competitvedictatorship

Employees in the USA and in certain EU states (currently the UK, Ireland and Greece) are now encouraged to denounce their employers for anti-competitive behaviour, and the law provides for those who inform to be treated leniently, where they themselves have been involved in the offence. People who thus collaborate with the cartel-busters are flatteringly called "whistle-blowers".
But we should heed the warning of lawyers James Gobert and Maurice Punch (1): History has not looked kindly on régimes which foster widespread informing by ordinary citizens. The most well-known example is Nazi Germany. But many totalitarian states have adopted similar practices.
Other procedures aim to foil collusive activities at an earlier stage. The US Department of Justice has recommended a code of practice for companies whose directors attend trade association conferences. Any such director should first be interrogated by his company's lawyer, who should enquire in detail what the director intends to do during periods of time at these gatherings when there are no scheduled activities. A question that surely cries out for an unprintable answer!
Current competition law tends to assume that any collusion is harmful unless the contrary can be proved. We have presumption of guilt, a principle not normally favoured in civilised jurisprudence. This doctrine drives collusion underground, so that intrusive probes have come to seem necessary.
We versus Us
Our current attitudes hail from the time (the mid-eighteenth century) of Adam Smith, who displayed a paranoiac horror of collusion between tradesmen to keep prices too high. This was understandable in an age when most people, living in villages and small towns, could at best have access to a few neighbouring tradesmen in each trade, who could easily meet to fix prices. Today, thanks to modern communications and transport, the old barriers to competition are collapsing. Haarlem flower-growers face competitors in Bogotá, Silicon Valley computer experts vie with those of Bangalore, and we are all under competitive threat from India and China.
Our world is intrinsically far more competitive than ever before. Yet governments are striving harder than ever before to squash any attempt to restrain competition. This strongly suggests that the current war on non-competitors is not a rational or practical strategy, but stems rather from an ideological obsession. That is seldom a promising basis for sound government.
The prime argument of the competitionists is that they must be right, since they side with "us", the producers, against "them", those greedy producers who strive continually to rip us off. To put it bluntly, the aim of modern competition policy is to pander to the consumers and bleed the producers. The Financial Times once commented that, for the chairmanship of Britain's Office of Fair Trading, sympathy for industry is unnecessary; it might indeed constitute a disqualification.
There you have in a nutshell the prevailing view. Policymakers should not even try to hold a fair balance beween producer and consumer interests. Their duty is to close ranks with consumers in an all-out struggle to make manufacturers and retailers, tradesmen and professionals cut costs and prices to the bone. Yet, though we are all consumers, we all depend in one way or another on the rewards of production and service. When we are not working and earning, we live on pension fund or investment income, derived from company profits; or on state benefits, financed by taxes paid by earners and investors.
What then is the point of squeezing producers to indulge consumers? This game is We versus Us. There is no merit in victory for either side. We need a draw.
Bedouins short of sand
The world of untrammelled competition is a jungle where the fiercest beasts devour the others; in other words, the bigger or more aggressive businesses eliminate the smaller ones. Too intense competition ultimately means too few competitors. Why has France preserved a greater diversity of independent shops than you can find in England? It is because the French authorities commit what economists consider a deadly sin; they restrict the development of supermarkets. The unconventional American economist Robert Reich, formerly a minister in Clinton's administration, once wrote to me: I am glad to hear that local boulangeries survive in Paris. American capitalism would not permit it, I'm afraid. But the free-marketeers dream of Americanising France. What a nightmare!
We take pride in our continual competitive growth in productivity, enabling more output with less human effort; yet in practice this makes our working lives more strenuous. Many people today find themselves obliged to work longer hours than were necessary when competition was gentler.
Unlimited competition means an economy and society in which wages and salaries are squeezed; in which reckless and greedy behaviour is encoutraged; in which immoderate inequalities distend; in which the pace of change is frenetic and the pace of living overstressful; in which there is no stability. Need we be ashamed of the case against all that?
Economic change is often painful. It can break up communities, increase unemployment, make hard-won skills obsolete, and inhibit the recruitment of older workers, who are thought to be less adaptable to change. Yet, as we live longer, we need to work longer, for otherwise pension costs may become unbearable.
The pace of change risks falling out of kilter with the human lifespan. But free-marketeers do not care. In a world that is changing faster then ever before, they persist in fretting over the risk that restraint of competition might "stifle inovation"; as though Bedouins were to worry about a shortage of sand.
Alternative strategies
What are the practical alternatives to current competition policies? We could treat competition enforcement as occasional strong medicine rather than daily diet.This was the custom till recently in Switzerland (2), where the tradition of respect for individual freedom led to a belief long forgotten elsewhere. The Swiss held that, if watchmakers or bankers wished to agree among themselves not to compete too fiercely, that was their right, with which no authority should tamper. This heretical policy did not prevent Switzerland from being one of the most prosperous countries in the world and, many would say, one of the most agreeable to live in.
In Britain, there used to be a Registrar of Restrictive Trading Agreements who maintained a public register of trade association agreements and the like. The idea was that moderate and reasonable restraints on competition should be permitted, so long as they were open and above-board. But by 1973 the free-marketeers had persuaded the government that there was no such thing as an acceptable restraint on competition; so the register was abolished. Thenceforth, restraints could survive only in secret.
We might do better to go back to those older ways, provided we can agree upon what economist Ronald Dore has called criteria for separating socially useful cartels from conspiracies against the public.
Such an approach clearly could not be adopted by one country alone. A worldwide change of attitude is needed before we can achieve a less frenetic and adversarial trading environment. But such a change is by no means impossible. Attitudes are contagious. Our current obsession with competition is a disease that has infected the world only over the last thirty years. It could as easily disappear over the next thirty.
What is good in moderation is harmful in excess. This principle is simple, familiar, obvious and wide-ranging; yet we have forgotten that it applies as well to competition as to anything else. The economists have bullied us into accepting a perverse and pernicious theory. It is time for us to clear our heads of it.
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References
(1) The Modern Law Review, London, January 2000
(2) According to the OECD, collusive behaviour through explicit cartel agreements has been commonplace for decades in Swiss domestic markets: see Economic Survey of Switzerland, OECD, Paris 1992