Tesla, Westinghouse and Electrification

One-hundred twenty-five years ago, foundational invention culminated with the arrival of alternating electrical current’s successful generation, transmission and use. This success set a technological standard, sparked dynamic competition and led to a marked increase in the standard of living.

All this thanks to secure, reliable, private property rights — particularly the exclusive right to one’s inventions for the limited duration of a patent.

Inventor Nikola Tesla and inventor-industrialist George Westinghouse applied and built on the knowledge and the earlier work of scientists such as Alessandro Volta and America's beau ideal Renaissance man Benjamin Franklin. Tesla invented the foundational technology, while Westinghouse provided the resources — R&D lab, industrial, financial, business savvy — vital to commercialization of inventions.

They won out on the type of electrical current transmitted, overcoming direct-current advocate Thomas Edison in the “War of the Electric Currents.” AC conveys electricity longer distance than does DC. AC became the standard for electrification.

Tesla and Westinghouse successfully connected their Niagara Falls hydroelectric station with the city of Buffalo, N.Y. They had worked out the practical application with its countless little, but important details, with associated inventions and improvements along the way.

Commercializing the AC-based electrical inventions was made possible by the protection of private property rights that Tesla’s patents secured. Relying on the property rights in the patents, the allies could pursue business arrangements to monetize their commercialization efforts.

Strong patents ensured that Tesla and Westinghouse could assert their patent rights and enforce their patents against infringers and other disrespecters of property rights. Such patent potency added to the value of patents as intangible assets. Reliable patents are more attractive to investors of venture capital.

They formed the Niagara Falls Power Company as the business entity for their novel power generation using Niagara Falls waters to produce electricity. Its first customer was Buffalo’s Cataract Power and Conduit Company. In turn, Cataract’s first customer for electricity was the city streetcar company.

NFPC built the 26-mile infrastructure from Niagara Falls to Buffalo. On November 16, 1896, power plant transformer switches were thrown at Niagara Falls. Within a second or two, alternating electrical current shooting through the power lines reached Cataract’s transformer and on to juicing Buffalo streetcars. A newspaper called this result “the journey of God’s own lightning bound over to the employ of man.”

On January 12, 1897, Tesla and others attended a celebratory dinner in Buffalo. Some 300 Buffalo citizens, 50 leading scientists and electrical engineers, and a group of industrialists and investors gathered to celebrate the achievement. It had taken 8 years and about $200.9 billion (in 2022 dollars) in venture capital just to build Niagara Falls Power and complete the Buffalo electrical connection.

The rest is history. AC electrification displaced small, local electrical systems. AC electricity was more efficient, cheaper and abundant. The Tesla-Westinghouse inventions, patents and commercialization efforts and AC’s proliferation have benefited people, communities, industries, businesses and multiple aspects of life.

New markets sprung forth implementing countless uses and applications of widespread electrical availability. Implementers have ridden on the rails of the foundational innovation. Numerous new companies have been created around implementing inventions that use electricity for untold applications of this abundant, cheap power coming into homes, shops, factories, hospitals and elsewhere.

That’s what dynamic competition looks like. It comes from the exclusive property right in one’s inventions of foundational technologies and their standardization. Exclusivity and reliable patents electrify innovation and spark the creation of new wealth and jobs.

This holds for today's great inventors, such as Moderna, Pfizer and BioNTech in biopharma and Qualcomm and InterDigital in wireless telecom.

We should never lose sight of the remarkable benefits across society that foundational, standardized inventions spark and how absolutely vital it is that all inventions enjoy secure, exclusive, private intellectual property rights.

(See Jill Jonnes, Empires of Light: Edison, Tesla, Westinghouse, and the Race to Electrify the World for a full account.)

The Administrative State’s New Lease on Life in Washington

A year into the Biden administration, a characteristic has emerged that’s emblematic of its central approach to achieving its policy goals: The wholesale embrace and hypercultivation of the Administrative State.

