The course, contradictions, and consequences of extending competition as a mode of (meta-)governance: towards a sociology of competition and its limits

Abstract

This article examines the use of competition as an object and mode of governance. It first considers how competition might become a principle of economic organization and, relatedly, how it may become part of state projects and practices. Second, it comments on the discursive and material dimensions of competition, considering it as a social construct and as a social constraint. Third, it examines the rather idealized representations of competition in the broader doxa of liberalism and neo-liberalism considered in terms of a rough threefold distinction among economic, political, and ideological imaginaries and the limits to the reproduction of these doxa in terms of the complexities of capitalist social relations. Fourth, it explores the complexities of competition in the actually existing world and their role in differential accumulation. In this context it distinguishes neo-classical, Austrian, and Schumpeterian views on competition and entrepreneurship and their contribution to equilibration or creative destruction. Fifth, it considers efforts to steer competition through, inter alia, the competition state and competition law. Sixth, it relates competition to other modes of governance and identifies limits to its role in this regard and introduces ‘meta-governance’ as a response to these limits. Finally, seventh, it comments on the fetishization of competition as a means to subsume society under the dominance of profit-oriented, market-mediated accumulation. It concludes with comments on the limits of competition in relation to fictitious commodities and goods and services that contribute to human flourishing.

Keywords:

• commodification
• competition
• competition law
• competition state
• competitiveness
• governance
• neo-liberalism
• new public management

Extending competition is often proposed as a simple solution to complex problems. Yet competition is itself too complex a process to permit simple definition and implementation and too complex for use as a mode of governance with predictable consequences. However, it has been a key element in the new public management and, despite disappointing results, remains a major theme in reform proposals. Underpinning the nature and effects of actually existing competition are the competition landscape and the uneven distribution of resources and abilities to compete, whether or not these are fully activated in any given conjuncture. This poses questions of ‘competitiveness’ – which has again become an important object of state action. Yet this is another conceptually ambiguous, politically controversial, and ideologically charged topic. As Robert Reich remarked, unfairly, the idea of national competitiveness moved from obscurity to meaninglessness without any intervening period of coherence.¹ Although competitiveness is neglected in neo-classical economics, it does figure in heterodox economics and has also been mobilized to inform economic, political, and societal strategies. There are many ways to define and measure it, and past and current economic, legal, political, and policy debates indicate the many issues at stake. The two terms are also articulated in different ways in the ideas and practices of the competition state and competition law, and they are also deployed in efforts to promote competition as an ideal (and idealized) mechanism of governance within and far beyond the ‘economy’.

These opening remarks frame my contribution to this special issue of Distinktion. The argument proceeds in seven steps. It begins by distinguishing six steps in the rise of competition as a principle of economic organization and, relatedly, how its integration into state projects and practices. Second, it discusses competition as a social construct and as a source of social constraint. Third, it considers both how the doxa of liberalism and neo-liberalism are refracted economically, politically, and socio-culturally and how, in each case, they deploy idealized representations of competition that fail to reflect the complexities of capitalist social relations and their effects in these same domains. Fourth, it highlights the complexities of competition and their role in differential accumulation on a world scale. Fifth, it explores efforts to steer competition politically via the competition state and legally through competition law. The sixth topic is the limited efficacy of competition as a part of, or complement or supplement to, other modes of governance and the response thereto, including notably growing interest in ‘meta-governance’. Lastly, it comments on how competition is fetishized and its contribution to the subsumption of society under the dominance of profit-oriented, market-mediated accumulation.

1. Competition and societalization

To discuss the conditions in which competition might become a principle of societal organization presupposes that there are fields of social relations that are not yet (or no longer) oriented to economic activities and/or that are not yet organized along market (or quasi-market) principles of one kind or another. We can interpret economization in terms of market extension – with the full integration of the world market as its ultimate horizon of realization. There are six possible steps in this regard, and each involves a different mode of competition. Distinguishing these steps helps explain the uncertain meaning and scope of competition in the economic field.

1. An exchange economy develops when want-satisfying material means are distributed, reallocated, or circulated through exchange, whether through barter, a separate medium of exchange, or debt relations. Exchange replaces other principles of economic organization: householding, reciprocity among similarly organized economic units, and redistribution through an allocative centre linked to a political regime (Polanyi [1957] 1982). This step does not require that exchange becomes central to social organization. Indeed, historically, markets existed on the borders of more significant households, redistributive communities, and reciprocity-based networks (cf. Marx [1883] 1963; Weber [1923] 1927; Polanyi [1957] 1982).

2. A commercial economy develops when commodification and monetization become basic features of economic organization. This occurs in so far as material provisioning acquires the form of commodity production and/or economic agents seek to derive monetary revenues from material provisioning or immaterial activities that previously were outside monetary exchange. This need not be a competitive society, however; monopolies, limits on competition, principles of fair exchange or just price, etc., could limit the degree and forms of competition.

3. A rational market economy is the site of free trade in commodities, the rational organization of production based on formal book-keeping principles, and trade in money and credit instruments with a view to maximizing gains (Weber [1923] 1927, [1922] 1978). The rational organization of production could also be subordinate to non-competitive principles (e.g. monastic production). Weber also identified three internally heterogeneous forms of ‘political capitalism’ in which gain is sought in ways that contradict the principles of a rational market economy, namely, through force and domination, unusual deals with political authority, or funding political adventures and enterprises.

