There were no dials, no buttons, and certainly nothing to look at on the sturdy black phones in the little Midwestern city where I was born. If you lifted the receiver, a woman would politely ask, “Number please?” She worked for what everybody in America called, simply, “the phone company.” There was only one.
Dial phones and dialtones followed, and pushbutton phones in white and pink and baby blue, all manufactured, wired and installed by Ma Bell. But in the 1980s, the federal government set out to break up the monopoly that had developed after Alexander Graham Bell’s invention took hold. As a young reporter a quarter-century after I saw my first dial phone, I watched competing teams of pinstripe-suited lawyers file into a Washington courtroom one morning to argue United States vs. AT&T – the antitrust lawsuit that eventually was settled with the phone company agreeing to split itself into various units.
That outcome was hardly inevitable, and many people were sympathetic to the phone company’s argument that the government shouldn’t be manipulating the free market, even if one business had gained total control over the country’s communication network.
Nowadays there’s talk of busting up the big tech giants – Microsoft and Google, notably. Some people say that’s anti-American, and contrary to our trust in the free market. But Americans’ nostalgic notions of the free market’s role in our economy are simply not matched by reality. Markets are swayed by all sorts of forces – official and legal, or manipulative and even malicious. Fairness often isn’t possible without the intercession of an external force. Usually, that’s the government of the United States.
It was all easier back in the mid-18th century, when Adam Smith, the Scottish economist and philosopher, suggested that what he called an “invisible hand” of consumer choices guided society to desirable ends – so that individuals acting in their own self-interest would cumulatively bring about social benefits.
But even as he was writing, events were challenging the views of Adam Smith. Rapid industrialization and an expanding finance industry concentrated wealth in a way that left ordinary people with little clout in the marketplace. Government policies already had distorted markets with tax breaks that helped some industries grow, and high tariffs on some foreign goods to protect domestic jobs, or punish foreign governments.
If that sounds familiar, it’s because tax breaks, trade, tariffs and jobs are topics that underlie a lot of policy debate in Washington. Our society has become so complex that government is called upon by one party or another to get involved in every movement of resources.
In the stratified society of 21st-century America – where the bottom 50 percent of families hold just 1 percent of the wealth – the key question isn’t whether the competitive market effectively allocates resources. It doesn’t. The issue in play is how policymakers allocate the wealth that society generates between, on the one hand, private enterprise, which acts on its own behalf, and, on the other hand, the government, acting as the redistributor of wealth for the good of many.
That’s the framework that must be applied as Washington weighs so many fundamental matters that are now in dispute. Because, as the Nobel-winning economist Joseph Stiglitz has noted, “The reason that the invisible hand often seems invisible is that it is often not there.” That is, as Stiglitz noted, “Markets, by themselves, produce too much pollution. Markets, by themselves, also produce too little basic research.”
And, perhaps, too few teachers, and healthcare that isn’t equitably distributed, and neighborhoods without suitable housing for families, and jobs that simply aren’t available in hometowns across vast stretches of the nation.
A government that doesn’t wisely use its authority to tax, spend and regulate isn’t doing the job it was created to perform – namely, in the words of our Constitution, to “establish justice” and “promote the general welfare” of its citizens. If there’s doubt about that, consider what happened when the U.S. government used its power to force the phone company to break up: Phone prices plummeted, quality increased, the cost of long-distance calls dropped. And over the next decade, an entire ecosystem of communication businesses emerged, sparking innovation that put America at the cutting edge of global technology. We’re still benefitting today.
I don’t know if it’s clearly a good idea for the government to step in now to break up the tech giants. It’s a bold step that would create a more competitive marketplace, certainly, and maybe one that’s more innovative and efficient. But it’s hard to imagine.
Yet the idea of breaking up the phone company was something we couldn’t have envisioned when I was a kid, back when every home in America was linked by the Bell system. Yet here’s what many of us can, in fact, imagine: a government that takes its job so seriously in the face of unmet needs and inequity here at home that it is willing to undertake the nearly unimaginable.
Rex Smith, the co-host of The Media Project on WAMC, is the former editor of the Times Union of Albany and The Record in Troy. His weekly digital report, The Upstate American, is published by Substack.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.