Evidentiary exhibit A is the appointment of radical Leftist acolytes of Sens. Elizabeth Warren and Bernie Sanders to government positions — e.g., Lina Khan at the Federal Trade Commission, Rohit Chopra at the Consumer Financial Protection Bureau, Tim Wu at the White House.

Exhibit B is reckless, unbridled conduct in their official positions, intended to disrupt policies and processes. They employ chaos as a tactic for unilateral policy change. Their administrative actions effect policy while disregarding rules, established procedures and congressional authorization.

These violate the rule of law and threaten private property rights. Some examples illustrate the extremist, antidemocratic antics now in play.

Mischief marks the Federal Trade Commission under Chairwoman Khan. Her dervishlike approach includes launching questionable antitrust investigations into petroleum, rail, grocery, sugar and other economic sectors. She is disrupting mergers and acquisitions, including some that have cleared antitrust review or already been consummated.

Khan is decoupling the FTC from the objective, evidence-based consumer welfare standard of antitrust. She has acted to remove important guardrails such as bipartisan Section 5 enforcement guidelines and merger review guidance, and advanced partisan subpoena and investigatory authority and rulemaking power.

Rebuffed FOIA requests and a recent complaint charging the agency with ignoring a FOIA request would shed light on these troubling developments. And Khan’s only been at the FTC since the summer!

The FTC’s stockpiling of “zombie votes” demands scrutiny. As he was leaving the FTC and taking appointment at the CFPB following Senate confirmation, former FTC Commissioner Chopra cast votes on future matters of FTC business — though no longer effectively an FTC commissioner. Khan’s FTC has since counted several of Chopra’s zombie votes.

Zombie voting at the FTC has led to congressional pushback (here and here) and a request for investigation into the practice.

Chopra is aggressively encroaching on — and trying to displace — well established bank merger policy and process. Chopra’s attempted hostile takeover of the FDIC’s authority ranges far outside his ex officio role on the FDIC board.

Chopra aims to radicalize and politicize bank merger reviews in unprecedented ways. The bureaucratic, unelected aiders and abetters in the Biden administration at the CFPB, Federal Reserve, the Comptroller of the Currency and the Justice Department have ganged up on the FDIC’s legitimate authority over these matters.

A dozen Republican U.S. Senators in a sharply worded letter note, “Director Chopra and [expired holdover] Director [Martin} Gruenberg’s statement and actions make clear that they violated FDIC procedures with the apparent goal of usurping the powers of the chairman and inhibiting her ability to carry out her official duties and responsibilities.”

This Chopra et al. hostile takeover and end-run of legitimate policymaking is part and parcel of the Administrative State mentality. It’s pernicious. It’s contrary to limited government and the rule of law. It may be illegal.

Chopra’s, Khan’s, Gruenberg’s and other denizens of the Administrative State’s unbounded, radical misconduct under color of law deserves reversal, and they warrant removal from office.

Thus, the minions of administrative mischief erect and consolidate political power in administrative agencies. They circumvent the constitutional separation of powers. They undo the means of safeguarding against government’s overreach, which confines the realm of the unelected to clearly enumerated authorities. Leviathan increasingly escapes transparency and accountability to duly elected officials, namely the legislative branch, and to the electorate.

The strengthening of the Administrative State and the weakening of oversight, checks and balances, and accountability have shifted into overdrive in the past 11 months. The Administrative State’s newly empowered “true believers” are working overtime to consolidate administrative power by combining legislative, administrative and judicial powers, and dismantling the procedural norms, rules and tools of due process.

The Administrative State never works out well for ordered liberty and the rule of law. This direction will lead to much destruction, unnecessary disruption and antidemocratic effects for many American citizens, private enterprises and our nation. The current course promises tyrannical rule by unlimited government.

The Grinches Stealing America’s Christmas

Senate Majority Leader Chuck Schumer and House Speaker Nancy Pelosi are behaving a lot like the unrepentant Grinch Who Stole Christmas — urged on by Grinch in Chief Joe Biden.