4. A capitalist economy develops when the commodity form is generalized to land, labour-power, money, and knowledge. These are fictitious commodities. That is, they have the form of a commodity (can be bought and sold) but are not produced in order to be sold. They do not originate in a profit-oriented labour process subject to the competitive pressures of market forces to rationalize production and circulation (Marx [1883] 1963; Polanyi [1944] 2001; Jessop 2007). This could result from a quantity–quality shift in which the extension and consolidation of the three preceding developments interact to produce a distinctive mode of production. This affects many areas of social life. In particular, capitalism is distinguished from other modes of production through the extension of property rights, contracts, and markets to include labour power. This leads to distinct tendential laws (in a descriptive-sociological, not normative-legal, sense) of competition that are the external expression of the immanent nature of the self-valorization and expanded reproduction of the capital relation (Marx [1883] 1963, 178).

5. A competitive financialized economy develops when the organization and dynamic of capitalism are subordinated to the circuits of capitalist credit money. This intensifies competition by: (i) enhancing the equalization of profit rates as finance capital qua functioning capital is reallocated among competing profit-generating investments; and (ii) enhancing the equalization of interest rates as finance capital qua property, i.e. fictitious capital, is reallocated among alternative asset classes (e.g. government bonds, derivatives, gold, or fine art). This marks a further step in the economization of all social relations.

6. A full-fledged finance-dominated capitalist economy is based on a strategy of ever-increasing market completion and ever more rarefied forms of fictitious capital (reflected in, inter alia, the explosive growth of derivatives); in addition, leverage is used in a competitive search for super-profits. This reinforces the dominance of finance capital qua property rather than functioning capital and works both to universalize competition for gain and to generalize and intensify the inherent contradictions of capital accumulation.

The ambiguity of exchange and competition as principles of economic organization also has implications for their potential role as a mode of governance in reorganizing the polity, politics, and policy. This is seen in general terms in different forms of neo-liberalism, which emphasizes the virtues of liberalization and deregulation in the market economy, and promotes the fictitious commodification of land, labour power, money, and knowledge by subjecting them to market logic. But it also aims to extend market rationality into the state by organizing internal markets for its activities and/or adopting market proxies and rank-ordered benchmarks to simulate market competition. This is a core principle of the new public management (see below). The principle of competition can also be extended to calls to privatize state activities (i.e. transfer them into a commercial, market, or capitalist economy) where these are not deemed to belong to the essential core functions reserved for the sovereign state. A powerful mechanism here is the commitment of the European Union to reform the public service around the distinction between services of general economic interest and social services of general interest. The extension of market principles and competition, whether via privatization or competitive tendering by capitalist enterprise to supply publicly funded services, is one goal of the proposed Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership, which have been strongly promoted by neo-liberal governments, led by the US, associated think-tanks and lobbies, and transnational commercial and financial capital.

A further step in introducing competition would come from financialization. This is inherent in the modern state's dependence for revenue on taxes on the private sector and/or on loans backed by its monopolies of taxation and coercion. Both means of finance limit the state's activities through threats of tax resistance, avoidance, or evasion and/or through the threat of a bondholders’ strike as public or sovereign debt increases. More recent examples of financialization include sovereign wealth funds, hedge-fund speculation in public and sovereign debt, the entry of private equity into erstwhile public sector activities, and the securitization of portfolios of privatized activities (e.g. of income flows from the Private Finance Initiative in the United Kingdom). These could also be seen as examples of market completion, which, as noted, subordinates all social activities to the logic of profit-oriented, market-mediated competition.

2. Competition as a social construct and social constraint

Section one indicated that there is nothing natural about exchange or competition as principles of economic organization and nothing automatic (or, one might add, irreversible) about the progression from an exchange economy to one subordinated to a full-fledged finance-dominated accumulation regime. Nor is there any general historical necessity to complete the world market and extend competition and competitive principles into ever-more social relations. There is no ‘natural’ or ‘spontaneous’ implementation of market mechanisms. Each of the six steps identified above is linked to different economic imaginaries that include ideas about competition, competitiveness, economic calculation, and the appropriate scope of markets, money, capitalist credit money, and the role of financial capital. Each step requires much effort on the part of interested social forces to extend market principles and consolidate them in the face of resistance, frictions, conflicts, and crisis tendencies. The nature of market forces varies with the nature of markets (e.g. perfect versus monopoly competition, free trade versus protectionism). Different dispositions of resources, different sets of economic agents, and different market rules will produce different market outcomes. This highlights the importance of institutional design and suggests that market forces are not facts of nature but depend on specific social relations. This supports the sociological commonplace that markets must be socially constructed via a set of agreed or imposed rules of the game. If specific markets seem to be self-equilibrating, this results from adherence to sophisticated regulations concerning the quality of goods exchanged, the inner organization of transactions, the legal penalty for non-compliance, etc. (on the role of international quality standards in the regional and global provision of services, see Hartmann 2011). Without such surveillance mechanisms, private sector opportunism and corporate self-interest would severely distort the alleged smooth adjustment process of supply and demand (see Boyer 1996). In addition, we can note the role of the ‘new constitutionalism’ with its associated disciplinary neo-liberalism in de-politicizing the global governance of the capital relation, markets, and market–state relations in favour of capitalist interests (cf. Gill 2003).

