Antoni's Wire Service

Date: Fri, 6 Aug 1999 21:51:29 -0300 (ADT)
From: Antoni Wysocki
To: Antoni's Wire Service
Subject: competition is good for you


Hard on the heels of one colloquium sponsored by DFAIT (the Department of Foreign Affairs and International Trade) I received an invitation to a second session. As related in the AntWire post "Investment or no", DFAIT officers have made whistle-stops in several cities for the purpose of soliciting opinions on Canadian policy at the World Trade Organization (WTO), and in negotiations on a Free Trade Area of the Americas (FTAA). In these chosen locations the DFAIT people have organized round-table discussions on selected issues with those they term "stakeholders in Canadian communities".

Prior to the first conference (the subject of which, incidentally, was investment) I conceived serious doubts about the whole affair. In particular, I feared that I would find the outcome of the colloquy was predetermined and that my attendance (as a representative of the non-profit sector) was desired only to provide a fig leaf for a body politic that had already sold out to big business.

For all that, in the end I did go - and in fact found the discussion most engaging. To be sure, I didn't get the sense that the Minister for International Trade would be in any hurry to implement my recommendations, but I did feel that a potentially very useful exchange of views took place amongst those present at the conference itself. True, the federal government likely will seize upon the event to make political mileage - and that is regrettable - but should that happen it will not, I think, outweigh the benefits derived from the broadening of participants' perspectives.

Though I was able to make peace with myself over the investment seminar, I was freshly discomfited by an invitation to its companion session. To an even greater extent than the first time, the guest list for this second installment read like a globalisation claque; and furthermore the theme ("competition") did not fall comfortably within my area of inquiry. Indeed, I found myself concerned that there might be no point of tangency for me in the discussion at all : while I abhor mono- and oligopolistic practices, this does not mean that I heartily endorse the emulous and cut-throat utopia of competition's paracletes.

All the same - come July 08, the appointed day - I duly girded my loins and once again trundled off to Halifax's Canada/Nova Scotia Trade Centre. I reasoned that, if nothing else, seeing homo economicus in action would make for an intriguing study in cultural anthropology.

The gathering was larger on this occasion - seventeen all told, over against the thirteen of the investment round-table; and this difference was accentuated by the contrasting ratio of facilitators to participants at the two meetings. At the first session, six people - moderator, secretary, four rapporteurs - served as functionaries; but the competition session made do with three rapporteurs, for a total of only five facilitators.

Back in June, at the investment conference, the four individuals charged with the task of receiving the opinions of the "stakeholders" were all DFAIT staff; in July's competition segment, two DFAIT personnel were accompanied by an employee of the Competition Bureau (an arm of Industry Canada.) The respective guest lists showed still more variance - the earlier session brought together :

the competition group, however, included :

The first session opened with a clipped and pertinent enunciation of the agenda by a DFAIT officer, and proceeded almost immediately to a plenary discussion of the issues. By contrast, the July meeting got off to a slow start with an extensive background briefing, courtesy of one Grace (a DFAIT agent who bore a remarkable - if unlikely - resemblance to the Council of Canadians' Maude Barlow.)

Given that our gathering, with more voices to hear from, had only three hours to enact its business - while the June colloquium had been allotted four - I resented the floor-time denied the guests by Grace's intervention. Granted, it is likely true - certainly it was of me - that for most of those in attendance the connection of investment to the international trade agenda is better established than is that of competition, so that the latter warranted more explication. Even allowing this point, Grace's presentation seemed to me overlong. I also found it highly tendentious : though Grace maintained that DFAIT wished to discover participants' unprejudiced opinions on the matters at hand, she biased the proceedings by making clear that the federal government was strongly predisposed to pursue competition disciplines at the WTO.

