Global Policy Forum

Giant companies and mega-mergers put huge
amounts of the national wealth into a few pockets.

By Jeff Gates

Like Br'er Rabbit tossed into the briar patch, Bill Gates must be laughing at his predicament in the Microsoft antitrust case, particularly the mindlessly narrow scope of suggested remedies. Who could blame him? Both the Justice Department and U.S. District Judge Thomas Penfield Jackson missed the point of antitrust.

It should come as no surprise in these market-myopic times that the case turned on the narrow issue of competition. Yet that confuses the means with the end. The trust-busters of the 1890s had no idea how markets would be dominated a century later. That wasn't the issue. The target was not the monopoly but the monopolists--the economic royalists with their kingly prerogatives--and the keen dangers they pose to democracy. That's why they urged that monopolies be broken up and their forbidden fruits dispersed.

Jefferson and Madison were similarly insistent. They warned about monarchical tendencies in the marketplace and the impossibility of maintaining a robust democracy alongside an economic oligarchy. Yet that's what today's market-obsessed perspective has wrought. The financial wealth of the top 1% of Americans now exceeds the combined net worth of the bottom 95%, according to New York University economist Edward Wolff. Gates' wealth alone exceeds the net worth of the bottom 45%. The personal assets of Microsoft co-founders Paul Allen and Gates plus Berkshire Hathaway's Warren Buffet exceed the combined gross domestic products of the world's 41 poorest countries, with their 550 million citizens. So much for being a beacon of hope for democracy.

Wired, the cyber-magazine, reckons that if the value of Gates' Microsoft stock continues to grow at the same torrid pace as it has since Microsoft's 1986 initial public offering (58.2% a year), he will become a trillionaire in March 2005, at the age of 49, and his Microsoft holdings will top $1 quadrillion (that's a million billion) in March 2020. By comparison, 1998 gross world product was $39 trillion.

It's easy to pick on Gates. But he's just the most visible tip of this nation's plutocratic iceberg. The wealth of the Forbes 400 richest Americans grew by an average $940 million each over the past two years (topping a combined $1 trillion). That's while the modest net worth of the bottom 40% shrunk by 80% between 1983 and 1995. For the well-to-do, that's an average increase in wealth of $1.3 million per day. If that run-up in riches were wages earned over a 40-hour week, that would be $225,962 an hour, or 43,876 times the $5.15-per-hour federal minimum wage. While the number of households expanded 3% from 1995 to 1998, the number of households with $10 million or more grew 44.7%. Eighty-six percent of stock market gains between 1989 and 1997 were harvested by the top 10% of households, while fully 42% flowed to the topmost 1%. Over the past three years, we've seen $3.7 trillion in mergers in the United States alone, topped by this week's $163.4-billion blending of America Online and Time Warner. Monday saw Time Warner Vice Chairman Ted Turner's net worth jump by $2.53 billion. That's more than the entire value of Turner Broadcasting System prior to its 1996 merger with Time Warner. Why would we allow our 400 richest citizens to monopolize assets equivalent to one-eighth of the GDP? Meanwhile, as of 1997, the median household financial wealth (net worth less home equity) totaled $11,700, $1,300 less than in 1989. So now we've allowed unfettered markets to undermine not only democracy but our fiscal well-being as well, leaving 76 million baby boomers with votes yet virtually no assets, a certain formula for a politically fractious future.

Microsoft must be forced to divest its key components, including breaking up the operating system division into several firms. It's tempting to impose a conduct remedy akin to saying: Go out and sin no more. Or to simplistically order a spinoff of its operating systems division. That's about what I'd expect from today's market-obsessives. Yet the only remedy consistent with antitrust's market-taming intention is a structural one that not only breaks up the monopoly but also reallocates wealth from the monopolists' ill-gotten gains.

In civil antitrust suits, the law allows highly punitive treble damages. Instead, Microsoft could be ordered to sell off its components for one-third their appraised value. Major shareholders could be required to accept in payment a non-interest-bearing note, with the principal paid solely from future sales generated by those independent operations. In truth, that may be too generous, as it would allow the monopolists to retain a huge component of their loot along with the ability to recover the balance to the extent that the successor companies can succeed in a genuinely competitive market. Yet any more traditional bust-up will further reward the offending parties, while conduct remedies are even worse.

Contrary to the misplaced focus of the current debate, antitrust isn't just about monopolizing markets. Never was. It's about redressing the anti-democratic results that accompany abuse of the market. To address only the means while leaving intact the gains mocks the very rationale for antitrust. Microsoft's breakup should include financed-stakes that foster widespread ownership of this market-dominant behemoth. Preferred stakes should be reserved not only for employees and independent contractors but also for those employed by suppliers, distributors and even those customers and competitors who make up the web of this company's much-abused market relationships.

Jeff Gates, President of the Atlanta-based Nonprofit Shared Capitalism Institute, Wrote "The Ownership Solution" (Addison Wesley, 1998)

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