“These days, the bigger the company, the less you can figure out what it does”*…
Late 19th-century Americans loved railroads, which seemed to eradicate time and space, moving goods and people more cheaply and more conveniently than ever before. And they feared railroads because in most of the country it was impossible to do business without them.
Businesses, and the republic itself, seemed to be at the mercy of the monopoly power of railroad corporations. American farmers, businessmen and consumers thought of competition as a way to ensure fairness in the marketplace. But with no real competitors over many routes, railroads could charge different rates to different customers. This power to decide economic winners and losers threatened not only individual businesses but also the conditions that sustained the republic.
That may sound familiar. As a historian of that first Gilded Age, I see parallels between the power of the railroads and today’s internet giants like Verizon and Comcast. The current regulators – the Federal Communications Commission’s Republican majority – and many of its critics both embrace a solution that 19th-century Americans tried and dismissed: market competition…
The current controversy about the monopolistic power of internet service providers echoes those concerns from the first Gilded Age. As anti-monopolists did in the 19th century, advocates of an open internet argue that regulation will advance competition by creating a level playing field for all comers, big and small, resulting in more innovation and better products. (There was even a radical, if short-lived, proposal to nationalize high-speed wireless service.)
However, no proposed regulations for an open internet address the existing power of either the service providers or the “Big Five” internet giants: Apple, Amazon, Facebook, Google and Microsoft. Like Standard Oil, they have the power to wring enormous advantages from the internet service providers, to the detriment of smaller competitors.
The most important element of the debate – both then and now – is not the particular regulations that are or are not enacted. What’s crucial is the wider concerns about the effects on society. The Gilded Age’s anti-monopolists had political and moral concerns, not economic ones. They believed, as many in the U.S. still do, that a democracy’s economy should be judged not only – nor even primarily – by its financial output. Rather, success is how well it sustains the ideals, values and engaged citizenship on which free societies depend.
When monopoly threatens something as fundamental as the free circulation of information and the equal access of citizens to technologies central to their daily life, the issues are no longer economic.
Stanford historian Richard White unpacks an important historical analogue; read it in full at “For tech giants, a cautionary tale from 19th century railroads on the limits of competition.”
[Image above: source]
* Michel Faber, The Book of Strange New Things
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As we wonder if The Invisible Hand is giving us the finger, we might recall that it was on this date in 1852 that Henry Wells and William G. Fargo joined with several other investors to launch their eponymously-named cross-country freight business. The California gold rush had created an explosive new need, which Wells, Fargo and other “pony express” and stage lines leapt to meet. It was after the Civil War, in 1866, when Wells, Fargo acquired many of their competitors, that it became the dominant supplier. (Ever flexible, they adapted again three years later, when the transcontinental railroad was finished.)
From it’s earliest days, it also functioned as a bank, factoring the shipments of gold that it carried. Indeed, when Wells, Fargo exited the freight business as a result of government nationalization of freight during World War I, the bank (which merged with Nevada National in the first of a series of “transformative transactions”) continued to operate as “Wells, Fargo,” as indeed it does (albeit under unrecognizably evolved ownership) today.