In the face of the institutionalization, under Brian Mulroney and Jean Chretien, of neoliberalism, competition has come to be a watchword in Canada. It is now most often encountered as a dictum for commercial operations in an increasingly globalised economy; in this connection it means, roughly speaking, that the indigent must always be ready to make further concessions to the affluent, these latter being deemed the essential agents of economic growth. A recent such instance was the employment of the term a few months ago by John Manley, Minister for Industry Canada, in justifying his call for a reduction in income tax for the wealthy of this country (Manley suggested that such "reform" would persuade plutocrats - supposedly fleeing en masse to the United States to escape excessive imposts - to remain in Canada.)

The above formulation is a kind of special case of competition as it has been known to economists ever since Adam Smith's day. For Smith and his heirs, "competition" is the condition that obtains when each producer rivals every other in efforts to make her/his/its particular product more attractive (hence saleable) to buyers. In the wake of the neoliberal revolution, this is most likely to take the form of companies cutting labor costs (through layoffs, reduced benefits packages, etc.) so as to be able to lower the price of a given commodity or service without reducing profit levels. Clearly, such an arrangement is beneficial primarily to owners, somewhat to consumers, not at all to society at large; and actively harmful to workers. In theory, however, at least some of the time, producers will seek to undercut their competitors by other means, such as creating new and useful products. In such cases, owners, consumers, workers and the general population all stand to benefit in some degree.

As noted two hundred years ago by Adam Smith, the curious thing about this scenario is that with no conscious design on anyone's part there yet exists a constant impetus for such a system to produce better goods at lower prices (because if you don't your rival will - and you'll soon be out of business.) Furthermore, what ends up being produced corresponds fairly exactly with what is desired for consumption (because if you insist on churning out articles no-one is interested in then you won't be able to make any sales - and, again, you'll be out of business.) By contrast, it has been argued, no planning board could adequately replicate this process given the magnitude of the data it would need to collect and analyze (on a continuous basis, no less.) On this view, the less interference with the market mechanism, the better for all concerned.

Whatever the merits of this hypothesis as an abstraction, at a minimum, a brace of necessary preconditions are glaringly absent in the real world. First, if nothing else, the sheer volume of available products ensures that if individual buyers do not experience information problems on the scale that a planning authority might, they are nevertheless unable to obtain enough knowledge to make properly informed choices between vended items. Accordingly, not product merit but accident - or deft advertising - conditions what is purchased; and hence which sellers prosper. Second, resource asymmetries amongst both vendors and customers mean that some members in either group will have unfair advantages over others. A producer with deep pockets can, e.g., sell at a loss until competitors are forced out of the trade; the survivor is then free to grossly inflate the price. By the same token, low income consumers may be dismissed by producers as not worth selling to, with the result that the marketplace comes to offer not what "the people" want, but only what the _rich_ people want. If few of the commodities consequently produced are sought by - and within the means of - the poor, there is little they can do.

In recognition of these flaws, over the past century governments have been obliged, under pressure from smallholders and consumer associations, to intervene to limit some of these problems. Of the measures adopted, no doubt the most obvious is anti-trust legislation, which places strictures on laissez-faire capitalism's tendency to bring about ever-greater concentrations of industry. However, as the fundamental flaw of the market utopia is that the success of its operations is dependent on all producers and consumers being nearly equipotent - while in practice such a system ineluctably gives rise to and amplifies power imbalances - any measure that checks the growth of such disparities (a progressive income tax regime, e.g.) goes some way towards addressing the difficulties associated with a "pure" market.

Though the foregoing was common wisdom in the Keynesian welfare state period of 1945-75, it has been largely displaced under neoliberalism. While neoliberals accept many of the premises of neoclassical economics (such as rational self-maximization - the idea that every person is consummately selfish) they have largely abandoned the pretense of the neoclassicists that "the market" is a forum for a multiplicity of individual actors. Since neoliberalism construes the world as (or as becoming) a single market, of which no state apparatus has the final oversight, it is theorized that domestic laws restricting the size of concernments only serve to make those enterprises unviable internationally. As neoliberal doctrine further supposes that autarkic measures condemn their sponsors to stagnation (and, indeed, are ultimately untenable in any case) the recommended course of action is to allow the untrammelled emergence of corporate behemoths on a scale not previously instanced. Similarly, it is said, "generous" social assistance payments or remuneration for labor within one country only make that polity unattractive to business (which always seeks to lower its costs) without producing the levelling effects necessary to forestall the combinations associated with laissez-faire (since "the market" in which the action takes place is no longer national, but global.)

