AT&T, founded by Alexander Graham Bell in the mid-1880s, is the perfect example of the dangers of dissolving technology companies. In the postwar period, AT&T was a telecommunications giant greater in size and influence than Google today. Most experts admired him for operating the most advanced and reliable telephone system in the world. Its equipment arm, Western Electric (later Lucent), and its research and development center, Bell Labs, were global leaders in innovation, producing technological breakthroughs that shaped the modern world. Yet for nearly 60 years, the Justice Department tried to break up AT&T, not because the company failed consumers, but because it was too successful as a regulated monopoly. Government repression gave us AT&T and Bell’s Seven Dwarfs.

Ideological critics of trust could not bring themselves to see that monopoly – or at least a certain degree of size, scale and market power – could be a powerful engine of innovation and productivity. By selling to AT&T domestically, Western Electric had a captive market (as Huawei now does in China), which allowed it to dominate global markets, exporting billions of dollars of equipment each year. No ordinary company would have financed Bell Labs, as AT&T did, because the positive impact on other companies would have been too great. Only a large monopoly like AT&T could afford these costs.

As the United States faces a formidable technological dragon backed by the Chinese state, the risks of major technological disruptions are even more powerful. Before 1979, when shareholder capitalism was not as dominant, many American companies invested heavily in basic research to innovate and build world-leading manufacturing companies. Very few now prioritize any of these priorities, which has eroded America’s technological advantages.

An exception is large companies with some market power. They are, along with many pharmaceutical companies, part of the small minority of American companies that still invest significant amounts of capital in R&D. The five biggest tech companies – Amazon, Apple, Meta, Microsoft and Google parent Alphabet – invested around $154 billion in R&D in 2021: more than every country in the world except the United States. United and China. These companies have enough cash to invest in high-risk businesses and are growing fast enough to ignore investors who, seeking short-term gains, tell them to stop investing so much.

Why is the United States a leader in artificial intelligence? That’s not due to federal science funding — which, tied with 2017, is at a 70-year low as a share of gross domestic product, according to the National Center for Science and Engineering Statistics. That’s because companies like Google invest huge amounts of resources into projects that may or may not succeed.

Alphabet has also invested billions to develop autonomous vehicles, transform agriculture and bring the internet to remote parts of the world. It funds Alphabet Labs, an entity dedicated to developing and testing potentially revolutionary ideas, most of which never make it to the mainstream market. The other big four tech companies are also investing billions to drive innovation and advance America’s technological leadership.

When the government filed an antitrust suit against AT&T in 1974, Bill Baker, a prominent scientist at Bell Labs, was asked what it would mean if the government won. His response: “I think Bell Labs as we know it today would simply disappear. » Unfortunately, he was right. The National Research Council concluded that “after restructuring, industrial support for this type of research declined, became more short-term in scope, and became less stable.” »

Many antitrust advocates today, taking their cue from Justice Louis Brandeis (1856-1941) – who railed against the “curse of greatness” of American business – are fond of breaking up antitrust. AT&T, because it supports their arguments against Google and other technology leaders. A good example: Tim Wu, former competition policy adviser to President Biden, recently wrote that the breakup of AT&T’s Bell system was responsible for “transforming (over time) the telecommunications sector from an economic backwater in what we today call the telecommunications sector. Internet sectors.”

Yet the implication that a breakup was necessary is absurd. The government simply needed to enforce interoperability and interchangeability between competing networks and devices. That’s exactly what the Federal Communications Commission did in 1980 in the second of its “Computer Investigations” trilogy, and it’s what lawmakers did in the 1996 Telecommunications Act.

Today, many antitrust officials simply don’t understand innovation. As economist Joseph Schumpeter explains, this process and its fruits occur when companies are incentivized to invest in research and profit from innovations that work. Breaking up big tech companies would undermine these incentives, with serious consequences for innovation and economic growth. This would be a recipe for American decline and Chinese leadership in innovation.

Mr. Atkinson is President of the Information Technology and Innovation Foundation.