The Complexities of Competition and Competitiveness: Challenges for Competition Law and Economic Governance in Variegated Capitalism

This on-line version is the pre-copyedited, preprint version. The published version can be found here:

‘The complexities of competition and competitiveness: challenges for competition law and economic governance in variegated capitalism’, in M.W. Dowdle, J. Gillespie, and I. Maher, eds, Asian Capitalism and the Regulation of Competition: Towards a Regulatory Geography of Global Competition Law, New York: Cambridge University Press, 96-120, 2013. 


I. Introduction

Competition is the external expression of the internal drive of capital as capital to expand, to produce surplus value, and realize it in the form of profit. It is through competition that the contingent necessities of the differential accumulation of particular enterprises, clusters, or sectors and the differential growth of particular economic spaces are realized. Competition takes many forms and plays out in many ways. It is not confined to any particular type of economic activities although, in today’s world, financial innovation and competition are especially significant. The ultimate horizon of competition is the world market but the world market is not a constant. It changes not only through the anarchic effects of market-mediated competition (and the crises that this periodically produces), but also through competing hierarchical or heterarchic efforts to redesign its rules and institutional architecture, and to govern the conduct of the economic (and extra-economic) forces with stakes in the competitive game.[1]

The capacity to compete is grounded in turn in diverse sources of competitiveness, both economic (broadly considered) and extra-economic. As the forms of competition and the sources of competitiveness change (partly in response to changing forms of regulation and the opportunities for regulatory arbitrage), we also observe changes in the modes of regulation, whether through legal or extra-legal means. This chapter seeks to put flesh on these bare statements and to link them to the nature and limits of competition law.

Specifically, it aims to put competition law in its place in relation to different modalities of competition and the changing bases of competitiveness in profit-oriented economies of an increasingly integrated world market — one in which Asian economies have once again become global forces to be reckoned with. It draws on critical political economy to show how changing forms of competition, changing forms of competitiveness, and changing forms of world market integration combine to make it harder to achieve the purported objectives of competition law.

In this regard, my chapter contributes to this volume’s discussion in at least three ways. First, it looks at competition from the perspective of actually existing capitalism and its differential accumulation, rather than from the perspective of how to regulate or govern competition from the viewpoint of its purported role as a public good. While there is a rational kernel to the perspective of competition itself as a public good (namely, in the contradictions between particular capitals and the interests of capital in general), it is typically interpreted in ways that merit at least a skeptical interrogation, if not a more radical ideological critique. Second, it looks at competition law in terms of the complexities of its object, rather than in terms of its mechanisms, its institutional architecture, its advocates, facilitators, coordinators, targets, and agents. Without paying attention to these complexities, there is a tendency to blame regulatory failure on the design of competition law rather than on the inherent ungovernability of its object. And, third, it also looks at competition law as one among several means in which economic and political forces seek to design social modes of regulation to promote the differential accumulation of some capitals at the expense of others. In this sense, it looks at competition law is one element in the overall governance of accumulation on a world scale.

The argument progresses through four ‘moments’ that overlap rather than being segmentable into distinct packages. The first moment concerns the modalities of competition and competitiveness, locating them materially and discursively. A second moment concerns intermittent reflections on the role of competition law in relation to the complexities residing in these modalities, exploring the limits these different modalities impose that law’s effectiveness. A third moment involves the problems of governing competition and at the same time boosting competitiveness in a world market that is becoming more integrated. And a fourth moment, developed towards the end of this chapter, raises the possibility that there has been a shift from the use of competition law from one of regulating particular national or at most macro-regional, varieties of capitalism (or, at least, competition that occurs in national or macro-regional jurisdictions) towards efforts at multi-spatial metagovernance of competitiveness in a variegated market – in which law is but one element in a more complex form of ‘collibration’. In these regards, then, my analysis directs attention away from firm-centred, market-centred, and state-centred analyses of competition to a more governance-centred analysis of competitiveness concerned with the ways in which competition law relates to the dynamic of differential accumulation in different varieties of capitalism and to the emerging dynamic of the world market based on the internal and external relations among these varieties.

II. Competition

Competition is a general feature of social life — but it is not its most essential feature, nor one that should be esteemed above all others. It acquires distinct forms in the capitalist mode of production, which is based on the generalization of the commodity form to labour-power, making labour-power into a ‘fictitious commodity’ (like land, money and more recently, knowledge) (cf. Marx 1963a; Polanyi 1944).[2] The resulting extension of property rights, contracts, and markets to include labour leads to distinct laws (in the descriptive-sociological sense rather than normative-legal sense) of competition that distinguish capitalism from other modes of production (see below).

Through his detailed discussion of the sociological laws of supply and demand, and their mediation through market competition, Adam Smith introduced the idea of competition into economics as a comprehensive science and as a general organizing principle of economic society (Smith 1776). Indeed, through this and other routes, competition became the basis and rationale for classical political economy. Thus, as John Stuart Mill argued:

Only through the principle of competition has political economy any pretension to the character of a science. So far as rents, profits, wages, prices, are determined by competition, [sociological] laws may be assigned for them. Assume competition to be their exclusive regulator, and principles of broad generality and scientific precision may be laid down, according to which they will be regulated (Mill, 1848: Book II: chapter IV, section 1).

