On the Innately Political Character of Market Regulation/Sobre o carater politico inato da regulacao de mercado.
| Autor | Dowdle, Michael W. |
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Introduction (1)
International 'best practices' with regards to market regulation, such as those advanced by the OECD or the World Bank, portray market regulation as a basically technocratic exercise. Being technocratic, this means that such regulation should ideally be insulated from 'politics' so as to ensure that particular political factions or interests are not able to cause that regulation to regulate in their interests rather than for the benefit of the common weal. For convenience, I will refer to this as the 'conventional model' of market regulation.
In this article, I will show that the conventional model is flawed. At the end of the day, market regulation is and can only be political in character.
To make this demonstration, I will first show, in Part II, that in contrast to the presumptions that inform the conventional model, there are in fact multiple forms of capitalism, and that these different forms invariably co-exist within a national economy--a condition that I will call 'variegated capitalism'. In Part III, I will then show that this condition of variegated capitalism ultimately has to be regulated politically, because there is no technocratic way to balance the competing needs of these different forms of capitalisms. In Part IV, I will suggest that the seemingly technocratic nature of market regulation probably stems from the unprecedented historical stability of the particular form of capitalism that gave rise to the conventional model, that of Fordism. But as will be discussed in the Conclusion, as Fordism is increasingly being superseded by post-Fordism, recognizing the innately political character of market regulation becomes increasingly important.
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On the Multi-Dimensional Nature of Capitalism
Orthodox technocratic models of market regulation derive from the twentieth century experiences of the advanced industrial economies of the North Atlantic, particularly that of the United States. (2) Embedded in these models are certain presumptions about the nature of a capitalist economy, presumptions that are for the most part unproblematic in the context of these North Atlantic forms of capitalism.
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The Conventional (Fordist) Model of Capitalism
Most discussion of market regulation presume a particular kind of capitalism, that associated with Fordism. Under Fordism, the principal function of markets is to maximize allocative and productive efficiencies so as to maximize social (material) welfare. (3) In other words, the social value of capitalism is seen as lying in the natural capacity of markets to distribute a limited amount of productive inputs in such a way as to maximize productive output. This ensures that society as a whole has greater access to a wider variety of goods and services at the lowest possible cost (i.e., the cost of production).
The way that markets do this is by encouraging a particular form of market competition called price competition. Under conditions of price competition, firms compete for revenue by offering their goods and services at prices lower than those of their competitors. Since each firm is trying to offer the lowest prices, this eventually pushes the price for these goods and services down to the cost of production--i.e., the aggregate costs of the inputs that go into making producing the product. Once this point is reached, firms must compete by using inputs more efficiently--i.e., by lowering the cost of production which allows then to continue lowering prices relative to their competitors. This promotes productive and allocated efficiency. More productively-efficient firms are able to offer their product at lowers costs, which allows them to survive in the market, while less efficient firms either become more efficient or are culled from the productive environment. The overall effect is to cause the market to be able to produce more product from a limited amount of resources (i.e., productive efficiency). At the same time, since greater market success also gives more efficient firms greater wealth, they are better able than their less efficient competitors to secure the resources used in production, thus ensuring that scare resources will go first and foremost to more efficient firms. In this way, markets also work to distribute their limited resources in such as a as to promote maximum productive output (i.e., allocative efficiency).
Because markets are able to do all this spontaneously (in the famous wording of Friedrich Hayek), market regulation in advanced capitalist countries at least those of the North Atlantic--has tended to be regarded as a largely technical exercise. Its key focus is on identifying and preserving those environmental predicates--predicates associated with what is called the perfect market (e.g., minimal information costs, minimal transaction costs, minimal externalities; and price competition)--that allow markets to spontaneously work their productive magic. Such predicates are considered objective phenomena. For this reason, market regulation is seen as best pursued by independent regulatory agencies (IRA)--i.e., agencies whose regulatory decisionmaking is insulated from political concerns not related to technical pursuit of market efficiencies.
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Other Forms of Capitalism
The conventional model is the model that informs our dominant conceptualizations of what market regulation should look like. But in fact, markets can and do take a diversity of forms other than that described by the conventional model. (4) And while these other forms are generally not as effective at contributing to social (material) welfare and consumer democracy, they can nevertheless make other kinds of important contributions to society.
One of the alternative forms that capitalism can take is that of what we might call 'producerist' capitalism. The conventional model is a consumerist model. This is because it is driven by price competition, and price competition allocates the surplus value created by production--i.e., the difference between the value of the completed product as against the aggregated value of the inputs that go into the creating of that product--to the consumer. Indeed, many see this as an important social contribution of capitalist markets. Consumers represent a much more inclusive social class than producers--we are all consumers, after all--and therefore allowing the surplus value generated by product go to consumers seems more 'democratic' than allowing it to accrue to the producing firms themselves.
Producerist capitalisms allow the producers to retain a greater share of the surplus value generated by production, generally if not invariably by constraining price competition, and therefore allowing them to charge prices that are significantly above the cost of production. There are at least two reasons why a state might which to establish or product producerist markets. One would simply be because the relevant industrial sector is driven largely by exportation rather than by domestic consumption. Since the conventional model works by distributing surplus value to consumers, it only works to promote aggregate social welfare if consumers and producers are all part of the same economy. But this is not always the case. Many industrial sectors, particularly lesser developed economies, are export-oriented, in the sense that their relevant markets sustain themselves by manufacturing products that are then consumed by consumers in a different economy. (5) Where this is the case, a competition regulatory regime that focuses on promoting consumer welfare and consumer surplus can be of lesser domestic benefit, since it would simply be exporting the wealth generated by domestic production to an outside economy. (6) In export-oriented economies, an alternative, producerist-oriented competition regulatory framework can be of greater benefit, since it would allow more of the wealth-surplus value--generated by production to remain in domestic economy. (7)
Another kind of producerism is found in markets in which products compete based on product design rather than on price. As described above, the conventional model presumes that market competition should be based on price. (8,9) But, in some sectors, products compete on the basis of product design rather than prices. This kind of competition is often referred to as "product competition" or "product differentiation." (10) A paradigmatic example of a product-competitive market is the consumer market for Hollywood films in the United States. Hollywood films do not generally compete on the basis of ticket price-the vast majority of local cinemas invariably price all movie tickets the same. Instead, people choose which movie to see based simply on the relative appeal of that movie vis-a-vis other available movies. (11) Success in product competition (product differentiation) effectively allows the successful firm monopoly to charge monopoly rents, rents that--because they are not governed by price competition --allow the surplus value generated by product to accrue overwhelmingly to the producer rather than to the consumer.
In fact, despite the fact that it is price competitiveness that is emphasized by the conventional model, product competitiveness is often a more critical component of a country's economic strength. Product competitiveness is generally characteristic of what Joseph Schumpeter called 'core industries'--industries that are principally responsible for driving economic growth in advanced industrial nations. 12 A core industry is an industry that, in addition to being product competitive, also (1) produces very large revenue flows; which derive from (2) participation in global markets with (3) high entry costs. Examples of such industries include (at least for the present) high-end automobiles, high-end electronics, computer and software design, commercial aircraft manufacturing, shipbuilding, information technology, entertainment, and service industries that provide...
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