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Saturday 19 Aug 2017 | 19:55 | SYDNEY
Saturday 19 Aug 2017 | 19:55 | SYDNEY

Reader riposte: International competition policy



17 April 2008 13:03

From Peter McCawley:

Stephen Grenville's post on the political economy of the proposed BHP take-over of Rio raises key issues. One difficult issue, beloved of Australian policy-makers, is the matter of 'healthy competition'. It's something of a paradox when the world's leading communist country argues in favour of preserving market forces!  And, moreover, makes the pro-market case to the Australian Government when Australia has been loudly beating the drum in favour of market forces in international circles for decades! Part of the problem is that the economic advantages for big corporations of being very large (even relative to global markets) are often considerable.  Economists have known for decades that in many markets there are powerful natural tendencies towards monopoly. It used to be thought that the problem of 'natural monopolies' tending to emerge was mainly a problem at the national level. But it now seems that it is a problem at the international level as well.

Another part of the problem is the need for regulatory institutions to help protect healthy competition. But it's hard enough to protect healthy competition at the national level. The ACCC (Australian Competition and Consumer Commission) has done a pretty good job in Australia in recent years. But it's hard to imagine how something like the ACCC might work to regulate the behaviour of firms like BHP and Rio in global commodity markets. The trouble is that it's still the Wild West out there on global markets. Nobody is keeping a close eye on the capitalists. And that, exactly, is what the pro-market economists in the Chinese government are worrying about!

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