For some 70 years after Smith, classical political economists treated ‘competition’ as an ordering force based on competition in exchange relations characterized by many buyers and sellers. The greater the degree of competition and the greater its transparency, the more likely that it was to benefit the public good. (Compared with the preceding pre-capitalist period, there was some merit to this claim). Thus classical political economists focused on the ways in which market exchange was organized. But they neglected the role that changes in the labour process or in the organization of production played as bases of competition. In this way, they reflected the mercantile capitalist’s concern with price formation as the basis for profit and loss, and regarded what today we would identify as competition ‘law’ (loosely defined) as simply a means to avoid market manipulation to the benefit of one of the parties in a market transaction.

A continuing problem during this period was the mechanism that determined the centre of gravity around which market prices fluctuated. Nassau W. Senior made a breakthrough here in 1836 when he introduced the idea of perfect competition:

But though, under free competition, cost of production is the regulator of price, its influence is subject to much occasional interruption. Its operation can be supposed to be perfect only if we suppose that there are no disturbing causes, that capital and labour can be at once transferred, and without loss, from one employment to another, and that every producer has full information of the profit to be derived from every mode of production. But it is obvious that these suppositions have no resemblance to the truth. A large portion of the capital essential to production consists of buildings, machinery, and other implements, the results of much time and labour, and of little service for any except their existing purposes. … few capitalists can estimate, except upon an average of some years, the amount of their own profits, and still fewer can estimate those of their neighbors (Senior 1836: 102).

In line with this, other classical political economists explored the role of competition in organizing production and, through the allocation of capital among alternative investments, its role in forming the general rate of profit. Criticism arose when firms took action alone or in collusion to hinder the role of competitive markets in forming a general rate of profit or, which is the same thing, to secure above average rates of profit through anti-competitive or non-competitive forms of competition. This indicated a tension between the interests of particular capitals to secure above average rates of profit at the expense of other capitals through anti-competitive forms of competition, such as via cartels of monopolies, and those of capital in general in securing the free play of market forces so that no particular capitals are disadvantaged. It is such tensions that competition law is expected (cognitively and/or normatively) to resolve.

But it is a tension that is easier to resolve in relation to anti-competitive competition in market exchange (manipulating market prices) than it is in relation to anti-competitive competition in the sphere of production (organizing the overall circuit of profit-producing capital in an effort to ensure an above average rate of return on capital invested in a given product or process). For it is hard for state power to penetrate formally, let alone substantively, into the heart of the corporation as a productive organization — even more so when that corporation is organized on a global scale and exploits zones of opacity to disguise some of its operations (see Henry Yeung, this volume).

Karl Marx elaborated the relation between these (and other) forms of competition (i.e., competition in market price and competition in cost of production) by focusing on the circuit of productive capital in developing his distinctive critique of political economy. Taking account of the metamorphosis of capital as it travels through this circuit of production, distribution, and exchange, he showed that capitalist competition is not simply for market share or for sales, but also for profit earned on investment: thus the capitalist’s key strategic decision is where to invest. The defining characteristic of capitalist competition thus lies in the mobility of investment, both among different commercial/financial/industrial activities and across space-time.

Along these lines, Marxists distinguish three forms of profit-oriented, market-mediated competition: first, to reduce the socially necessary labour-time required for producing commodities for sale; second, to reduce the socially necessary turnover time of capital through innovations in money, credit, commercial capital, means of transportation, etc.; and, third, to reduce the naturally necessary (re)production time of nature (e.g., plants, animals, raw materials) through its direct or indirect manipulation (e.g., though bio-technology, genetic engineering, factory farming, etc.).

This leads Marxist analysis in a different direction, from a concern with market prices towards a concern with costs of production and rates of return on capital invested. Thus Marx noted that whereas merchant capital continually compares purchase and sale prices for its merchandise because this is the source of mercantile profit, “[t]he industrial capitalist always has the world-market before him, compares, and must constantly compare, his own cost-prices with the market prices at home, and throughout the world” (Marx 1963b: 336). While this puts production at the heart of competition in an integrated world market, it still depends (increasingly, so one might argue) on the role of the credit system in promoting competition on the world market.

Whereas Marx was already well aware that through in competition, “one capitalist always kills many” (Marx 1963a: 714), in the sense that capitalist development was characterized not only by the centralization of capital but also its concentration under the control of a limited number of capitals, he actually paid little attention to the specific dynamic of monopoly capitalism. Later Marxist analyses have studied in various ways and from rival perspectives the dialectic of competition and monopoly. This initially reflected the emergence at the end of the nineteenth and start of the twentieth century of trustification, finance capital, and giant firms that collectively monopolised national markets (Bukharin 1917). Yet, even if monopoly tends to suppress the anarchy of capitalist competition on the market at the national level, there is still competition to gain advantage in the organization of other parts of the productive circuit of capital, and competition thus re-emerges in an even more intensified but disruptive form at the global level.

Thus, for Bukharin and other leading contemporary theorists of imperialism, the concentration and centralization of capital produce, not an end to competition, but a change in its form and scale. For example, Lenin, following Bukharin, argued that the trend to monopoly did not exclude competition. It continued to operation among the small and medium enterprises subordinated to monopoly domination, among the monopolists themselves, or and even among competing imperialist powers (Lenin 1918). Marxist specificities aside, this idea is also reflected in the focus of recent neoliberal scholarship on competition in the context of the global contestability of monopoly positions and the quest for dynamic Schumpeterian competition (see Yeung, this volume).

