Virgil: What Would Teddy Roosevelt Do: An Anti-Trust Reckoning for the Tech Lords?

Roosevelt Lives! 

Theodore Roosevelt, our 26th president, left the White House in 1909, and yet his spirit — larger than life and larger, even, than death — is still with us. And that is in no small part because many of the problems that the Great Trustbuster grappled with back then seem so similar to the problems we confront today.

For instance, here is a headline that appeared in The Seattle Times over the weekend: “Big Tech needs to face a Theodore Roosevelt-style trust busting.”

Perhaps that piece, by columnist Jon Talton, caught the eye of the world’s richest man, Jeff Bezos, whose company, Amazon, is based in Seattle. And yet columnist Talton is clearly not a fan of his tech homeboys, nor of the other big tech firms further down the left coast:

Big Tech’s greatest sins are locking in a winner-take-all economy, decimating the middle class and exercising monopoly-like powers that cause the free market to fail. Competition is stymied. Power is in the hands of too few.

As we old Romans like to say say, Aperta sunt prata et quod puts in quo equi non pervenit (That puts the hay down where the horse can get it).

We might note that the Seattle area is also home to the world’s second-richest man, Bill Gates, who co-founded another tech giant, Microsoft, way back in 1975. Talton writes unkindly of that older company — which was formally judged to be an “abusive monopoly” in 2000 — describing it as “the original gangster.”

Yet the newer tech companies, Talton asserts, are no better, even if they have better people skills:

Unlike Microsoft, which was typecast early on as the “Evil Empire,” Google, Apple, Facebook, and Amazon have combined savvy public-relations efforts with sophisticated political lobbying operations.

Indeed, politically correct schmoozing has kept the new tech titans out of trouble — at least until recently. And yet now the political wheel is turning as many in the chattering class join Talton in calling for anti-trust action. As Virgil noted recently, every day brings a new revelation — or at least a new accusation — against Big Tech.

So it’s no wonder that just as TR is making a comeback, so too is the Sherman Anti-Trust Act of 1890. Indeed, that comeback is bipartisan: “The Democrats rediscover antitrust” was a 2017 headline in The Hill, a D.C.-insider publication. Meanwhile, Josh Hawley, the Republican attorney general of Missouri, is going specifically after Google. (Hawley, it is worth noting, was the author, a decade ago, of an admiring book on TR; he is now running for the U.S. Senate, and, in fact, this month, President Donald Trump appeared at a St. Louis fundraiser for him.)

During Teddy Roosevelt’s time in office, 1901-1909, his administration filed some 40 anti-trust actions, although perhaps the most famous application of the Sherman Act was resolved only in 1911, after Roosevelt had departed office. That was the case of U.S. vs. Standard Oil, which broke the vast oil monopoly into 33 different corporate pieces.

Without a doubt, anti-trust breakup is a drastic remedy, but it is not that drastic, in the sense that it does not involve forfeiture of assets. And so, for example, even though Standard Oil was legally smithereened, its owner, John D. Rockefeller, did not lose any money; he simply took separate ownership of the newly separated entities. Indeed, the mogul soon discovered that the new constellation of companies was actually worth more than the old consolidated Standard Oil.

And so today, as the Trump Justice Department’s anti-trust suit against AT&T’s attempt to buy Time Warner goes to trial, we can observe that even if the DOJ suit prevails, AT&T and Time Warner will be fine; they will simply continue to be indvidually profitable mega corporations.

Looking ahead, we can see that more antitrust litigation is inevitable, and some of it may yet be painful to the defendants. For instance, we might note that private anti-trust litigation is also possible. And under the provisions of the Clayton Anti-Trust Act of 1914, a successor to Sherman, economic victims of monopolistic abuse can sue, through private action, for treble damages. In other words, all the myriad media companies that have suffered so much financial damage from Facebook and Google might have a legal remedy.

Yet before the new anti-trust train gets too far down the track, we might stop and ask ourselves: What is the desired end goal here? That is, do we think the problem is that Big Tech is too big or simply that it’s misbehaving? That is a distinction worth pausing over because big doesn’t automatically mean bad, and small doesn’t automatically mean good. To put it another way, the quality of a company might well be different from its quantity. Virtue, or not, comes in all sizes.

To illustrate, let’s suppose that, say, Facebook finds itself trust-busted. Such an outcome might be satisfying for many, but the change might prove to be illusory.

That is, if the dangers Facebook poses today are that it is liberal, biased, and careless with its data, we must ask: Would any of those flaws be lessened if the company was broken up into five, or fifteen, or twenty-five different social-media companies?

After all, as with Standard Oil a century ago, those pieces would all still be owned, and likely controlled, by Mark Zuckerberg and his corporate-culture allies. That is, even in the wake of a trust-busting — which could take a decade or more to work through the courts — it is quite likely that the same Silicon Valley liberals would control each and every piece.

