Competitive Advantage and Competition Policy in Developing Countries

Competitive Advantage and Competition Policy in Developing Countries

The CRC Series on Competition, Regulation and Development

Edited by Paul Cook, Raul Fabella and Cassey Lee

The book discusses competition from different theoretical perspectives and examines the implications these viewpoints have for policy. The contributors assess competitiveness in domestic markets and the impact of foreign competition. They also review the experiences of a range of countries in developing competition policy and examine both the strengths and weaknesses of these policies.

Chapter 2: Competition and the Regulation of Economic Development

John Stanley Metcalfe and Ronnie Ramlogan

Subjects: development studies, development economics, law and development, economics and finance, competition policy, development economics, public sector economics, law - academic, law and development

Extract

John Stanley Metcalfe and Ronnie Ramlogan INTRODUCTION The theme of this chapter is competition as the regulator and promoter of economic development and that competition and development are processes for the transformation of economies from within. This process view of competition links development to new uses for resources, to the creation of new activities, to the formation of new patterns of consumption and demand and to innovation and rivalry. We contrast this view with the more familiar idea of regulating states of competition, arguing that the static theory of resource allocation, in which the conventional ‘antitrust’ case is grounded, is a distorting mirror in which to reflect the competition policy needs of developing economies. Indeed the central thrust of our argument is that the promotion of competition as a process of rivalry is not the same as the regulation of the market behaviour of errant firms. Traditional views of the abuse of market power and the definition of markets are displaced by a concern with open markets, the prevention of exclusionary practices by incumbent firms and the stimulation of enterprise (Krattenmaker, Lande and Salop, 1986; Charles River Associates, 2002). The consequences of this shift to a developmental perspective are considerable, for it rules out of consideration many of the existing frames of thought that relate to the idea of economies as equilibrium states of affairs. First, it should be obvious that any system that is in equilibrium has exhausted all the internal tendencies to change and that...

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