The role of competition continued to exercise classical political economists in the 19th century, and from mid-century onwards they discussed the growing importance of natural monopolies such as railroads, public utilities, and the growth of large industrial enterprises. In contrast, during that time, a new discipline, that of neoclassical economics, emerged that began the turn to mathematical formalization, in the process demanding a more precise definition of ideal market competition. Thus, “perfect” competition of Nassau Senior became the benchmark for defining the allocative efficiency of markets and for evaluating other forms of market competition (Horverak 1988).

As a result, the classical political economic conception of competition and neo-classical economic concept of competition became incompatible. Whereas classical political economy regarded ‘competition’ as a steering mechanism of actual economic development and differential accumulation, one based on the formation of production costs and/or market prices, neoclassical economics regarded ‘perfect competition’ as an abstract or idealized condition of equilibrium in which there was no long-term competitive advantage between firms. As Hayek put it, “if the state of affairs assumed by the theory of perfect competition ever existed, it would not only deprive of their scope all the activities which the verb “to compete” describes but would make them virtually impossible” (Hayek 1948: 96).

This obviously poses interesting questions for competition law. Should it be oriented to governing competitive behavior in dynamic markets, or to achieving the conditions for perfect competition? And how has the balance between these goals changed as competition and anti-trust law have been modified over the years?An interesting observation in this regard comes from Franz Neumann, the German critical theorist. In his remarks on the attempts of the Nazi regime to limit the operation of market forces through top-down planning, he noted:

Disruption of the ‘automatism’ of market reactions does not abolish the market. The fact that the tendencies of production-agents to react are checked and subject to restrictions does not annihilate them. When an individual production agent is prevented through monopoly or administrative regulation from making profits by raising prices, he will try to increase his sales or cut down his costs, or both, in order to secure his goal as a producer of commodities. When he is not allowed to market more than a definite quantum of goods, he will have to raise prices, and when both prices and marketing quotas are set by regimentation or monopoly, he must alter the set-up of cost elements in manufacturing processes through pressure on the costs of raw materials, manufacturing equipment, use of labour and capital, as well as through changes in the manufacturing process itself, both organizational and technological (Neumann 1942: 26).

Just as planning cannot fully eliminate competition, competition law cannot fully eliminate anti-competitive behavior. For example, it cannot address problems with competition as it operates within corporations: in the allocation of capital to different activities within the corporation in the expectation that this will increase profits of enterprise (see Michael Dowdle, this volume; Henry Yeung, this volume). This is an example of what is sometimes termed dynamic allocative efficiency, a form of competition that, as we shall see below, is often thought to be difficult to regulate through the lever of competition law (cf. Graham and Smith 2004) (although in the above example, the principles of shareholder value make a valiant effort to substitute for it).

Related to the distinction between competition in market exchange and competition in the organization of production is that between competition in the routine activities of firms in a stable competitive market oriented to price competition and competition in the disruptive, creatively destructive, effects of entrepreneurship in dynamic markets. This distinction is conventionally associated with Joseph Schumpeter (1934, 1943). He rejected the notion of perfect competition both in reality and as an abstract reference point for analyzing imperfect competition. He also disputed the idea that markets tended towards equilibrium. He argued that entrepreneurship disrupts equilibrium through the ‘creative destruction’ of innovation, and that that is constantly altering the pace and direction of economic growth.

Schumpeter identified five areas of innovation. These are: (1) the introduction of a new good or a new quality of a good; (2) the introduction of a new method of production or a new way of commercially handling a commodity; (3) the opening of new markets for one’s own products; (4) securing a new source of supply of raw materials or half-finished goods; and (5) the reorganization of an industry, e.g., the creation of a new cartel or monopoly position, or the breaking up of existing cartels or monopolies (Schumpeter 1934: 129-35). Successful competition in these areas allows, in the short-term, monopoly profits. But in a well-functioning market, these higher profit-levels will eventually be competed away as other firms adopt these innovations or seek to counter them with their own innovations (whether competitive or anti-competitive). Without directly following Schumpeter’s arguments, the Austrian School of Economics, which also rejects the ideal of a perfect competition (see Hayek above), is another theoretical paradigm that emphasizes the importance of dynamic competition vis-à-vis static, price and production cost competition.

The relative importance of static competition focusing on the formation of market prices on the one hand and dynamic competition focusing on innovation on the other varies significantly. The latter is especially important during those punctuated evolutionary periods in which a previously dominant form of productive technology and/or associated forms of firm organization and finance is overtaken by some other. Such transitions tend to disrupt competition law, which lags behind changes in products, processes, marketing, sourcing, and corporate organization. A particular system of competition law can weather the relatively minor disruptions and crises associated with contiguous day-to-day developments, the more serious crises that accompany the punctuated transitions from one technological epoch to another will sooner or later trigger a corresponding search for new regulatory system.

