The Free Market and Politics: Cornelius Vanderbilt’s Steamboat “Monopoly”

For the second video in this series, I discuss Cornelius Vanderbilt and his activities in New York’s steamboat industry in the early 1800s. Some people like KnowledgeHub claim that Vanderbilt was one of the infamous “Robber Barons.” However, the facts show that Vanderbilt was in fact a savvy business owner who was competing against state enforced monopolies. In this case, that monopoly was Robert Fulton’s Steamboat Monopoly.

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Original Video:

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Citations:

Biography.com Editors (Ed.) (2017, April 28). Cornelius Vanderbilt Biography. Retrieved December 5, 2018, from https://www.biography.com/people/cornelius-vanderbilt-9515195

Entrepreneurs and American Economic Growth Cornelius (Commodore) Vanderbilt. (2017, May 23). Retrieved December 5, 2018, from https://legacy.voteview.com/vanderb2.htm
Sourced from the University of Georgia.

Gordon, J. S. (1993). The Steamboat Monopoly. American Heritage Magazine, 44 (7), Retrieved December 5, 2018, from https://www.americanheritage.com/content/steamboat-monopoly

Hess, P. (2015, August 11). Early Years of Steamboating on the Hudson. Retrieved December 5, 2018, from https://newyorkhistoryblog.org/2015/08/early-years-of-steamboating-on-the-hudson/
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Are Libertarians “Holding the Door Open for the RADICAL and RABID Left?” A Response to Black Pigeon Speaks

antifa rioters

Members of Antifa Plan to Silence Opposition by Force

We’ve all seen it coming for a long time. First there was the Adpocalypse of 2017. We all cringed when we saw Alex Jones kicked off just about every social media platform within a matter of days. Now Google has been caught red-handed. In a leaked document, Google admitted that they are moving away from a platform of free speech and towards one of active censorship.

This is truly disturbing, especially to those of us on the political right who know all too well that big tech firms like Google, Twitter, and Facebook are actively collaborating with the left to censor opinions that conflict with the progressive agenda. Many commentators have made a living using these platforms, and the fear that their primary methods for content distribution and income could disappear at a moment’s notice is daunting.

For a long time, conservatives and libertarians were largely in agreement about the right of private businesses to do business or not do business with whoever they pleased. However, many conservatives and even some libertarians are now saying that big tech has gone too far. We tried to play fair and let market competition work, but big tech is simply too powerful. Unless we want to be silenced forever, we need to abandon free market principles and fight for direct government regulation in order to save our place in public discourse.

In particular, the YouTube commentator Black Pigeon Speaks (BPS), with a following of nearly 400,000 subscribers, released a video this past week calling for the government to begin regulating social media as publishers. In doing so, such platforms would lose their legal immunity regarding content posted by their users and then bare liability for any and all content that appears on their platforms. If platforms like YouTube, Facebook, and Twitter are going to censor some content, they might as well be held liable for what they censor and fail to censor just like CNN, Fox News, or any other publisher. At least, this is how the argument goes.

Other commentators such as Styxhexenhammer666 and Paul Joseph Watson have likewise called for an internet bill of rights to provide for free speech on big tech platforms. Their message is clear. Libertarians are simply naïve and will be promptly done away with by progressive elites unless they stand up and utilize the power of government to fight back. As BPS stated in his video, libertarians are, “Holding the door open for the RADICAL and RABID left.”

bps tweet

Tweet from BPS’s Twitter Account @navyhato

Before I explain why this response is misguided, I’d like to say that I have a great deal of respect for BPS. While I have a number of significant disagreements with him, I enjoy his content very much, and no one can deny that his videos are well researched and very informative. None the less, I believe that he, and everyone else advocating for government intervention to save online free speech, fails to recognize why this type of government intervention will give the left exactly what it wants in the long run.

All the arguments for government intervention in big tech boil down to some variation of the arguments for so called “natural monopolies.” There are certain utilities such as water, electricity, and now the internet that are simply more profitable and efficient when everyone is using one centralized delivery system, or so we’re told. As a result, one large monopoly inevitably forms due to convenience for the users and profitability for the owners. However, once that monopoly has had an opportunity to function free of competition, they realize that they now have significant sway over society in that they have the power to double prices at will, or deny service to certain citizens in order to manipulate them. As a result, these natural monopolies must be allowed to exist, but only under heavy regulation from the state to protect the citizens.

This argument has led to the rise of many so called “public utilities.” Be it water, electricity, or the internet, we are told that the market simply cannot stop these powerhouses from forming and gaining control over society once their services become a necessity to live day to day. Google, Facebook, Twitter, and the rest of the big tech world have become de facto public utilities, and now the only way we can save right wing speech is to introduce the same sorts of government regulations that prevent the electric companies from turning the lights off in homes with the wrong political views.

However, the evidence from history simply does not demonstrate that natural monopolies are the result of the market. After thoroughly examining the history of the electric, telephone, and cable television industries, author Thomas Dilorenzo concludes,

“The theory of natural monopoly is an economic fiction. No such thing as a ‘natural’ monopoly has ever existed. The history of the so-called public utility concept is that the late 19th and early 20th century ‘utilities’ competed vigorously and, like all other industries, they did not like competition. They first secured government-sanctioned monopolies, and then, with the help of a few influential economists, constructed an ex post rationalization for their monopoly power” (DiLorenzo, 1996, p. 58).

