How the American dream has come unstuck

On why the US has failed to deal with the problem of Bill Gates

There was an excellent piece in the New Yorker magazine this week about the US Justice Department's battle with Microsoft. Timed to coincide with renewed court hearings over whether Microsoft is abusing its position in the Internet browser market, this was the definitive article on the monopoly Bill Gates has managed to establish in personal computer operating system technology, and the way in which he is using this to dominate other key areas of the PC software market.

Up until very recently few have had anything but praise for Mr Gates. In the US he is an icon, the very personification of the American dream and the global triumph of American technology and its free market capitalist system.

Until recently that is. Now that image is beginning to sour, and in the process policy makers have begun to question why it is that both the self correcting mechanisms of the free market, and America's impressive battery of anti trust and competition laws, have been unequal to the task of checking the growing power of the Microsoft machine.

Worse, they wonder whether Mr Gates, for so long the man who seemed to epitomise the cutting edge of technology, is not now beginning to act as a break on technological development and change. And if that's the case, is there not a danger of the US eventually losing its present undisputed lead in computer technology and sales?

Before trying to answer these questions, it is worth making some general points about the nature of businessmen and monopolies. There is nothing particularly odd, new or surprising about the way Mr Gates operates or behaves. It would be wrong to view him, as some do, as an evil genius astride a war like empire set on world domination. That may once have been the model for the successful monopoly enterprise, but it isn't these days. In any case, Mr Gates isn't like that and nor is his company. On the other hand, nobody would quarrel with the contention that he has been particularly ruthless and single minded in the way he has developed, defended and exploited an original great new idea and market opportunity. This is what successful entrepreneurs do.

In a sense, it is the function of business to aspire to monopoly, for that is where the greatest likelihood of survival and spectacular profit lies. Businessmen who fail to keep uppermost in their minds that their whole endeavour should be bent on trouncing the competition, invariably end up getting trounced themselves.

Mr Gates, then, belongs to a glorious (or not so glorious depending on your point of view) tradition of inspired and highly successful businessmen, stretching from John Rockefeller in the late 1800s through Cecil Rhodes in the early part of the century to Rupert Murdoch today. On present showing, Microsoft looks as if it will out monopolise all these role models.

Monopoly can be achieved in a number of ways. The simplest is to buy it, either by acquiring the competition or by driving it out of business through price cutting - a method known as predatory pricing. In the developed world at least, the first of these routes is now more or less outlawed, though some big companies do still seem to get their consolidating mergers through regulators. The competition authorities both in the US and Europe are also getting better at stamping out predatory pricing, though again there is perhaps a way to go, particularly in Britain.

New industries and technologies offer the opportunity of an entirely different approach to monopoly. Copyright is a tradition as ancient as commerce itself. Hardly anyone would seriously dispute an inventor's right to profit from his own discovery, so international law has rightly been constructed to offer cast iron protection. What this does is to give the inventing individual or company an effective monopoly over the product, at least for a limited period of time. Generally, however, it's not long before the competition comes up with a new and hopefully better version of the same thing.

The trick that Mr Gates managed to pull off was to make his MS-DOS operating system, originally designed for IBM's onslaught on the personal computer market, into what became the industry standard. After that came Windows 95, which has piggy backed off MS-DOS into the same position. Mr Gates has thus achieved the holy grail of all entrepreneurs, for once the industry standard, everyone has do buy your product even when there are better and cheaper versions in prospect. The market has in effect been locked up. Mr Gates has achieved this, moreover, in the world's fastest growing industry, personal computers.

Quite how he managed it has been the subject of more column inches than the Gulf War. In part, it was simply the snowball effect. Because high tech goods have to be compatible with each other, a product can sweep all before it once a certain critical mass has been achieved. More and more other software products become captive to that standard, making it more invaluable still. Anyone with children who has gone the Apple Mac route to the desk top computer must be only too aware, for instance, of the impossibility of getting the latest wizzo computer games in anything other than Windows compatible form.

There is nothing illegal in any of this, but clearly it profoundly distorts the way in which free markets are meant to work. Arguably, there were better alternatives, both to MS-DOS and Windows, but none has come to occupy anything more than a small niche position. Obviously, there's something wrong here, but there's nothing either the market or regulators can do about it. Instead, the Justice Department has chosen to attack Microsoft on its attempt to lock up another area of the market, Internet browsers. Even before Microsoft launched Internet Explorer, there were growing signs of overtly anti competitive behaviour.

With Explorer, it became much more contentious. What Microsoft did, was directly to link its Explorer product with Windows, so that you could not have Windows without Explorer. Most browsers, which act as a gateway to the Web, are in effect given away, both by Microsoft and rivals. Even so, it is clear what Microsoft is up to here. The strategy is that of maintaining control over all aspects of the desktop, thereby preventing competitors from getting a foot in the door.

In the end, it is for the US authorities to deal with Mr Gates and the threat he poses to the free market system. We all have to use them, but these are almost exclusively US technologies, and it is primarily America's lookout if it fails urgently to address the problem. Obviously we are affected, however. And there is a parallel in Britain, if an inexact one. Rupert Murdoch's TV encryption technology occupies a similar position in subscription TV to that of Microsoft with the PC - you cannot offer pay TV without using his system. The consequent opportunity for abuse is obvious, though to be fair, there is as yet no evidence of him using it. As long as capitalism continues to flourish, there will always be those who aspire to monopoly. What governments and regulators have to be eternally vigilant in remembering is that monopoly is also capitalism's greatest enemy.

Start your day with The Independent, sign up for daily news emails
Legendary blues and rock singer Joe Cocker has died of lung cancer, his management team as confirmed. He was 70
people70-year-old was most famous for 'You are So Beautiful'
Chelsea manager Jose Mourinho
footballLatest score and Twitter updates
Arts and Entertainment
David Hasselhof in Peter Pan
The US stars who've taken to UK panto, from Hasselhoff to Hall
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
newsIt was due to be auctioned off for charity
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
Sir David Attenborough
environment... as well as a plant and a spider
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'