An important barrier to the extension of competition and market completion is the status of land, money, labour power, and knowledge as fictitious commodities. This barrier can be linked to the first four steps above, which are analytically rather than chronologically distinct. Step one begins when a product (a good or service) is offered for exchange. This may involve no more than a surplus beyond producers’ immediate needs, can originate in many kinds of production relations, and may not involve money as a unit of account, medium of exchange, or means of deferred payment. In a commercial economy, commodities are produced for sale in exchange for money. Merchant capital has a key role in organizing commerce here across space and time. Step three is related to the development of capitalist commodity production, i.e. the production of commodities in a labour process subject to capitalist competition to reduce socially necessary labour and turnover times.

This involves, as noted, the generalization of the commodity form to land, labour power, money, and knowledge. To assume that these are simple and/or capitalist commodities obscures the conditions under which they enter the market economy, get transformed therein, and contribute thereby to the production of goods and services for sale. Taking each in turn, land as a fictitious commodity comprises land that has been enclosed and appropriated and then sold or rented in a private commercial transaction with its price reflecting its productive potential and/or market demand; labour power is the capacity to perform useful labour – a capacity reproduced outside the market economy and entering the labour-market in return for a wage; money is a marketable store of value and medium of exchange, with competing commodity monies (e.g. gold, silver), fiduciary monies (tokens, paper money, bank credits, fiat money), or tradable currencies (e.g. dollars, euros, yen); and knowledge qua intellectual commons becomes a fictitious commodity when it is transformed into intellectual property, appropriates surplus in the form of royalties and other IP revenue streams, and is treated as an asset class to be securitized and otherwise traded. Because all four could be redistributed in other ways, e.g. territorial conquest, enslavement, requisition or confiscation, direct or indirect reciprocity, and so on, markets in them have to be created and institutionalized.

‘The market’ can be interpreted as a simplifying self-description of the economy, enabling actors to orient their economic strategies without having fully to comprehend the economy in real time in all its complexity. Understandings of competition and competitiveness are discursively shaped by specific frames, categories, strategies – original, mimetic, or imposed – that simplify what would otherwise be too complex to observe, calculate, manage, regulate, or govern. Different framings of competition and competitiveness involve different forms of action with uneven impacts on the positioning of firms, sectors, regions, nations, and continents, as well as on the balance of economic and political forces in and beyond the state system itself. But ‘the market’ is also the actual form of movement of a complex material substratum of economic interactions that are more or less embedded in a wider nexus of social relations. The three processes of marketization, capitalization, and financialization are increasingly important vectors in this form of movement. They contribute to the equalization of profit rates and interest rates, the concentration and centralization of capital, generalize ‘best practice’ (which is often bad practice) through the treadmill of competition, reinforces the logic of differential accumulation based on a political economy of time realized in space, and drive the completion of the world market. Social agents (or, indeed, observers) cannot fully comprehend the market in this sense and, a fortiori, cannot regulate the market.

3. Competition, liberalism, and neo-liberalism

An idealized account of competition became a key element in the promotion of liberalism and has become even more important in the ideological justification of neo-liberalism. But the different forms of economic competition noted above are only one moment of liberalism and neo-liberalism as principles of societal organization. There are also political and ideological moments, and their weight varies within and across liberal and neo-liberal regimes.

Economically, liberalism endorses the expansion of the market economy – that is, spreading the commodity form to all factors of production (including labour power as well as land, money, and knowledge) and extending formally free, monetized exchange to as many social practices as possible. Politically, it holds that collective decision-making should involve a constitutional state with limited substantive powers of economic and social intervention, and a commitment to maximizing the formal freedom of actors in the economy and the substantive freedom of legally recognized subjects in the public sphere. Competition for votes should be confined within the limits of the rule of law to prevent the tyranny of the majority. Ideologically, it claims that economic, political, and social relations are best organized through the formally free² choices of formally free and rational actors who seek to advance their material or ideal interests in an institutional framework that, by accident or design, maximizes the scope for formally free choice. These three principles can lead to conflict over the relative scope of anarchic market relations, collective decision-making, and spontaneous self-organization as well as the formal and substantive freedoms available to economic, legal, and civil subjects. Consequently the relative weight of economic, political, and civic liberalism within the matrix of liberal principles depends on the changing balance of forces within an institutionalized (but changeable) compromise. This means that the role of competition also changes its meaning across these fields, and, if it is the most important principle of organization of a liberal capitalist world, it is one that is internally heterogeneous and even incoherent.

The recurrence of liberalism is related to its nature as a more or less ‘spontaneous philosophy’ within capitalist societies. Of course, there is nothing ‘spontaneous’ about ‘spontaneous philosophies’. They do not emerge ex nihilo from an ideational act of will but are grounded in (and help to reproduce) specific practices and institutions; they can also become objects of more explicit reflexion and articulation into more elaborate economic, political, and social imaginaries (cf. Gramsci 1971, on the ‘spontaneous philosophy’ of common sense; and Althusser 1990 on the spontaneous philosophy of scientists as reflected in unconscious assumptions about their scientific practices). Much effort is required to create the conditions for such common-sensical, almost self-evident economic, political, and social imaginaries. These conditions are linked to four specific features of bourgeois society.

