Re: economies of scale and global competition

[wfcooper@tiac.com (Bill Cooper)]

  On Thu, 20 Nov 1997 11:39:37 -0500 (EST), Robert Weissman
  <rob@essential.org> wrote:
  
  >Following on an earlier line of list discussion, if a small or
  >medium-sized country were to draw up a fresh antitrust law, among the
  >challenges proponents would face are the following related arguments:
  
  An interesting question.  I think the answer, in general, is that as a
  small country, in a global economy there are some things you can
  control and some things you can't.  You might have to compromise
  anti-trust principles in order to achieve strong economies of scale
  for export related industries, but that doesn't mean that you should
  abandon them for all industries.
  
  >1. Economies of scale mean strong anti-monopoly policy is inappropriate
  >for our modest economy.
  
  Nearly every economy has a couple of industries that can't achieve
  economies of scale and be competitive (that's why we have regulated
  utilities for instance).  But you'll have many more where you can have
  genuine competition and still achieve economies of scale.  You need to
  have a policy that recognizes which is which.
  
  >2. We compete in a global economy. Even in industries where a single
  >national firm controls the entire domestic market, it faces existing or
  >potential competition from global competitors (assuming it benefits from
  >no significant tariff or non-tariff protections). 
  
  Well, if it faces real competition then you have no real problem.
  Your consumers are getting the same benefits from international
  competition, that the consumers in a large economy get from
  intranational competition.  If the competition is only potential, I
  would ask why?  Are you giving your large national firm a monopoly
  under the guise of protection?  If so, you should certainly consider
  changing your policies.
  
  >3. We need big corporations so that they can be competitive in other
  >countries' markets.
  
  I think that you likely would.  Think for a moment that the United
  States were a collection of small countries, with free trade, but no
  common economic policy.  Would the President of Tennessee be concerned
  that 1 company (Saturn), manufactures all the automobiles in your
  "country"?  Maybe not.  Your consumers still have lots of choices of
  cars to buy, besides Saturns, so they're not exposed to predatory
  pricing.  It's probably not the case that anything you could do to
  Saturn, would increase the amount of competition that your consumers
  experience, anyway.  Does that mean that you should allow a
  country-wide monopoly on ... dry-cleaning, for instance?  No, you
  probably wouldn't.
   
  The real problem is that many countries don't have much control over
  the degree of competition in global industries that their consumers
  buy from.  All they can do is establish strong anti-trust regimes in
  the industries they can control, and hope for the best on the ones
  they don't.  Of course you might try to establish international
  anti-trust regimes (the real United States, which supposedly does have
  a common economic policy, can't even accomplish this within it's own
  border, so good luck).  Would you wan't to try to convince King Bill
  of Washington to crack down on MicroSoft?
  
  Bill Cooper
  wfcooper@tiac.com