'The Road Ahead' is rocky

In light of the recent ruling on Microsoft, it's a good time to review the case against the company.

Since I'm not a Microsoft shareholder, the Justice Department action against the company has been academic from my viewpoint. The world is, after all, full of stupidity and injustice, most of it emanating from government. Generally speaking, the thing to do when you see a SNAFU (Situation Normal, All Fouled Up) that you can't do anything about is to FIDO (Forget It, Drive On).

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Still, I hate to see such an abominable miscarriage of justice. The company is clearly being attacked simply because it's so large and successful. That, and the fact it's created thousands of millionaires, was probably just too much for the kind of envy-driven losers who find employment at Justice and need an excuse to justify their existence.

The whole subject of government involvement in the economy, in general, and antitrust, in particular, can be summed up best in a joke about three businessmen in prison. One says he was busted for gouging the public and profiteering because he was charging more than his competitors. The second guy thinks that's funny since he's also in for antitrust, except he charged less than his competitors and was guilty of unfair competition and restraint of trade. The third guy just cracks up because he was charging the same price as his competitors, so they got him for collusion and conspiracy to fix prices.

Of course antitrust laws have never had anything to do with protecting consumers or enhancing competition – they do just the opposite. They're a device for non-competitive, but politically-connected businesses to have government destroy the competition. It would be interesting to see the trends in political donations among Microsoft's competitors. And I don't think Bill Gates saw this trend in his book, "The Road Ahead."

A note on an underlying principle

Some might wonder whether there are two sides to this story. Is Microsoft an evil predator, out to destroy everything in its path? Is the government doing the right thing by trying to break it up? Long-time readers are probably taken aback by questions as conventional as those even being given consideration here. And they wouldn't be, if I hadn't seen a couple of posts on my discussion forum indicating several readers don't understand my position on these things. Let me state it briefly: The government should have no role whatsoever in the economy – zero.

That's a pretty far cry from current reality, but it would solve a great many of the world's economic and social problems. The big question here is not whether the government should "do something" about Microsoft, but what the government should do at all. Or, really, whether the government should even exist.

Government is, in essence, organized coercion. As Mao said, its power comes out of the barrel of a gun. But the hallmark of a civil society is that coercion is limited, including government coercion. So, considering the essence of government, it should logically be limited solely to preventing physical coercion within its bailiwick. That implies police and an army (to counter force), and a court system (to allow settlement of disputes without resorting to force).

Personally, I'd go farther than that, since I think those things are far too important to society to be left to the type of people who are drawn to "public service." For instance, a better alternative to today's politically-motivated judges (a la Jackson) interpreting nonsensical laws might be a system of private-arbitration companies competing with each other on the fairness, speed and low cost of their decisions. Who'd make the laws? Besides the law of gravity, there are only two worth obeying: 1) Do all that you say you'll do and, 2) Don't impinge on another's person or property. And I'd feel a lot better finding a Mike Hammer or Thomas Magnum to ferret out miscreants than a salaried government employee.

I don't want to spend too much time on the implications of all this – there's just not room to re-write a book here. I urge you, therefore, to read the following: "Economics in One Lesson," by Henry Hazlitt; "The market for Liberty," by Morris Tannehill; "The Machinery of Freedom," by David Friedman; and my own (inappropriately titled) "Crisis Investing For The Rest Of The '90s."

If I were Gates, rather than take all the abuse, I'd investigate moving the enterprise outside of the United States – at least to the greatest degree practicable. I can think of several large countries and lots of smaller ones that would lay out the red carpet for Microsoft, including the establishment of a free-trade zone where it and its employees would be completely exempt from taxes and regulations. The cost of Microsoft picking up and leaving would be immense, but so would the savings, in that they paid billions in income tax alone last year.

For a company as large as Microsoft, a move of jurisdiction would be traumatic, but not unrealistic. Certainly, it's a far more realistic thought now than ever before, with the superb transport and communication infrastructure of today's world. The idea is especially suitable for so-called "New Economy" companies dealing in information, as opposed to raw materials.

Since the government is actually threatening its survival, what do they have to lose by making some motions toward the door? The fact is that Microsoft and any of scores of other large companies are fully capable of peacefully taking over any of a number of countries around the world. When you look at the realities of the matter, the whole idea of a "country" is a silly fiction at best – a country is really nothing but an area of land ruled by a certain government. What do the inhabitants of any country get from it but taxes and aggravation? Some would say Americans shouldn't complain, since they're so much better off than inhabitants of some other countries. I say it's idiotic to be thankful you only have tuberculosis just because your neighbor has cancer – neither is healthful or necessary.

A corporate buyout of a small government's assets and liabilities would be a great deal for the locals, who'd be lifted from poverty overnight. And a great deal for the company which, in addition to direct tax savings could, just for openers, fire all of its lobbyists, tax accountants and most of its attorneys.

I have no doubt something like that will happen in the years to come. What's the main stumbling block to it happening? Psychology, if an informal poll I recently took of some Canadian friends is any indication. I asked at least a dozen who could basically do their jobs from a base anywhere in the world, why they continued to live in a place where the government left them with only 50 percent of every dollar they earned. And from that 50-cent dollar they then had to pay an additional 7 percent VAT plus (typically) 6 percent provincial sales tax on everything they buy. Plus a myriad of other levies – not to mention the prospect of having to travel to the United States for any serious medical condition, in view of Canada's abominable nationalized health-care system.

Everyone admitted transplanting themselves would be the intelligent thing to do, but almost no one felt they were even in a position to think about it, mainly because of family ties – everything from aged parents to kids in school to a spouse's social circle.

On the other hand, that's exactly why immigrants are, almost without exception, successful in their new countries. They want a better life badly enough to leave everything they know in an effort to get it. Immigrants generally value freedom and opportunity above convenience.

Microsoft as a tobacco company?

Interestingly, minions of the DOJ have consulted with their counterparts in a number of countries around the world, suggesting they also press an action against Microsoft. It's hard to fathom why they'd do this, other than to make themselves appear right. But it's not the first time it's happened. Elements of U.S. regulatory agencies were instrumental in helping their foreign colleagues bring the house down on American cigarette companies – which are being prosecuted around the world, not just in the United States.

Personally, I have no sympathy for these companies or their largely dishonest and shamefully overpaid managements, if only because of the craven settlement they made with the U.S. government over health issues last year.

Could what happened to big tobacco happen to Microsoft? It seems unlikely now, of course, but I suspect Microsoft faces challenges far more potent than a bunch of government lawyers in the form of innovations like Gnutella. The consequences of such things are impossible to predict, but they're never good for the existing order.