The first feature is the institution of private property – that is, the juridical fiction of ‘private’ ownership and control of the factors of production (including fictitious commodities). Here ‘rule Freedom, Equality, Property and Bentham, because both buyer and seller of a commodity, say of labour power, are constrained only by their own free will’ (Marx [1883] 1963, 121). They feel entitled to use or alienate their property without regard to how this might affect the operation of the market economy and cohesion of a market society. Second, ‘free choice’ seems to rule in consumption as those with sufficient money choose what to buy and how to dispose over it. Third, the institutional separation and operational autonomies of the market economy and state make the latter's interventions appear as external intrusions into the activities of otherwise free economic agents. If pushed beyond some minimum night-watchman role, these also appear as fetters on free markets and/or political oppression of private economic agents. Fourth, the institutional separation of civil society and the state encourages the belief that, once rules for social order are agreed, the state intrudes into the formally free choices of particular members of civil society.

Opposition to liberalism may also emerge ‘spontaneously’ on the basis of four other features of capitalist social formations that are closely related to the former set. First, growing socialization of the forces of production despite continued private ownership of the means of production suggests the need for ex ante planning or deliberate self-organization among producer groups to limit market anarchy. Second, there are the strategic dilemmas posed by the shared interests of producers (including wage-earners) in maximizing total revenues through co-operation and their divided and potentially conflictual interests over how to distribute these revenues. Various non-market governance mechanisms may help to balance co-operation and conflict here. Third, contradictions and conflicts are posed by the coexistence of the institutional separation and mutual dependence of the economic and state systems. This leads to different logics of economic and political action but also generates a need to consult on the economic impact of state policies and/or the political repercussions of private economic decision-making. Fourth, civil society involves a sphere of particular interests opposed to the state's supposed embodiment of universal interests. This indicates the need for institutional and discursive means to mediate the particular and universal by providing forums to articulate and contest a hegemonic – and necessarily selective – definition of the ‘general interest’.

This suggests that there are limits to liberalism as a ‘spontaneous philosophy’ that are grounded in those same social relations that generate its seeming self-evidence. Polanyi identified these in his critique of nineteenth-century liberalism and the resistance that developed as social groups mobilized against its one-sided treatment of land, labour power, and money as fictitious commodities. The eventual compromise solution was a market economy embedded in and sustained by a market society (Polanyi [1944] 2001). This compromise broke down in the 1920s and 1930s, however, leading to various reactions, including the New Deal, fascism, and state socialism.

The limits to marketization without a market society are also seen in neo-liberalism. This is a more complicated phenomenon and has taken many forms since the neo-liberal project was first translated into government actions after General Pinochet's coup d’état in Chile in 1973. The key neo-liberal economic policies comprise: liberalization (making markets more competitive), deregulation (reducing state intervention in the market forces), privatization (bringing state-owned or state-funded activities into the private profit-oriented, market-mediated sector), the use of market proxies in the residual public sector, internationalization (to promote competition and the spread of best practice), and reductions in direct taxes (to enable consumers greater freedom to spend ‘their’ money and thereby enhance consumer sovereignty in a global market economy). There is wide variation in initial starting-points for pursuing these policies, and their sequencing, the manner in which they are implemented, and the political and social contexts in which they are implemented are quite varied. For example, the neo-liberal economic policy set has been pursued by military dictatorships, post-Soviet and post-apartheid states, technocratic regimes imposed by the IMF, ‘Third Way’ governments, ruling social and/or Christian democratic parties, and openly neo-liberal movements. Together with the differential location of economic and political spaces in the world market and changing conjunctures, this explains the different forms of neo-liberalism and the variegated nature of neo-liberalization seen as a process rather than a one-off accomplishment (see Jessop 2010; Peck 2010).

4. The complexities of competition

This section turns from projects to construct and reproduce competitive markets and from the less reflective, more simplified ‘spontaneous philosophy’ of liberal and neo-liberal ‘common sense’ about markets and competition. It focuses on the complexities of actually existing competition, regardless of how they have been conceived as the foundation of classical political economy (Smith [1776] 1976; Mill [1848] 2004) and subsequently vulgarized in neo-classical economies (for which the assumption of perfect competition rules out effective strategies to win long-term competitive advantages; see von Hayek 1948). Thus this section draws on various contributions of evolutionary and institutional economics as well as on some arguments from critical state theory and governance studies. The justification for this is twofold. First, this heterodox (and, indeed, heterogeneous) body of work is more sensitive to the varieties and modalities of competition and competitiveness and typically asks ‘what must the world be like’ for particular competitive dynamics to exist. This contrasts with the mathematized ideological modelling that currently dominates the neo-classical tradition. Second, given its double hermeneutic (Giddens 1976), social science reasoning both draws on common sense and actual practices to construe and explain the social world and, in turn, influences common sense and practices. This is especially evident in the attempts to extend and complete the market through the redesign of policies, politics, and the political system.

