[CTRL] The Gates-Rockefeller Myth

[M.A. Johnson (by way of \"M.A. Johnson\" <[EMAIL PROTECTED]>)]

-Caveat Lector-   <A HREF="http://www.ctrl.org/">
</A> -Cui Bono?-

~~for educational purposes only~~

The Gates-Rockefeller Myth
By Thomas J. DiLorenzo

The judge in the Microsoft antitrust trial,
Thomas Penfield Jackson, recently stated
that he "didn't see a distinction" between
Bill Gates's Microsoft Corporation and
John D. Rockefeller's Standard Oil Company.

The judge is right, but for the wrong reasons.

Like Gates, Rockefeller was the victim of
a vindictive political assault on his company
for the "sin" of rapid innovation, a vast
expansion of production, and rapidly-declining
prices. As with Microsoft, the political attack
on Standard Oil was launched by Rockefeller's
less-successful rivals who sought to achieve
through politics (i.e., legalized theft) what
they failed to accomplish in the marketplace.

Standard Oil was such an extraordinarily efficient
company that even Rockefeller's harshest
journalistic critic, Ida Tarbell, described it
as "a marvelous example of economy." The
efficiencies of economies of scale and vertical
integration caused the price of refined petroleum
to fall from over 30 cents per gallon in 1869
to 10 cents by 1874, and to 5.9 cents in 1897.
During the same period Rockefeller reduced his
average costs from 3 cents to 0.29 cents per
gallon.

The industry's output of refined petroleum
increased rapidly throughout this period--just
the opposite of what mainstream monopoly theory
would predict. In 1911, the year in which the
federal government forced the breakup of Standard
Oil, the company faced fierce competition from
Associated Oil and Gas, Texaco, Gulf, and 147
other independent refineries. Because of this
competition Standard Oil's market share fell
from 88 percent in 1890 to a mere 11 percent
by 1911.

The parallels with Microsoft are remarkable.
As Stan Liebowitz and Steve Margolis show in
their book, Winners, Losers, and Microsoft,
the effect of Microsoft's fierce competitiveness
has been a radical reduction in prices and a
vast expansion of both quantity and quality
of computer products. In the software industry,
for example, software products which do not
compete with Microsoft fell in price by about
12 percent from 1988 to 1995, but where there
was competition with Microsoft the price
reduction was almost 60 percent during that same
period.

Word processing prices had been rising before
Microsoft introduced Word for Windows in 1989,
after which they fell dramatically, from around
$300 in 1990 to $50 or less by 1997. Some
personal finance software products sold for
over $100 in 1990, but after Microsoft
introduced "Microsoft Money" in 1991 the
price fell to under $20.

Judge Jackson and Microsoft's competitors
complain that it has "dominated" the computer
industry and should be punished for doing so.
But during this rise to dominance, which began
in 1975 when Gates and a half-dozen or so
colleagues started the company, the cost of
information processing to the consumer has
plummeted so far that today it is one-one
hundredth of one percent of what it was in
1975.

It is not consumers who are complaining about
Microsoft's great products and low prices, but
its evil, plunder-seeking competitors and their
paid professional obfuscators, like former
judge and cultural scold Robert Bork. In a poll
of adult computer users taken by USA Today, only
six percent of those surveyed said that reducing
Microsoft's influence was a "major issue" to them.

And despite Mr. Bork's repeated complaints that
his financial benefactor, Netscape, is being
blocked from the browser market, Netscape managed
to distribute more than 150 million copies of its
browser since 1995.

In his November 1999 "statement of fact" regarding
the Microsoft case Judge Jackson devoted a mere 5
out of 412 paragraphs to the issue of consumer
welfare, with the bulk of his "facts" relating to
"harm" allegedly done to Microsoft's competitors.

Judge Jackson is clearly unconcerned about consumers.
He is merely a front man for the Washington
establishment, which has demanded millions, if
not billions, of dollars in protection money from
Bill Gates as a condition of allowing him to keep
his company intact.

Sadly, Gates has finally caved in and is showering
Washington politicians and "political consultants"
with campaign contributions and other forms of pelf,
including billions of dollars for the myriad statist
causes that are now being funded by Gates's private
foundation.

The one good thing that has come out of the Microsoft
antitrust case is that it has demonstrated to the
public how government has become nothing but an
elaborate protection racket that makes the
Mafia seem like child's play by comparison.

Once Microsoft is broken up, the antitrust regulators
will eventually turn on some of the very same companies
that have instigated the government's decade-long
attack on Microsoft. Justice will at that point be done.

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