What happens to American businesses when they dance to the tune of the government flute.
On April 5, President Obama kicked off his newly-minted presidential campaign by announcing that he would be conducting a “Facebook town hall” event streaming live via the website and via the White House website on April 20. Just to ensure that the Facebook audience recognizes that this isn’t merely another media appearance but an endorsement of Obama by the Facebook executives, Facebook CEO Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg quizzed Obama before an audience of over 1,000 Facebook employees and other internet mavens.
The recorded result will be chopped up and distributed via Facebook and the White House website over the coming months. “We’re honored that President Obama will be visiting headquarters later this month and will be using the Facebook platform to communicate with an international audience,” Andrew Noyes, Facebook spokesman, gushed.
Obama isn’t the first politician to use Facebook as a fundraising platform. But he is the first politician to be granted the privileged insider status of visiting HQ to do so. Facebook has been one of Obama’s most important supporters over the past several years. And Facebook is hardly the only Silicon Valley organization backing Obama. Apple and Google have also become vocal supporters of the administration. Steve Jobs dined with Zuckerberg and Obama in February to discuss job creation; Google CEO Eric Schmidt was one of Obama’s earliest backers for the presidency; Chris Hughes, one of Facebook’s founders, became Obama’s internet czar in 2007. In fact, prior to the election of 2008, Schmidt toured the United States with Obama’s soon-to-be FCC Commissioner Julius Genachowski to stump for Obama’s net neutrality policies.
On the surface, this makes little sense. Obama’s policies have targeted businesses with remorseless cruelty, setting them up as villains in the class conflict Obama wishes to precipitate. Facebook, Apple, and Google are three of the most successful businesses of the 21st century. Yet all three seem to be mobilizing in favor of the Obama Administration.
That’s because all three must dance for their political master.
Because the federal government is so large and so powerful, and because President Obama is obviously willing and able to use government weight to press forward his agenda, major businesses in the United States must look to appease him. Obama has no problem wielding the heavy club of regulation to hurt his political enemies, or to help his political friends. Major businesses like Facebook, Google, and Apple have all felt the sour stings and warm embraces of big government. And all of them prefer the warm embraces.
President Obama has already promoted Facebook and Google openly: in his State of the Union address, for example, Obama stated, “We are the nation that put cars in driveways and computers in offices; the nation of Edison and the Wright brothers; of Google and Facebook.” Obama’s net neutrality policy, which may or may not be backed by Google, would lock Google into place as the leading search engine on the internet – other search engines would not be able to pay internet service providers (ISPs) to make their websites run faster. Obama has promoted Apple publicly too, particularly Jobs.
By the same token, Obama has also targeted each and every one of these businesses, making it clear that they had better get in line. Obama’s Justice Department has cracked down on Google Books, covertly threatening antitrust lawsuits. The DOJ has also pledged to shut down Google’s acquisition of ITA, a flight data and software company. Michelle Obama has said that Facebook is no place for children, and President Obama has stated that iPads and iPods threaten the republic, making “information … a distraction, a diversion, a form of entertainment, rather than a tool of empowerment … it is putting new pressures on our country and on our democracy.”
Facebook’s, Google’s, and Apple’s flirtations with President Obama are just the latest example of how American businesses die. To be sure, Facebook, Google and Apple are a long way from death. But once they begin dancing to the tune of the government flute, it is only a matter of time before they become obsolete.
The growth of government – and the threat of government involvement in industry – has eventually crippled virtually every major industry in America over the past century and a half. Businesses are started by entrepreneurs; when they grow successful, government intervenes to take its pound of flesh; entrepreneurs respond by parlaying with government, hamstringing their own businesses in an attempt to government wrath. Those businesses gradually become decrepit, dependent on the whims of the capricious Washington D.C. deities. Overseas competitors begin to compete, and the now-slow-moving businesses require government subsidies to survive. This is how businesses turn from American assets into American sinkholes.
Almost every industry since the railroads has undergone this horrific decay from pure capitalism to corporatism to irrelevance. James J. Hill, the man who built the Great Northern Railroad, derided government aid, explaining, “The government should not furnish capital to these companies, in addition to their enormous land subsidies, to enable them to conduct their business in competition with enterprises that have received no aid from the public treasury.” As Thomas DiLorenzo brilliantly documents here, Hill started off as a grocery clerk, then worked in a variety of industries before pooling his cash with several partners to enter the world of the railroads. His business model was a paradigm of pure capitalism. Teddy Roosevelt’s trust-busting converted the railroad industry into a shell of its former self, and converted its “robber baron” leaders into public villains. Now today, President Obama tells us that we must publicly fund rail systems so as to compete with the Chinese.
In the oil industry, the Rockefellers of the early 20th century gave way to the heavily regulated firms of today – and not coincidentally, the foreign oil dependence that now shapes our foreign and domestic politics.
In the automobile industry, Henry Ford entrepreneurialism gave way to government-supported unionization, subsidization, and finally, bankruptcy.
When President Obama praises the fact that we are “the nation that puts cars in driveways and computers in offices,” he neglects to mention that we are also the government that kills the car industry and ships the computer industry overseas; when he lionizes us as “the nation of Edison and the Wright brothers,” he ignores the fact that Edison has given way to government-sponsored GE, a company whose stock fluctuates with each presidential press conference; when he effervesces over Google and Facebook, he blithely overlooks the fact that his own intervention will help make those companies archaic before their time.
This is what liberalism does to industry. It kills it. Industries would be wise to acknowledge that inevitability before committing to the dark road of corporatism.