the browser, along with many other applications it had added to the Windows platform over the years, when the hardware box-makers installed Windows software. Microsoft charged nothing extra for this Windows upgrade and this new feature—in fact, the entire Windows platform—with applications in word processing, spreadsheets, databases, desk-top publishing, office networks and browsers—represents only 5% of the cost of a personal computer system.

A rival browser made by Netscape was losing market share to Microsoft. Netscape and others rivals ganged up on Microsoft, not by offering a better product or better terms, but by running to Washington and getting trustbusters to launch an attack and incorporate their grievances. This is nothing new: 80% of all antitrust cases are initiated and sustained in just this way—by disgruntled rivals using coercion to secure what they can’t achieve voluntarily on a free market. The Ayn Rand Institute, a sponsor of this talk, makes the point dramatically. Recall the Olympics in which top figure skater Nancy Kerrigan was assaulted by the thug friend of a trailing competitor—Tonya Harding. Microsoft’s competitors, says an Institute press release, those “unable to gain profits by voluntary means—have resorted to the Tonya Harding approach: if you can’t win fairly, they physically cripple your opponent.” [iv] Why is it that most people properly despise Harding and sympathize with Kerrigan yet despise Bill Gates while sympathizing with laggards?

Anit-trust laws don’t merely sympathize with economic laggards—they subsidize them. An allegedly damaged party gets “treble damages” under antitrust—that is, he gets three times the alleged financial harm shown. Thus, if Microsoft is alleged to cost a rival $100 million in profits, the aggrieved firm gets a $300 million reward. Do you see the motive for initiating an antitrust case? 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. Victimization occurs only when rivals attempt to gain by coercion what they couldn’t gain by voluntary trade. The plaintiffs are the real “robber barons” in the realm of antitrust.

At a press conference in the spring of 1995 Janet Reno, head of the U.S. Justice Department, announced she would fine Microsoft $1MM per day unless it unbundled its browser from Window’s 95. Microsoft argued, correctly, that one of the virtues of its platform is that it’s integrated—the pieces are intended to work together for maximum performance. It’s irrelevant whether there are bugs in the platform or that its integration is less than perfect—surely Microsoft had the right to offer its platform to buyers, in the way it designed it, letting the best platform win. No chance, said Reno. 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.” What an obscene travesty. Microsoft, a leading producer using voluntary cooperation is called a coercive thug; its puny rivals- puny because they had difficulty selling their inferior products—are permitted to wield actual coercive power, with the full backing of the world’s most powerful government—worse, from its “Justice” Department.

Let’s make even clearer what’s been obscured. 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. Political power involves involuntary subjugation to the state, which has sole discretion over the use of force. Remember this key fact: government is the only social institution having a legal monopoly on the use of force. No other party can use force with impunity. We lodge our natural right of self-defense in an agent called government. It’s the opposite of gang warfare and vigilantism. But what if government offers weapons to gangs, whether gangs on streets or in business?

In a free society government may only use its power in just 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, government acts as a robber or a gang—but far worse: a robber or gang with no higher, legal authority above, controlling it. When a government initiates force, not just occasionally, but continually, as a matter of principle and policy, when it lords itself over the entire domain of big business and the economy, dictating, at will, who shall do what and get what and how—as it does in most cabinet agencies and under the antitrust laws—then the government is a Robber Baron. It’s a government in possession, not merely of a legal monopoly on the legitimate use of retaliatory force, but in possession of a legal, unchecked monopoly on the initiation of force against otherwise defenseless innocents.

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. Unlike political power, which entails fear and punishment, economic power entails incentives and rewards. Should a businessman initiate force, he is, precisely to that extent, a criminal, not some economic power-lord. Should a criminal take some time out to earn some wealth instead of stealing it, to that extent he is in business, working in a creative role. Economic power means the power of a dollar—how many you earn and how many you can spend determines the extent of your “power.” Economic power involves trading benefits with whomever you choose to deal and with whoever chooses to deal with you. That is, it involves the power to harm no one.

Political power is the power of a gun—of police, the military, the taxman and the jailer. Should you flout the law, whether a just law or an antitrust law, you must submit. No one “must” submit to a business proposition—not even from Bill Gates. If people value his products and services, they’ll freely contract with him for them. The fact that someone might possess more economic power or resources than another may effect the terms of a deal, but it doesn’t alter the fact that the deal is entirely economic, a completely voluntary trade. For those of you still unclear about these distinctions, let me suggest an experiment. After you graduate from Harvard, during your first year in the workforce, don’t buy or use any of Microsoft’s products. That is, send the alleged “Robber Baron” no money. At the same time, send the government no money. That is, don’t pay your taxes. Then wait. Watch who comes after you for your money and how and with what weapons.

Essential Nature of Capitalism

The essential feature of a capitalist system is not that it has capital, nor even competition—these are corollaries, or manifestations, of capitalism. Capitalism, as Ayn Rand properly defines it in her book, Capitalism: The Unknown Ideal, is “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.” It is true that such a system, protecting freedom as it does so well, will also be the most productive system—that it will generate huge sums of wealth—that a small minority of productive geniuses and giants who generate the wealth will be the rightful owners of it—that these creators will also be the rightful administrators of the companies that help create it—that ever higher living standards will be achieved by an ever-widening middle class—that the system will serve as an open invitation to any and all to participate and compete, with a better idea or mousetrap—that its capital markets will be open and deep enough to fund new ideas and products—if they’re commercially viable. But capitalism is not a system that permits the violation of individual rights should any of these specific, derivative features fail to emerge—or if they emerge, but not exactly in the way an envious competitor or bureaucrat subjectively “feels” is preferable

Like a perpetual Olympics of the productive spirit, capitalism is replete with active competitions which companies actually win. The winners strike gold, in effect, while others earn merely bronze, or a ribbon, or something less. But unlike the Olympics, capitalism has no fixed program of events, or industries, within which to compete. It burdens no participants with a static quantity of opportunities or a single pot of treasures or an inelastic market from which all must grab their market “share.” Capitalism competition is not some “zero-sum game” in which one man’s gain is another’s loss; nor is it some “dog-eat-dog” battle to the death; nor is it “cut-throat.” Capitalist competition entails not the brutality of animals fighting over a fixed hunk of meat but the vigorous and peaceful exchanges of rational, productive creators of wealth. The freedom and economic “power” inherent in the Olympics of capitalism encourage the creation of new events and expanded programs—of new material creations, new products and new industries.