Moreover, precisely because of their profusion, the pieces would be harder to monitor. And finally, crucially, they might be harder to secure against hacking and manipulating. Why is that? Because security is expensive, and smaller companies would be more tempted to scrimp.

So we can see: It is not at all certain that simply taking a hammer to big obnoxious companies does anything other than turn them into a bunch of smaller obnoxious companies.

Interestingly, one keen observer who shared this concern, in his time, was Theodore Roosevelt.

What Roosevelt Believed In: A Square Deal for All

Roosevelt came into office in 1901 firmly convinced that something needed to be done about corporate abuses. TR was essentially conservative in his views — he was, after all, a well-off patriotic war veteran — and yet he could see that reform was needed.

Indeed, as early as 1883, when he was still in his twenties, TR had worried that abuses, if left unchecked, could lead to unrest, even revolution:

There is a strong and growing feeling of indignation among the people at the actions of these great corporations. It is incumbent upon us to see that this feeling takes a lawful shape … For the sake of protecting honest capital, we ought to punish, if we legally can, the deed of the dishonest wealthy for fear that some day an uprising might come that will overwhelm innocent and guilty alike.

In these words from the young Roosevelt, we see many of the key themes that would guide his entire public career: “Public outrage is justified, and yet we don’t want socialism or communism — instead, we want prudent reform.”

In that conservative reformist vein, TR used the phrase “Square Deal.” In 1901, for example, he called for “a square deal for every man, big or small, rich or poor.” That is, everybody should be included, even as nobody should be ripped off.

So while President Roosevelt was fully aware of the Sherman Act — and was, as we have seen, willing to use it — his actual preferred solution was regulation, not litigation. His argument can be stated simply: If corporations are doing wrong, then the thing to do is to pass a law to stop them from doing wrong, right away. By contrast, the narrower anti-trust solution is, at best, retroactive, and at worst, so slow as to be ineffective at stopping abuse.

Arguing on behalf of the regulatory remedy in 1907, TR declared:

The design should be to prevent the abuses incident to the creation of unhealthy and improper combinations, instead of waiting until they are in existence and then attempting to destroy them by civil or criminal proceedings.

Once again, TR’s idea was to use regulation to get ahead of a problem. Using litigation after the fact — that is, to go chasing after the problem after it had manifested itself — was better than nothing, and yet it was not best.

Indeed, six years earlier, in 1901, TR had called upon Congress to create a new Cabinet body, a “Department of Commerce and Industries,’’ to oversee commercial activity “in the broadest sense.” In Roosevelt’s telling, it would be…

…a comprehensive and far-reaching scheme of constructive statesmanship for the purpose of broadening our markets, securing our business interests on a safe basis, and making firm our new position in the international industrial world; while scrupulously safeguarding the rights of wage-worker and capitalist, of investor and private citizen, so as to secure equity as between man and man in this Republic.

So again, we see the essence of the Rooseveltian Square Deal: TR did not want to pit one interest or class against another; he wanted to see all treated fairly.

Indeed, amidst the worker protections that TR wished to guarantee, we might pause over another phrase from that 1901 communique: “making firm our new position in the international industrial world.” Here Roosevelt was talking the muscular talk of economic nationalism. That is, even as he wanted social justice for Americans at home, he wanted economic advancement for American firms abroad. After all, he reasoned, the better for American capitalists, the better for American workers. As TR said in 1904, “We shall have to work out methods of controlling the big corporations without paralyzing the energies of the business community.”

Today, such thinking is put in the category of aiding “national champion” industries. And of course, it is not limited to the U.S.; just about every modern country seeks to help its companies succeed in the global market.

Back then, TR’s idea for a new department was embraced by Congress, but it was also somewhat changed; in 1903, the Department of Commerce and Labor was established. A decade later, the “labor” part was peeled off to become the separate Department of Labor, and then, in 1914, the regulatory functions of the Commerce Department were turned over to the new Federal Trade Commission.

To be sure, some will look back at these bureaucratic formations with a certain distaste, perhaps even outright libertarian disdain. And yet it is hard to imagine what American life would be like today without key business regulation.

Or maybe it isn’t so hard to imagine it because what we’re seeing, today, is what it’s like when Big Tech is essentially unregulated.

Yet in the meantime, according to the polls, most Americans support more regulation — and as the disturbing revelations about Big Tech keep mounting, it is hard to see how that support won’t continue to grow. The challenge is to make it the right sort of litigation, so that our companies can expand in ways that help both their owners and the nation as a whole — and not in ways that hurt the nation.

So yes, in a way, it’s like we are back in the days of President Theodore Roosevelt. And if so, it is worth understanding the actual legal and political mechanics of the Square Deal. We ought to learn from the master himself.

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