The Battle of the Century

I'm not talking about Hillary Clinton and Barack Obama, at least not at the moment. The battle is between Microsoft and Google.

Microsoft, the desktop-software giant, wants to move into the lucrative online search and advertising business. Google, the goliath of online search and advertising, naturally doesn't want it to. The pawn is the ailing Yahoo! Yahoo has said no to Microsoft's initial $44 billion bid, but it has few alternatives. Microsoft may sweeten the offer somewhat.

But if you think the final outcome will be decided by the shareholders of Yahoo and Microsoft, you don't know the real power plays, or players.

You see, Google and Microsoft both maintain armies of lobbyists and lawyers in Washington. Microsoft has had a big Washington presence for twelve years. Google opened its lobbying office two years ago. Both are hiring like mad, and feeding the stars of the Washington legal and lobbying fermament fat retainers. The two firms also have Political Action Committees which, according to the Center for Responsive Politics, have given generously to congressional leaders and members of antitrust committees on both sides of the aisle (as well as to a number of presidential candidates).

Now, I'm not suggesting outright payoffs, mind you. The money will
open important doors that the two armies of will enter with their paid experts and their finely-honed arguments and, of course, their implicit promises of future campaign donations. And eventually - after many months or even years, and millions more in payments from Microsoft and Google - one of these armies will win.

The official question to be debated in Congress and at the antitrust agencies will be whether it's more dangerous for Microsoft to be able to use Yahoo to extend its Windows operating system's market power on to the Internet, or for Google to gain increasing dominance over the Internet unopposed. But the answer will depend on which companies' Washington army is biggest, richest, and cleverest.

That's how lots of big economic decisions are made these days. Washington is engulfed by corporate lobbyists, lawyers, and campaign money because of just this sort of arm's race among big companies to gain competitive advantage over rivals through favorable laws and rulings.

Shareholders don't win. The public doesn't win. The only true winners are Washington's lobbyists and lawyers themselves (along with their public-relations staffs and hired-gun experts) -- whose numbers and earnings continue mushroom.

Here's where we get back to Clinton and Obama. Clinton is taking money from corporate lobbyists; she says there's nothing wrong with that. Obama isn't taking lobbyist money. Both have pledged to loosen the grip of lobbyists over Washington -- as has John McCain. But it won't happen until the corporate arm's race comes to an end.

How to end it? Let's hope our future president demands it. But one group that should join in the lead are the big institutional investors whose shareholders -- comprising investors in both Microsoft and Google -- would be better off if the race ended. The big institutions should be insisting on mutual de-escalation.