 III. Competitiveness

The idea of ‘competitiveness’ is conceptually ambiguous, politically controversial, and ideologically charged. Essentially it comprises the key set of resources and abilities that underpin competition. It refers to the capacity to engage in competition and prevail in the struggle over differential accumulation — whether or not this capacity is fully realized is another, contingent matter. As such, competitiveness varies with the forms and modalities of competition. There are many ways to define and measure it, and past and current legal and policy debates over its nature indicate the political issues that are at stake.

Definitions and discourses of competitiveness and their associated discourses are liable to change: mercantilist notions from the 17th century can be contrasted with those of 1890s imperialism or with recent worries about structural competitiveness vis-à-vis emerging market economies. A well-known periodization is that proposed by Michael Porter, who initially distinguished four stages in the development of competition among nations, and then generalized this to competition among cities, regions, inner cities, and regional blocs. These are factor-driven competition (based on static comparative advantage); investment-driven competition (based on dynamic allocative advantage); innovation-led competition (based on Schumpeterian entrepreneurship leading to creative destruction); and wealth-driven competition (based on the legacies and prestige of past success, e.g., in luxury goods, art markets, consultancy) (Porter 1990). Another interesting periodization of the discourse in competition, this time address the private sector, is found in three distinct discursive periods that make up the international developmental discourse following the end of the Cold War as described by Ngai-ling Sum in her contribution to this volume (Sum 2013).

Institutional economists sometimes distinguish between micro-, meso-, and macro-forms of competitiveness. Traditionally, competition law seeks to regulate micro-economic competitiveness, i.e., competition in the structure and behavior of firms. This is often measured through market share, profits, and growth rates. There is an extensive body of managerial and industrial economics literature that argues that “firm-specific advantages” – i.e., factors that unavailable in the short-term to competing firms – are the key basis for this kind of competitiveness. Such advantages are the basis of monopolistic competition. They might originate in factors of production (patent rights, know-how, research and development capacity) or in marketing capacity (design, image, knowledge of likely demand, sales networks). But they can also derive from extra-legal or illegal activities (e.g., predatory pricing, political deals, mafia-like conduct). This is the level of competitiveness in which the paradox discussed in the previous section between the interests of particular capitals in securing above average profit rates (facilitating their differential accumulation at the expense of less profitable firms) and the interest of capital in general in the formation of an average rate of profit, an average rate of interest, and so on, is located.

The meso-level looks at the larger institutional complexes – such as the clusters or economic regions – in which a particular population of firms is embedded and on which they depend for their competitiveness (in this volume, see Yeung on production networks; and Frederic Deyo on Asian industrial parks). An increasing array of institutions is being identified as relevant here in affecting the capacities of firms to compete in technology, delivery, after-sales service and to develop other forms of firm specific advantages. This is an area where industrial policy has a key role to play, and often finds itself in conflict with competition law (see, for example, Vande Walle’s chapter on Japan). Indeed, for the Parisian école de la régulation (the “Regulation School”), the enterprise form and its associated forms of competition constitute just one of five key sites of the “regulation” (or, more precisely, the ‘regularization’ or normalization[3]) of capital accumulation (e.g., Boyer and Saillard 2002). Other areas of capitalist “regulation” include capital-labour relations; monetary and financial systems; the state; and international regimes. While certain aspects of the capital-labour relation can be managed at the level of the firm, this and the other sites of regulation are better seen as meso- or macro-level problems that emerge from the firm’s larger environment. This is where competition law, competition policy, and competitiveness intersect, and may prove complementary or may prove contradictory.

Conventionally, the macro-level of competitiveness is equated with national economies. Relevant measures of competitiveness here include employment levels, growth rates, exports, and profits. But this is doubly misleading. First, it is the world market, not the national market, that is the ultimate site and horizon of accumulation, and even beneath this, there are also sub-national and supra-national states that work to sustain (or handicap) competitiveness outside the reach of national institutions (see also Michael Dowdle’s introductory chapter to this volume). And second, and self-evident nowadays, many leading firms and banks are transnational in their manifestion, with complex internal divisions of labour and with complex forms of embedding into global production chains and financial flows that transcend the reach of national regulatory systems (see Yeung, this volume).

For this reason, a more inclusive range of factors influencing macro-level competitiveness should include:

the size of domestic markets, the structure of domestic production, relationships between different sectors and industries … the distribution and market power of supplier firms … the characteristics and size distribution of buyers, and the efficiency of non-market relations between firms and production units (OECD 1986: 91-2).

And it might further depend on:

no exaggerated conflict in the field of income distribution, price stability, flexibility, and the adaptability of all participants in the market … a balanced economic structure based on small, medium-sized, and big companies … the acceptance of new technology, favourable scientific and technological infrastructure and realistic requirements for risk containment and environmental protection (OECD 1986: 91-2).

Once macro-economic competitiveness is deemed relevant, it can be targeted for action. But the definition of competitiveness, the target variables, and the strategies adopted are all discursively constituted and will vary from case to case. Insofar as that competition is mediated through market forces, it will depend on the struggle to increase efficiency. But in other cases, extra-economic factors – such as tariff and non-tariff barriers to trade, or access to state subsidies – can prove crucial.

