[Appeared in the Washington Post Book World, August 20, 2000]
Monopolies in America
By Charles R. Geisst
Oxford University Press, 2000
The Age of Access
By Jeremy Rifkin
Penguin Putnam, Inc., 2000
Reviewed by Albert A. Foer
Striving for competitive advantage -- the driving force in the modern economic world-- can never be strictly economic in nature. As companies gain economic power, they generate opposition, which naturally turns to the state for assistance. As Charles R. Geisst concludes in Monopolies in America, "The history of monopoly in the United States since the early nineteenth century still relies upon a watchful government to keep big business in check... Despite its successes and failures, applications of the antitrust laws are still very susceptible to prevailing political trends."
Geisst's theme is this: "Monopoly is the logical outcome of free market economic organization. Antitrust claims to be the antidote if that power overextends itself and ceases to provide benefits." Unfortunately for this thesis, not many economists besides Karl Marx hold that monopoly is the logical outcome of competition, there being many economic forces (not to mention political forces) that limit the logic of monopoly to only a few "natural" arenas, such as electricity transmission.
Geisst, however, is not really talking about "monopolies" in the economic sense. Rather, his story is about the big business empires, their builders, from Jay Gould to Bill Gates, and their enemies. And by "antitrust" he doesn't mean only the antitrust laws, but more generally governmental regulation of big business. This conceptual looseness is only one form of sloppiness that mars a colorful and important tale. Antitrust experts and even generalists will detect many errors and questionable statements. (It's hard to take seriously a writer who says things like: "Warren Burger was chief justice until 1986, and was accompanied in the liberal camp by Justices Marshall and Brennan.") A gap-filled bibliography and inadequate referencing further detract from the author's authority.
One historic theme will have to suffice for discussion here. Is antitrust an essentially Democratic or Republican issue? Aside from an unconvincing effort to tie antitrust to Hamilton and laissez faire to Jefferson, Geisst seems to argue that antitrust is to be associated with Democrats, while Republicans are more, well, Jeffersonian. Yet, time and again, he depicts Republicans playing a leading antitrust role: Sherman and Harrison in 1890; Roosevelt and Taft in 1912; Nixon in the '60's bringing the FTC back to life and creatively attacking conglomerate mergers. Geisst discounts Republican trustbusting by suggesting that presidents like Nixon and Ford had lost control over antitrust to their underlings, but their underlings (people like Attorney General John Mitchell) were neither crusaders nor Democrats.
Actually, antitrust has had an uneven but remarkably bipartisan history, with the era of Ronald Reagan representing a laissez faire blip. Geisst titles his concluding chapter "Good-bye to Antitrust," underestimating antitrust's repeatedly demonstrated ability to regenerate itself - as indeed it has, first under the Bush administration and then much more so under the Clinton administration.
Jeremy Rifkin's The Age of Access raises large questions about whether antitrust will be relevant in the emerging "new culture of hypercapitalism." Annoyingly redundant and a bit hysterical in its ramrod projection of certain perceived trends into a paradigm of a wholly new social and economic order, this is a wide-ranging, stimulating, and frustrating book.
In the Age of Access, markets are replaced by networks and ownership is replaced by access. Buying and selling give way to leasing and other forms of short-term use. Wealth is no longer vested in physical capital, but rather in human imagination and creativity. We are shifting from the work ethic to the play ethic, trading increasingly in access to cultural experiences. Rifkin's dialectic, therefore, has more to do with Groucho than Karl. "Cultural production represents the final stage of the capitalist way of life, whose essential mission has always been to bring more and more human activity into the commercial arena."
"The new means of organizing economic life brings with it different ways of concentrating economic power in fewer corporate hands," Rifkin writes. "Having a monopoly over ideas in each commercial field allows a few firms to grab hold of the workings of an entire industry." Two examples Rifkin develops are about business format franchises and gene patents. Business format franchises (a device for which McDonalds is famous), may be important, but they are old news. Although there are conflicting court decisions, antitrust has often come to the aid of abused franchisees, and the fact that franchise conflicts arise in the context of "access" rather than outright ownership has not required a major rethinking of antitrust theory.
Genes, on the other hand, are "the raw resources of the biotech century." As a result of a 1987 US Patent and Trademark Office policy, Rifkin says, genes, chromosomes, cells, and tissues are patentable. They can be treated as the intellectual property of whoever first isolates their properties, describes their functions, and finds useful applications for them in the marketplace, and they can be lent to users for short terms. Giant life-science companies are being created to gain control over this property. These developments, Rifkin rightly says, raise disturbing new questions.
How, he asks, should nations fashion new legal restrictions to prevent companies from using their power over ideas and intellectual capital to monopolize and control networks? His questions are not as new as Rifkin imagines, and there are answers. First, very large companies at this stage in our history are not only a fact, but necessary, at least in some industries. Second, monopoly is not necessary in most industries, and in those few where it is (e.g., where a network must be so large that there is no room for competitors), we already have a framework for thinking about it: public regulation of natural monopoly. Where competition can exist, antitrust has great flexibility for protecting competition. For example, the doctrine of essential facilities can provide competitive access to a monopoly. Third, antitrust can be used aggressively to stop mergers that lead toward domination of markets, and it doesn't matter at all whether the markets involve material or intangible products, owned or leased.
But, fourth and most important, there is nothing automatic about antitrust. Rifkin is wrong in thinking that antitrust has to be reinvented to deal with the Age of Access. Antitrust can do the job. But, as Geisst shows, it is a political tool and must be wielded with social goals in mind. Candidate Gore seems disposed to enforcing the antitrust laws in moderately aggressive ways; Bush seems to take a more Reagan-like laissez faire attitude. Whoever wins in November will be answering Rifkin's important questions.