Let me begin by stating that it is through competition that the contingent necessities of the differential accumulation of particular enterprises, clusters, or sectors and the differential growth of particular economic spaces are realized. As Marx's analysis of the metamorphosis of capital shows, capitalist competition is not simply for market share or for sales but for profit on investment. As such it assumes many forms and plays out in many ways as capital is reallocated in the search for profits across space-time within a still emerging world market. This changes not only through the anarchic effects of market-mediated competition (and the crises that this periodically produces) but also through competing hierarchical or heterarchic efforts to redesign its rules and institutional architecture and to govern the conduct of economic (and extra-economic) forces with stakes in the competitive game.

Profit-oriented, market-mediated competition in rational capitalism (Weber [1922] 1978, 2009) occurs in two main ways. Merchant capital continually compares purchase and sale prices for its merchandise because its profits derive from buying cheap and selling dear. This principle also shapes more refined forms of arbitrage (including the activities of interest-bearing capital) and can also be generalized to regulatory and other kinds of institutional arbitrage. In contrast, ‘[t]he industrial capitalist always has the world-market before him, compares, and must constantly compare, his own cost-prices with the market prices at home, and throughout the world’ (Marx [1894] 1963, 336). For profit-producing³ fractions of capital, this puts the organization of production at the heart of competition. There is also a vital role for the credit system and interest-bearing capital in promoting competition on the world market (see below).

Another important distinction is that between competition in the routine activities of firms in a stable competitive market oriented to price competition and competition in the disruptive, creatively destructive, effects of entrepreneurship in dynamic markets. This distinction is conventionally associated with Schumpeter ([1934] 1962, [1943] 1975) but was anticipated in Marx's critique of political economy. The Austrian rejected the notion of perfect competition both in reality and as an abstract reference point for analysing imperfect competition. He also disputed the idea that markets tended towards equilibrium. He argued that entrepreneurship disrupts equilibrium through the ‘creative destruction’ of innovation, and that that is constantly altering the pace and direction of economic growth. Every mode of differential accumulation rests on a balance of competition and entrepreneurship. The former is hard to regulate without undermining innovation. Yet celebration of innovation can often serve as a legitimating cloak for predatory activities, illustrated by the recent examples of what one might call ‘financial criminnovation’ (see below).

Schumpeter identified five areas of innovation: (1) the introduction of a new good or a new quality of a good; (2) the introduction of a new method of production or a new way of commercially handling a commodity; (3) the opening of new markets for one's own products; (4) securing a new source of supply of raw materials or half-finished goods; and (5) the reorganization of an industry, e.g. the creation of a new cartel or monopoly position, or the breaking up of existing cartels or monopolies (Schumpeter [1934] 1962, 129–35). Successful competition in these areas allows, in the short-term, monopoly profits. But in a well-functioning market, these higher profit levels will eventually be competed away as other firms adopt these innovations or seek to counter them with their own innovations (whether competitive or anti-competitive).

Second-generation Austrian economics also rejects the ideal of perfect price and production cost competition (cf. von Mises 1949; von Hayek 1948; Kirzner 1973). In a superficially similar account, Austrian scholars concede that ‘market phenomena are not, at each and every instant, equilibrium phenomena’ (Kirzner 1997, 61). However, they regard entrepreneurship as a process of discovery that enhances equilibrating tendencies by ‘pushing back the boundaries of ignorance’ that prevent ‘prices, output and input quantities and qualities’ reaching ‘values consistent with equilibrium (seen as the complete absence of sheer ignorance)’ (Kirzner 1997, 62). Entrepreneurs are seen mainly as speculative arbitrageurs hoping to exploit errors in the process of market discovery and, where successful, bringing equilibrium closer. In other words, in contrast to Schumpeter, they do not regard entrepreneurship as a fundamentally disruptive, disequilibrating force but as a mechanism that ‘tends systematically towards equilibrium’ (Kirzner 1997, 62; for an overview of definitions of entrepreneurship from Richard Cantillon in 1730 to the current period, which, inter alia, brings out the differences between Schumpeterian innovation and Austrian school arbitrage, see Ahmad and Seymour 2008).

The reflections of Marx and Schumpeter, among other critical scholars of the disruptive nature of innovation, grow more significant, the more integrated the world market becomes in real time. For this tends to universalize competition. It continually rebases the modalities of competition, reinforces their treadmill effects, promotes the concentration and centralization of capital, facilitates the equalization of profit and interest rates, and intensifies the contradictions of capital accumulation on a world scale. The recent ascendency of financial capital over productive capital, together with the enormous expansion of liquidity associated with derivatives and securitization, has further reinforced these tendencies. For this development pressures other capitals to achieve rates of return obtained by financial capital (or expected by financial capital on the basis of maximizing shareholder value), and establishes a new form of commensuration that allows for further universalization and standardization of competition (cf. Bryan and Rafferty 2006).