Competition in modern capitalist economies is said to depend increasingly on such extra-economic factors, and this is leading tendentially to the subordination of the whole social formation to the imperatives of accumulation and competition. This occurs because of the growing importance that is attached to structural or systemic competitiveness and to cultivating the knowledge-base as a critical source of dynamic competitive advantage. It extends economic competition to a virtual competition between entire social worlds, as mediated through the audit of the world market, and it increases pressures to valorize a wide range of previously social and extra-economic institutions and relations. Among many examples, consider the importance that that “social capital”, “social trust”, “collective learning”, “institutional thickness”, “untraded interdependencies”, “local amenities”, and even “culture” are now said to play in global competitiveness. Likewise, discourses and strategies of structural or systemic competitiveness now emphasize not only firm-level and sectoral-level factors, but also the role of an extended range of the social and extra-economic institutional contexts and socio-cultural conditions in which economic actors also “compete” (cf. Deyo, this volume). They are linked to the rapid expansion of (competing!) benchmarking exercises and services concerned to construct league tables and offer recommendations on how to enhance such competitiveness (see also Sum, this volume). This is reinforced by the growing importance attached to the knowledge-base in post-Fordism and thus to knowledge production and transfer in the wider society.

These changed discourses and strategies mean in turn that hard economic calculation increasingly rests on the mobilization of soft social resources that are both irreducible to the economic and resistant to such calculation (Veltz 1996: 11-12). The competitiveness of cities and regions, for example, is now said to depend not only on narrow economic determinants, but also on the localized untraded interdependencies, knowledge assets, regional competencies, institutional thickness, social capital, trust and capacities for collective learning mentioned above, as well as on distinctive and attractive local amenities and aspects of culture. Similarly, there is also growing emphasis on improving the interface between business on the one hand and previously non-economic institutions such as universities and the state on the other to promote competition in the new, knowledge-based economy (Leydesdorff and Etzkowitz 1997; Deyo, this volume).

As attention has turned from micro-level competitiveness to meso- and macro- level competiveness, the role of the state in regard to competition also changes. This is reflected in the concepts of the developmental state (oriented to catch-up competitiveness) and the so-called competition state. The latter notion was introduced by Philip G. Cerny and has been further developed by myself (Cerny 1990; Jessop 2002). A parallel notion was introduced in German by Elmar Altvater and Joachim Hirsch (Altvater 1994; Hirsch 1995). Cerny initially described the competition state as a new form of state that prioritized the pursuit of global competitiveness on behalf of its national territory and domestic capital (in subsequent works, he gave it a more complex definition) (Cerny 1997). In general, the competition state is one that aims to secure economic growth within its borders and/or to secure competitive advantages for capitals based in its borders, even where they operate abroad, by promoting the economic and extra-economic conditions that are currently deemed vital for success in economic competition with economic actors and spaces located in other states. The leading Asian NIEs illustrate this tendency well (Deyo, this volume). The same tendency is equally evident in the leading Western economies in terms of the organization of regional and global outsourcing, regional and global commodity chains, and in the organization of global finance (Yeung, this volume). Paradoxically, offshore, more peripheral national economies can themselves be an element in this struggle for competition, insofar as they can be sponsored (or tolerated) by the competition state in order to secure competitive advantages for domestic or international capitals based in their own territories (such as via transnational supply chains) (Palan 1998).

Although the competition state’s strategies may be targeted at specific places, spaces, and scales, and even directed against particular competitors, these strategies are always mediated through the operation of the world market as a whole — especially as efforts are made to widen and deepen the reach of that market through strategies of neoliberal globalization (Jessop 2009). This is reflected in the growing transnationalization of competition law (Gerber 2010). Here, we can observe the emergence of new, state-centered structures of ‘global competition law’ (as defined in Dowdle’s introduction to this volume). These include transnational networks that link together national competition agencies; treaty arrangements affecting state-level responsibilities for implementing competition policy; and inter-state arrangements for the transnational enforcement of national competition law regimes (for illustration, see Imelda Maher, this volume).

At the same time, however, the competition state still tends to prioritize strategies that are intended to create, restructure, or reinforce – as far as it is economically and politically feasible to do so – the overall competitive advantages of its particular territory, population, built environment, social institutions, and economic agents. The same idea is sometimes expressed in the notion of ’entrepreneurial state’. And just as there are different forms of competition, so too are there different forms of competition state in this particular aspect (among the types distinguished are the neoliberal competition state, the dirigiste competition state, and the social- democratic competition state) (cf. Cerny 1997; Jessop 2002).

We also find a proliferation of spatially specific competitiveness strategies at many other scales and sites of economic and political action, strategies that are associated with and promoted by differently-scaled entrepreneurial actors and/or competition regimes. As we noted above, the state is not the only scale at which macro-competitiveness manifests itself

 IV. Varieties of Capitalism

There is no best way to organize and govern capitalism and, notwithstanding claims about long-term convergence, several varieties of capitalism persist due to the heterogeneity of the goods and services (including fictitious commodities) produced for sale, and due to the inevitable embedding of capitalist production and markets in broader sets of social relations. Such variation is evident in the wide range of firms, industries and sectors, complexes and clusters, local and regional associations, national economies, plurinational systems, transnational networks, and trading blocs found in capitalist environments. Advocates of a one-size-fits-all model of competition law, particular those that come from liberal market economies (LMEs) tend to ignore this diversity – especially where the model for this derives from liberal market economies. From this LME perspective, varieties of capitalism simply represent path-dependent frictions within the larger trajectory of the neoliberal realization of economic efficiency, shareholder value, and freedom of choice. From the viewpoint of coordinated market economies (in all the heterogeneity of their forms of coordination), however, this diversity represents the path-dependent economic and extra-economic legacies of different specializations in producing and marketing, the production of different types of commodities, and different trajectories of insertion into a multi-scalar and still-fragmented world market. This latter perspective indicates that there should be different forms of competition law for different varieties of capitalism.

