The federal government's high-profile attacks against high-tech powerhouses Microsoft and Intel raise a critical question: Do government regulators or the market have a better record when it comes to advancing the interests of consumers?
Consider the recent experiences in other economic sectors:
What's happened since Washington deregulated the airline industry 20 years ago, exposing flyers to the competition of the market? The number of flights is up 50 percent and the number of passengers has doubled. With fares down more than 40 percent in inflation-adjusted terms, more people are flying than ever before. How did that happen with government relegated to the sidelines?
In the great 1993 health-care scare, proponents of nationalized health care tried to frighten Americans, saying health care would gobble up 19 percent of our Gross Domestic Product by 2000. Americans didn't buy it, and the effort to put the Nanny State in charge of health care died. Meanwhile, the percentage of GDP devoted to health care has remained unchanged, even as 92 percent of employees with employer-provided health plans have a choice between an Health Maintenance Organizations and coverage that permits a choice of doctors outside that network. In 1994, health care insurance premiums actually declined by 1 percent. No federal mandate made that happen.
Perhaps nowhere has the market worked more dynamically than for personal computer users - the market federal regulators and lawyers now accuse Intel and Microsoft of controlling with a vise-like grip. Still, it's a strange kind of monopoly, one in which computer users enjoy faster and faster computing capability at a lower and lower cost. Take the PC on which this article was composed: A middle-of-the-road model, it is twice as fast and has 75 percent more memory than its predecessor PCs just two years ago. Yet it's price has been halved. Most computer-savvy consumers can be excused from hoping that the Microsoft-Intel hegemony goes on a bit longer.
Maybe Intel and Microsoft should counter-claim that they actually don't exist. They could subpoena government records to make their case. More than a decade ago, government anti-trusters were going after IBM for maintaining a monopoly that would have, by definition, made the emergence of Microsoft and Intel impossible. The government gave up, but the old memos are all there on the hard drives of the Justice Department's PCs.
There are certainly times when public policymakers try to directly assist the private economy. Unfortunately, these efforts are often channeled toward the most politically influential interests, contributing to waste and inefficiency.
Consider the way the US and other governments have been trying to soften the economic impact of the financial crisis in Asia, intervening in the financial markets to bail out banks that have taken on excessive debt in the region. Thus does the hand of government create what economists call a "moral hazard," using public policy to insulate private parties from the consequences of their irresponsible actions. Good intentions or not, government intervention is serving only to prolong the adjustment period in Asia by encouraging more speculative lending to failing companies.
From PCs to health care to airlines, markets are delivering in ways government could never dream of. To paraphrase F.A. Hayek, the "road to serfdom" is paved with government's good intentions. Or to update an old home-grown saying for the new millennium, the message for government interventionists is: "Don't just do something. Sit there."
* Manley Johnson is a former Federal Reserve vice chairman. Warren Stephens is an investment banker. They are advisory board members of Citizens for Good Common Sense, an organization to educate the public on the merits of the free market.