5. The governance of competition

This section adds two further perspectives. One is the regulation or governance of competition from the idealized viewpoint of its role as a public good. Suspending judgement for the moment on whether perfect competition is really possible, this approach does have a rational kernel, namely, the interest of capital in general, as opposed to particular capitals, in securing a level playing field. The realities of differential accumulation suggest that the competition policies and their effects merit at the very least a sceptical interrogation. The other perspective involves a radical ideological critique of discourses about competition and competitiveness as direct principles of governance. This is because competition is so heterogeneous and complex a process that most, if not all, efforts to make it a principle of governance must rest on serious cognitive and normative simplification, if not fetishism and ideological mystification.

Two useful entry-points here are the competition state and competition law. Although ‘competition’ figures in both, its respective connotations illustrate the polyvalence of the concept and the complexities of its referent. Whereas competition (or anti-trust) law attempts to regulate competition, the competition state attempts to promote competitiveness. Competition law draws mainly on orthodox analyses of (perfect) competition and/or on institutional analyses of contestable markets (e.g. in the law and economics movement). It prioritizes micro-economic competition and may be supplemented by efforts to remove or control tariff and non-tariff barriers to trade (extending into questions of new constitutionalism, and so on). In contrast, the competition state draws on ‘the other canon’, i.e. heterodox analyses of competition that justify strategies and policies to promote competitiveness at various scales from micro- through meso- and macro- to meta-competitiveness. Paradoxically perhaps, many policies pursued by competition states (e.g. in the field of industrial policy) might well be ruled illegal according to the principles of competition law. The two aspects can be linked to the extent that states promote competition law for the sake of enhancing national or regional competitiveness (on the case of the European Union's ‘competition for competitiveness strategy’ in this regard, see Wigger 2008).

Competition law

I examine this from three aspects. One is the complexities of its object. If these are neglected, regulatory failure is likely to be blamed on the design of competition law rather than the inherent ungovernability of its object. This poses interesting questions for competition law that are also reflected in the contrasting traditions of US anti-trust law (now weakened by the growing influence of the Chicagoan ‘law and economics’ movement) and the Continental European tradition, which still owes something to Ordoliberalism despite the growing integration of the world market in the shadow of neo-liberalism (for evidence of a partial convergence within the EU towards the US model with, however, continuing US–EU differences regarding global competition policy more generally, see Wigger 2008; and Buch-Hansen and Wigger 2010). For example, first, should competition law aim to govern competitive behaviour in dynamic markets or to secure the conditions for perfect competition? And how has the balance between these goals changed as competition and anti-trust law have changed over the years? A second aspect is the place of competition law as one among several means through which economic and political forces seek to design modes of regulation to promote the accumulation of some capitals at the expense of others. The third aspect concerns the problems of governing competition alongside boosting competitiveness in an increasingly integrated world market.

Traditionally, competition law seeks to regulate micro-economic competitiveness, i.e. competition in the structure and behaviour of firms. This is often measured in terms of market share, profits, and growth rates. An extensive managerial and industrial economics literature argues that ‘firm-specific advantages’ (factors that are unavailable in the short term to competing firms) are crucial to such competitiveness and, indeed, underpin monopolistic competition. They might originate in factors of production (patent rights, know-how, R&D capacity) or marketing capacity (design, image, knowledge of likely demand, sales networks). They can also derive from extra-legal or illegal activities (e.g. predatory pricing, political deals, mafia-like conduct). This is the primary site of the conflict between individual capitals’ search for super-profits at the expense of other firms and the interest of capital in general in conditions that create an average profit rate, an average rate of interest, and so on.

Competition law tends to operate with a relatively static notion of competition centred on the formation of market prices. But, as an actual rather than idealized process, competition is inherently disequilibrating and, in Schumpeterian guise, creatively destructive. The latter matters especially in periods when a previously dominant productive technology and/or associated forms of finance and enterprise are displaced by another technology and its accompaniments (cf. Perez 2002). Such transitions tend to disrupt competition law, which lags behind changes in products, processes, marketing, sourcing, and corporate organization. Whereas a particular system of competition law can weather relatively minor disruptions and crises, ruptural transitions between long waves of development tend to trigger a search for a new regulatory system. World market integration has its own effects. It is reflected in the growing transnationalization of competition law (Gerber 2010) and the growth of new, state-centred structures of ‘global competition law’ (Dowdle 2013). These include transnational networks among national competition agencies; treaties affecting state-level responsibilities for implementing competition policy; and inter-state arrangements for transnational enforcement of national competition law.

Efforts to regulate competition are further complicated by the many bases for competitiveness considered as a set of real capacities/powers. In this regard there is typically a specific hierarchy of forms of competition and competitive players, and, as this alters, the dynamics of competition also change. Among relevant changes are: (1) the relative importance of different markets in setting the parameters of competition; (2) the relative super- and subordination of forms of competition; and (3) the types of firm associated with advantage in given fields of competition. Not all of the factors shaping these hierarchies can be regulated by competition law.