Only, this wholesale theft inflicts real-world pain on American entrepreneurs, innovators and those who benefit from their entrepreneurial and innovative talents. The victims include those who work at the businesses these entrepreneurs create and those whose lives and well-being are enhanced through American innovations.

The partisan budget reconciliation legislation (H.R. 5376) contains many nefarious, Grinchian provisions that spell trouble for our nation’s future. This legislation assaults Americans’ property rights, including intellectual property. It weighs down our most productive citizens with heavy, even confiscatory, tax burdens and diminished economic freedom.

This monstrosity injects government bureaucrats into our economy in breathtakingly socialistic, centralized ways. It solidifies command-and-control measures intended to quash America’s ability to advance our industrial competitiveness, which we could do by taking advantage of our abundant resources that could make us energy-independent and assure our economic strength.

Consider some examples:

The highly successful, extremely popular, market-based Medicare Part D prescription drug program and Medicare Advantage private health plan choices option get saddled with onerous bureaucratic restraints, including price controls. H.R. 5376 seriously undercuts these programs’ cornerstones of consumer choice and private sector competition for seniors’ selection.

The reconciliation bill puts price caps on Parts B and D medicines and charges a 95% excise tax penalty if a drug’s price rises above the rate of general inflation. That’s regardless of market forces (e.g., supply shortages of components, supply manufacturer worker strike) beyond the pharmaceutical innovator’s control.

H.R. 5376 also gives government authority to dictate the price of certain brand drugs. That’s common in government-run health systems. It hasn’t been allowed in Medicare. Even worse, these government-fixed drug prices apply to the private sector — directly interfering with private right of contract.

Bogus, partisan congressional “reports” on drug costs notwithstanding, thanks to the Hatch-Waxman Act which balances biopharma innovation and generic drug competition, generics’ prices average 39% less than brand drugs costed before a generic’s introduction. FDA data indicate a single generic competitor today reduces a brand medicine’s price more than the drug price controls of H.R. 5376 would achieve. Thus, H.R. 5376 sacrifices pharma innovation while producing less in cost reductions and causing the number of new cures and treatments to fall.

And the bill effectively forces Medicare Advantage health plan enrollees to pay for new dental, hearing and vision care coverage this legislation creates in conventional, fee-for-service Medicare. Never before has Medicare tapped one beneficiary population to underwrite another groups’ benefits.

Heads-up, Baby Boomers: These dramatic, disruptive changes come just as MA plans’ enrollment approaches 30 million enrollees.

Between H.R. 5376 and Senate budget reconciliation negotiators, wealth creators and job creators have a target on their backs in the death tax arena. The House bill cuts the estate tax exemption in half. It also contains “indirect death tax hikes in the form of severe restrictions on legitimate grantor trusts and on common-sense family business valuation rules.”

Senate Finance Chairman Ron Wyden (AKA Horace Greeley) is pushing a “double death tax” called “mark to market,” which taxes unrealized capital gains upon death. This is a killer for family businesses, farmers and ranchers.

Ben Franklin warned about the inescapability of death and taxes. These greedy politicians want to leech more money from America’s wealth creators and innovators, and even turn death itself into a taxable event.

And what shall be the result of such legislative theft of private property and quashing of free enterprise and innovation? Among many other detriments, H.R. 5376, whatever it looks and smells like when it comes out of the Senate, will make inflation worse.

Americans have now suffered eight straight months of inflation above 4%. Six of those months exceeded 5%. October surpassed 6%, while November was just shy of 7% — a 39-year high. This appears to be a troubling trend.

Can stagflation be far behind, given the extensive government manipulation and intervention in the productive part of our economy H.R. 5376 contains? The Grinches driving this socialist train (increasingly resembling Jimmy Carter’s economy) won’t admit it, but . . . .

We can kiss this and a lot of future Christmases goodbye if H.R. 5376 becomes law.