Economic and Domestic Policy

When control crushes innovation

By Ezra Klein
Sunday, December 5, 2010

The Master Switch

The Rise and Fall of Information Empires

by Tim Wu

Knopf, 384 pp.


In 1876, Western Union, then the most important communications company, joined forces with the Associated Press, then the most important news service, to throw the election to Rutherford B. Hayes.

Hayes was close with executives at the Associated Press (in particular, their political fixer William Henry Smith), and the Republicans, who'd nominated him, had long been allied with Western Union, as much of the telegraph giant's line was laid by the Union Army. With Hayes in the White House, both companies could rest easy that their interests would be looked after.

But first, they had to get him elected. Western Union had a monopoly over telegraph lines, and the only news service they carried was the Associated Press. So the AP ran an endless stream of stories gushing over Hayes and hammering his opponent, Democrat Samuel Tilden. Even so, on election night, it looked as if Hayes had lost. Some accounts say he was prepared to concede.

And maybe he would have, except that Western Union gave the New York Times - then a paper affiliated with the Republican Party - access to telegrams sent by the Tilden camp that showed that a Democratic victory in the South was less certain than had appeared. The GOP immediately shot off its own telegrams instructing its partisans in the region to begin lobbying state electoral commissions, and the Hayes camp declared victory, kicking off a months-long stalemate that ended, most historians think, when House Democrats agreed to elect Hayes in return for removing federal troops from the American South and ending Reconstruction.

This story is usually told as a tale of political hardball. But Tim Wu, a law professor at Columbia and author of "The Master Switch," my pick for economics book of the year, sees it as "a crucial parable for communications policymakers" and an example of "the kind of political advantage a discriminatory network can confer." (My pick for non-economics book of the year, in case you're interested, is Isabel Wilkerson's extraordinary history of the African American migration, "The Warmth of Other Suns.")

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