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Government: Destroyer of Wealth


That ugly sucking sound coming from Washington, D.C., is the federal government’s antitrust case against Microsoft. For as long as this case lasts, it will be like a monster vacuum cleaner powerfully drawing wealth from the pockets of every American, and everyone else in the world for that matter.

The amount of money that the case will cost Americans as consumers and taxpayers will be staggering. It will go into the billions. The ten years the federal government spent in its absurd and futile case against IBM deprived us of untold innovative and perhaps life-saving products and services. We’ll never know precisely what we lost because of that case. But we were all big losers. (Perhaps the only winners were bureaucrats who gained temporary prestige and larger budgets.)

The same will be true with the current Microsoft case. Think for a moment of the money that is being spent on the highest-priced legal minds available. Microsoft, of course, must pull out all the stops to save itself from the persecution it is being subjected to. Who knows how many bright people inside and outside Microsoft are providing support services to the lawyers? Then there are the lawyers in the Justice Department who are pressing this lawsuit. They have much at stake in terms of reputation now. And they are not being paid in (potentially allergy-provoking) peanuts, are they?

Does anyone care about this tragic waste of scarce human labor?

We are unaccustomed of thinking in these terms. A great 19th-century economist, Frederic Bastiat, once told the story of a French village, where a mischievous youth tossed a rock through a shop window. The townsfolk gathered to lament the shopkeeper’s misfortune, but a misguided optimist opined that there was a silver lining to this dark cloud. The shopkeeper’s need to fix the glass would set money in circulation, beginning with the window maker, and would bring unexpected prosperity to the community. Why, the broken window would create a veritable windfall! At that point, some wise guy suggested that they should break all the windows in town and make everyone rich.

We shouldn’t be so quick to laugh at that story. How often has someone said essentially the same thing after an earthquake or hurricane?

Bastiat’s point is that before we can size up a situation, we have to look at the unseen effects. Everyone could picture the shopkeeper paying the window maker for a new piece of glass; they then could imagine the window maker taking the money to the baker and the baker taking it to the butcher, and so on. But what no one could picture was how the shopkeeper would have spent his money had he not needed a new window. He would have used the money to buy something he did not have, rather than to restore something he had lost. As a result, he would have been better off and not just back where he started. Of course, by spending his money to make himself better off, he would have helped make others better off as well-for trade always benefits both parties to the transaction.

The relevance to the Microsoft case should be obvious. The government’s lawsuit is going to require the spending of billions of dollars. In the end, either Microsoft will be where it is today or the government will fine it (more money wasted) or break the company up and destroy its efficiency.

If there were no lawsuit and if the government were barred from bringing all such idiotic lawsuits, that money would go into the production of goods and services to improve the lives of everyone.

How do I know that? Because in a free market, you make money by offering people things they value. The more you please them, the richer you get.

The consumer is boss. And that’s also why the Microsoft lawsuit is yet another monument to the government’s stupidity.

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    Sheldon Richman is former vice president and editor at The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.