ANTITRUST IS CORPORATE WELFARE
or
ALL MONOPOLIES ARE LEGAL

Stuart K. Hayashi


One of the most misunderstood issues in the world today is that of monopoly. Most people have been taught that monopolies are caused by the free market, and that it is the government which protects us from them. In reality, the exact opposite is true.

Most people think that monopolies are illegal. The'y are dead wrong. Every true monopoly in America is legal, because it was the government which made them monopolies in the first place.

If any resident of Hawaii is so opposed to monopolies, he ought to demand that the state file an antitrust suit against the Hawaiian Electric Company of Oahu. In case he hasn't noticed, the Hawaiian Electric Company is the only electric company in all Hawaii! Therefore, it's a monopoly! That explains why their service is so poor, why their rates are so high, and why they've had a lot of blackouts in the past. And why does it have such complete dominance over the utilities market? Because it's illegal for there to be just a second electric company based on Oahu. The government's excuse (and Hawaiian Electric's excuse) for this are the telephone lines, which are owned by the government. They say that it would be too big of a hassle if they let a second electric company come in and compete it with Hawaiian Electric, because they'd have to get city crews to alter the telephone lines to so that another company could use them. Now is a bad time to do this, what with the state's bad economy, but the state could've allowed this a long time ago, back when the economy was better, and, in the long-run, I think that the taxpayers would actually have spent less money, because the two electric companies would compete for customers by improving their service. And their are some mainland cities that actually do have competing utility companies, such as Lubbock, Texas, and, as you can imagine, they have cheaper rates and fewer blackouts. (2001 addition to text: Recently, people have become confused over why there has been a power shortage in California. The statists have attempted to blame this on "deregulation," but the real causes are the new regulations that were written. The government put price caps on the on what the energy retailers could charge, which meant that they could not curb demand by raising prices, thereby creating a shortage. Moreover, the price ceilings also forced the power companies to sell at a loss, making their bankruptcy inevitable. And finally, the reason why California was short on the 500 megawatts it needed was because no new power plants have been erected in the state in thirty years, thanks to environmental regulations. If not for those laws, there would be enough power plants and energy to provide for everyone.)

A far less justified example of using the government to outlaw competition is the duopoly between Matson Navigations Co. and SeaLand (Hawaii's two shipping companies), which is created by a law called the Jones Act. This legislation was passed back in the 1920's, forbidding foreign vessels from sailing between U.S. ports. [1] So, if a Japanese ship dropped off some cargo at California, it would be illegal for it to sail from that Californian port to a Hawaiian port to drop off some more goods. So what the Japanese ship does is deliver to California and go back home.

So how does Hawaii get foreign goods? This is where Matson and SeaLand come in. We pay them to sail all the way to California to pick up the foreign cargo, and then we pay them some more to bring that cargo all the way from California to here. They make their money charging Hawaii's wholesalers for shipping, which makes these products even more expensive here than they are on the mainland. [2]

But what would happen if we got rid of the Jones Act? That would dissolve Matson's and SeaLand's stranglehold over these islands. This is because a foreign ship could then sail between U.S. ports, which means that it could drop off cargo at California, then come here and drop off some more cargo without criminal prosecution. If that happened, we wouldn't need Matson or SeaLand to simply sail to California and back, which means that those companies won't make as much money, and that they'd have to face foreign competition. So of course, both Matson's management (millionaire Robert J. Pfeifer)[3] and its unions denounce any attempt to repeal the Jones Act.[4]

Which Hawaii politicians are inconsiderate enough to support this law, which is of great detriment to both Hawaii and Alaska? Among them are U.S. Sen. Daniel Inouye and U.S. Rep. Neil Abercrombie (both are “liberal”Democrats). [5] One of their main reasons for doing so is because they are both heavily supported by longshoremans' union (and probably by Robert J. Pfeiffer as well). Much of the union's money is poured their re-election campaigns and also orders the union members to vote for them. These men know which side their bread is buttered on. Robert J. Pfeiffer usually prefers to stay out of the discussion, since his presence should indicate to many people that what the Jones Act is really about is corporate welfare. [6]

Abercrombie's excuse for supporting the Jones Act sounds humanitarian at first, but it falls apart after asking just one simple question. He claims that his reason for preventing foreign ships from sailing between U.S. ports is that their ships are rotten, third world, rust-bucket “slave ships” (he didn't specify which country's ships are like this, so we can presume that Britain, Japan, and Hong Kong are among these inhumane "slavers"), and that America, being so great, should not allow these awful ships to sail between U.S. ports. [7]

