Economic Law and Economic Growth: Antitrust, Regulation, and the American Growth System

By George E. Garvey; Gerald J. Garvey | Go to book overview

ing--and even then, only after careful study had established both special capital needs in the industry and a special position of that industry in the network of economic interdependencies on which the growth system depends.


Public Subsidies

As compared with subsidies, the administered resource transfer approach would shift some of the cost of industrial redevelopment from the electorate as a whole to consumers of the industry's products. The actual proportions of resource transfers assigned to consumers rather than to taxpayers in general could be "rough-tuned" by varying the mix of transfer and subsidy. We would rarely expect the capital position of firms in any industry to depend entirely on any one source, but rather on a combination of retained earnings, external capital, resource transfers, and perhaps even some direct subsidies.59

Such a policy would retain an important measure of market discipline. A resource transfer represents, in a sense, a supplement to profits, permitted under carefully circumscribed conditions as a way of restoring a wage-price-profit balance that has, for whatever reason, been thrown out of kilter. But in order to generate this kind of supplement to profits, the firms in the industry must themselves be potentially profitable--in itself, a notable difference between the resource transfer and the subsidy approach. Indeed, there must be sufficient consumer demand within the industry to generate monopoly profits, a requirement that implies at least a residual economic vitality. If lower-priced substitutes exist for good X, collusion by X-producers can at best only achieve an orderly phaseout of the industry. Absent subsidies, a dying industry will eventually die, and any attempt to extract monopoly profits will only hasten the terminal process. But after all, the picture of a peaceful sunset too can sometimes be considered to be a desirable one.


NOTES
1.
See figures and analysis in Timothy Tregarthen, "Explaining the Great Slowdown", The Margin 4 ( November-December 1988): 20.
2.
Miles Kahler, "European Protectionism in Theory and Practice", World Politics 37 ( July 1985): 475. See also Clyde H. Farnsworth, "Bloc by Bloc, the World is Raising Trade Barriers Again", New York Times, June 12, 1988, part 4, p. 2. Most recently, the United States and the European Community seem poised for a trade war involving food products. Martin Crutsinger, "Hormone Used on EC Farms, Senator Says", Washington Post, December 29, 1988, E10.
3.
That is, over time all participants' export-import accounts must be balanced multilaterally. "Multilaterally" means that a given trader's accounts need not be balanced, imports for exports, with any one trading partner; rather, over the aggregate of all inflows and outflows over a reasonable period of time, the value of imports must equal those of exports. In fact, accounts will balance over time, one way or another. If the balance is not achieved by growth, however, it will come at the expense of the debtor

-137-

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