Ad-Hoc Expert Group on the Role of Competition Law and
Policy in Promoting Growth and Development
Geneva, 15 July 2008
Competition Policy, Growth and Development:
The Flash Points
by
Professor Eleanor Fox
New York University School of Law
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.
COMPETITION POLICY, GROWTH
AND DEVELOPMENT:
The flash points
Professor Eleanor Fox
New York University School of Law
UNCTAD Geneva 15 July 2008
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OUTLINE
• 1 Growth, competition and poverty
• 2 The role of competition in growth
– Competition policy
– Competition law
• 3 The three flash points: growth,
development, convergence
• 4 How the developed world must help
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1. Growth and competition
• Evidence, though there is little:
– Tends to confirm link between competitive
environment and economic growth
• Firms facing competitive environment
perform better
• Research: DG EcFin doing study for
Europe
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Growth: why growth?
• “Growth is not everything. But it is the foundation for
everything. The poorer the country the more important
growth becomes, partly because it is impossible to
redistribute nothing and partly because higher incomes
make a huge difference to the welfare of the poorest.”
Martin Wolf, FT 3 June 2008
• “fast growth [goes] with fast poverty reduction”
• William Easterly, The Elusive Quest for Growth (2002), noting
studies showing strong expansion (8.2% increase in avg incomes
per year) entailed 6.1% reduction in poverty per year p 13
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cont’d
• “Growth is not an end in itself. But it makes it
possible to achieve other important objectives of
individuals and societies. It can spare people en
masse from poverty and drudgery. Nothing
else ever has. It also increases the resources to
support health care, education, and the other
Millennium Development Goals to which the
world has committed itself.”
– The Growth Report, Commission on Growth and Development,
2008
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The policy ingredients of growth
• What factors and policies produce growth?
• An open integrated world economy
• allows economies to import ideas, technologies, knowhow, e.g. through FDI,
•
•
•
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foreign education
• Allows markets for exports
Resources must be mobile
Property, contract rights
Domestic savings
Effective government leadership, investment in infrastructure,
health, education; institutions (see also Kovacic)
• Relying on markets to allocate resources “is clearly necessary … but
that is not the same thing as letting some combination of markets
and a menu of reforms determine outcomes”
cont’d
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cont’d
• “if large numbers of people do not feel any
improvement in their circumstances, then there
is more work to do”
• Social protections, equity; protect people (not jobs)
• “equity and equality of opportunity are essential ingredients
of sustainable growth strategies.”
• Experiment, and do what is possible
– Deng Xiaoping: “cross the river by feeling for the
stones.”
– The Growth Report
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De Soto’s El Otro Sendero: a path to
growth and development
• Fighting the Shining Path in Peru, Hernando de
Soto outlined a path of inclusiveness
• Tear down government barriers such as dense licensing
•
•
requirements
Enable the poor to move from the informal economy, to
participate in formal economy
Build ladder for mobility
• Ladder for mobility and robust competition
– as guide and symbol for developing countries’
antitrust
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2. Role of Competition Policy, Law
• Competition policy
– Highly relevant, removing impediments
• Advocacy – the de Soto agenda
• Incumbents will ask for protection; should not get it
• New companies, new technologies will be the hope
– “some empirical studies suggest that economies owe most of
their progress to the entry of new, more productive firms, and
the exit of ailing ones. Improvements in the efficiency of
incumbent firms play a smaller role. … This means that
entry and the threat of entry are important to ensure
competition.”
™ The Growth Report
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Competition Law
• Competition LAW is law to preserve competition
– which should produce efficiency, keep markets accessible on the merits,
and benefit consumers and [potentially] efficient, innovative firms
• Translates to: prohibitions against anticompetitive
• agreements, abuse of dominance, mergers
• But what does “anticompetitive” mean?
• Clearly, cartels and boycotts in support
• But what is the baseline for condemning or inviting
everything other than cartels? What is consumer welfare
and efficiency, and how should nations reach it?
– The three flash points: growth, development, convergence
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3. Sources, guides of/for antitrust law
appropriate to developing countries
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•
•
Established principles in the world
• Basic principle: antitrust for markets and
consumers
• NOT to protect inefficient competitors from
competition
• NOT to create market power or empower national
champions
– Value of adopting established principles:
• coherence, market integration
Development
Growth
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Characteristics of many developing
countries
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Statism
Corruption
Closed markets and privilege
Large informal economy
Poor infrastructure
High ownership concentration, high barriers
Weak corporate governance
Weak financial markets
– See Mark Dutz, R. Shyam Khemani describing “tyranny of
predatory vested interests,” … Challenges in South Asia 2007
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Marrying country characteristics
with antitrust policy perspective:
• Distinguish basic principles from rules of antitrust
– Should developing countries adopt all of the antitrust rules of
the industrialized world?
– There is room for argument that some contemporary rules may
protect market power rather than competition and consumers
• See R. Pitofsky ed, Where the Chicago School Overshot the Mark:
Effect of Conservative Economic Analysis on U.S. Antitrust (forthcoming
Oxford 2008)
• Consider in contrast, The Growth Report
– Importance of entry and access of new and young firms, even more
than static efficiencies of old firms
– Equality of opportunity is “essential ingredient” of growth strategy
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Cont’d
• Consider the types of practices that
bedevil and target developing countries
see data of Frederic Jenny, Simon Evenett
– What hurts developing countries the most is largely illegal in world
• But – there is a small margin where developing
countries might choose to err on side of
• protecting opportunities of new firms to compete
on merits more than freedom of action of
dominant firms
• Thus, COMPETITION LAW WITH AN EYE TO MOBILITY, ACCESS,
OPENNESS, AND INCLUSIVE GROWTH
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4. The Role of the Developed
World: duty of cooperation
• “Developing countries cannot grow
without the support of the advanced
economies. In particular, they need
access to the open global trading system.”
The Growth Report
• They need to be free from harm from
world cartels, especially those targeted at
them from developed nations, and they
cannot get this on their own
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Developed countries’ duty
• In spirit of EU proposal to WTO, developed countries should help
developing countries, especially when the developed country’s own
nationals are the violators of clear shared principles of antitrust.
– The developed countries should revise their laws, extending jurisdiction
so as to make hardcore export cartels illegal.
• Basel Convention as model and testament to political possibility:
Basel Convention on the Control of Transboundary Movements of
Hazardous Wastes
– If a signatory country prohibits import of hazardous wastes, all other
signatories must make illegal the shipment of hazardous wastes to that
country.
– The United States and other developed countries should adopt this
model for hardcore export cartels, which are the hazardous wastes of
antitrust.
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Duty, cont´d
• Failing that, the United States and other developed
•
countries should amend their antitrust laws to provide
jurisdiction for the discovery of documents and
testimony from knowledgeable people regarding lawsuits
against them and other nationals launched abroad. This
should include subpoena power when the developed
country’s citizens are the alleged victimizers of the
people of developing countries.
Thus, a cosmopolitan vision; a modest imperative
for developed nations to accept responsibility for the
harms they cause.
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CONCLUSION
• The three flash points for developing
countries – follow the lights of growth,
development, convergence
• The one flash point for developed
countries – enable growth and
development of developing counties by
measures to stop the export of the
“hazardous wastes” of antitrust
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