‘New-Economy’ Fears Familiar to Authors of Century-Old Law

It has not escaped high-tech leaders who have watched the Microsoft antitrust trial that the law used against Microsoft by the Justice Department was passed by Congress in the 1890s. The fact that a law over a century old can reach out across time and strike the premier company of the Information Age is curious in itself. But there are other significant and perhaps portentous similarities between our time and the America of a hundred years ago.

The Sherman Antitrust Act was passed during the Gilded Age of the late 19th century, an era named after a best-selling satirical novel by Mark Twain. It was a period not unlike our own. Americans were then living in the first great technological revolution; the last decade of the 19th century was also known as the Age of Invention. Automobiles, lightbulbs, mass production, typewriters, sewing machines, motion pictures and countless other innovations were rapidly changing life.

It was a time of mass urbanization and the biggest surge of immigration in history, until the present day. Great disparities of wealth developed and the era was plagued with political corruption and scandals, and widespread concern over the future of democracy.

The Sherman Act was the result of friction between rural farmers, ranchers and small businessmen, and the “robber barons” of the railroad industry, Wall Street and new, large urban corporations. The Civil War had created many industrial millionaires in the North, who used their wealth to consolidate their investments and build large empires of power. The wealthy created pacts and arrangements that, to the farmers and ranchers dependent on the railroads and urban markets, began to look like extortion.

Many scholars consider the Sherman Act a poorly crafted and vague law, the product of bitter disputes and inevitable compromises. Ironically, it was first used against labor unions in the 1890s when they were charged with the same “restraint of trade” allegation the government has now leveled against software giant Microsoft. The prevailing politics of the time were still conservative and pro-business, but class conflict was building. In 1896, William Jennings Bryan, the Democratic Party candidate for president, gave a famous speech on Labor Day in Chicago, where he called for “putting rings in the noses of hogs,” a folksy but unambiguous metaphor for taming giant corporations.

It wasn’t until after the turn of the century, during the Progressive Era of President Theodore Roosevelt, that the federal government began to use its powers to enforce rules on the “new economy” of that period. At the age of 42, Roosevelt became our youngest president, assuming the office in 1901 after the assassination of William McKinley. He soon became the nation’s “trustbuster,” reviving the Sherman Act and initiating 43 antitrust cases in seven years. One of those was the landmark prosecution of John D. Rockefeller’s Standard Oil trust, a case filed in 1906 and resolved by the break-up of the trust in 1911.

“The parallel between the Standard Oil and Microsoft cases,” said Scott Bowman, author of “The Modern Corporation and American Political Thought” and professor of political science at Cal State L.A., “is that they both reflect antitrust prosecution in a period of reconstruction of the economy.”

The trustbusters of the Progressive Era were essentially laying down the rules in the first decades of the modernization of industrial capitalism. They were shaping the relationship of the federal government to large private enterprises, in turn creating the modern regulatory state as we know it today. They understood that economic development had created corporate structures that had outstripped the powers of states. Thus the federal government became the referee, the “countervailing power” with enough clout to tame the immense new companies of the time.

The same thing seems to be happening today. Now that the “new economy” of the Information Age appears to be maturing, and is now universally regarded as the engine of future economic growth, the dilemma is how to shape the behavior of giant corporations that have superseded the powers of the nation-state. This is what the debate over “globalization” is all about. The question is whether new corporate interests, which are now focused on a global market, can be reconciled with public, democratic interests, which are typically local or national in scale.

Historian Steven J. Diner has written in his 1998 book, “A Very Different Age: Americans in the Progressive Era,” that citizens a hundred years ago were concerned how “government could restore individual autonomy and preserve democracy in an age of industrial concentration.” That sounds familiar. Confronted with many of the problems we face today, our ancestors developed many of our same concerns.

“There’s a need for rules in the marketplace, internationally, or else we’re going to have the same problems globally that we had in the U.S. a hundred years ago,” said Bowman. “Antitrust is almost like a parallel Constitution, enforcing the rules of the marketplace.”

The “new progressives” in the U.S. today have questioned why the federal government has pursued Microsoft so relentlessly, while ignoring or at least tolerating massive concentration in other industries, such as media, oil, telecommunications, defense, banking, radio, agriculture and pharmaceuticals. The message seems to be clear, however.

Monopoly practices will not be tolerated in the “new economy,” but oligopolies--with a handful of big companies within an industry--is the kind of competition that can be advantageous to the United States in the new global marketplace. Thus the federal government’s power is increasingly integrated with new global institutions to help manage the world market, like the World Trade Organization.

“People try to define the ‘new economy’ as something outside of all historical experience. I suspect that’s not really the case,” said Lawrence Mishel, vice president of the Economic Policy Institute in Washington. “There is a political force out there responding to some of the perceptions of stress and inequality that emerge from globalization. If the economy goes into recession or the stock market falters, it will come that much more to the fore.”

As Yogi Berra said, we’re having “deja vu all over again.” Just as the Sherman Act was part of a comprehensive and historic transformation of the relationship between government and the economy, the Microsoft case may be viewed by future historians as one step in a global realignment over the social contract inherent in our “new economy.”

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Gary Chapman is director of the 21st Century Project at the University of Texas at Austin. He can be reached at gary.chapman@mail.utexas.edu.