Tuna Baskoy: The Political Economy of European Union Competition Policy: A Case Study of the Telecommunications Industry

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Tuna Baskoy The Political Economy of European Union Competition Policy: A Case Study of the Telecommunications Industry, Routledge: London, 2008, 242 pp: 9780415965255 60 [pounds sterling] (hbk)

There is a widespread consensus on the importance of competition policy. The mainstream political right sees it as a necessary means of ensuring a free market economy, while for the mainstream left it is a way of curbing monopoly and the concentration of corporate power in capitalism. All see competition as necessary to promote innovation and to enhance economic efficiency, prosperity and social welfare. Competition policy is perceived as necessary because 'perfect competition' is not encountered in the real world, and firms often behave in ways that are detrimental to competition. Competition policy has thus become the central pillar of modern micro-economic policy, conducted mainly by technocratic agencies and paralleling monetary policy as the central pillar of macroeconomic policy. Most developed industrial nations have independent competition agencies, and the European Commission has significant supranational powers in the area. This all suggests that competition policy and its implementation is and should be a matter mainly for technical specialists, a perspective that is intellectually rooted in liberal theory of market competition, and that underpins much of the literature on competition policy.

This book seeks to undertake a critical analysis of these assumptions grounded in critical political economy and drawing on the development of competition policy in the EU telecommunications sector. Baskoy makes a compelling argument that most studies in the large body of literature on competition policy take the liberal model for granted, and do not critically analyse the nature of either market competition or competition policy. This consensus and the assumptions of the liberal model, Baskoy argues, have led to a European market in telecommunications that is not highly competitive, and that has favoured larger corporate interests at the expense of broader social and consumer welfare.

At the heart of the book is a critique of the notion of 'workable' or 'effective' market competition that is put forward by many mainstream analysts of EU competition policy, and which informs the European Commission's policy making. The model of workable competition purports to overcome some of the problems of the liberal model, notably the static focus on market structure and the unobtainable ideal of perfect competition. Workable competition focuses more on the process of competition, and involves a recognition that it can flourish in oligopolistic structures and that the dynamics of markets mean that competition policy might have to be adjusted during short-run falls in profitability to ensure longer-term sustainable competition. Nevertheless, Baskoy argues that workable competition shares some of the key weaknesses of the liberal model--in particular its failure to conceptualise market competition in terms of varying economic, social and political power--and the underlying assumption that the state is an independent and omnipotent body.

In order to address these policy and analytical problems, Baskoy argues for the adoption of a more credible model of market competition. Drawing on radical traditions in the analysis of markets, notably Thorstein Veblen, the book suggests the need for a model of 'dynamic market competition' in which market competition is conceptualised in terms of multiple political, economic and social forces, and competing values and ideas. This offers the hope of a better understanding of market competition by policy makers and the hope of better competition policy that might increase social welfare, rather than the welfare of those with economic power. …