During last week’s antitrust hearing, Representative Jamie Raskin (D-Md.) provided a sound bite that served as a salvo: “In the 19th century we had the robber barons, in the 21st century we get the cyber barons.” But with sound bites, much like bumper stickers, there’s no room for nuance or scrutiny.
The news media has extensively covered the “questioning” of the CEOs of Facebook, Google, Apple, and Amazon (collectively “Big Tech”). Of course, most of this questioning was actually political posturing with little regard for the actual answers or antitrust law. But just like with the so-called robber barons, the story of Big Tech is much more interesting and complex.
The myth of the robber barons: Market entrepreneurs vs. political entrepreneurs
The Robber Barons: The Great American Capitalists, 1861–1901 (1934) by Matthew Josephson, was written in the midst of America’s Great Depression. Josephson, a Marxist with sympathies for the Soviet Union, made the case that the 19th century titans of industry were made rich on the backs of the poor during the industrial revolution. This idea that the rich are wealthy due to their robbing of the rest of us is an idea that has long outlived Josephson and Marx down to the present day, as exemplified by the writings of Matt Stoller and the politics of the House Judiciary Committee.
In his Myth of the Robber Barons, Burton Folsom, Jr. makes the case that much of the received wisdom on the great 19th century businessmen is wrong. He distinguishes between the market entrepreneurs, which generated wealth by selling newer, better, or less expensive products on the free market without any government subsidies, and the political entrepreneurs, who became rich primarily by influencing the government to subsidize their businesses, or enacting legislation or regulation that harms their competitors.
Folsom narrates the stories of market entrepreneurs, like Thomas Gibbons & Cornelius Vanderbilt (steamships), James Hill (railroads), the Scranton brothers (iron rails), Andrew Carnegie & Charles Schwab (steel), and John D. Rockefeller (oil), who created immense value for consumers by drastically reducing the prices of the goods and services their companies provided. Yes, these men got rich. But the value society received was arguably even greater. Wealth was created because market exchange is a positive-sum game.
On the other hand, the political entrepreneurs, like Robert Fulton & Edward Collins (steamships), and Leland Stanford & Henry Villard (railroads), drained societal resources by using taxpayer money to create inefficient monopolies. Because they were not subject to the same market discipline due to their favored position, cutting costs and prices were less important to them than the market entrepreneurs. Their wealth was at the expense of the rest of society, because political exchange is a zero-sum game.
Big Tech makes society better off
Today’s titans of industry, i.e. Big Tech, have created enormous value for society. This is almost impossible to deny, though some try. From zero-priced search on Google, to the convenience and price of products on Amazon, to the nominally free social network(s) of Facebook, to the plethora of options in Apple’s App Store, consumers have greatly benefited from Big Tech. Consumers flock to use Google, Facebook, Amazon, and Apple for a reason: they believe they are getting a great deal.
By and large, the techlash comes from “intellectuals” who think they know better than consumers acting in the marketplace about what is good for them. And as noted by Alec Stapp, Americans in opinion polls consistently put a great deal of trust in Big Tech, at least compared to government institutions: