Abstract
Competition law has been promoted across developing countries as part of a market liberalisation package which is premised on a neo-classical model of competition, privileging static allocative efficiency and largely ignoring production. This article critiques this approach through an assessment of its application in South Africa where substantial weight was given to competition law. Building on the critical assessment, the article proposes an alternative framework based on the conception of ‘optimal competition’ of Amsden and Singh (The optimal degree of competition and dynamic efficiency in Japan and Korea. Eur Econ Rev 38:940–951, 1994). It does this through assessing the relationship between competitive rivalry, productive investment and the development of capabilities in two key industry groupings in South Africa, metals and machinery, and plastics and chemicals. We argue that the failure to develop diversified production capabilities in South Africa reflects the entrenched incumbent firm advantages and the lack of a coordinated policy agenda which proceeds from a recognition of economic power and the need to reshape markets to alter competitive rivalry. An optimal competition framework allows analysis of dynamic rivalry and capabilities development.
Highlights
Concurrence qui privilégie l’efficience allocative statique et ignore largement la production
The neo-classical framework assumes that anticompetitive conduct such as cartels are a distortion to otherwise well-functioning markets when, in reality, entrenched market power and strategic interactions between firms are intrinsic features of market economies
Notwithstanding all the developments in economic theory which focus on strategic interactions of firms in oligopolistic markets, the dominant conceptualisation of competition continues to be largely based on the perfect competition benchmark, with assumptions of constant returns to scale, homogenous products and complete information
Summary
Competition law has been promoted across developing countries as part of a market liberalisation package which is premised on static allocative efficiency and largely ignores production This market fundamentalist conceptualisation of competition privileges exchange and does not address the role of competitive rivalry in the process of accumulating capabilities to raise productivity. Optimal competition implies sufficient competitive rivalry to reduce inefficiency within large companies and discipline the exercise of market power, while spurring investment and innovation (Amsden and Singh 1994) As such, it embodies a balance of interests consistent with maximising the long-term rate of industrial growth, taking into account achieving economies of scale, enhanced efficiency, optimal use of scarce resources, international competitiveness and productivity (Amsden and Singh 1994). Data for upper-middle income industry value-added growth are for 1994–2017. 2 Between 1994 and 2014, the share of black African youth in skilled occupations decreased (StatsSA 2016)
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