Sounds wonderful, doesn't it? But this whole “argument” falls apart when you ask, “If we can't allow these inhumane slave ships to sail between U.S. ports, why isn't it also illegal for them to sail to our country at all?” Abercrombie has no answer. So, basically, it's wrong if this “inhumane” Japanese ship sails from California to Hawaii, but perfectly okay if it sails from Japan to Hawaii and back. In the latter case, their being a “rust-bucket slave ship” is acceptable. Actually, the real reason why they wouldn't allow this means banning foreign trade, and Abercrombie wouldn't be foolish enough to advocate that. As we can see, even he is more concerned about economics than with “human rights,” since these ships are only “inhumane” when they are allowed to compete with Matson Navigation and SeaLand, both of which “coincidentally” employ his most powerful political supporters. Abercrombie would have you believe that he opposes the “corporate fatcats” but, in truth, he'll scratch their backs as long as they help re-elect him. That's not conspiracy; that's just politics.

One of the most wretched legal monopolies was (and Is?) the bus monopoly. Back in the late thirites, Hawaii had several bus companies tha were highly efficient. But politicians complained that having so many bus companies would lead to “cutthroat competition” and that there would be “too many buses on the road.” So they made it a law that only Harry Weinberg's bus company--Hawaii Rapid Transit, Ltd.--could operate, and that it was illegal for any bus company to compete with him. [8]

Like all true monopolies, it could only exist because the government squashed its adversaries! So, of course, with his company being the only bus company in Hawaii, Weinberg grew careless, and he ended up treating his employees and customers lousy, and the workers went on a lot of strikes. People complained about this and, as always, ridiculously blamed the free market. Thus, Honolulu mayor Frank F. Fasi said that we couldn't allow busing to be in the hands of greedy capitalists, and he socialized the local bus system by starting TheBus, Inc., which, even with its fares, is tax-funded.(9)

Weinberg had to charge more, since he wasn't funded with tax money. Obviously, he couldn't make his fare lower than TheBus' (their upfront fare, I mean. If you add tax dollars into the equation, TheBus was probably more expensive) and still make a profit, so he went out of business, and, thus, his monopoly was replaced by an even worse monopoly--TheBus.[10] I don't think it's even legal to have a bus company to compete with TheBus anymore. As usual, the government “helping” Harry Weinberg was a Trojan Horse. Weinberg thought he was getting a great deal when they gave him a monopoly, but he was just a stepping stone on the politicians' way to socializing the bus system, and, in the end, even he was cheated, along with everyone else.

At this point, those who advocate state intervention in the economy shout, “See! This is what happens in the free market!” That's just plain incorrect. None of these "partnerships" between business and government are examples of it. The free market requires that the government does not interfere with free trade in any way, meaning that it doesn't “help” any business. In all of these cases, the government violated the free makret by favoring one or two companies over the others, thereby undermining laissez faire (French for “left alone”) competition, rewarding “businessmen” for making friends with politicians instead of for proving a superior product and/or service. Excluding the industries whose clients are the police, military, or courts, any “partnership” between business and government is tantamount to a fascist form of socialism, not capitalism! [11] [Many who have been indoctrinated by government schools would then say, “There's no such thing as a fascist form of socialism, because fascism and socialism are opposites on the political spectrum,” not realizing that they're pretty much the same--that fascism is only socialism disguised as capitalism, and that fascism is only one type of socialism, among many others. For more on fascism's parallels with socialism, see "The Faulty Political Spectrum" if you haven't already.]

So, as we have seen, there is nothing illegal at all about having a monopoly. In fact, in most of these antitrust cases, the company being prosecuted isn't even a real monopoly! The only true monopoly I can ever recall being prosecuted for breaking antitrust laws was AT&T, and the only reason it had a monopoly in the first place was because the government made it illegal for other companies like MCI and Sprint to compete with it! [12] As terrible as AT&T was, the major culprit was the government. The state should have sued itself for assisting in the violation of antitrust laws!

I've also noticed that when you argue with antitrust advocates, the definition of the word “monopoly” changes. At first, when they assume that they know more about these things than you do (which is often), they'll say that a “monopoly” is a company that is so big and poweful that it has no competitors whatosever. Then, after you point out that these “monopolies” being prosecuted do have competitors (such as Rockefeller's Standard Oil Co.)[13], then a “monopoly” is just a company that's really big and mean that has “anti-competitive practices.” [14]

And what are these “anti-competitive practices?” Heavily competing with the other companies! How in hell can you be “anti-competitive” by competing with others? That's like saying that Michael Jordan is “anti-competitive” in Basketball because his competitiveness “restricts the competition” of other Basketball players. Or, better yet, that's like saying that Mother Teresa was “anti-charitable” because she was so charitable that people preferred her over other social workers. This would then make her “unfair to social workers.”