Seen in these terms, we should examine how different modes of inter-firm competition and/or cooperation in different varieties of capitalism in a variegated world market lead to the relative dominance of formal market exchange in some circumstances and of different forms of networking in securing the conditions of valorization, innovation, etc., in others. These sets of factors operate initially at the level of specific branches and sectors (for example, in the organization of the labour process, in the structure of labour markets, in training regimes, or in the differential development of paternalism and occupational welfare). But depending on the relative dominance of specific economic sectors and fractions of capital, and their particular hegemonic capacities, the effects of these factors on competition can become more general (or even universal) within particular regional or national formations.

Competition law is one such factor, but only one—there are many others.  And of course, these factors must be balanced against one another. The relative weight of these different factors can also vary not only across capitalisms, but also between different stages of a particular capitalism. The recent rise of finance-dominated accumulation vis-à-vis production-dominated accumulation, particularly in LMEs, provides only the most recent example of this. And it is producing critical challenges to competition law, both as regards the governing of finance and the neoliberalized world more generally.

The literature on varieties of capitalism tends to focus on what Max Weber called ‘rational capitalism’ — i.e., profit-oriented, market-mediated economic organization based on formal-rational calculation of opportunities for profit on the market and the allocation of capital and organization of economic activities with a view to maximising profits. Rational capitalism encompassed two of the six different orientations to economically profitable activities that Weber identified (see Figure 5.1). The two orientations associated with rational capitalism include (1) trade via free markets and the rational organization of capitalist production in the light of calculations about expected rate of return and (2) trade in money and credit instruments, together with speculation in these instruments (modes #1 and #2 in Figure 5.1). Weber also contrasted rational capitalism with what he called political capitalism, which consisted of three other approaches to generating profit. These included (1) securing profits through political-predatory means; (2) pursuit of market profits through private force and domination; and (3) pursuit of profit via unusual deals with political authority (modes #3, #4, and #5 in Figure 5.1). (Weber also identified a sixth kind of orientation that revolved around traditional (pre-modern) forms of trade or money deals (see mode #6, Figure 1), but which need not concern us here (Weber 1978).

 F-2013c Competition-Dowdle Figure 5.1 Weber’s Modes of Orientation to Profit

Figure 5.1: Weber’s Modes of Orientation to Profit (Weber 1978).

Figure derived from Swedberg (1998)

Competition law is clearly oriented to Weber’s rational version of capitalism. At the same time, competition law has particular problems with ‘political capitalism’ (see, e.g., Crouch 2004).  Perhaps for this reason, those who look at competition from an LME or neoliberal perspective often associated “Asian capitalism” with the latter (others have referred to other parts of Weber’s economic analysis, focusing not on his typology of capitalism but on his analysis of patrimonial and prebendal societies). While the developmental state analysis and claims about ‘crony capitalism’ (which are often disingenuous, especially when advanced by the same authors who once praised East Asia’s developmental state) can be subsumed under one or more forms of political capitalism, the more recent developments in East Asian capitalism as it moves beyond catch-up competitiveness and develops distinctive forms of competition state are harder to fit into his scheme. Simon Vande Walle provides a good illustration of the problems that this produces in Japan – the original reference point for discussions of the developmental state – in his analysis of the continued tensions between competition law and industrial policy (Vande Walle, this volume). This survives today, and not just in Japan, as East Asian economies move from what Porter would call factor- and investment-driven competitiveness into innovation-driven (or Schumpeterian) competitiveness with their distinctive forms of coordinated market economy. Asian capitalisms’ current incompatibility with neoliberal vision of competition law could be a reflection of its creative adaptation of “post-Fordist” accumulation within regimes that are less marked by the supposedly typical institutional separation between the economy and polity systems that is said to characterize Western liberal market economies.

 V. Some Implications and Generalizations

Competition occurs on a stratified terrain rather than a level playing field. As the hierarchy of forms of competition and competitive players alters, the dynamics of competition also change. These hierarchies can be approached from several directions: (1) changes in the relative importance of different markets in setting the parameters of competition; (2) changes in the relative super- and sub-ordination of different forms of competition; and (3) changes in firm organization associated with advantage in given fields of competition. It is also important to note that economic competition includes social and other ‘extra-economic’ factors, forces, and capacities.

The first hierarchy concerns the relation among four types of markets: which comprise financial market, industrial, and commercial markets, together with emerging ‘meta-markets’ in the ever more central field of intellectual property. These can be considered both within national economies (e.g., the dominance of City interests in Britain) and across national economies (e.g., the emergence of an “’international intellectual property regime” as part of the high-tech neo-mercantilist strategies pursued by the USA and Japan). Along these lines, financial market transactions prompted by short-term money-making opportunities have grown at the expense of long-term industrial (or producer) interests, and have engineered massive restructuring of firms through new financial instruments. Likewise, as technologies become more knowledge-intensive, access to “meta-markets” of technological know-how (licences, data-bases, patents, technology transfer, etc.) become crucial to effective competition, and the appropriation of knowledge becomes a key factor in competitive success.

