The Big Tech Extortion Racket
 
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Popular histories present the Boston Tea Party as a rebellion against taxes. Yet what the colonists objected to more than anything was the idea of an all-powerful corporate middleman regulating commerce. They viewed the 1773 protest in Boston Harbor as a victory for liberty and a blow against the British East India Company’s trade monopoly.

That corporation owed its dominance not to any proprietary advantage but to an exclusive British government charter. The artificial nature of this power was made clear soon after the Congress of the new United States signed a peace treaty with Britain. Six weeks later, the American ship Empress of China sailed from New York, bound for Canton. When the ship returned, its traders sold tea and porcelain on the open market. Without the active backing of the British state, the East India Company could not stop the sale—let alone determine who sold what, or where and how they sold it, in America.

But around the middle of the nineteenth century, Americans began to develop technologies that could not be broken into component pieces. This was especially true of the railroad and the telegraph. These expensive and complex networks were built across vast areas of land and required large teams of people to operate. This made the earlier solution to monopolies—dissolution—impossible. If Americans planned to take full advantage of these technological advances, they would have to regulate the actions of the corporations that controlled them.

Such corporations posed one overarching challenge: they charged some people more than others to get to market. They exploited their control over an essential service in order to extort money, and sometimes political favors. The system of “discriminations made between individuals . . . is the most serious evil connected with our present methods of railroad management,” the Yale professor Arthur T. Hadley explained in 1885. “Differences are made which are sufficient to cripple all smaller competitors. . .  and concentrate industry in a few hands.”

Americans found the answer to this problem in common law. For centuries, the owners of ferries, stagecoaches, and inns had been required to serve all customers for the same price and in the order in which they arrived. In the late nineteenth century, versions of such “common carrier” rules were applied to the new middleman corporations.

Today we rightly celebrate the Sherman Antitrust Act of 1890, which gave Americans the power to break apart private corporations. But in many respects, the Interstate Commerce Act of 1887 was the more important document. This act was based on the understanding that monopoly networks like the railroad and the telegraph could be used to influence the actions of people who depend on them, and hence their power must be carefully restricted, in much the same way that we restrict the power of government. As Senator Sherman himself put it,

It is the right of every man to work, labor, and produce in any lawful vocation and to transport his production on equal terms and conditions and under like circumstances. This is industrial liberty, and lies at the foundation of the equality of all rights and privileges.

For a century and a half, Americans used common carrier policies to ensure the rule of law in activities that depended on privately held monopolies. These rules served as a pillar of American prosperity through much of the twentieth century. By neutralizing the power of all essential transport and communications systems, the regulations freed Americans to take full advantage of every important network technology introduced during these years, including telephones, water and electrical services, energy pipelines, and even large, logistics-powered retailers. Citizens did not have to worry that the men who controlled the technologies involved would exploit their middleman position to steal other people’s business or disrupt balances of power.


Read full article on Harper’s.