Capitalism is not a system of anarchy, as libertarians claim. It’s a system of objective laws, laws that are just, clearly defined and known in advance, laws that protect individual rights—the only kind of rights that exist—including rights to private property. That means the right to your property, to the property you’ve earned—not some alleged “right” to the property of others, involuntarily surrendered. There are no rights that entail the obliteration of the rights of others. Objective laws are just laws, laws that punish evil and protect the good. They do not presume that wealth—even vast wealth—is evil. Indeed they presume innocence, not guilt. Justice applies to and protects individuals and the associations they form, including economic associations called corporations or trusts.

I’ve said economic power is the power to produce—and without question, this power can be enhanced by joining with other producers and investors. Sometimes, two heads are better than one—but that shouldn’t make such combinations illegal. Nor should combining or segregating one’s assets. A “trust,” after all, is nothing more or less than a means of holding assets, be they stocks, bonds, patents or copyrights. Today they’re called holding companies. A trust is an efficient vehicle for holding and organizing one’s property, especially if it’s massive and complex. This form of ownership permits persons and businesses to expand beyond self-financed proprietorships to corporate forms, so as to attract the capital investment of others typically required to finance large-scale enterprise.

Under the U.S. Constitution—and in any capitalist system—property is private-held and protected by law against assaults from the initiation of force or fraud. Under this system, you don’t lose your right to your property simply because you elect to hold it in a more complex or efficient form. Nor do you lose the right to your property simply because you create more property. That right is violated by a system of graduated income taxes—and most certainly by antitrust laws. Because trusts are what they are, the antitrust laws are, in essence, anti-property, anti-large-scale enterprise, anti-corporate, anti-wealth and anti-American. What’s more, the antitrust laws are blatantly unconstitutional. And a “trustbuster,” in essence, is a state bureaucrat devoted to busting up property, wealth, large corporations, American values and constitutional protections. He is a lawless wielder of political power, not with the aim of protecting private property, but of destroying it.

Here is the height of injustice: when the U.S. Justice Department attacks Windows, a product delivering expanded applications and integrated functions at an ever-cheaper price to millions of satisfied users, at a satisfactory rate of profit to Miscrosoft—and when the so-called Justice Department assumes PC makers are subjected to “force,” when in fact it was Netscape, the maker of the inferior browser—not Microsoft or its customers, Dell or Compaq—who used force. This is injustice: an attack on freedom of contract for the sake of sheer political power. Proper laws protect voluntary trades—or contracts—from force or fraud. Unjust laws sabotage voluntary agreements at the expense of a wealthier party, because he’s wealthier. Unjust laws penalize, not broken contracts, but earned wealth. They penalize success—not success achieved by force, but by production and trade. Unjust laws penalize success for the sole sake of penalizing success. They codify envy.

In her 1957 novel, Atlas Shrugged, Ayn Rand dramatizes, often humorously, the utter absurdity and illogic of “preserving” capitalism by means of antitrust laws. The novel tells of the passage of various antitrust style laws—“the “Anti-Dog-Eat-Dog Rule,” the “Equalization of Opportunity Law” and the Preservation of Livelihood Law.” Supporters of the laws are overheard pontificating at a cocktail party. One argues that “Competition is essential to society and it is society’s duty to see that no competitor ever rises beyond the range of anybody who wanted to compete with him.” (page 130). A second insists that “There’s nothing more destructive than a monopoly,” “except,” adds a third, “except the blight of unbridled competition. The proper course is always the middle. It is the duty of society to snip the extremes.” A fourth advocate offers the following peculiar logic, a logic not unlike the kind one might see being used in Congress today: “A free economy cannot exist without competition. Therefore men must be forced to compete. Therefore, we must control men in order to force them to be free.” Isn’t that just it, Senator Hatch?

Competition Under Capitalism

To compete in a free economy means to create and offer better values to customers than rival firms. Successful competitors focus on reality, inventions, innovations, materials and methods—not on rivals per se. They’re independent, unconventional, often rebellious toward accepted norms and opinions. They’re first-handed. They don’t copy—they originate. They don’t travel well-warn paths—they blaze new commercial trails. They are forward-looking—not mired in the past or in the status quo or burdened by conventional habits. They’re not passive order-takers” or servants of demanding consumers. They invent products and processes that consumers never heard of nor could dream of.

The primary concern of the capitalist producer and competitor is the creative work itself—and as a close second, its commercial applications and profitability. They focus primarily on creative work done well and profitably, not on the welfare of employees, customers or suppliers. But since the creator’s work is done well, employees, customers and suppliers flock to them willingly. Creative producers know that competition means only one seller can receive the same dollar of spending; but they recognize this not as a fixed hunk of meat to be torn from the jaws of rivals, but an incentive to expend greater effort, to improve and achieve higher standards and to attract more dollars. They know they’re not capturing a tiny wedge from a fixed pie but creating more and different pies at a profit. The creators recognize that wealth is created, not seized. If a capitalist competitor doesn’t succeed in the context of voluntary exchange, he does not grab a gun to settle matters, nor run crying to Washington to have Janet Reno use her gun, as did Netscape and its cohorts.

Competition under capitalism leads not to the restriction of output at ever-higher, wallet-gouging prices but rather to an abundance of output at ever-lower prices. The image of competition as leading to monopolies, in which stingy, Dickensian, Scrooge-types hoard their wealth and parcel it out in mean-spirited ways is the image held by those who’ve never grasped the creative essence of capitalism. Creativity comes from a confident ego, from rationality and self-interest, not from humility, self-abnegation and charity. It’s the product of human virtues, not of vices—of a life-affirming ethic, not the ethic of a hermit.

The whole history of capitalism shows this. The creative and productive giants of business boosted output and caused plummeting prices, permitting customers from all walks of life to afford the new and improved. The creators did this while profiting—indeed, to earn a profit means to create new wealth net of resources consumed in production. The profits were earned not by price-gouging but by cost-saving, by expanding the size of operations and inventing labor-saving devices. The result, system-wide, was not fewer workers employed at a plummeting, misery-causing real wage but more employed at rising real wages. This is the new pie, not the fixed pie. Production is neither theft nor exploitation. The stupendous advances of capitalism—made most stupendous by its biggest companies—was completely ignored or derided by Marx and his cohorts in academia and politics.