The second hierarchy is more complex and concerns the relation among different forms and/or bases of competition. Thus, as well as the economic interactions characteristic of the conventional categories of ‘pure’ markets (for example, perfect, imperfect, monopolistic, oligopolistic, and monopsonistic), we can also cite other, supposedly less ‘pure’ forms of economic interaction, such as networks or strategic alliances, that can also serve as the agent for competition. To these can be added a concern with the bases along which these different forms of economic interaction operate (e.g., costs and prices, various forms of rent, state subsidies, etc.). This is not simply a question of which competition forms per se exist, but of their relative sub- and super-ordination. Thus, even where liberal competition survives in current capitalism, it is often subordinate to monopolistic competition in particular circumstances, such as in the case of suppliers to retail chains (Cf. Galbraith 1978). Conversely, as new technologies, process, or product innovations become more widespread, the dynamic economies associated with Schumpeterian innovation decline and neo-classical allocative efficiencies becomes more significant again.

The third hierarchy concerns the corporate form assumed by the competition setters in different markets and/or forms of competition. The peak of the global corporate hierarchy is currently occupied by denationalized, transnational banks that offer a full range of financial services at the global level and by ‘stateless’ multinational firms that specialize in high-tech, high value-added groups of products such as specialty chemicals, advanced transport, and energy resources (see also Yeung’s discussion of transnational production network in this volume).

Combining these hierarchies, we can say that the dominant competitive forces are those that set the terms of competition in the most important market. This can be linked to ecological dominance within the broader ecology of different markets (on ecological dominance, see Jessop 2009). And, as the forms of competition and competitive strategy shift, patterns of competitive advantage will so as well. In turn, this implies that the state’s capacity to promote competitiveness depends on its ability to pursue dynamic competitive strategies that adapt to the ever evolving position of the national economy within these evolving and co-evolving hierarchies.

Markets must also be socially constructed via a set of agreed on or imposed rules of the game. There is no ‘natural’ or ‘spontaneous’ implementation of market mechanisms. If specific markets seem to be self-equilibrating mechanisms, this results from adherence to sophisticated regulations concerning the quality of goods exchanged, the inner organization of transactions, the legal penalty for non-compliance, etc. Without such surveillance mechanisms, private sector opportunism and corporate self-interest would severely distort the alleged smooth adjustment process of supply and demand (see also Boyer 1996).

‘The market’ is both a self-description for the interactions among profit-oriented economic agents – hence a social construct – and the actual form of movement of a complex material substratum of economic interactions that are more or less embedded in a wider nexus of social relations. It is impossible to regulate the market in this second sense and, as I hope to have shown above, to regulate its competition in all its complexity. Indeed, as the preceding analysis suggests, competition occurs not only between economic actors (for example, firms, strategic alliances, networks) but also between political entities representing specific spaces and places (for example, cities, regions, nations, triads).

Likewise, as we have also seen, competition and competitiveness depend on extra-economic as well as economic conditions, capacities, and competencies. At best, then, social forces can identify a subset of interactions among profit-oriented economic agents, isolate them as an object of regulation or governance, and then seek to govern them through the development of appropriate rules, regulations, agencies, mechanisms, and institutions (all steps being contested). Even here, however, the pronounced influences of the ‘unmarked’ and the ‘unobserved’ persist, forming a ‘constitutive outside’ that continues to shape the development of the actual form of movement of market forces, resisting regulatory capture. This is one of the sources of market and regulatory failure.

This becomes all the more significant the more integrated the world market becomes in real time. For this integration tends to universalize competition — to rebase the modalities of competition and reinforce its treadmill effects for all forms of competition, and to intensify the contradictions of capital accumulation that exist on a world scale. Indeed, the recent ascendency of financialization over industrialization, together with the enormous expansion of liquidity associated with derivatives and securitization, has enhanced the primacy of financial capital over productive capital. This imposes competitive pressures on other capitals to meet rates of return compatible with financial capital, and establishes a new form of commensuration that allows for the further universalization and standardization of competition (cf. Bryan and Rafferty 2006). New forms of competition law are being developed here in the hope that this increasingly inclusive spread of competition will conform to market-liberal standards. But as my earlier discussion of post-fordism suggest, one suspects that this hope is in vain.

 VI. Conclusions

Competition and competitiveness are extraordinarily complex phenomena and, as such, resist regulation and governance. Matters can be simplified a little by relating them to the periodization of capitalism and to varieties of capitalism, but this comes at the price of neglecting the complexities of variegated capitalism in the world market with all its uneven and combined development. Thus, unless we recognize that the capital relation, including the role of competition in mediating the drive to differential accumulation, is inherently contradictory in structural terms; that it poses major strategic dilemmas; and that it is subject to all manner of paradoxes; we will never fully understand the complexities of regulating and governing capitalism – including through competition law – and the inherent tendency for all forms of governance of capitalism is to fail.

