When I wrote, below, that some measure of enforced equality is necessary to the functioning of a democratic republic like ours, some commenters and other bloggers responded that the problem was that the elites captured the levers of power of the state, and used their control of the state to maintain their power. For example, over at Thought Mesh:
If we look at history and ask how elites have maintained their dominance what we see is that they used the power of the state to do so. It is through law and regulation that persistent aristocracies are created and maintained, not economics and business.and in the comments:
The best way to ensure a turnover of power is to argue for free markets to remain in place, with little bureaucracy to ensure its stability. Walmart may be powerful now, but in a free market the only thing we can count on is continual productive change.and
However, it is a mistake to assume that an unequal distribution of private wealth is, per se, evidence of a social problem.Actually, yes it is a probem, and what these folks are demonstrating is first, a lack of historical awareness - remember why Teddy Roosevelt was famed for being the first major 'trust buster'?? This was the first large regulatory intervention, and why do you think it was necessary and popular? Or do you think it was unnecessary?
But lest we think we're past those eras, and as the 1980's stock analysts suggested, 'the old rules no longer apply,' I saw something in Business Week this week:
Commentary: Why the Market Can't Police ItselfAnd since Bill Gates keeps being brought up as an example of the worthy rich, an article on why Microsoft keeps getting such close government scrutiny:
Now that 10 Wall Street firms have agreed to settle charges of biased research, Congress and the Securities & Exchange Commission are facing a new question: Does self-regulation by Wall Street work?
The answer is a resounding no. It's not just that the New York Stock Exchange failed to act on phony research. More proof came when Sanford I. "Sandy" Weill, chairman and CEO of Citigroup (C ) (whose Salomon Smith Barney (C ) unit was implicated in the research scandal), was invited to represent the public on the NYSE board. Weill withdrew after a storm of protest.
Reports that NYSE Chairman and CEO Richard A. Grasso's compensation totaled $10 million last year were another troubling sign. Grasso's pay is set by a board-compensation committee, but he regulates most of its members. Among them: the chairmen of Bear Stearns (BSC ), Goldman Sachs (GS ) and Merrill Lynch (MER ). And on May 20, Grasso was reelected to the Home Depot (HD ) Inc. board, putting him in the position of both serving on it and policing its conduct. Grasso declined to comment. Says New York Attorney General Eliot Spitzer: "Fixing self-regulation is perhaps the most important policy issue facing the SEC."
The Microsoft Monopoly and its Effects April 2001 Edward J. Black President & CEO Computer & Communications Industry AssociationAs financial and legal technology advanced to permit the large corporation, the ability of these giant enterprises to distort the market in their favor can only be counteracted by the central government.
As the evidence from the trial showed, heavy-handed abuse of market power may take different forms in different industries, but it doesn't lose its basic character or effectiveness. Antitrust law may be even more important in intellectual property based industries in which network effects and tipping are common phenomena and technological tie ins and dependencies create "locked in┤ customer bases. The Sherman Antitrust Act, the cornerstone of American antitrust law, prohibits monopolization, attempts to monopolize, or conspiracy with others to monopolize a market for goods or services. Microsoft is most serious violations involve efforts to protect its existing monopolies and expand them into adjacent markets through anticompetitive tactics.
Microsoft has frequently taken actions that harm original equipment manufacturers (OEMs), the largest source of revenue for their Windows operating systems, and in turn consumers at large. By not allowing OEMs to alter various aspects of Windows, including the bundling of Internet Explorer, the startup sequence, and the arrangement of icons on the initial user interface, Microsoft has prevented OEMs from providing consumers with meaningful choices and potential innovations in computing. Microsoft claims any modification would alter the user is ¬Windows experience,┤ but in essence is dictating that rather than going "where you want to go today,┤ you will go "where Microsoft wants you to go today, tomorrow, and indefinitely.┤ Hewlett-Packardobjected to these dictates, and expressed its frustration to Microsoft in a memo introduced as evidence during the district court hearing: "From a consumer perspective, we are hurting our industry ... If we had a choice of another supplier, based on your actions, I assure you that you would not be our supplier of choice." This behavior is what lies at the heart of the case and is classic anticompetitive maintenance of a monopoly, a clear violation of section two of the Sherman Antitrust Act. The practices of a dominant monopolist would be counterproductive and unthinkable for a normal business operating in a competitive environment. Most companies cannot, and will not, behave in the manner that Microsoft has ... competitive market forces simply will not permit these actions. If a typical company spent millions on a product only to give it away for free, they would be bankrupted. If a normal company alienated, threatened, and punished its business "partners," it would surely face retribution. However, such considerations are not of concern to Microsoft. Because of its entrenched monopoly, Microsoft need not heed countervailing forces in the marketplace. Microsoft can even give away Internet Explorer, reducing Netscape is ability to charge and profit from their own revolutionary web browsing software. Microsoft is able to show contempt for its OEM consumers because Hewlett Packard and other OEMs know that Microsoft is the only game in town. This lack of economic accountability is why a monopoly is held to different legal standards the law rightfully recognizes that the marketplace
Now, I'll certainly agree that this presents its own set of meaningful problems. I'm trying to work toward a new kind of liberalism, because I see those problems, and I understand that interests - teacher's and prison guards' unions, as well as more traditional 'investors' in the political process who work buy regulation that serves their interests (think of the Fanjul sugar interests) - play the current government and regulatory scheme for all it's worth to them. Which is a lot.
But to imagine that somehow eliminating the government leg of this tripod will create a dynamic economy in which the Microsofts and Citibanks will somehow find themselves in fair competition with small companies is to have read too many Heinlein books. The large enterprises have - whenever not checked by greater powers - been very happy to consistently abuse the markets in their favor.
And, having distorted and abused the markets, they will continue to concentrate power until we are all living in Pottersville.