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Volume 18, Number 11

November 2000

Is Klein a Selfless Public Servant?

William L. Anderson

During the seemingly endless debate over the government's treatment of Microsoft, the consensus seems to be that this is mostly a battle over ideas, including the role of government in economic matters. Whenever the subject of "self interest" appears, it usually deals with Microsoft's competitors that stand to gain from the destruction and looting of that software company.

The role of those in the US Department of Justice pursuing the Microsoft case-as well as a number of other high_profile antitrust suits -however, is rarely discussed, at least when it comes to examining their motives. At best, they are seen as dunderheads who simply are ignorant of economics, and at worst, they are seen as lackeys for those who pull the real strings of political power. It is time to take another look at these folks.

In his examination of economic history and the thinking of past economists, Murray Rothbard was fond of looking beyond the surface. The main question he asked was, "What did these folks have to gain by taking a certain action?" When he looked at why politicians do what they do, that question really came to the fore.

Rothbard is not the only economist who has been liberated from the "public interest" view of government, a viewpoint that says politicians and bureaucrats are making all of their decisions to formulate a greater "public good." Public Choice economists like James Buchanan, Robert Tollison, William Shughart, and Robert McCormick have written volumes on this very thing. As Tollison and McCormick noted in their book Politicians, Legislation, and the Economy, Dr. Jekyll and Mr. Hyde may make for good cinema, but it fails to explain why those in the employ of government do what they do.

A better tool for explaining political behavior has been given to us by those in the Austrian and Public Choice Schools of economics. In the words of Woodward and Bernstein's secret source "Deep Throat," we are to "follow the money." Perhaps a more complete way of saying this is to note that we cannot ignore the personal interests of those who make decisions, even when they insist they are acting in the "public interest."

This brings us to Joel Klein and his happy minions who gave us the antitrust suits against Microsoft, Intel, America Online, and beyond. According to Klein and his supporters, he is simply acting to ensure that the high technology sector of the US economy remains "competitive" and is not swallowed up by rapacious monopolies. This explanation seems to satisfy the editorial writers in this country, even those who believe that Klein is doing the wrong thing.

However, there is a glaring problem with Klein's rationalization: It makes no sense once we see who the real winners are in these antitrust suits. Klein insists that he is only looking out for US consumers. What he does not say is that he is actually looking out for himself.

According to the mainstream media spin, Klein and the other lawyers in the Antitrust Division of the DOJ have absolutely nothing to gain from their actions. First, they supposedly have avoided conflict_of_interest problems by divesting themselves of stocks of companies involved in the lawsuits. Second, they are not receiving fees for their actions, only government salaries.

Both statements are true in their own right, but they leave out something very important: many of those directly involved in these lawsuits are not career DOJ lawyers, but rather are political appointees. When this current administration packs up and leaves 1600 Pennsylvania Avenue (and not a moment too soon), Klein and company will also be looking for work, and what work it will be!

Unknown to most Americans is the fact that antitrust litigation is a fabulous moneymaker for law firms and economists. While government suits and price_fixing prosecutions grab the headlines, they account for only about 10 percent of all antitrust cases. The rest are filed by firms seeking to damage their rivals through litigation, and it is here that attorneys and economists make the "big money."

While Joel Klein has been portrayed as the consummate "public servant," in reality he has been fattening up his resume to the tune of millions of dollars a year. After he and the others leave the DOJ, they will command huge salaries working for private law firms in the area of antitrust. Many economists have already tapped this very deep well and no doubt those in the economics profession who aided the DOJ in the Microsoft case will be able to add to their riches.

In other words, "besting" Microsoft in court meant that Klein was able to demonstrate he could "win the big one," which means he has now become hot property in this multi_billion_dollar industry, along with his other cohorts who have proven their prowess to law firms specializing in antitrust litigation. This is no minor feat. Klein and his friends have set themselves up to become extremely wealthy people for the rest of their lives.

Of course, no one has seen fit to put in print that Klein and company have been engaging in an act of sprucing up their "human capital." Economists have known that dirty little secret for years. The fact that numerous economists have become millionaires by testifying in antitrust cases plays no small role in the fact that antitrust laws are still on the books.

As Thomas DiLorenzo and Donald Boudreaux have noted, the early supporters of antitrust law were those who also supported protectionism. In the early days, economists generally were against the passage of these laws. The era of big litigation money, however, has definitely helped to mute opposition to antitrust laws within the economics profession. This must be what the Chicago School economists call "the market test."

For all of their verbal support for consumers, Joel Klein and his friends are the worst enemies consumers can have. First, they have managed to throw a thriving industry into confusion and a near civil war of litigation, and, second, they have forced partisan politics once again into private business.

Third, and most distressing, they will be able to continue their dirty trade long into the future. Their income will come from looting other firms and consumers. The so_called discussion of ideas and concerns for consumers are basically smokescreens for one group of people being legally able to loot others. This is a legacy of tyranny and nothing else.

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William L. Anderson (ANDERWL@prodigy.net) teaches economics at North Greenville College.

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