TEXT OF COMMENTARY

Scott Jagow: Microsoft versus Google looms as a great corporate battle this year. Yahoo’s rejecting Microsoft’s buyout bid this week is only round one. But whatever happens next, commentator Robert Reich says the victor won’t be decided in Redmond, Washington or in Sunnyvale, California.

Robert Reich: Microsoft wants to move into the lucrative online search and advertising business. Google naturally doesn’t want it to. The pawn is the ailing Yahoo!

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. The two firms also have Political Action Committees, which give generously to congressional leaders and members of antitrust committees on both sides of the aisle.

Now, I’m not suggesting outright payoffs. The money will open important doors that the two armies 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.

Officially, the question to be debated in Washington will be whether it’s more dangerous for Microsoft to use Yahoo to extend its Windows operating system’s market power on 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 in corporate money because of just this sort of arm’s race.

Shareholders don’t win. The public doesn’t win. The only winners are Washington’s lobbyists and lawyers themselves, whose numbers and earnings continue to mushroom.

One group that should be taking the lead in ending the arm’s race and cleaning up Washington are the big institutional investors that are investing in both Microsoft and Google, and every other set of major competitors, and whose shareholders would be better off if the race ended. The big institutions should be demanding mutual de-escalation.

Jagow: Robert Reich teaches public policy at the University of California Berkeley. His latest book is “Supercapitalism.”