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Re: economies of scale and global competition
On Thu, 20 Nov 1997 11:39:37 -0500 (EST), Robert Weissman
>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
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
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?