Silicon Valley Oligarchs

The irony is that, in the United States, high-tech entrepreneurs have long argued against government oversight. True, Silicon Valley electronics firms benefited from Pentagon contracts early on — and it is also true that the Internet was first developed as a government project. But the mass-market commercialization of that new technology owes nothing to government assistance.

A multibillion-dollar economy has evolved without Washington or the California state government in Sacramento putting in their two cents. In fact, until recently, high-tech companies wanted the government to stand clear of the market. Now, the fallout of the Microsoft antitrust trial is changing that Silicon Valley mindset.

The captains of high-tech who wage competitive war against Bill Gates found that the government had its uses in their bitter rivalry. The case focused on possible damage to Netscape, Microsoft’s rival in the web browser market. But many of the world’s largest, most successful computer software and hardware manufacturers, such as Oracle and Sun Microsystems, cheered on the competition watchdog.

Microsoft, which decries what it sees as heavy-handed tactics by the U.S. Justice Department’s Antitrust Division, has mounted a huge lobbying effort to sway politicians in its favor — at least according to information unearthed by Oracle, one of these competitors. Oracle employed private investigators to sift through garbage and obtain this information.

U.S. regulators are just starting to pursue New Economy companies — and are developing a taste for what they find. MCI WorldCom was prevented from taking over Sprint. Federal approval for AOL’s merger with Time Warner is still uncertain — especially now that rival Walt Disney has weighed in with its own unsolicited suggestion to split the merged company in two.

All this flies in the face of the fundamental principle of the new economy, as stated by U.S. Treasury Secretary Larry Summers.

Mr. Summers recently observed that, “the only incentive [for high-tech companies] to produce anything is the possession of temporary monopoly power…. The constant pursuit of monopoly power becomes the central driving thrust of the new economy. And the creative destruction that results from all that striving becomes the essential spur of economic growth.”

Still, it is hard to imagine that Mr. Summers was thinking of anything remotely resembling the behavior of Russian oligarchs.