The Free Market 18, no. 8 (August 2000)
In The Constitution of Liberty Friedrich Hayek warned that the rule of law could evolve into the rule of despotism unless the rules that are enforced by the state are known, certain, and prospective rather than retrospective. Throughout history, a hallmark of governmental tyranny has been the opposite kind of behavior: random arrests and incarceration for breaking “laws” that the alleged lawbreakers had no way of knowing about; constantly shifting definitions of what is legal and what is not; and sudden announcements that behavior which was thought for years to be legal and proper was illegal.
It is exactly this kind of legal tyranny that was used by the communists in the former Soviet Union and elsewhere to intimidate and punish suspected deviationists from the Official Ideology. It is also a perfect description of the enforcement of American antitrust laws and is no better illustrated than with the government’s persecution of Microsoft.
Two years ago Senator Orrin Hatch held hearings in Washington, DC, on the issue of high technology, at which Bill Gates was an invited witness. Watching the hearing on C-SPAN, I was struck by the Soviet-style show-trial nature of it all. Instigated by Gates’s sour-grapes competitors, the frowning and sullen-looking politicians pointed their fingers and lectured Gates about their unhappiness with his business practices, but did not explicitly accuse him of doing anything that was illegal. They warned him repeatedly, however, that they were very suspicious about his business practices and if, someday, they or some other part of the government decided that he had broken the law, he would be in Big Trouble.
Think about that. There were the nation’s top lawmakers who, in a free society, are supposedly assigned the job of clearly defining the laws that we must live under. But they were anything but clear, nor could they ever have been, because the antitrust laws themselves make it impossible for business people to live under a rule of law that is not arbitrary, retrospective, and tyrannical.
As Murray Rothbard wrote in Power and Market, with antitrust, “no businessman knows when he has committed a crime and when he has not, and he will never know until the government, perhaps after another shift in its own criteria of crime, swoops down upon him and prosecutes.”
Alan Greenspan made the same point in 1962, long before he became a central banker. Antitrust “is a world in which the law is so vague,” Greenspan wrote, that “businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judges’ verdicts-after the fact.” Antitrust, in other words, fits Hayek’s definition of arbitrary governmental tyranny perfectly.
The government paid MIT economist Franklin Fischer and Georgetown University economist Steve Salop, and other top mainstream antitrust economists, to invent a number of elaborate theories (Fischer’s were hundreds of pages long and filled with mind-numbing mathematics that Judge Jackson most certainly does not understand) to rationalize new legal interpretations of routine competitive business practices such as tie-in sales and exclusive dealing contracts.
These new theories were used to rationalize the ex post facto prosecution of Microsoft and Judge Jackson’s finding of guilt. Thus, mainstream antitrust economists are not just wrongheaded and ignorant of the real world of competition; they are accomplices in the government’s assault, through antitrust regulation, on the rule of law.
Not only is antitrust inconsistent with a free society under the rule of law; it is also an assault on private property, freedom of choice, and freedom of association. How else can one interpret laws that restrict corporate mergers other than that, according to government, private property and freedom of choice are not desirable institutions? Adam Smith was correct when he wrote in The Wealth of Nations that such laws could not be “consistent with liberty and justice.”
The American public acquiesces in antitrust tyranny because of the most egregious monopoly of all- the government school monopoly-that has been spreading antimarket, antifreedom, and pro-government propaganda in the nation’s classrooms for some 150 years. When Yuri Maltsev first came to America from the former Soviet Union he told me that the biggest difference between the two societies was that in the latter no one believed anything the government said, but in the US people still tend to believe the government’s lies. And there is no bigger governmental lie than that the free market allows “monopolists” to “exploit” consumers unless their behavior is regulated by the antitrust authorities.
Antitrust is an extortion racket whereby companies that are fearful of a Microsoft-style “investigation” are pressured to bribe their way out of trouble with campaign contributions. It has no place in a society that values private property, the rule of law, freedom of choice, and freedom of association, and should be abolished.
Thomas J. DiLorenzo teaches economics at Loyola College and is an adjunct scholar of the Mises Institute.
