by jon l. shebel, publisher
I would like to see everyone in government, elected or not, take an oath of
office based on the ancient physicians’ postulate of primum non nocere -- first do no
harm.
Not that people in government intentionally set out to harm the governed. They are
simply the victims of one law politicians cannot repeal, the law of unintended
consequences. From Lyndon Johnson’s War on Poverty and its progeny of illegitimacy
and welfare dependency to Richard Nixon’s price controls and the resulting collapse
of the economy, grand government programs to fix society’s problems almost always
hurt more than they help. In fact, the best we can usually hope for is a minimum of pain.
The beginning of December, in one of those felicitous coincidences, brought a reminder
of that.
As the Justice Department forged ahead in its antitrust suit against Microsoft, news
broke of the proposed Exxon-Mobil merger. As you might remember from your high school
history classes, Exxon and Mobil were created in the breakup of Standard Oil, the
industrial behemoth created by John D. Rockefeller in 1870.
Standard Oil was the prime target of trust-busting President Theodore Roosevelt’s
war on monopolies. But how anti-competitive and anti-consumer was Standard Oil? When the
company was created, kerosene sold for 30 cents a gallon. Twenty years later, when
Rockefeller had captured almost 90 percent of the market, the price of kerosene had
dropped to 8 cents a gallon. The very size of Standard Oil gave it the resources to cut
costs.
The late economist Murray Rothbard argued that competition is a process, not a
quantity. Standard Oil’s market concentration didn’t necessarily qualify it as
non-competitive. In fact, at the time of its breakup, Standard Oil was on the verge of
decline because it had failed to invest in Texas oil fields in the early 1900s. As the
Justice Department was "fixing" Standard Oil’s alleged restraint of trade,
Gulf Oil was experimenting with offshore drilling and the corner service station. The
market was doing its
job just fine without the help of government, thank you.
Today the two descendants of Standard Oil are merging because of the need for greater
efficiency in the petroleum industry. In this case, two smaller companies can’t
achieve the needed economies of scale that translate to increased efficiency, which
translates to better products at lower prices for consumers.
The high-tech sector, where Microsoft has excelled, is even more complex and turbulent
than the world John D. Rockefeller toiled in. And its functionings are far beyond the
imaginings of those who understand the economy through two-dimensional theories and static
equations. Microsoft does not operate as a self-satisfied monopoly. Instead it is haunted
by the idea that its competition will engulf it in a tsunami of market-driven innovation.
Need proof? With the news of the Exxon-Mobil merger, it was easy to forget that just seven
days earlier we had been reading about another big merger: the $4.2 billion acquisition by
AOL of Netscape Communications Corp., archrival of Microsoft and obstetrician of the
Justice Department’s antitrust prosecution.
The hurly-burly of the marketplace never makes for a placid existence. Political
promises to ease the strain of the competitive struggle sound a beguiling song, but one
that ultimately numbs the power from which our economic prosperity springs.
So as the days of the legislative session wear on, and enthusiasm for big
government’s exercises in compassion wax strong, here at Associated Industries
we’ll voice the reminder: Primum non nocere.
Jon L. Shebel is president & CEO of Associated Industries of Florida and
affiliated companies.
