Competition policy and democracy

Competition policy cannot be easily separated form other objectives, such as better and fairer labour markets, environmental plans or other social and political issues. Today, a strong competition policy is also an important pre-requisite for a well-functioning democracy, because it prevents strong concentrations of private power that can undermine free societies.

Acemoglu explains in his Nobel prize lecture that “by the end of the 19th century, US industry had reached a very high level of concentration, with a few firms, such as Standard Oil, J.P. Morgan, and Carnegie Steel, dominating their sectors, and also gaining greater political power. It was not out of the question that this would lead to the consolidation of political power in the hands of these companies and a closing of the economy to new firms and ideas, for example, as Venice experienced in the 13th and 14th centuries. In that instance, increasing concentration of economic power in the hands of a few patrician families enabled them to further monopolize politics, and this undermined the institutional foundations that had previously underpinned remarkable innovativeness and prosperity in Venice. In the end, this did not happen in early 20th-century United States, in part because political power shifted away from these large corporations and their owners during the Progressive Era. New politics led to institutional reforms, enacting antitrust laws against monopolies and cartels, introducing new tools for regulation and redistribution such as the Federal Reserve and the federal income tax, and allowing greater room for collective bargaining for workers.”

Simon Kuper in a recent article in the Financial Times (which could also be interpreted as a qualification to the Draghi Report) argues that “the EU has to weaponise its greatest strength: the single market and its regulators. The European Commission is the institution on earth best placed to take on US tech. It now also has an economic “anti-coercion instrument”, known in Brussels as “the bazooka”, to fight trade wars. The EU wishes it had a serious tech industry and trillion-dollar companies, but there are upsides to not having them. As economist Joseph Stiglitz argues, trillion-dollar companies tend to be the consequences of monopoly. Without tech oligarchs of its own, the EU can confront the industry. That’s a big bargaining chip, as Trump’s chief constituency now appears to be Silicon Valley, not his voters who rendered themselves irrelevant when they elected him one final time.”

The current calls for administrative simplification and competitiveness in Europe should not be confused with deregulation. In the difficult times that now Europe and the world are living, it is imperative to strengthen the rule of law institutions which separate us from autocracies, and one of these regulatory institutions is competition policy.

Trump 2.0 as private provision of a global public bad

In economics, a public good is a good that is non-rival and non-excludabe. It could be something material (fireworks) or non material (an idea). Different people may have different preferences for a public good: some people like fireworks, other people do not. For those that do not, fireworks are a public bad.

If a public good affects people all over the world, we are in front of a global public good. If people (or a majority) dislike it, it is no longer a good, it is a bad.

Public goods (or bads) are usually provided by the public sector, as it happens with local public goods such as roads or traffic signals. But they can also be provided by individuals or by the private sector, as in some charities or with corporate social responsibility.

Using these definitions, Trump 2.0 can arguably be characterized as a privately provided global public bad. Leaving the World Health Organization, or reneging from the Paris climate agreement, or stopping international aid, are going to cause unnecessary suffering all over the world. The support of the Trump administration for extreme right wing political parties in other countries, or the threat of causing geostrategic or trade disruption, and their poisoning of political communications, go in the same direction.

A public good (or bad) can be privately provided for a variety of reasons: it could be in the interests of the individuals providing the good, or they could be altruists or believers in something. The techno-oligarchs that run the new US administration with Trump are interested in removing regulations that may threaten their business or their power. The support of these oligarchs is one of the features that distinguishes Trump 2.0 from Trump 1.0.

An early example of private provision of a winning political alternative took place in Italy in the 1990s and early 2000s with Berlusconi. Like now in the US, it was a case of political vertical integration: two usually contracting units (lobby and political party) merged in the same value chain. There are differences though. Berlusconi created a new political party, while Trump basically took over an existing one. And the Trumpian techno-oligarchy has created a truly global public bad, whereas in Italy it didn’t go beyond the national level. The corruption inherent to the alliance between Trump, Musk and the other oligarchs is without precedent.

A global public bad can only be defeated with coordinated global action, or at least action from citizens and actors from as many jurisdictions and institutions as possible. How to fight these global powers should include breaking the private provision with regulations fighting the excessive power of techno-oligarchs, overcoming the global collective action problem with new forms of organization and communication, and developing policies that strengthen democratic forces and governments.

In this context, the European Union has an enormous responsibility, and also an opportunity: more than ever, it should reinforce its institutions (with further integration) and those of global peace, and promote a balanced industrial policy, compatible with competition to fight global monopolies, and a rule-based trading and immigration system.

In a way, Trump 2.0 challenges the notion of national sovereignty. But the right challenge to the nation-state is to question the idea of the US new administration as the only sovereign state. If sovereignty is shared in peace to face our global challenges, democracy will prevail.