Those who claim that the “little guy” has no chance under capitalist competition, that the man of limited means but big potential, big ideas and a few commercially viable products will get nowhere or be squashed by the giants—well, these critics ignore the crucial role of capital markets. Under capitalism vast pools of savings are directed by investors into all kinds of new products and ventures, so long as they can project a reasonable rate of return. The return on investment, not its size, is what counts. An investment of $1000 can return 10% just as $1 billion can. No one in the business world even heard of Bill Gates in the late 1970s, when IBM and DEC were both considered insurmountable computer behemoths. Of course IBM, as a creative leader, was then under attack by trustbusters. Under the burdens of a 13-year antitrust case spanning most of the 1970s (1969-1982) IBM lost its edge and much of its creative talent. Microsoft rose up, but not on the back of IBM. Apple rose up too. But Microsoft rose further and farther—and as a result was, like IBM, targeted for attack by the trustbusters: attacked because it was getting large and profitable, because it was creating wealth and contented workers, suppliers and customers.

Even under capitalism it happens that large firms fail to keep innovating, to attract the top talent, or increase profits, through their own short-comings. But in the event, these firms do not deserve, nor receive, any special protections, favors or subsidies from government. The only way a large, existing firm can remain in business and grow is not by raising prices—that would attract competition—but by lowering prices through efficiency and cost-savings. By expanding output at no higher or even lower prices such firms are able to increase their profitability—at the expense of no one. Smaller, would-be competitors who do not yet possess the size, experience or cost-saving prowess of the giants have no right to run to government and secure decrees to rewrite contracts or seize patents and products, or demand the division of the leader into separate pieces. Nor does government have the right to establish a single department or agency to promote such rights-violating atrocities.

Whenever firms or industries become less profitable, investors withdraw their capital and re-invest it where profits are rising, or have the decent prospect of doing so. Typically, the fastest-growing sales and profits are found among the smaller, younger companies in any industry. They face no real disadvantage—and every chance of success—under capitalist capital markets. Indeed, capital can flow to such start-up ventures so quickly that instead of applauding this, the critics of capitalism condemn it. Read today’s papers and find articles deriding the alleged “bubble” in Internet stocks, by which the critics mean, “too much saving” is going into firms that no one has ever heard of, into firms with few products and, as yet, no visible profits. The critics ignore the fact that such ventures incur start-up costs that preclude immediate profitability; and ignore the fact that investors are both forward-looking and patient, willing to take reasonable risks for the chance of high returns. In the 1980s the anti-capitalist critics denounced firms and investors for being “short-term,” obsessed only with next quarter’s profits. In the 1990s they denounce short-term losses taken for long-term gains and decry the alleged obsession with rising stocks.

Today the world’s wealthiest man, Bill Gates was once an unknown, a college drop-out with big talent, a big ego, and big ideas—but a fairly small bankroll: the Geek David facing the Goliath IBM. But in time the capital markets recognized the talent and potential in Gates—in his ideas, his products and his company. The capital markets are a crucial means by which new entrants with good ideas and products grow bigger. If laggards like Netscape truly had a superior, commercially viable array of products, capital would have rushed to its door. That capital did not is no fault of Microsoft and no sign of coercion.

Capitalist competition, despite all the derisive descriptions given it by critics—such as “vicious,” “cut-throat,” is in fact voluntary and peaceful. Indeed, it entails a significant degree of cooperation and coordination—among producers, suppliers and customers. This does not mean self-sacrifice. Capitalist competition is certainly vigorous. It is no tea party—nor should it be. It’s a competition of wits and abilities, not a battle of fists or weapons.

This seemingly paradoxical union of competition and cooperation under capitalism may help you understand a crucial aspect in the persecution of Microsoft. We’re all aware that it’s a vigorous competitor. But who sees that Microsoft is also an excellent cooperator? It must have been to be so successful. Creators like Gates are the fountainheads of human achievement, but they can not and do not create in a vacuum. Workers, suppliers and customers may not match their talents, but they’re important to their commercial success.

The Justice Department is not merely ignorant of the extent cooperation is required—they positively attack it. Here I refer to the department’s assault on the freedom to contract with others. Every firm, Microsoft included, must make contracts—that is, legally binding agreements—with workers, suppliers and customers. Contracts are not coercive devices. They are not undertaken because the parties distrust one another. They ensure that the terms of a voluntary cooperation already achieved are understood and will succeed the inevitable turnover in personnel that occurs. Most important, of course, contracts permit long-range business planning essential to a forward-looking, wealth-building system. The government’s role is to uphold contracts—not to write them, re-write them or break them.

Committing continual acts of injustice, the US Justice Department writes, re-writes and breaks market-based contracts. Trustbusters, for example, have persecuted Microsoft for entering into “restrictive contracts” with suppliers and customers, like Intel, Dell and Compaq. Now, contract law has a long and noble history. Trustbusters violate such law at every turn. It should be obvious that contracts, by their very nature, are “restrictive.” The phrase “restrictive contract” does not symbolize a fraud—it depicts a redundancy. Contracts specify whom you will trade with, on specific terms, at specific prices, over specific time periods. They restrict, as they must, the “whom,” “how,” “what” and “when” of your trading relationships. For those who doubt that contracts are both voluntary in origin and execution, while also restrictive in form and content, ask yourself what it means to enter into a marriage contract. Ask your spouse or spouse-to-be how much force it required to make such a contract and how loose they’ll be in abiding by its restrictions.

To characterize contracts as “coercive” because they are restrictive is to obliterate the meaning of voluntary contract as such. It makes a mockery of freedom. No contracts are safe from such a premise and such smears. This is precisely the result of the Justice Department’s position on contracts. To oppose “restrictive contracts” is to oppose contracts per se. To oppose contracts is to oppose rational, voluntary exchange per se. To oppose voluntary exchange is to oppose liberty per se. When the Justice Department of the United States actively subverts contracts, voluntary exchange and liberty, it’s no longer a department of justice but a dungeon of hellish injustice where liberty is crucified.

