- The CRC Series on Competition, Regulation and Development
Edited by Paul Cook, Raul Fabella and Cassey Lee
Chapter 2: Competition and the Regulation of Economic Development
2. Competition and the regulation of economic development 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...
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