Monday, May 11, 2009

Political classification and market structure.

In a post today (, Greg Mankiw expresses fear that the Obama administration is planning to restore a more activist antitrust policy, which would lead, inevitably, to mistakes such as the lawsuits against Microsoft and Intel in the 1990s.

He reminds us of his definition of the difference between the right and the left:
“The right sees competition as a pervasive feature of the economy and market power as typically limited both in magnitude and duration. The left sees large corporations with substantial degrees of monopoly power that need to be checked by active antitrust policy”.

In the first case, markets should be trusted, and in the second case government regulation would be needed. But what about European economies where government intervention often has had for result the development of large corporations (whether privately or state-owned) with substantial degrees of monopoly power and rather inactive antitrust policies?

I wonder: could that specific continental market structure explain why, on this side of the Atlantic, the dominant opinion - whether officially on the left or officially on the right side of the political spectrum - is so frequently anti-market and pro-regulation (and favorable to mercantilist policies), and thus uniformly on the left in Mankiw’s definition? If this hypothesis makes sense then it is not surprising that mercantilists of both stripes are so firmly entrenched and classical liberals in such disrepute here. There is even an officially registered “antilibéral” party in France, where any opinion that would qualify as “middle of the road” in the US is dubbed “ultra-libérale”, and where more government intervention is the only "solution" that most people ever think of. Let us call that a self-fulfilling political strategy: first distort or prevent competition, then call for government intervention to correct the resulting market failure...

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