The only proper objection one might raise about the validity of any contract is if it was signed under threat of physical force or embodied a misrepresentation or fraud. Capitalist justice does not permit fraud or the initiation of force. The fact is, 99.9% of all contracts do not have such defects. But the Justice Department intervenes in a much greater part than 0.1% of all contracts. Together with regulators, they intervene in more than 90% of them—in the name of justice, but in direct violation of it. Microsoft’s contracts have not involved force or fraud. They were signed with firms like Dell and Compaq, not with Netscape, the lagging rival who got the Justice Department to label Microsoft’s contracts “coercive” and to initiate coercive proceedings against the company. Nothing prevented Dell or Compaq from carrying Netscape’s browser; they refused for business reasons. Netscape answered, not with a better product or proposition—but with the barrel of a gun.

Government should uphold and enforce market contracts—not violate freedom of contract by dictating the terms, changing the terms, or abrogating the terms of contracts. It should neither commit these injustices directly nor assist disgruntled rivals in doing so. When government dictates, alters or abrogates the content and execution of contracts it reverses it’s role as a protector of contracts. It transforms itself from a proper agent preventing or rectifying force or fraud to an initiator of both—it becomes a lawless but legalized thug.

“Pure and Perfect Competition”

I’ve mentioned some of the political and legal aspects of antitrust law. I’ve also described the basics of capitalist competition. But there is a another, more predominant view of competition held by most economists, politicians, and journalists. It’s been taught for decades in the universities. It’s a major reason lawyers and government officials intervene so extensively in the free, competitive process. This view of competition is held even by the victims of antitrust—one reason they’ve been so inept at defending themselves.

I’m referring to the wildly mistaken concept known as “pure and perfect competition.” This is a theory, not about how market competition really does work—but about how it ought to work, regardless of reality. Before I summarize this theory, you might ask: How could such a theory have any practical relevance? My answer: Because it’s based on a moral code so widely accepted in the culture that people believe the theory and apply it regardless of its practicality. But judging whether a theory is practical requires looking at one’s goal. What if the goal is to stifle and shackle the able on behalf of laggards? No matter how unreal a theory, its practice could have the effect of accomplishing just that.

According to the theory of “pure and perfect competition,” markets are perfect, or ideal, only if they possess the following characteristics [the list is in most economics textbooks]:

 

  • Every industry must have hundreds of firms and potential entrants, each firm with tiny shares of the overall market. 
  • Potential entrants must have equal and virtually cost-free access to the industry.
  • Each firm must be completely devoid of any power to influence the price of his product or to alter his market share.
  • Within each industry the products and services of each firm must be virtually indistinguishable from those of other firms; with no need to differentiate one’s offerings, ideally there should no promotion or advertising; if there is, it’s a waste. 
  • Profits are non-existent; if then exist there is an imperfection. Prices would be too high. A firm’s price should only cover a its “marginal costs”—those are the variable costs a firm incurs, the extra costs needed to produce extra goods, such as materials, fuel, inventory and labor; in pricing its product a firm does not cover fixed costs, those costs associated with plant, equipment, and patents, because these assets already exist. Since, in fact, fixed capital wears out and must be replaced, the requirement that price cover only marginal costs means that the “ideal” situation is firms showing losses.
  • Finally every firm, consumer and investor must have cost-less and “perfect information” about the state of prices, production, employment and markets as well as of each others’ intentions—this despite the fact that it costs time and effort to produce valuable information and despite the “ideal” requirement that there be no advertising. 


That’s it. I’ve made none of it up. The theory says there should be intense competition, but if any firm is actually observed competing or, God forbid, winning a competition, that’s strong evidence of “imperfect competition” and a “market failure.” According to the theory, what’s the solution to a market that “fails?” Obviously, a government policy to “fix” the failure, to enforce competition, all in accordance with the demands of the theory.

I don’t have to tell you that this theory is wholly at odds with the facts of reality. It’s a theory that pertains to no industry and no market, any place in the world, at any time in history. The proponents of the theory know this full well; they admit it openly in their texts. Yet they’re not embarrassed by the breach between their theory and market facts. Why not? Well, have you ever heard the bromide, “that’s good in theory, but not in practice?” Have you ever asked yourself, “Why would any theory qualify as good if it doesn’t fit reality?” No theory can do that accurately, it’s claimed. When epistemological confusion becomes this perverse and this pervasive, it’s “deuces wild.” You can make up anything you want and pass it off as scientific, especially if it fits a culture’s prevailing sense of what’s “ideal,” what’s the “perfection” toward which we should all strive.

Indeed, doesn’t the theory of “pure and perfect” competition fit the prevailing view of “ideal” fairness and justice? Aren’t large companies and wealthy capitalists seen as ruthless and powerful exploiters? Let’s have hundreds of firms, each with no influence on us. Isn’t it felt that everyone, regardless of ambition or merit, should have equal access to wealth and the preconditions of wealth? That’s egalitarianism; its political application is socialism. Well, let’s have equal access to industry, to goods, to information, to investment advice. Isn’t it considered vulgar and crass to promote oneself and one’s products? Isn’t it thought impolite to stand out as different, let alone as better? Let’s have no advertising or promotion. Isn’t profit considered a theft? Aren’t businessmen implored to “give something back to the community” because it’s presumed they stole something simply by engaging in business? Let’s have the opposite; let’s have losses. Don’t the so-called idealists criticize business for daring to claim a right to property? Don’t the critics insist that business must be a “steward” of the wealth that’s already there and belongs to “society” (or, according to the environmentalists, to far-distant generations)? Isn’t business urged to ignore the rights of its shareholder and instead serve the needs and wishes of “stakeholders.” By “stakeholders” the critics mean anyone except a firm’s owners. Let’s have an ideal view of pricing and profits which forbids business to take care of, replace or upgrade their capital or equipment. If they do, that’s “imperfect.” That’s “impure.” That’s “tainted” competition. “Clean” competition really means no competition.

Although the liberals in America, the traditional disciples of big government, have been willing accomplices in promoting this view of competition, it is the conservatives, the alleged defenders of capitalism, who are most responsible for it. I’ve already mentioned the role of the conservative politicians. But the source of the “pure and perfect competition” doctrine is none other than the conservatives from University of Chicago, the school with the reputation of having the most pro-capitalist economists in the world.

