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Businessmen as Enemies of the Market

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One of the most common myths is that businessmen favor free enterprise — that is, enterprise that is free from government interference. Historically businessmen have been among the biggest proponents of government interference in market transactions, especially in order to use government power to gain a privileged position against their competitors.

The latest example of this tragic phenomenon is Google, the leading search engine on the Internet. Faced with the possibility of Microsoft’s takeover of Yahoo, Google is running to Congress in a desperate attempt to use government to block the deal. Of course, there might be payback involved owing to Microsoft’s campaign last year to use government force to interfere with Google’s purchase of DoubleClick.

Employing its battery of Washington lawyers and lobbyists, Google plans to beseech congressmen and federal regulatory bureaucrats to block the proposed merger between Microsoft and Yahoo on the ground that it would violate federal anti-trust laws. It’s a classic example of how businessmen use federal regulations to block competitive threats to their firms.

Under principles of economic liberty, people in the marketplace should be free to become as prosperous as they can. Unlike the Postal Service, which relies on government force to secure its privileged position, firms in an unhampered market economy can get big and successful only by pleasing the consumer. They do this by furnishing goods and services that people are willing to buy. The more a company pleases consumers, the larger its market share and the larger its profits.

Just because a firm becomes big and successful, it is not a “monopolist.” A genuine monopoly, such as the USPS, depends on government to suppress competition. The big, successful company must constantly please consumers, no matter how big it gets. If it doesn’t, consumers, who are among the most fickle people in the world, will take their business elsewhere.

Consider IBM. Do you remember when the government was suing IBM for antitrust violations, claiming that IBM was a “monopoly”? The government finally dropped its suit, and rightfully so. Yet, where is IBM today? It’s lost market share to competitors in the marketplace. If it had been a genuine monopoly, it would still be at the top today.

Consider Microsoft. Do you remember that federal officials sued Microsoft, claiming that is was a “monopoly”? People were saying, “Microsoft is just too big. No one could ever get the necessary capital to compete against Microsoft. We need the federal government to protect us from Microsoft.”

Where is Microsoft today? Struggling against the competition of Google, once an upstart company.

In an unhampered market economy, no firm, no matter how big and successful, can afford to rest on its laurels because there is always the prospect of new firms suddenly appearing and taking customers away. Businessmen realize that. That’s why big, established businesses are among the most ardent supporters of government regulations. They know that the more regulations there are, the harder it will be for new, upstart companies to put themselves into a position to compete against the big firms.

There is also the delay factor involved with securing government approval of mergers and acquisitions, which plays into the hands of companies who are trying to block market-based deals. According to the New York Times, “The size and complexity of a Microsoft-Yahoo deal is such that a government review is unlikely to be completed quickly, particularly in an election year, and may not be final before a new administration takes office in 2009.” Of course, by that time who’s to say what market conditions will be like, especially given the rapidly changing technological world?

What’s the best solution to this interventionist, regulatory mess? A total separation of economy and the state. Just as we don’t permit the government to regulate speech and religion, so it should be with people’s economic activity. Or as the French would put it, “Laissez faire, laissez passer”: Let it happen, let it pass — without government interference.

Unfortunately, many American businessmen would oppose a genuine free-market economy with every resource, lawyer, and lobbyist at their disposal. Google’s shameful attempt to use government to block the Microsoft-Yahoo deal is just the latest example of that phenomenon.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.