What's especially unjust about antitrust laws is that they can be enforced retroactively!! That means that if you did something in 1994 that was legal at the time and never did it again, and it was made illegal in 1999, you could be legally prosecuted for it this year! So many of these antitrust “crimes” for which many entrepreneurs are prosecuted for weren't even illegal when they committed them! That's would be like if a man stopped drinking alcohol before Prohibition started, and was then arrested by Prohibition agents anyway.

These laws are written in a way so vague, that any act by any big business can be considered “anti-competitive” If you make your prices lower than anyone else's, you are being “monopolistic” because you'll drive all the other companies out of business and then be the only company left. If you make your prices too high, you're being “monopolistic” because you are “exploited” the consumers through your economic power. If you make your prices the same as your competitors, you are being “monopolistic” because you and the competitor are conspiring to be uncompetitive, and will probably merge into a single “monopolistic” cartel in the future. So you pretty much can't win. [15]

What really makes you “monopolistic” in the eyes of the law? That's easy. You irritate competitors who have friends in D.C. The Novell Corporation, which is one of Microsoft's rivals, is based in Utah. “Coincidentally,” that very same state's senator, Orrin Hatch (a Republican), is eager to persecute--er; prosecute--Microsoft. [16] Or take the CEO of American Express, who is a close supporter of the Clinton Administration. "Coincidentally," the Clinton Administration has recently filed an antitrust suit against MasterCard and Visa for “anti-competitive practies.”

All of this talk of being “anti-competitiveness” is curious. Bill Gates gained a fortune through hard work, determination, and without any subsidies. Netscape's CEO Jim Barksdale is sustaining his own company's existence by using government force to restrain his competitors.[17] Who's really being anti-competitive here?!! MasterCard and Visa became the top credit card companies through sheer competence. American Express' chief tool of competition seems to be to restrain their dominance by sicking the government on them. Who's mistreating whom?!! Microsoft, MasterCard, Visa, and even Standard Oil succeeded in business because of superior practices and a greater ability to make deals. Netscape and American Express seem to preserve themselves by using government coercion on their rivals, with their lawsuits are completely funded by tax dollars. Who really has the unfair advantages?!!

. Some “trustbuster” fanatics claim that business must be restrained, because once a company becomes too large, it becomes powerful enough to squash other potential rivals by stealing their ideas, improving on them, and under-selling its competitors by making their products cheaper. First of all, intellectual property rights prevent any company, as large as it is, from stealing patented ideas. But what is far more disturbing about this “argument,” is that those who use it could care less about the consumer. They sound more concerned with the welfare of those second-rate corporations that are already rich. These companies are “victims” of the number-one companies just by being having less money. Take for instance one of Microsoft's “victims”--the billion-dollar America Online, owner of AOL Time Warner. Its founder and president, Steve Case (who is from my home state of Hawaii) is a billionaire. Yet he whines about how mean Bill Gates is to him and about how America Online might make less money because of greedy Microsoft. Apparently, a mansion isn't an adequate enough shelter for him!

This whole Microsoft antitrust case is pretty much about welfare for the rich. The idea is to take property away from Bill Gates and give it to other billionaires (Netscape's Jim Barksdale, Oracle's CEO Lawrence Ellison, and Sun Microsystem's president Scott McNealy) who are his “victims.” Apparently, we have to stop Bill Gates from stomping on the poor, little, defenseless billionaire CEO's.

If we really wish to end monopolies, we must take away their government priveleges, such as subsidies, bailouts, tariffs, import quotas, state franchises, and other such regulations, and end this persecution of market entrepreneurs who use none of this corporate welfare. Then, and only then, can competitive enterprise work for all of us.


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END NOTES

1 -- Ed Cesar, "Why Living Cost Is High," The Honolulu Advertiser, Tuesday, 10 November, 1998, p. A6

2 -- Ibid.

3 -- R. J. Pfeiffer, Chairman Emerits of Matson Navigations Co. and CEO of Alexander & Baldwin (which owns Matson), View Point, "Jones Act Serves Hawaii and the Nation Very Well," The Honolulu Star-Bulletin, Friday, 26 December, 1997. p. A-15.

