Markets, the state and the efficacy of competition policy

George Kararach ()

Chapter 18 in Liberating Economics From Ideologies and Dystopia, 2025, pp 239-257 from Edward Elgar Publishing

Abstract: To the neoliberals, the main reason why many countries do not have formal competition policies is that it was not needed. In the case of developing countries, this is because there was considerable state control over economic activity and if the government thought there was anti-competitive behaviour by some corporations or industries, it intervened directly and fixed prices such as for medicines and other essential products. Besides, state-owned industry was enjoined not to charge monopoly prices. There would appear to be no obvious relationship between competition policy and competition since many developing and developed countries have been able to maintain considerable competition in product markets despite the absence of a formal competition policy. An analytical reason for this lack of correspondence between competition and competition policy lies in the fact that domestic firms have been increasingly subject to foreign competition with the liberalisation of their economies. We need to construct a post-neoliberal world to supplant the erroneous assumptions of competition being an unambiguously good thing in the first-best world of economists. That world assumes large numbers of participants in all markets, no public goods, no externalities, no information asymmetries, no natural monopolies, complete markets, fully rational economic agents, a benevolent court system to enforce contracts and a benevolent government providing lump sum transfers to achieve any desirable redistribution. Appropriate levels of state engagement in markets and regulatory regime are key elements of competition policy and ways to maintain dynamism in a modern economy. The question therefore arises: how can competition policy and competition authorities contribute to more sustainability and economic stability?

Keywords: Competition policy; Public goods; Externalities; Information asymmetries; Monopolies; Market failures; Regulatory regimes (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035316175
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