In addition to market relations, for example, competitive advantages are pursued to boost profits of enterprise within corporations. Such actions exemplify ‘dynamic allocative efficiency’, a form of competition that is hard to regulate through competition law (cf. Graham and Smith 2004).⁴ Moreover, not only does competition occur between economic actors (for example, firms, strategic alliances, networks) but also between political entities representing specific spaces and places (for example, cities, regions, nations, triads). The expanding world market and plurality of states create further regulatory problems, regarding, for example, the role of international private law, how to handle conflicts of laws, and the reach of extraterritoriality. Competition and competitiveness also depend on extra-economic as well as economic conditions, capacities, and competencies. Thus, if competition is hard to regulate through law, how can it govern the factors making for the ‘competitiveness’? At best, regulators can identify a subset of interactions among profit-oriented economic agents, isolate them as an object of regulation or governance, and seek to govern them through the development of appropriate rules, regulations, agencies, mechanisms, and institutions (all steps being contested). But many sources of competitive and anti-competitive behaviour remain beyond the reach of competition law. This is one of the sources of market and regulatory failure.

The competition state

Definitions and discourses of competition and competitiveness date back centuries and have different implications for state action. Mercantilist notions from the seventeenth century tied to state policies to control trade and increase financial reserves can be contrasted with 1890s imperialism oriented to state enclosure of territory for military-political as well as geo-economic goals. With the transition to a more liberal post-war order (in the shadow of US hegemony), competition focused more on domestic growth and multinational foreign investment, leading to conflicts between techno-nationalism and techno-globalism (Ostry and Nelson 1995). Likewise, with the rise of the current neo-liberal transnational financial order and with the theoretical and policy interest in a globalizing knowledge-based economy, competition has refocused on innovation (including in finance and securitization) and in how best to link extra-economic factors to the ‘demands' of economic competition.

Different framings of competition and competitiveness involve different forms of action with uneven impacts on the positioning of firms, sectors, regions, nations, and continents, as well as on the balance of economic and political forces in and beyond the state system. Moreover, many leading firms and banks are transnational in operation, with complex internal divisions of labour and complex forms of embedding into global production chains and financial flows that may nonetheless be regarded as important for national or bloc competitiveness, especially where they have significant bases in a national state (contrast the USA and European Union). Once competitiveness is accepted as a real phenomenon that varies across scales of economic (and extra-economic) organization and affects capacities to compete in a world market characterized by a stratified terrain of competition, uneven development, centre-periphery relations, and so on, it can become the target of strategies and policies to enhance, neutralize, or weaken competitive capacities.

This is reflected in the developmental state (oriented to catch-up competitiveness) and the more general form of the competition state. Broadly defined, the latter is a state that aims to secure growth within its borders and/or to secure competitive advantages for capitals based in its borders, even where they operate abroad, by promoting the economic and extra-economic conditions currently deemed vital for success in economic competition with economic actors and spaces located in other states. Paradoxically, offshore, more peripheral national economies also become an element in competition, in so far as they can be sponsored (or tolerated) by states to secure competitive advantages for domestic or international capitals based in their own territories (such as via transnational supply chains) (Palan 1998; Urry 2014). As such the competition state prioritizes strategies to create, restructure, or reinforce – as far as this is economically and politically feasible – the competitive advantages of its territory, population, built environment, social institutions, and economic agents. The same idea is sometimes expressed in the notion of ‘entrepreneurial state’, which is more closely associated with Schumpeterian views on competitive advantage, promoting ‘sunrise’ technologies, industries, and other cutting-edge innovations. This has been extended to support for financial innovation (including, tacitly, ‘criminnovation’) to secure competitive advantage – sometimes linked to a regulatory race to the bottom (which London has won vis-à-vis New York). Just as there are different forms of competition, so too are there different forms of developmental, competition, or entrepreneurial state (for the second, these include neo-liberal, dirigiste, and social democratic competition states: see Cerny 1997; Jessop 2002).

Although developmental and competition states have been studied primarily at the national level, this is not justified by the historical and contemporary record. Since the fifteenth century, catch-up competitiveness has been pursued at different scales from the city through regions and provinces to national states and international or supranational blocs (imperial blocs, the capitalist and communist camps, the European Union, etc.). In turn, these state strategies to develop ‘laggard’ economies have met resistance by more advanced states that seek to maintain their advantages by promoting free trade (Reinert 2008). In short, although the ‘developmental’, ‘competition', and ‘entrepreneurial state’ are new concepts, significant historical analogues have guided state policy at different scales for almost 600 years.

Unsurprisingly, a wide range of factors has been identified in different economic imaginaries, theoretical and policy paradigms, and at different times as relevant to competitiveness. In the 1980s, for example, the OECD listed these factors: ‘the size of domestic markets, the structure of domestic production, relationships between different sectors and industries … the distribution and market power of supplier firms … the characteristics and size distribution of buyers, and the efficiency of non-market relations between firms and production units’. Other factors included: ‘no exaggerated conflict in the field of income distribution, price stability, flexibility, and the adaptability of all participants in the market … a balanced economic structure based on small, medium-sized, and big companies … the acceptance of new technology, favourable scientific and technological infrastructure and realistic requirements for risk containment and environmental protection’ (OECD 1986, 91–2; cf. Esser et al. 1998; Pedersen 2011; and Campbell and Pedersen 2007).