Frank Knight, founder of the Chicago School of Economics and a Christian philosopher to boot, first spelled out the so-called ideal” in an influential book published in 1921.[v] He guaranteed a lasting role for antitrust by grounding it philosophically. Knight believed the ethical standard for judging competition was “social justice,” based on a “Christian conception of goodness” which, he wrote, “is the antithesis of competitive.” According to Knight, the only justification for a competitive system is that the most productive men are encouraged “to make the greatest possible addition to the total social dividend.”[vi] Laws must preserve those who lose in what he derisively called “the game of business.”

Friedrich Hayek, a Nobel Prize-winner in economics (1974), who spent nearly a decade at Chicago, shares these premises. He defended antitrust similarly and in addition, on the view that private property is often what he called “an undesirable and harmful privilege.” “When I speak of ‘Free Enterprise’ and ‘Competitive Order,’” he once wrote, “the two names do not necessarily designate the same system, and it is the system described by the second that we want.”[vii] According to Hayek, “it may be a good thing if the monopolist is treated as a sort of whipping boy of economic policy.”[viii]

Milton Friedman, the most famous of the Chicago School and widely-considered to be a defender of free markets, also embraces the theory of “perfect competition” as an ideal. “The participant in a competitive market,” he once wrote, “is hardly visible as a separate entity.” I ask you—does this describe Bill Gates? Any businessman who is “visible” is virtually a monopolist, Friedman claims, and as such “it is easy to argue that he should discharge his power . . . to further socially desirable ends.”[ix] Friedman realizes that “widespread application of such a doctrine would destroy a free society,” so he suggests that the antitrust laws should only be enforced selectively. I would remind you that this means they should be applied arbitrarily, since all successful businessmen under capitalism are “visible” in some way. Might envy become the motive in targeting culprits? Recall, it’s Christianity that insists “it shall be easier for a camel to pass through the eye of a needle than for a rich man to enter the kingdom of heaven.” [The rich are the devil].

Those are the views on competition and antitrust held by the alleged defenders of capitalism. I leave it to your own imagination to consider what the liberal and socialist views might be. If these conservatives are capitalism’s friends, does it need any enemies?

What are the deeper, ethical roots of these theories? They are well described by John Ridpath, Professor of Intellectual History at York University in Toronto. Ridpath names the ethics of altruism, which advises not benevolence toward others, but self-sacrifice. Altruism is, of course, the ethical code seen as “ideal” by conservatives and liberals alike.


"The altruist ideal of unrewarded service to others motivated the acceptance of the perfect competition model and its use as a standard of antitrust. The root reason the lawyers, economists, politicians and businessmen accepted this model and hold it as a virtually unchallengeable standard is that the conduct it depicts is perfect according to the altruist morality. The model appeals to altruists because it describes a world in which everyone is acting to best serve the interest of the consuming public—a world in which goods are automatically distributed in such a manner that no one receives any selfish gain “at the expense” of others, and in which everyone participates in a process that gives the most satisfaction equally to all. This is the moral meaning of the standard used by modern antitrust. Businessmen are being persecuted for not being sufficiently identity-less, passive, altruistic servants of consumers.”[x]

The altruist ethics considers self-interest and its commercial counterpart, profit-seeking to be evil. Altruism is incompatible with any defense of capitalism and only inspires attacks against it. As Northrup Buechner, Professor of Economics at St John’s University, puts it:


"For the last one hundred years, economic thought has rested on the following logical chain: selfishness is evil; capitalism is based on selfishness; therefore capitalism is evil and must have evil results. The rational purpose of economics is to identify, interpret and explain the results of a free economy’s operation. Altruism assured economists in advance that those results were evil. The consequence has been . . . a blizzard of bizarre theories and constructs . . .”[xi]


Thus we see that the theory of “perfect competition” is patently false and unrealistic. That it’s considered ideal only by reference to an anti-capitalist ethic. Yet it has real, concrete consequences. Suppose you held the following theory: you could prepare for and pass your exams by sitting in the middle of Harvard Yard for seven straight days and nights, completely naked, in a lotus position, gazing up at the sky, stoned on LSD, free of all books and notes except for Shirley MacLaine’s latest autobiography. Now this is certainly a “theory.” It bears no relationship whatsoever to the requirements of passing your exams (I hope). But practice the theory and you’ll see real, concrete consequences on exam day.

Or imagine a theory of “pure and perfect university education.” There must be hundreds of schools like Harvard, none standing out as superior. Anyone should be able to start up a new Harvard from scratch, costlessly. Tuition here should cost no more nor less than elsewhere. Harvard’s curriculum, professors, and reputation must be indistinguishable from that of other schools, such as UMASS. After all this, if Harvard produces any superior products—like educated graduates—these graduates can’t profit or benefit in any way by their Harvard education. They can’t show transcripts with grades higher than those of their classmates. They can’t advertise that they went to Harvard. No Harvard on your resume. No Harvard-inscribed sweatshirts. No affected Harvard accents. Well, suppose that’s the “ideal.” Do you live up to it? Or should I say live down to it? If not, we have some penalties and jail terms we can impose on you for not being “pure and perfect.”

Ayn Rand once wrote, “don’t bother to examine a folly—ask only what it accomplishes.” Well, the theory of “pure and perfect competition” is definitely folly. It’s foolish. It’s absurd. So I won’t spend more time on it. But what, exactly, does it achieve? It does for business what my hypothetical studying method does to your transcript and future and what my hypothetically “perfect market” in universities does to Harvard. It wrecks them.

The Nature of the Antitrust Laws

The antitrust laws are based on the economic theory of “pure and perfect competition” and deeper, on the ethical theory of altruism, or self-sacrificial service to others. What do the laws require? What illegal behavior do they cite? What punishments do they endorse?

The antitrust laws are as arbitrary as the “perfect competition” doctrine and as anti-business as altruism requires. Consider only those provisions relating to price setting. If a business sets a price above the prices of its rivals, it can be charged with “intent to monopolize.” If it sets a price below those of rivals, it can be charged with “predatory pricing” or “unfair competition” or “restraint of trade.” If it charges a price similar to those of rivals, it can be charged with “collusion” and joining a “conspiracy to fix prices.”

