The Best Competition Policy: Free Trade, Deregulation, and Open Capital Markets
Many people are worried about increasing levels of economic concentration in United States industries. As a result, they call for expanding the interventionist reach of antitrust law. That would mean encouraging the Justice Department to reject more mergers and bring suits against more companies alleged to have monopoly power.
One difficulty with this approach is that it is difficult to determine whether a company possesses monopoly power, let alone figure out whether a merger will result in more monopoly power rather than invigorate competition. Moreover, attacks on monopoly discourage businesses from trying to obtain monopolies, an effort that itself brings innovation and benefits for consumers.
Three policies would decrease concentration far better than expanding antitrust law: making our trade freer, cutting back on regulation, and getting out of the way of efficient capital markets. Together, these policies would make the monopolization provisions in antitrust law much less needed.
Free Trade: The most powerful competition against domestic firms with market power can come from abroad.
Worries about an Increasingly Partisan Fed
Federal Reserve in Washington D.C.As central banks go, the Federal Reserve is one of the best. Much academic literature suggests that one of the reasons for its relative success is its relative political independence and freedom from partisanship. Central banks that are partisan or politicized are likely to engineer booms to elect the candidates of their party even if those booms have unfortunate long run effects on the nation. The classic case is a bank that pursues a loose money policy in the run up to the election to create a false sense of prosperity or to enable the party in power to finance…
If We Love the Banks, We Must Love Them Enough to Let Them Fail
Photographer: John Taggart/Bloomberg via Getty ImagesCommenting on the health of big U.S. banks last week, former Fed Chairman Ben Bernanke wrote on his Brookings blog that “a lot of progress has been made (and more is in train) toward reducing the risks that large, complex financial institutions pose for the financial system and the economy.” Bernanke’s observation came after Minneapolis Fed president Neel Kashkari’s recent commentary about the need to reduce the alleged problem of “Too Big To Fail” within banking. Some readers could be excused for wondering why Bernanke would have any opinion on the matter at all.
De-Rigging Capitalist Privilege
When Charles G. Koch, the chief executive officer of his family business, recently wrote an op-ed for the Washington Post saying he agreed with Democratic presidential candidate Bernie Sanders that our economic system is “often rigged to help the privileged few,” it raised eyebrows even among the company-town’s power structure.
The online version was absolutely swamped with comments. Almost all of the commenters agreed about the evils of crony capitalism but most of them unfairly attacked Koch as hypocritical for being a capitalist himself. The examples he presented of Koch Industries’ opposing government subsidies that could have advantaged its business counted for exactly nothing. Pretty tough to crack the capitalist stereotype even when the capitalist supports one of the Left’s core precepts.
Dodd-Frank’s Frankenstein Creeps Forward
This past week, a unanimous panel of the D.C. Circuit (Judges Kavanaugh, Pillard, and Rogers—Judge Kavanaugh writing) held that State National Bank of Big Spring, Texas (“SNB”) may proceed with its lawsuit challenging the federal Consumer Financial Protection Bureau’s authority on various constitutional grounds.
Congress at Work. Really!
Yesterday, the House of Representative passed a massive $1.1 trillion spending bill to keep government—most of it, anyhow—operating through the summer of 2015. (The measure is expected to pass the Senate unless someone filibusters.) Senator Warren, the Madame Defarge of the U.S. financial sector, is very upset about one piece of the bill: an amendment to the Dodd-Frank Act that would give certain FDIC-insured banks the ability to keep derivatives contracts on their books (as opposed to the statutorily required “push-out” to subsidiaries). Senator Warren thinks this fix will spell the difference between the Dodd-Frank’s ironclad anti-bailout protections and a future Armageddon at taxpayer expense.
Who’s Afraid of Consumer Credit? A Discussion with Todd Zywicki
The market for consumer credit has been subjected to an ever increasing amount of federal regulation since the 2008 crisis. The Dodd-Frank Act created the Consumer Financial Protection Bureau to intervene in consumer credit markets and protect us from the rapacious lenders who devour household income and place consumers in unmanageable levels of debt through stealth and manipulative business practices. The predictable results have been a marginal increase in the cost of credit and its decreasing availability to lower income consumers as the CFPB’s rules price them out of this market. Todd Zywicki, co-author of Consumer Credit and the American…
Does a Sophisticated Theory Miss the Facts?
Michael Greve introduces “adversarial corporatism,” a new conceptual lens through which to view the growing and contentious collaboration of industry and government. Adversarial corporatism takes the conventional story of crony capitalism and regulatory capture—a story appealing to critics on the left and the right alike—and adds a dose of a starker reality: the cooperation is there, unquestionably, but so is a mutual antagonism that exists side-by-side and sometimes symbiotically with that cooperation. If Greve’s oxymoron confuses a reader coming at this literature for the first time, it clarifies a dynamic that administrative law scholars have been watching for many years.…
The Rise of Adversarial Corporatism
Timothy F. Geithner, former U.S. Secretary of the Treasury and savior of the free world,[1] has lamented the intractable paradox of financial crises: government must lend freely to actors who by all rights should bear the price of their own reckless conduct and be wiped out. The post-crisis years have been marked by a related but somewhat different paradox: On the one hand, the government has recapitalized financial institutions, subsidized them, and drawn them closer to its ample bosom. On the other, it has hit those same institutions with an avalanche of prosecutions. Settling these cases is very costly; one…
Responses
Michael Greve’s essay vividly describes some deeply troubling trends in the relationship between the government and the economy. It provides a much needed perspective at a time when politics and policy-making are nothing if not adversarial, and more casual observers succumb to the temptation simply to choose sides without asking how we came to this…
