Lawmakers should learn from the mistakes of the Gilded Age rather than repeating them.
Lawmakers should learn from the mistakes of the Gilded Age rather than repeating them.
T his month, Senator Amy Klobuchar (D., Minn.) introduced two bills aimed squarely at America’s largest technology companies. The American Innovation and Choice Online Act and Platform Competition and Opportunity Act join a litany of antitrust bills introduced this year, all with the same purpose: to rewrite decades of judicial precedent and give lawmakers unbridled power to redesign the American economy.
Legislators are eager to reform antitrust laws based on their own values and political motivations. They argue that antitrust has lost its way, and that current economic conditions necessitate a radical transformation of competition policy. In particular, Senator Klobuchar has repeatedly likened big companies, especially Big Tech, to the corrupt industrialists of the Gilded Age.
The comparison, if accurate, would justify giving lawmakers more authority to reshape competition. After all, if present-day conditions are similar to those of the Gilded Age, then the new antitrust bills would serve a similar purpose to the Sherman Act and Clayton Act. As a marketing tactic, it’s working. Many voters believe that Big Tech platforms are too big and too powerful. For the first time in decades, words like “trustbuster” and “robber baron” are back in the headlines.
But history is not as simple as lawmakers would have you believe, and the Gilded Age serves as a great example of Congress’s tendency to dole out political favors and contribute to corruption instead of ending it.
As historian Burton W. Folsom Jr. described in The Myth of the Robber Barons, not all entrepreneurs during the Gilded Age were corrupt. Market entrepreneurs were successful because they offered superior products at low prices, while political entrepreneurs relied on the government to intercede on their behalf. For example, steamboat inventor Robert Fulton developed a successful commercial service because the New York legislature granted him a 30-year monopoly on the Hudson River. Cornelius Vanderbilt, on the other hand, built his steamboat empire without government-granted privileges.
Recent antitrust bills do not distinguish between anticompetitive behavior and success through lawful means. At the same time, they dole out special privileges for modern political entrepreneurs while placing blame on market entrepreneurs for various, often unrelated, social and economic problems proliferating in society.
While lawmakers would like to be revered as trustbusters, their actions are more closely aligned with the political elite who granted favors for specific individuals and businesses. Large companies such as Google, Amazon, and Facebook are being targeted by the proposed legislation, but similarly situated businesses are not equally affected. For instance, the Platform Competition and Opportunity Act, the most recent antitrust bill from Senators Klobuchar and Tom Cotton (R., Ark.), notably excludes top companies from the sponsors’ home states. Minnesota-based Target and Arkansas-based Walmart are not covered by the bill — despite having significant e-commerce sites that compete with the likes of Amazon. And this summer, during the markup session for the House antitrust bills, Representatives Thomas Massie and Darrell Issa pointed out that Microsoft “mysteriously avoided” criticism, despite surpassing Apple as the world’s most valuable public company.
Superficial Gilded Age analogies are often used to portray Big Tech companies as domineering monopolies that can only be reined in with legislation. But, if it’s to work, that comparison needs to rely on something more substantive than size and market power, neither of which deserve to be condemned in themselves. Many of the underlying abuses associated with the Gilded Age were enabled by an unhealthy relationship between government and capital that distorted the operation of free markets. “Political entrepreneurship” must be discouraged, but entrepreneurs (in the classic sense of that word) should not.
Not every tech CEO is a robber baron. Lawmakers ought to consider whether the businesses they want to punish are actually engaged in unlawful conduct or have simply captured a sizeable share of the market through the innovation and entrepreneurial flair that has done so much to make this country as rich as it is.