In short, the minute you go into business, whatever price policy you adopt, you violate the antitrust laws. You’re guilty for being in business as such. You’re presumed guilty until you prove yourself innocent, a direct perversion of proper justice. Does this mean every enterprise is prosecuted under the antitrust laws? No. But the wide discretion and limitless capacity to attack anyone, anywhere, at anytime, gives the trustbusters enormous power. What, then, is the standard or signal justifying prosecutorial action? The trustbusters target those firms that it feels exhibit what it deems, subjectively, to be “excessive” pricing power, “excessive” contracting powers, “excessive” profits, or “excessive” market share. By “powerful” they mean: economic power is political power. By “excessive” they mean: more than what altruism and “perfect competition” can allow.

The trustbusters seek out and persecute the most visible “imperfections” in the market—that is, they seek out and attack the biggest, most distinct, most successful, most profitable, most widely advertised and most frequently patronized firms. The antitrust advocates call it “leveling the playing field” but it’s really leveling of the ability, the skills and rewards of the players on the field. Objectivity entails the rule of law, not the rule of men and their whims. It provides a level playing field, but with the state as a referee, not as a brazen and biased intruder, running riot on the field, or roughshod over ability, in pay to incompetence, by changing the rules and the score at will to achieve his twisted aims.

There are other elements of antitrust law which codify altruist and egalitarian theories of perfection and sabotage business freedom. There is the “essential services” doctrine which says a product or service that becomes widely used and relied upon loses its private character and effectively becomes public property, to be shared with rivals and the government. If this is not penalizing success for being success nothing is. Here, the successful exercise of one’s property rights, the successful creation and distribution of a product throughout an entire economy causes one to lose those rights, to be robbed of the product of one’s creative efforts. These values are stolen and given to those who did not and could not create them. The wealth is stolen “from each according to his ability” and given “to each according to his need.” That’s Karl Marx’s phrase; Marx, codified in law.

An example of the arbitrariness of these laws can always be found in the way the trustbusters define a firm’s “market share.” They define it anyway they wish, to maximize guilt. In a case against DuPont they said the firm monopolized the market for food wrap. It created cellophane. Few others made it as well. What’s the market, cellophane? Why not define the market as all food wrap? Include aluminum foil, zip-lock bags, or Tupperware? Too big a market? How about the market share of these things, not in the US but only in Cambridge? Or only in the stores around Harvard Square? You get the idea. The government defines the market as narrowly as possible to show “excess share.”

What about the interpretation of that share? Why is it called a “share?” Are markets fixed things, grabbed at by competitors? Or are markets made possible by and expanded by the producers? We’re told, ominously, that Microsoft “controls” 80% of the market for operating systems for personal computers, that it has a “dominant” market share.” Has it been forgotten that Microsoft made these products? That it owns them until they’re sold? That the products were bought voluntarily? The right to private property means the right to hold it, to alter it, to exchange it—that is, to control it. Is a firm guilty of controlling its own property? To prosecute a firm for that is to obliterate the right to private property. Is that justice? Can a firm be said to “control” goods it sold in an open-market, goods now owned by others? How? Don’t others have the right to their property?

I’ve not even mentioned the array of other antitrust provisions that violate simple justice. There are the retroactive elements—definitions of wrong-doing that are so murky, firms can’t know in advance what they might become charged with, what they may be guilty of, when, or for what reason. That’s called retroactive law, and its forbidden by the US Constitution. The rights of criminals are better protected than those of businessmen. Add to this the fact that most antitrust cases are decided by precedent—not what’s written in the law itself, but what thousands of judges have written in thousands of antitrust case spanning an entire century. And it gets worse every year. And if all this were not bad enough, convictions under these laws bring heavy fines, dismemberment, even jail terms.

Two specific tactics used by trustbusters involve the consent or sanction of the victims. One is the old tactic of “divide and conquer,” in which the government uses the testimony of one company against another, and then goes after the first company with the help of yet another. Thus Intel testified against Microsoft; as did IBM. Then the government went after Intel. This happens all the time. It happened at the start, a century ago, when the farmers were used against the railroads. The trustbusters count on threats, intimidation, extortion and revenge—you know, the tactics of mobsters. The other tactic is called the “consent decree.” It’s an oxymoron suggesting both agreement (consent) and compulsion (decree). It’s a document drawn up by trustbusters for the signature of the target, telling it how to conduct its business, how to split it up, transfer patents, dismantle products, and refrain from competing. The decree is promised as an allegedly “easy way out,” to preclude a full trial. And firms sign these, as Bill Gates did, in 1994. To sign an antitrust “consent decree” is to agree, voluntarily, to abide by the decrees and dictates of an unjust inquisitor. The decrees are equivalent to executing a death sentence for your own business, certainly for your freedom. For you write your own ticket for entry into the jungles of antitrust law. A businessman can’t win. But that’s the whole idea! And not even consent decrees preclude a full trial. IBM signed a consent decree in 1956 and was micro-regulated by trustbusters for 13 years before a full-fledged case, lasting another 13 years, was launched in 1969. That’s a full quarter century of government oversight of IBM. No wonder it couldn’t stay on top. Nor was a trial against Microsoft prevented when Gates signed the decree in 1994. In fact the decree hastened it. Gates passed willfully through the antitrust Gates of Hell.

The antitrust laws are the epitome of Soviet-style laws. They are an obscene hash of vague, undefined, arbitrary rules and edicts, of oxymoronic “consent decrees,” forced testimony, presumptions of guilt, paid informants, show trials, retroactive penalties and jail terms. These laws, in sum, are a rank injustice—but one that’s been perpetrated for over a century now against America’s greatest producers. Perhaps the most grotesque, Orwellian aspect of their injustice is the fact that the Antitrust Department of the United States government is a division of the U.S. Justice Department. Trustbusters operate in the most unjust, unconstitutional, rights-violating bureaucracy in the entire government. It has been said that “if you build a better mousetrap, the world will beat a path to your door.” Yes, they will—voluntarily. But under antitrust, so will Janet Reno—in a KGB-style campaign to exterminate commercial speech, freedom of contract and voluntary exchange.

