Regulating power is the power to control

In his opinion, in 1819 V.I McCulloch v. MarylandJohn Marshall, Chief Justice of the US Supreme Court, famously stated what everyone already knows, “The power to tax is the power to destroy.” Americans also knew that the authority to regulate imposes costs as well, so it is more akin to the authority to tax. And they are now re-learning a lesson they should never have forgotten, that the power to tax or regulate is also the power to control, not only in the supposed “public interest” but for the benefit of the regulators themselves, specific politicians, or the government in general.

Once, companies can fight government mandates and win. Perhaps most infamously, during World War II, the Western Cartridge Company of East Alton, Illinois, successfully fended off a merger order issued by the FDR’s Fair Employment Practices Committee (FEPC), largely because white workers were willing to strike over This issue at a time when their production was desperately needed for the war effort.

However, by the 1930s the US government had regulated some industries enough to be able to control managerial decision-making. Radio is perhaps the most important of these tightly controlled industries. Founded in June 1934, early in FDR’s first term as POTUS, the FCC licensed radio spectrum for only six months at a time. This gave her the power to harass radio stations critical of the New Deal, or Franklin D. Roosevelt himself. The FCC quickly developed a reputation for denying licenses or causing significant enough problems with radio stations’ paperwork to call into question the New Deal or the administration’s official narratives.

One startling example of government censorship via corporate agent occurred in February 1934, when the country’s radio spectrum was still controlled by the FCC’s predecessor bureaucracy, the Federal Radio Commission. Like modern proxy censorship, it has led to death and destruction.

Eager to further its version of the Great Reset, FDR announced that contracts with private airlines to deliver general mail were canceled (as were the gold clauses in bonds) and the routes were turned over to the USAF. Unfortunately, the army pilots at that time were far from running for the Top Gun School. As expected, they began to fall apart. And soon dozens died, in addition to many of the letters they were assigned to carry.

To hide his failed policy, veteran aviator Eddie Rickenbacker was watched by Franklin D. Roosevelt, who took to the airwaves to bring the matter to public attention. NBC Radio’s William P. Miller warned Eddy that if he said anything controversial on the air, it would be pulled on orders from Washington. Instead of criticizing Roosevelt as intended, Eddie gave up.

The Twitter Files saga proves that the US federal government is still using its regulatory powers to force companies to censor critics, despite the fact that doing so is patently unconstitutional. As the US Supreme Court ruled in the 1960’s Bates v. City of Little Rock (361 US 516), First Amendment rights are “protected not only against harsh frontal attack, but also from strangulation by more subtle government intervention.”

However, the problem of indirect government censorship of the Internet has been brewing for decades. In 2006, University of Pennsylvania law professor Seth F. Cramer in a legal review article warned of “censorship by proxy” and noted that the government was looking for the “weakest link” in the digital supply chain between spam providers and their audiences. His article reveals that most of the early efforts at corporate agent censorship by Western governments focused on the bad guys, like Nazi pedophiles, who no one wanted to defend. The problem was that the tools they developed were scalable and ready to be used against anyone, even someone like Rickenbacker.

The subsequent emergence of a few huge social media sites such as Facebook, Tik Tok, and TwitterYouTube will create the weak links that the government wants. Their corporate owners are huge, and so they have a lot to protect from incursions by the IRS, FBI, FCC, Department of Justice, and perhaps even the most effective regulator of all, the National Archives and Records Administration.

The social media companies likely calculated that being willing followers of Leviathan wouldn’t hurt their bottom line, and might even increase them. Small users who might pose a risk can be easily fired without significantly hurting revenue. However, many smaller users may start to get dumped in the collection, especially if they are kicked out for reasons that can be applied to larger accounts as well. Why social media companies don’t hire high-profile lawyers to protect themselves from losing “whales” remains unclear, but it’s possible that the government played the old dirty trick of hiring the best people in town.

There was also a risk that users would flee platforms that had developed a reputation for legal and much-needed censorship of content, especially if close alternatives were available. Indeed, when it became clear that something untoward was happening on the big social media platforms, competing entrepreneurs created new companies that were allegedly immune, or at least less susceptible to government oversight. New social media platforms have attracted users, thus taking some market share away from established companies, but none of them have been huge hits. Some may be engaging in the same kinds of censorship recently revealed on Twitter, while others, microblogging site Parler, have proven vulnerable to attacks on their links to the Internet, including app download services.

The “chilling effect” of government oversight by corporate agency is keeping Americans on an ice-slope bottomed out in the kind of political servitude that founders and founders feared. Luckily, the slope was long, with some flat areas, and Constitution across the SCOTUS threw us safety lines, but we might as well pick up the pace. Moreover, one of those strongest lines of safety, the First Amendment, has been stretched to the breaking point.

Robert E Wright

Robert E Wright

Robert E. Wright is a senior research fellow at the American Institute for Economic Research. He is the (co-)author or editor (associate) of more than twenty major books, book series, and edited collections, including AIER The best of Thomas Paine (2021) and financial exclusion (2019). He has also authored numerous articles for important journals, incl American Economic ReviewAnd Business history reviewAnd Independent reviewAnd Special Projects MagazineAnd Financial reviewAnd Southern Economic Review. Robert has taught business, economics, and politics courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since earning his Ph.D. in history from the State University of New York at Buffalo in 1997.

Selected publications

  • Reducing recidivism and encouraging distancing: A social entrepreneurship approach Journal of Entrepreneurship and Public Policy (Summer 2022).
  • “The Political Economy of Modern Wildlife Management: How Marketing Can Reduce Game Abundance.” Independent review (Spring 2022).
  • “Sowing the Seeds of a Future Crisis: The Securities and Exchange Commission and the Emergence of the Nationally Recognized Statistical Rating Organization (NRSRO) Class, 1971-1975.” Co-author: Andrew Smith. Business history review (Winter 2021).
  • “Adjusting the AI≠UBI Income Portfolio to Technology Transformation.” Co-author: Aleksandra Przegalinska. Frontiers in human dynamics: social networks (2021).
  • Liberty Befits All: Stowe and Uncle Tom’s Cabin. ” Independent review (Winter 2020).
  • “Pioneer Financial News National Broadcast Journalist Wilma Seuss, NBC Radio, 1954-1980”. Press history (Fall 2018).
  • “The Mandate of the Republican Model of Anglo-American Corporate Governance.” Advances in financial economics (2015).
  • “The Pivotal Role of Private Enterprise in the Age of Transportation in America, 1790-1860.” Special Projects Magazine (Spring 2014)
  • “Corporate Insurance Companies in Antebellum America.” This article was co-authored by Christopher Kingston. Business history review (Fall 2012).
  • “Deadliest Games: Dueling Foundation.” This article was co-authored by Christopher Kingston. Southern Economic Journal (April 2010).
  • “Alexander Hamilton, Central Banker: Crisis Management During the United States Financial Panic of 1792.” Co-Author: Richard E. Sylla and David J. Cowen. Business history review (Spring 2009).
  • “Integration of the Transatlantic Capital Markets, 1790-1845.” The article was co-authored by Richard Sella and Jack Wilson. Financial review (Dec 2006), 613-44.
  • State “coins” and conversion to US dollars: Clarifying some confusions. Co-author: Ron Michener. American Economic Review (June 2005).
  • “IPO Market Reform in the United States: Lessons from History and Theory,” Accounting, business and financial history (November 2002).
  • “Bank Ownership and Lending Patterns in New York and Pennsylvania, 1781-1831.” Business history review (Spring 1999).

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