4 -- The union's argument is presented by John Yaukey, "Jones Act Effects Elude Agency," The Honolulu Advertiser, Business section, Wednesday, 11 March, 1998, p. B5.

5 -- This was stated on a PBS show by Hawaii's U.S. Rep. Neil Abercrombie, in a debate with former State Rep. Gene Ward. Dan Boylan, a "liberal" Democrat, was an incompetent "moderator," as he stated clearly from the beginning that he sided with Aberocrombie.

6 -- The exception to this rule, of course, is Matson executive Robert J. Pfeiffer's one editorial concerning the Jones Act in View Point column, "Jones Act Serves Hawaii and the Nation Very Well," The Honolulu Star-Bulletin, Friday, 26, December 1997, p. A-15.

7 -- This is the argument used by Abercrombie in his PBS debate with Gene Ward. The argument was repeated by John Yaukey, "Jones Act Effects Elude Agency," The Honolulu Advertiser, Wednesday, 11 March 1998, p. B5).

8 -- "Jitney Buses Ruled Off Streets," The Honolulu Star-Bulletin, 7 May, 1940). Cited by Cliff Slater, "It's Time to Rethink TheBus," The Honolulu Advertiser, Wednesday, 2 September 1999. Citation at www.lava.net/cslater/busesfoot.htm.

9 -- At least, Frank Fasi took the credit for this atrocity in his 1998 Gubernatorial candidacy campaign commericials.

>10 -- Slater, "It's Time to Rethink TheBus," The Honolulu Advertiser, Wednesday, 2 September 1999, p. A8. Reprinted at www.lava.net/cslater/busesfoot.htm.

11 -- John T. Flynn, journalist, The Roosevelt Myth, Fiftieth Anniversary Addition. (San Francisco: 50th Anniversary Edition printed by Fox & Wilkes, 1998, p. 39).

12 -- Daniel Gross and the editors of Forbes magazine, "William McGowan and MCI: A New World of Telecommunications," Forbes' Greatest Business Stories of All Time. (New York: John Wiley & Sons, Inc., 1996, pp. 285-297).

13 -- Yes, Standard Oil Co. did have competitors! See James V. DeLong, adjunct scholar with the Competitive Enterprise Institute, "The New Trustbusters," Reason magazine, March 1999, p 41). Reprinted at www.reasoncom/9903/fe.jd.the.html.

>14 -- I see and hear this buzzword pop up frequently. One such example is "Lawyers Focus On Netscape," The Washington Post, Thursday, 22 October 1998). Reprinted in The Honolulu Advertiser, Business section, Thursday, 22 October, 1998, p. B8. You can also see it in "Microsoft Laywers Fire Back," Washington Post. Reprinted in The Honolulu Advertiser, Business section, Wednesday, 21 October, 1998, p. B8.

15 -- This point was eloquently illustrated by Alan Burris, Ph.D., in "Monopolies, " A Liberty Primer, Second Edition. (Rochester: Society for Individual Liberty, 1983, pp. 210-225).

See also Leonard Peikoff, Ph.D., "Why Businessmen Need Philosophy," Why Businessmen Need Philosophy, edited by Richard E. Ralston. (New York: Ayn Rand Institute Press, 1999, p. 15).

16 -- DeLong, p. 38. Reprinted at www.reason.com/9903/fe.jd.the.html.

17 -- Ibid., p. 39.


RECOMMENDED BIBLIOGRAPHY

The following books will help acquaint the reader with the effects on antitrust laws on competition and innovation.

* Friedman, Milton, Ph.D. Nobel Prize-wining economist. With Rose D. Friedman. Free to Choose: A Personal Statement. Reprint edition. Harcourt Brace: San Diego, California. November 1990.

* Greenspan, Alan, Ph.D. Current Chairman of the U.S. Federal Reserve. Economist and former partner at Townsend-Greenspan & Co. "Antitrust." Capitalism: The Unknown Ideal. Edited by Ayn Rand. Signet: New York, New York. 1967.

* Peikoff, Leonard, Ph.D., et al. Why Businessmen Need Philosophy. Edited by Richard E. Ralston. Ayn Rand Institute Press: New York, New York. 1998.


The following book gives the true story of the "robber barons" of the late nineteenth century.

* Folsom, Burton W., Jr., Ph.D. Historian. The Myth of the Robber Barons. Young America's Foundation. 1997.



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The above essay is Copyright © 1999 Stuart K. Hayashi, and may not be reproduced by any means without his written consent. All Rights Reserved.