Firms that are not yet even direct targets of trustbusters nevertheless engage in what’s known as “self-regulation;” that is, in trying to anticipate and pre-empt trust-busting assaults, threatened firms selectively choose not to create products, not to expand operations, not to merge with other firms, not to profit “too much”. Microsoft, you may recall, did this with its April re-organization, with it’s decision in 1997 to abandon its planned purchase of Intuit; in 1996, when it invested $100 million in Apple Computer, a failing rival; in 1995, when it gave away some of its hard-earned technical secrets to competitors. Self-regulation is a hallmark of any totalitarian regime.

Do I exaggerate? Why would a top antitrust official himself, a man by the name of Lowell Mason who once headed the Federal Trade Commission, call these laws “a system of tyranny?” He should know, shouldn’t he? Why would he be so candid? Because, as the former head of an antitrust agency, he is now finally free to speak the truth?

Injustice permeates every antitrust case ever launched, especially those against big businesses: Standard Oil (1911), ALCOA (1945), General Electric (1962), DuPont (1960s), IBM (1969-82), AT&T (1982), Wal-Mart, American Airlines, Staples, Intel, Microsoft, Visa & Mastercard (1990s). The list is a “Who’s Who” of great American businesses. That should tell you that greatness, not coercion, is the target. Notice, it’s precisely big businesses, the firms with the genius and the vast capacity to organize and mass produce on a large scale that create the products and services which are so widely purchased and used. But the altruists aren’t satisfied when the masses receive such values, for the hated giants are still, to them, evil profit-mongers. As are firms of lesser size. They all seek to grow and profit. But lest you worry that the “perfect competition” doctrine targets only big firms, be assured that scores of smaller firms also are persecuted. There are hundreds of antitrust cases initiated every year. Mergers leading to as small a market share as 5% have been forbidden. Remember, no firm must stand out.

Antitrust says success is a sin. Here are a just a few representative excerpts from judicial decisions in three major antitrust cases tried in this past century (1911, 1945, 1995):

  • Standard Oil Company (1911): “Much has been said in favor of the objects [products] of the Standard Oil Trust, and what it has accomplished. It may be true that it has improved the quality and cheapened the costs of petroleum and its products to the consumer. But such is not one of the usual or general results of a monopoly and it is the policy of the law to regard, not what may happen, but what usually happens.”[xii]
  • ALCOA (1945): “It was not inevitable that [ALCOA] 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 newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections, and the elite of personnel.” [Judge Learned Hand, presiding trial judge]
  • Microsoft Corporation (1995): “Microsoft has a monopolistic position in a field that is central to this country’s well-being, not only for the balance of this century, but also for the 21st Century.” If the Department of Justice does not break it up and transfer its patents, “the message will; be that Microsoft is so powerful that neither the market not the government is capable of dealing with all its monopolistic practices . . . Microsoft is a potential threat to this nation’s economic well-being.” [Judge Stanley Sporkin][xiii]


These opinions demonstrate how antitrust laws seek not to prevent force or fraud but to penalize success. The opinions twist every which way, in contradictory ways if necessary, to penalize. Note the use of the “essential services” theory in the Microsoft opinion. The firm has created products of such value and importance that even this judge recognizes them as “central to the country’s well-being.” Yet he says the firm’s “a threat to the nation’s well-being.” Allegedly it’s evil, like China; strong, like the US Defense Dept; dangerous, like a virus. Yes, the firm created great products, but the fact of its greatness is what makes it “dangerous.” Its patents and products must be seized, to dilute its “power.”

The black man from the Deep South was assaulted because he is black. For no other reason. Microsoft is being assaulted because it’s the biggest, because it’s the most profitable, because it’s the most successful, because it’s so widely-recognized, because its products are widely and productively used, because it’s chairman is a young multi-billionaire and the world’s wealthiest man, because it has thousands of millionaire employees and because its stock has soared. This is my main theme tonight: Microsoft is being assaulted, in short, because it is, not simply good, but greatthe best in the business. Microsoft has risen above all competitors and mediocrities—not through force or fraud but through voluntary exchange and with no favors or handouts from government. Microsoft stands tall and its stands alone. Usually, it also stands proudly. To some, that is it’s worst sin. After all, we’re taught, “pride always goes before the fall.” But if Microsoft stumbles or falls it won’t be from pride—it will have been kicked, crippled and pushed into falling, because it’s a success, because it has something to be proud of. The virtue of pride precedes no fall unless pride is met with envy and coercion.

Microsoft is in the process of being lynched, plain and simple. Even though it resides in the United States of America, in the nation inspired by Thomas Jefferson and erected by the founding fathers of constitutional liberty, in the nation that used guns to abolish slavery and reason to dispel prejudice, in the nation with “hallowed halls of justice”—it is receiving no justice. Justice consists of punishing the bad for being the bad and rewarding the good for being the good. Injustice involves punishing the good for being the good.

Sanction of the Victim

Like other antitrust targets, Microsoft, is guilty—of something. They’re guilty of something terrible. They’re guilty of believing they’re guilty. They’re guilty of believing they’re evil. They’re guilty of apologizing for they’re success, for their sales, their profits, their contracts, their so-called “market shares.” They’re guilty of pledging to “share” their codes, patents and property, like some child’s toys, with competitors who are the equivalent of neighborhood bullies. They’re guilty of using philanthropy as absolution for unearned sins. Each of these tactics has been deployed, with miserable practical results, by Microsoft and its predecessor victims. For no one believes a businessman who denies that, in fact, he selfishly wants to create, grow, prosper, profit, succeed, win—and to be left free to do these things. Unfortunately few businessmen realize that such aims represent the height of virtue. They’ve accepted altruism as a moral ideal, unaware, or not willing to fully recognize, that self-sacrifice is incompatible with their freedom and happiness. Still, aside from this tragic appeasement, the victims of antitrust have not sinned—although they don’t know that. On the contrary, they’ve been sinned against.

When the creators and producers come to recognize that they live only by rational self-interest and that this is a moral ideal, they’ll begin to throw off their oppressors and live freely, as they’ve never lived before. They’ll stop signing consent decrees. They’ll stop appeasing their enemies. They’ll stand proud. Are they rare today? Yes. Do you need a vision of this? I recommend Ayn Rand’s great novel, Atlas Shrugged, within which you’ll read a courtroom speech by an industrialist under a siege similar to that of Gates. That’s the passion and moral certitude needed to launch a new revolution for liberty.