As neoliberalism is the theory of which globalisation is the practice, it might be expected that a government which subscribes to this school of thought - which is more or less all of them, less Cuba's - would wish to see the narrower Manley kind of competition incorporated in multilateral trade instruments, rather than the more diffuse Keynesian type. However, the outcry raised against the merging of Canada's large chartered banks made clear to Ottawa that the citizenry has not yet accepted that globalisation requires acceding to the unlimited combination of capital.

Recognizing that too obvious an adherence to Manley competition in international trade policy could prove a political liability at home, but compelled by the logic of neoliberalism to spurn the Keynesian form, the Chretien government found itself faced with a dilemma. To judge from the July round-table, the solution hit upon by Ottawa is to ostensibly pursue the pro-social objectives of the Keynesian mode, while actually remaining true to the spirit of neoliberalism. This prestidigitation is accomplished by laying down, as cornerstones of international competition policy, transparency and non-discrimination in investment.

At first glance, such axioms may seem unexceptionable. Indeed, at the competition conference Greg, Nova Scotia's Trade Representative, stated that "this is one issue that the left wing and the right wing can agree on." However, in the parlance of the WTO "transparency" is code for ensuring that things are done the good ol' American way; and MAI-nots will be aware that in this context "non-discrimination" really means eliding relevant differences. To come to the point; both principles are extremely useful in advancing one of Washington's priorities for the Seattle round : government procurement. US capital is fairly slavering over the prospect of breaking into what had previously been the purview of the public sector in Canada and the European Union - notably health care - and the White House, of course, is doing all it can to help this along.

If it might seem that this provides a better rationale for American interest in neoliberal competition than for Canadian, consider that Washington has previously negotiated significant exemptions from multilateral trade agreements for US state and local governments. If prised open through WTO disciplines on competition and government procurement, foreign concernments would thereby be afforded tremendous opportunities to vie with American firms in their former sinecures. Then, too, the Canadian private sector is no less eager than its US counterpart to usurp functions of Canada's public sector. Finally, to the degree that WTO competition protocols may encourage countries to adopt measures restraining endogenous industrial combinations, this encourages corporations to merge transnationally. Agglomerations of the latter type are apt to be more palatable to citizens, who may fear that price-gouging or loss of service may result if one company gobbles up most of its domestic competitors while not appreciating that absolute size is also significant in determining the power a firm can command.

In the July colloquium, at any rate, this strategy worked very well. While not everyone stayed to the finish, amongst those who did there was considerable backing for Ottawa's competition policy. To be sure, though, at least some of this support was given reluctantly and stemmed from despair at the apparent lack of adequate alternatives; as Art, an executive from British Aerospace, lamented, "You can't fight the US Commerce Department." For this fellow, the WTO - for all its manifest faults - still offers the best chance of limiting Washington's ability to unfairly protect US capital, since it enjoins the same rules upon all members.

The trouble with this view is that it fails to take into account that the regulations that get passed in this forum are invariably those of the only nation with the wherewithal to maintain full delegations and technical support teams for every agendum : the United States. Then again, perhaps the problem is that I am making the mistake of supposing that, apart from the interest of capital, there is such a thing as the public weal, while Art scorns such puerile illusions. For in the end, what it comes down to is this : any initiative at the WTO - damn the details and regardless of what heading it is put under - is a boon to multinational corporations (wherever they are headquartered) and a blow to the masses worldwide.

In the end, I was rather disappointed with the competition session. I was chagrined at how easily the DFAIT personnel managed to use the mythology of "the market" to advance a program which is actually its antithesis. Whether true market mechanisms are all they're cracked up to be is another matter, but so long as neoliberals are able to sell the idea that binding the hands of governments will bring on the system imagined by Adam Smith, centralization of the international economy will continue apace - but under private ownership, outside even the theoretical control of the general public.