This phenomenon is attributable in large measure to the sustained propaganda efforts of the regulated industries. Over the years, these industries have spent huge sums for institutional advertising, propaganda, litigation, lobbying, political contributions, and public relations activities —all designed to frustrate public regulation, or to subvert it, or to prevent political action adverse to their interest. Such "political" expenditures have no functional relation whatever to the supplying of essential public utility services; they are purely defensive in character—calculated to protect established monopoly positions. Public regulation has not only failed to prevent such expenditures from being made, it has actually condoned them, legalized them, and compelled consumers to pay the bill. By permitting such outlays to be considered a legitimate cost of doing business, for purposes of rate-making and computation of income tax liability, regulatory commissions have bilked consumers and the federal Treasury of considerable sums, the exact amount of which perhaps can never be known. The effect is that the people, as consumers and taxpayers, are forced to pay for forging the chains of their own political subservience to private monopoly.
The political consequences are serious. The regulatory commissions themselves, both federal and state, become increasingly impotent, unable to protect the public interest or restrain the aggressions or resist the demands of private monopolists. They become errand boys of the industries they are supposed to regulate, utilizing their powers to protect and aggrandize private monopoly, and to frustrate the development of competing institutions for supplying these services. State legislatures and the Congress, confronted with such powerful propaganda influence and lack of popular support, are unable either to strengthen public regulation or to devise alternative arrangements. Political parties become either subservient to these powerful interests or wary of attempting any frontal assault on them. The press and radio, solicitous for their patronage, either espouse their cause or remain discreetly noncommittal. The result is progressive political deterioration, in which private monopoly grows stronger and public regulation weaker, while society becomes increasingly dependent on these industries but less able either to control or supplant them. The ultimate destination is public subsidy of private monopoly—the subordination of sovereignty to the service of its "chosen instruments." The Role of Competition in the Regulated Industries Much as one may deplore the failure of public regulation to stem the drift toward monopoly, and may yearn for the stern discipline of competition, it must be conceded that the prospects for restoration of free competition in the public service industries are limited. The nature
of existing technology, economic organization, and social demands precludes general reliance on free competition of the traditional type. But it does not follow that competition is without functional value in these industries; or that some significant degree of competition cannot be maintained; or that it should be systematically eliminated by state intervention. Neither does it follow that, because competition must necessarily be limited, private monopoly is therefore inevitable and desirable, or that government should use its sovereign power to establish, protect, and subsidize it. Several alternatives are available between the one extreme of free competition, which is unrealizable, and the other of subsidized private monopoly, which is intolerable. Within this broad range of social choice it should be the part of wisdom to make all practicable use of competition. In short, the objective of public policy should be to get as much competition as possible in these industries.
If we fail in this, and private monopoly becomes increasingly intolerable, then public ownership is the only remaining alternative. While public ownership has its values and appropriate uses, it offers no general solution to the problem of maximizing human freedom in economic affairs. If the goal is economic freedom, as the authors think it should be, then public ownership applied generally and indiscriminately to all public service industries might prove as oppressive and antithetical to freedom as private monopoly. It would constitute no net gain for human freedom to escape from the aggressions of private monopoly only to fall under the oppressive sway of the all-embracing state. Modern experience teaches us that political man is no more the friend of liberty than is economic man, when possessed of excessive power over his fellows. The price of freedom, whether in politics or economics, is diffusion of power among the people so that no man has so little that he need be a slave and no man so much that he can exploit others. A free society is one characterized by diffusion of power, institutional diversity, a wide range of choices among alternatives, and vigorous competition among producers and institutions for public favor on the basis of performance. Neither private monopoly nor exclusive, generalized public ownership meet this crucial test. It is for this reason, then, that every effort should be made to exploit fully the potentialities of competition in this sector of the economy.