Conclusion

In closing, let us return briefly to the Deep South, to your stool at the bar—and the imminent lynching of a black man—because he’s black. What will you do? Will you join the mob and hasten the dirty deed? Or will you sit passively, with not a care in the world, as an indifferent, moral agnostic, crying “Who am I to judge?” Or will you care? Will you become incensed by the injustice and violence of it all? Will you alert the authorities—or at least expose their own corrupt assent to the crime? Will you exert courage and serve as a witness? Even if you take immediate action in this specific case, will you recognize the deeper principles involved? Will you realize that when one man’s liberty is assaulted—and worse, sanctioned by law, then all men are prone to assault by tyrants? Will you write essays, pamphlets and letters? Will you march or join a Civil Rights crusade to abolish the injustice permanently and for good? What will you do?

I speak now to those of you objecting to my drawing a parallel between the black man in the Deep South and Bill Gates in the Northwest. One’s poor and unknown, you might be thinking; the other is wealthy and well-known. One can’t seem to get a break in life; the other makes his breaks. One was born with his hated attribute; the other nurtured and developed it. One runs the risk of death—but no one’s trying to actually kill Bill Gates. Well, not yet at least. But there have been other villains and scapegoats—in other rights-violating nations in this century, that have been killed—or tortured, gassed, maimed, exiled. Some attempted lynchings in the Deep South did not lead to death—some victims escaped, albeit with deep neck scars and broken windpipes. Are you going to split hairs about the moral differences between lynchings and attempted lynchings? For what purpose, other than to preserve the “right” to lynch or maim whomever you please?

My parallel is between a black man being lynched because he’s black and a successful man being lynched because he’s successful. They are both injustices. But if there is a Hell of injustice, with rungs on a ladder going down, I’d say a lower rung should be reserved for the lynchers of Gates than those of the black man. Not because one’s rights are more important than the other’s. They both possess individual rights that are not to be violated. It’s certainly wrong to harbor prejudice, to discriminate against, segregate and persecute people on the basis of a non-essential human attribute, such as skin color. But more evil is to discriminate against, segregate and persecute people on the basis of an essential and life-promoting human attribute: intelligent, productive ability. Shackle or destroy this and you destroy the fruits of human civilization upon which all men depend.

Both kinds of lynchings to which I’ve referred tonight are made possible by ignorance, bigotry and hatred. Each is made possible only with the support—overt or silent—of the authorities: the police, the lawyers and judges—those whose purpose, in a free society, is to protect individual rights, not to violate them or help others to do so. The only “robber barons” among us, aside from common street criminals and firms like Netscape, reside in the Antitrust Departments, and nowhere else.

Let’s recognize antitrust for what it truly is: a thoroughly anti-American regime, an enemy within our own borders, a barbarian, not leering at us from outside the civilized gates, but careening around within, legally raping and pillaging creators like Gates. We must put an end to this legalized injustice and coercion. I appeal, not to the doubters that might still remain in tonight’s audience—those who can’t, or won’t recognize injustice and fight against it—but to those who do want to fight for justice and liberty. Forget the liberals and conservatives, the libertarians and the greens. They’re part of the problem, not it’s solution. Join me and others in a crusade for justice, to liberate business from the atrocities and lynchings of antitrust—and, I might add, from the more common regulations that shackle ability and enterprise. Help us in our crusade to abolish the antitrust laws and departments of this great and noble country. We are the abolitionists now. But we stand not merely against evil; more importantly, we stand for the good.

Also, help us to show our nation’s most able and productive leaders the way to a proper, moral self-defense, one free of guilt or apology, one full of certitude and pride—a moral and practical code—not the Sermon on the Mount or Earth Day chants, but a code of rational self-interest; a code worthy enough for the creators to state at their shareholders meetings, in their corporate mission statements and annual reports, in their boardrooms, in computer chat-rooms, in press releases and, if necessary, in our hallowed halls of justice.

If you choose to join us, you’ll be participating in the only rational, moral crusade worthy—and capable—of leading America and its great entrepreneurs into the 21st century—into a Century that can be more rational, more free, more just and more productive than the one we’ll soon be leaving behind. Evil and injustice have no independent power to survive, let alone to win—they win only when the good appease them. We have the right philosophy—and righteousness on our side. I think that’s a very good place to begin. And as for my talk tonight, I think this is a very good place for me to end.

Thank you very much.



Endnotes

[i] “What Bill Gates Really Wants,” Fortune, January 16, 1995, p. 63.

[ii] Hatch: “It seems far better to have antitrust enforcement today than heavy-handed regulation of the Internet tomorrow.” From a speech, cited in Information Week Daily, February 6, 1998.

[iii] Cited in Salsman, “Antitrust Returns with a Vengeance,” The Intellectual Activist, May 1995, p. 13.

[iv] The Ayn Rand Institute, “Antitrust Assault on Microsoft is Immoral: Tanya Harding Approach to Competition is Anti-American,” Press Release, May 22, 1998.

[v] Frank Knight, Risk, Opportunity and Profit (Chicago: University of Chicago Press, 1921).

[vi] Frank Knight, The Ethics of Competition (Augustus M. Kelley, 1935), p. 45, 48, 72.

[vii] Friedrich Hayek, Individualism and Economic Order (1948), pp. 114, 111.

[viii] Friedrich Hayek, The Constitution of Liberty (1960), p. 265.

[ix] Milton Friedman, Capitalism and Freedom (1962), p. 119-120.

[x] John Ridpath, “The Philosophic Origins of Antitrust, The Objectivist Forum, June 1980, p. 14.

[xi] M. Northrup Buechner, “Ayn Rand and Economics,” The Objectivist Forum, August 1982, p. 6.

[xii] From the Supreme Court decision breaking up the company; cited in George Reisman, “Microsoft and It’s Enemies: Which is the Monopolist?” March 30, 1999.

[xiii] Cited in Richard M. Salsman, “Antitrust ‘Returns’ With a Vengeance,” The Intellectual Activist, May 1995.  

References

Atlas Shrugged (1957), by Ayn Rand

Capitalism: The Unknown Ideal (1967), Ayn Rand, Alan Greenspan et al

Why Businessmen Need Philosophy (1999), Leonard Peikoff, Richard Salsman et al

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