Does the evidence suggest that big tech resulted solely from free market forces, or like DiLorenzo suggests, did it result from government intervention, thereby resulting in ex post facto calls for legal status as a public utility? The evidence would suggest the latter.

It’s well documented that Google and other big tech firms benefit from generous tax credits and government subsidies not available to their competitors. While providing tax credits is not necessarily the same as direct subsidies, the government choosing to tax certain industries more heavily while drastically cutting the tax rates for corporations like Google ends up tipping the scales heavily in the favor of those corporations and not allowing market competition to function as it normally would. Combine this with the receipt of lavish government contracts, and big tech firms become confident that they will be considered “essential” by the government. If they ever cease to be profitable, they can rest easy knowing that the government will keep them afloat as they did with Chrysler and General Motors between 2008 and 2014.

It’s also worth noting that big tech firms were some of the biggest proponents of net neutrality and other FCC regulations. As with other regulations pertaining to so called natural monopolies, the American public was told that net neutrality was for their own safety and to prevent Internet Service Providers (ISPs) from having control over what they could and could not view on the internet. However, it went virtually unnoticed by masses of people as to just how much big tech stood to gain from net neutrality. See articles here and here to learn more.

This isn’t to say that big tech firms became the powerhouses they are solely because of government intervention. Obviously, millions of people use these services because such services are useful and were found to be more effective than other competitors (i.e. Bing, Yahoo, AOL, MySpace, etc.). It is to say, however, that unlike industries in a free market where even the most successful businesses must constantly be wary of the threat of losses, these big tech firms are significantly more likely to be swayed by political pressure and not by the sentiments of their user base.

Take for example the ban of Alex Jones from YouTube, Facebook, Twitter, etc. Jones had more than 2 million subscribers on YouTube with monthly earnings of up to $68,200. Since the YouTube Partner Program allows YouTube to pocket 40% of all earnings from participating channels, it is ridiculous to think that YouTube would’ve banned one of their highest earning channels if they were operating solely from a standpoint of trying to ensure profits instead of losses. In fact, YouTube would stand to make far more profits if they allowed advertisements to be played on a higher volume of videos without demonetizing “controversial” content.

Consider also a sort of reverse scenario. What if a committed white nationalist restaurant owner decided to act on his convictions and ban all non-whites from his restaurant even though some of the most regular and highest paying customers weren’t white? Even assuming the government took no action, ridding himself of paying customers could only result in a restaurant with lower profits, even if there were no ensuing boycotts from the white customers. The restaurant owner may feel better about himself, but he is none the less worse off.

To be clear, I am not saying that big tech firms are not profitable or were never profitable. It may be the case that they currently remain profitable even without people like Alex Jones. I’m saying only that ridding oneself of paying customers and partners only makes sense if a business has more to gain from doing so than will be lost in profits. In the case of big tech, there is definitely something more to gain.

Predictably, as with every other discussion of natural monopolies in history, the drama of internet censorship has led to calls for the internet being regulated for the safety of the people. Content creators like BPS are understandably concerned about losing their primary sources of income. However, economist Greg Jarrell’s research has suggested that the actual results of these types of regulations will be higher prices for consumers and guaranteed profits for the regulated industries (Jarrell, 1978).

Even if an internet bill of rights is passed and big tech is forced to allow right wing voices back onto their platforms, this will only give credence to the idea that big tech firms are “essential” services and must be guaranteed by government as a public utility. This will finally give government the complete control of the internet that they crave, and leave big tech firms without any incentive to do things in the best interest of their customers. In the short term, commentators like BPS may see their income saved, but they stand to lose far more in the long term. As the saying goes, “The same government that has the power to give you everything you want is a government that has the power to take everything that you have.”

As a final point, it is simply wrong to say that competition cannot mitigate this problem. After Alex Jones was banned from big tech, he reported that traffic to his website and number of subscribers hit record highs. In addition, the user base of the alternative platform BitChute nearly doubled overnight, with more and more users agreeing to donate to their platform. Even if someone like BPS was kicked off YouTube, I seriously doubt that his 400,000 subscribers would simply say, “Oh well,” and move on as though he never existed. If they truly enjoyed his content, the loyal fans would follow him to a new platform and support him with crowd-funding.

It’s also worth noting that in their current form, big tech is not in fact immune from going under. Ironically, one day after publishing the video that this article is a response to, BPS posted another video noting that big tech firms are now on the decline.

The bottom line is that libertarians are not holding the door open to be run over by the left. We are simply trying to avoid solving a problem by invoking the very entity that made this problem possible. That entity is of course the government. It always is. We don’t need an internet bill of rights or any other form of government regulation for big tech. We need to get the government to remove its dirty fingers from the industry entirely.

I hope that more people will come to see the state for what is, a cancer that destroys everything it touches.

And that is my 2 cents. Take it for what it’s worth.

Citations:

Dilorenzo, T. J. (1996). The myth of natural monopoly. The Review of Austrian Economics, 9(2), 43-58.

Jarrell, A. G. (1978). The demand for state regulation of the electric utility industry. Journal of Law and Economics, 21(2), 269-275.

Note: It is worth noting that websites like YouTube, Facebook, and Twitter are not entirely in the clear simply because they are private corporations. In many cases, they have defrauded their users by banning them for “hate speech” even though they have failed to offer a consistent definition of hate speech. These platforms also defraud their customers by not being forthright about their explicit banning of right leaning content. As such, I believe banned users may in fact be able to bring civil suits against these platforms.