In high school, I remember learning about government’s heroic anti-trust break up Rockefeller’s Standard Oil. Yay, government! That was long, long ago. I’ve since come to regard government not as the thin gray line between the public interest and corporate greed, but as the instrument of corporate greed. Here, I think, lies the difference between liberals and conservatives.
In debates with my liberal friends, their underlying assumption often seems to regard government as a benevolent force, which would cure our ills if only we surrendered more wealth, more liberty, and more power to it.
Here are several stories which, I hope, shatter the myth of government benevolence:
– Regulator Let IndyMac Bank Falsify Report. A senior federal banking regulator approved a plan by IndyMac Bank to exaggerate its financial health in a May federal filing, allowing the California company to avoid regulatory restrictions only two months before it collapsed, a federal inquiry has found. (Read more from washingtonpost.com)
– Press reports document criminality of US financial elite. Recent press reports make clear that the Madoff affair is not an aberration. It is indicative of pervasive fraud and criminality in the highest echelons of the financial establishment, aided and abetted by government regulatory agencies. (Read more from inteldaily.com)
– Antitrust’s Greatest Hits. The government’s victory against Standard Oil had a long-term effect on the oil industry that is seldom discussed by those who see parallels with the Microsoft case. Only six years after losing the antitrust case, Standard Oil dramatically changed its attitude toward Washington, moving from hostility or avoidance to a very warm embrace. Company chief A.C. Bedford served as chairman of the War Services Committee, an agency created to mobilize the nation’s supplies of gasoline and diesel fuel for military use during World War I. After the war, federal control never retreated, transforming what economist Dominick Armentano has called “a virtual textbook example of a free and competitive market” into “what had previously been unobtainable: a governmentally sanctioned cartel in oil.” The legacies of this transformation include higher prices for consumers and the “energy crisis” of the 1970s. Deregulation in the 1980s finally restored some measure of competition to the industry.
The Standard Oil case teaches some important lessons about competition, innovation, and antitrust law. We see the difficulty antitrust has dealing with highly innovative companies. We witness the vagueness of antitrust law, which allows prosecution on the basis of alleged intent rather than specific actions. And we see how the Standard Oil case ultimately failed to benefit consumers or investors. Instead, it laid the groundwork for collusion between industry and government, bringing about many of the very ills the “progressive” proponents of antitrust said they were fighting. (Read more from Reason.com)
– Washington Is Killing Silicon Valley. From the beginning of this decade, the process of new company creation has been under assault by legislators and regulators. They treat it as if it is a natural phenomenon that can be manipulated and exploited, rather than the fragile creation of several generations of hard work, risk-taking and inventiveness. In the name of “fairness,” preventing future Enrons, and increased oversight, Congress, the SEC and the Financial Accounting Standards Board (FASB) have piled burdens onto the economy that put entrepreneurship at risk.
The new laws and regulations have neither prevented frauds nor instituted fairness. But they have managed to kill the creation of new public companies in the U.S., cripple the venture capital business, and damage entrepreneurship. According to the National Venture Capital Association, in all of 2008 there have been just six companies that have gone public. Compare that with 269 IPOs in 1999, 272 in 1996, and 365 in 1986.
Faced with crushing reporting costs if they go public, new companies are instead selling themselves to big, existing corporations. (Read more from wsj.com)
– Anti-trust, Anti-truth. In his masterpiece, Antitrust and Monopoly: Anatomy of a Policy Failure, Dominick Armentano carefully examined fifty-five of the most famous antitrust cases in U.S. history and concluded that in every single case, the accused firms were dropping prices, expanding production, innovating, and generally benefiting consumers. It was their less-efficient competitors who were “harmed,” as they should have been.
For example, the American Tobacco Company was found guilty of “monopolization” in 1911, even though the price of cigarettes (per thousand) had declined from $2.77 in 1895 to $2.20 in 1907, despite a 40 percent increase in raw material costs. (Read more from the Ludwig Von Mises Institute)
– Letter from an angry business owner. To All My Valued Employees, There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn’t pose a threat to your job. What does threaten your job however, is the changing political landscape in this country. (Read more from fivemilliondots.com)