Every government has the right -- indeed, the obligation -- to ensure that there is competition within their borders. The EU was simply doing what it should do, following well established procedures. The fact that it did not let corporate influences dominate its decision is testimony to the leadership and integrity of Mario Monti and Romano Prodi and the integrity and commitment to competition in Europe.
A century ago the US created its competition laws because of the concern that monopoly interests would seek to dominate markets by "capturing" government. The ready profits from monopoly can buy influence in high places, if not through bribes, then through big campaign contributions.
This is why those injured by monopoly were given, under the US' early anti-trust laws, the right to sue, receiving treble damages if victorious. It was an early piece of legislation directly empowering people, and reflected a healthy, and deserved, skepticism about the ability of government to address these concerns. Today, with globalization, we have another check: independent competition authorities check each other.
One of the most important roles for government is creating the "rules of the game," which enable a market economy to work. Among the most important rules of the game are those about competition. Nowadays, what typically tries to pass as a "free market economy" is a corporatist economy in which government uses its powers to advance the interests of business, often at the expense of consumers.
Many developing and transition economies, indeed, were told: open up your economy to international trade and that will suffice to ensure competition. That advice was misguided. Trade liberalization with monopoly importers only served to transfer some government revenues into the pockets of the monopolists. In Russia, secretary O'Neill's international aluminum cartel resulted in a blood bath as rival groups fought over who got the monopoly profits, and out of that turmoil a single monopolist emerged. Monopoly interests have bought and corrupted governments throughout the world.
Strong competition policy is not just a luxury to be enjoyed by rich countries, but a real necessity for those striving to create democratic market economies.
Joseph Stiglitz, professor of economics at Columbia University was chairman of the Council of Economic Advisers to former US President Bill Clinton and chief economist and senior vice president of the World Bank. Copyright: Project Syndicate
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