National Capitalism and Competition McCann Ch. 3

But first, let's talk about Monopoly

Competition & Capitalism The industrialized world runs on the belief that systems of political economic governance are the superior way to generate economic growth and activity “Effective regulation of the economy requires the state to build and protect free markets” The core philosophy around free markets is encouraging competition through a system of capitalism But what's a free market look like?

Influences on the EU The German “Ordo-Liberalism” (Constitutional Liberalism that upholds classical liberal ideals) was the main influencer on Euro policy. Some of the beliefs included: Free market capitalism is “Inherently unstable” Left unattended, will degenerate the very system that created it While competition is vital, it is self destructive if not directed

The EU Situation The goal is to create an open and honest market that can encourage competition but not let capitalism run, how might that be a challenge in a system like the EU? How might that challenge differ from states that use the euro as opposed to those that use their own currency? Given that the states only have control of fiscal policy and not monetary policy, how does that affect competition?

Solutions to EU challenges The Treaty of Rome: Also referred to as the Treaty establishing the European Economic Community -Created formal laws (Articles) preventing illegal collaboration and blocking mergers that would impede competition The European Commission: An independent institution of the EU that ensures that treaties are followed -Investigate and enforce those laws, issuing fines against violators in necessary.

Merger Policy Some markets are singular by nature (Think public transit) so most Euro countries put them in the public domain or heavily subsidised private firms When two firms merge they begin to monopolize the market which is detrimental towards fair trade and competition. Therefore, the E.C. manages these mergers and approves them or prevents them

State Aid This was a more complicated issue in the Treaty of Rome because of the conflict of interest when financially saving competing nations or firms The general consensus as of 1999 was using state aid as a safety net to ensure a level playing field and a free and fair competition

Sector Liberalization Many goods and services are considered to be matters of public interest and therefore lead to natural monopolies (Utilities, energy, telecommunications). To combat this and maintain a free market, Large countries such as Britain, France, and Germany have heavily regulated and followed these firms. They’re moving in a direction of “Competitive regulated markets” and are breaking down previous systems of non-market coordination

Questions?