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Economic Crime?

November 4, 1998

The Soviet state punished "economic crimes": entrepreneurial actions that went against the central plan and resulted in "excess" profits. It didn't matter that the public need for food, clothing, and liquor could only be served because a few heroes were willing to take the risk of prosecution. The will of the bureaucrat was all that mattered, especially in punishing political enemies of the regime.

The kangaroo court harassing Bill Gates and Microsoft is the same: state thugs muscling a man for serving consumers. An arrogant federal judge, wholly ignorant of software and empowered by embittered bureaucrats, prosecutes a great American success story for alleged violations of nebulous and nutty regulations that shouldn't exist in the first place.

Brush away all the mumbo jumbo about Microsoft's supposed illegal acts, and the company is a winner in the only way that counts. The market, consisting of the choices of millions of people around the world, has deemed its products suitable for our constantly expanding computing needs. Microsoft works hard to keep this lead, which is why it keeps adding more features, many free, to its Windows operating system.

Thanks to Microsoft, and the pressure it has put on others also to innovate, we are linked as never before in a vast and growing global network of information and commerce. This network helps counter the power of governments and entrenched elites. No wonder the feds want to break up the company.

The petty tyrants at the Justice Department insist they are doing it for consumers, just as the politburo claimed to be serving the proletarian masses. But even a passing look at the case reveals what is actually driving the campaign against Microsoft, and it's not whether Gates violated regulations concerning tie-ins and segmented marketing.

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No, this is about the envy of a company called Netscape, and the small, gray men in government pleased to use that moral fault to expand their own power, and satiate their own envy. Netscape couldn't keep up in the market for web browsers, so it used the tyrannical courts to beat up on its competitor with a series of bogus claims. The lesson is this: when disgruntled adversaries gain access to the levers of power, market success, consumer service, and spectacular innovation are punishable crimes in the United States.

In a free society, Netscape would not be able to get away with this. It would not be able to help drag an entrepreneur into a star chamber, to be grilled by menacing G-men who have never performed a productive act in their lives. Instead, Gates would be celebrated as a champion who broke technological barriers in the cause of human betterment.

But in the "third way" economy of the U.S., the apparatus of the state is always available to override the judgment of the market, to intimidate entrepreneurs in conjunction with willing dupes in the private sector, to spy on the internal communications of private firms, and to try to make an example out of anyone who pays insufficient obeisance to the leviathan.

The media bias against Gates is formidable. Consider the New York Times "news" story describing his coerced testimony. "The Bill Gates on the courtroom screen was evasive and uninformed, pedantic and taciturn," wrote the Times. "In some cases Gates' answers were so banal that even" the judge "chuckled and shook his head."

This is precisely how Pravda would write about a wayward factory manager hauled before a people's court. Imagine the Times describing Bill Clinton's grand jury testimony in the same way.

Of course Gates was cautious, and probably more than a little bit nervous. Here is a man who has done nothing but serve the public with better products, forced into an inquisition where one wrong word might lead to the destruction of everything he has worked to build up.

One part of his testimony caused guffaws. He was asked whether a particular Windows application was designed to compete with someone else's similar product. Gates responded, "It depends on what you mean by compete." An evasion? Hardly. To the Justice Department, "competition" means a fixed formula of market shares and price spreads, and veering outside of the formula implies "monopoly."

In the free market, competition means a playing field unencumbered by legal restrictions. No market is more open in this respect than computers and software, which is precisely why it is so innovative. So the Justice Department seeks to privilege some firms, granting monopolies in the name of competition, and enhancing its own already oppressive power.

Gates has been sucked into an Orwellian world where it make sense to ask precisely what our masters mean when they accuse you of successful innovation. Businessmen who served the public under Soviet socialism would understand.

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Llewellyn H. Rockwell, Jr., is president of the Ludwig von Mises Institute in Auburn, Alabama.


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