There are several modes of differential accumulation, associated with different kinds of competition and different bases of competitiveness. Competition law tends to target just one sub-type, that of ‘rational capitalism’, and even here it is better suited to regulate competition based on static allocative efficiency than it is the dynamic, destructive creation associated with Schumpeterian innovation. This indicates a tension between competition within static or stable markets on the one hand, and entrepreneurial activities in turbulent conditions on the other. Yet every mode of differential accumulation rests on a balance of competition and entrepreneurship. The former is hard to regulate without undermining innovation. At the same time, however, the celebration of innovation can often serve as a legitimating cloak for predatory activities, such as in the recent examples of what one might call ‘financial criminnovation’[4] (cf. Black 2005, 2009).

Efforts to regulate competition are further complicated by the fact that competitiveness has many bases, many of which (notably extra-economic ones) are unsuited to competition law. The expanding world market and the plurality of states create further regulatory problems, such as with regards to the role of international private law, how to handle conflicts of laws, and the reach of extraterritoriality.

One response to this, much discussed in the last 15 years or so, is the shift from a one-sided emphasis on specific forms of governance – e.g., the anarchy of the market, the hierarchy of command, the heterarchy of self-organization, and the solidarity of collective commitments – to efforts at meta-governance or collibration. Building upon efforts by Andrew Dunsire, Jan Kooiman, and myself, this can be defined as an approach to governance that involves the judicious mixing of market, hierarchy, networks, and solidarity to achieve the best possible outcomes from the viewpoint of those engaged in metagovernance (Dunsire 1996; Jessop 1998; Kooiman 2003; see also Scott 2006). Governments have a key role to play here, but even this kind of ‘meta-governance’ is fallible. The emerging system is a complex, multi-scalar, hybrid, and tangled system of meta-governance. But it continues to operate in the shadow of the continued dominance of competition law by the Western model (which means, in particular, the American model) as advanced by the continued national dominance (if no longer the continued hegemony) of both the US economy and the American state in the world market. Yet the very complexity of the interweaving of different forms of governance and government on different scales means that the resulting system is more complex than any state, or political or social entity, can understand, and its overall evolution lies beyond the control of a state or its society.

In conclusion, let me recapitulate some of the problems confronting the role of competition in securing a level playing field for different capitals seeking to benefit from differential accumulation. First, competition, as an actual process, is inherently disequilibrating and when it takes a Schumpeterian form, is creatively destructive. Second, competitiveness is a set of real capacities/powers that affect the ability of agents to engage in competition and prevail in struggle over differential accumulation. Competitiveness has many bases, especially if viewed in meso-, macro-, and meta- terms (not just micro-), and in relation to modes of capitalism and their requirements. Understandings of competition and competitiveness are discursively shaped by specific frames, categories, strategies – original, mimetic, or imposed – that simplify what would otherwise be too complex to observe, calculate, manage, regulate, or otherwise govern. Different framings of competition and competitiveness involve different forms of action with uneven impact on positioning of firms, sectors, regions, nations, and continents, as well as on the balance of economic and political forces in and beyond the state system itself. And if competition is hard to regulate through law, it is impossible to govern the factors making for the “competitiveness” that competition law is supposed to serve.

Competition does not occur in a social vacuum, but depends on complex sets of institutions and broader social frameworks. This is one of the bases of distinguishing modes of production, stages of capitalist development, and varieties of capitalism – and, in the work of scholars like Karl Polanyi, of examining the consequences of de-institutionalization or disembedding (Polanyi 1944). The instituted nature of competition is reflected in the development of competition law, their regulatory institutions (e.g., anti-trust departments), and other mechanisms to limit, shape, guide, or extend competition.

Contemporary economists disagree about the relevant units of competition. Notably, some argue that it is only the owners of economic resources, such as firms and workers, that compete; and that it is mistaken to treat cities, regions, nations, or supranational blocs (such as the European Union) as units of competition (for example, Krugman 1994). Others argue that these entities can, indeed, compete (Porter 1990). The extent and manner to which this is literally true, metaphorically feasible, or merely rhetorically useful needs to be investigated. Overall, while the critics are right that ‘economies’ are not really agents or subjects, they err insofar as real agents or subjects do identify economies as being strategically engaged in ‘competition’, and act on this perception. Such competition is perceived in political or military as well as economic arena, and is closely linked to the organization of world society in and through nation-states.

Finally, with growing concerns about the environment, and about the effects of growing inequalities in income and wealth, there is also the question of whether competition needs to be tempered and moderated in the name of moral economy. The logic of competition in the capitalist mode of production is connected to the principle of unending, ever-expanding accumulation. Perhaps it is time to compete to find ways to block the effects of this growth-oriented dynamic. And, in this context, perhaps it is time to return to the ancient and medieval doctrines of ‘fair price’, the limitations on competition in the name of solidarity, and a willingness to cancel odious debt in the name of social justice.

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Endnotes

[1] This chapter draws in part on work for my ESRC-funded Professorial Fellowship on the Cultural Political Economy of Crises of Crisis-Management (RES-051-27-0303). It also builds on my earlier work on meta-governance (Jessop 1998; Jessop 2011).

[2] On knowledge as a fictitious commodity, see Jessop 2007.

[3]In French, régulation refers to processes of standardization; as contrasted against règlementation, which refers to ‘regulation’ in the political-legal sense of the term.

[4] This term is my own and captures the predatory nature of much recent financial innovation.

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