Because of the importance attached to structural, systemic, institutional, or societal competitiveness, economic competition expands to become a virtual competition between social worlds. This increases pressures to valorize a wide range of institutions and social relations that were previously regarded as extra-economic. One consequence is that hard economic calculation increasingly rests on the mobilization of soft social resources that are both irreducible to the economic and resistant to such calculation. Recent examples include ‘social capital’, ‘social trust’, ‘collective learning’, ‘institutional thickness’, ‘untraded interdependencies’, ‘local amenities’, the knowledge base, the ‘triple helix’ of business-university-local state interactions, and even ‘culture’. Such discourses are linked to rapid growth in (competing!) benchmarking exercises and in associated commercial services to construct league tables and recommend how to enhance or manipulate scores.

Although state strategies may target specific places, spaces, and scales and even be directed against particular competitors, these efforts are always mediated through the operation and audit of the world market as a whole. This extends the importance of the three main forms of capitalist competition: reducing socially necessary labour time, socially necessary turnover time, and the naturally necessary (re)production times of nature (e.g. plants, animals, raw materials), both as a source of wealth and, if commodified, source of surplus value. It also extends the importance of extra-economic factors bearing on competitiveness and profitability: in addition to those illustrated above, we can add tax competition, regulatory arbitrage, offshoring, and so on. Moreover, following Weber's account of political capitalism, we could also include measures to promote competition through force and domination, unusual deals with political authority, lobbying for favourable, anti-competitive legislation, ‘de-supervision’, and de-criminalization (on the two last-mentioned, see Black 2005, 2011).

6. Competition as a mode of governance

According to Polanyi, the ‘economistic fallacy’ describes all economies in terms of categories that are actually unique to the (capitalist) market economy and explains all economic activities in terms of maximizing behaviour. This fallacy is seen in the neo-classical theoretical tendency to strip commodities (and fictitious commodities) of their specific properties and assume that they can all be organized in the same way along competitive lines to produce efficient market outcomes (Alam 2014). It is also seen in the liberal and neo-liberal tendency to focus on the exchange-value rather than use-value aspects of commodities and fictitious commodities. For example, the wage is seen as a cost of production rather than source of demand, and capital is seen as a sum of (credit-)money for investment in any asset anywhere rather than as a stock of assets to be valorized in a particular time-space (for further examples, see Jessop 2010). This tends in turn to produce such powerful tensions and crisis tendencies in capitalist market economies that, as Polanyi observes, ‘society’ eventually fights back against their environmentally and socially destructive effects. Neglecting this set of problems is the basis for extending market and competitive principles into the operations of the state and civil society where they cannot be privatized.

Different principles of governance seem more or less well-suited to different stages and forms of capitalism. These may have distinctive economic and political imaginaries and institutional attractors (or centres of gravity) around which regulatory or governance principles oscillate. This is reflected in successive generations of the comparative capitalism literature from the German historical school to recent work on varieties of capitalism. A key issue here is whether changes in governance practices reflect economic and political imaginaries more than structural complementarities or result from their interaction in a dialectics of path-shaping and path-dependency. A recent test case for exploring this issue is the crisis of finance-dominated accumulation and the switch from the celebration of ‘more market, less state’ to quite exceptional and unprecedented forms of state intervention to restore the momentum of neo-liberal reforms and to rescue failed finance-dominated accumulation regimes.

Exchange based on the anarchy of the market or quasi-market arrangements is one of the four principal modes of governance in complex societies. The others are: command based on hierarchy; heterarchic networks and partnerships; and solidarity based on unconditional commitments. Hybrid forms also exist. Historically all four have coexisted, albeit with varying weight across different social fields and across space-time. Neo-liberalism privileges the market and, above all, (capitalist) market competition as a principle of governance even more than liberalism. It advocates liberalization, deregulation, and privatization and introduces market proxies in those social areas, in the state, public sphere, and ‘civil society’, where profit-oriented, market-mediated principles based on the commodity form, price form, and money form are absent and, in addition, deemed inappropriate. This prompts the neo-liberal search for functional equivalents to these principles and their associated forms.

Whereas the 1960s and 1970s saw the high-point in advanced capitalism of the discourses and practices of planning and productivity, the 1980s marked a turn towards markets and flexibility. Driven by neo-liberal regime shifts (with New Zealand being the most radical exemplar), increasing emphasis was placed on counteracting state failure by redrawing the boundaries between government and market and, for the residual public sector, engaging in ‘administrative recommodification’ (Offe 1984). This was expressed in the development of market governance (where the state designs, creates, monitors, and polices a market to fulfil a public purpose – for example, though the issue of vouchers to be spent in a competitive market) and the rise of ‘new public management’ and, in the USA, a movement for ‘reinventing government’ (cf. Donahue and Nye 2002; Osborne and Gaebler 1992; Peters 2001).

Pollitt and Bouckaert (2011) identify a common trend in this regard in advanced capitalist economies. In broad terms, this posits that the public sector can be improved by importing business concepts, techniques, and values. More specifically, it comprises a ‘bundle of specific concepts and practices’. These include: (1) greater emphasis on ‘performance’, especially through the measurement of outputs; (2) a preference for lean, flat, small, specialized (disaggregated) organizational forms over large, multi-functional forms; (3) substitution of contracts for hierarchical relations as the main co-ordinating device; (4) a widespread injection of market-type mechanisms including competitive tendering, public sector league tables, and performance-related pay; and (5) an emphasis on treating service users as ‘customers’ and on the application of generic quality improvement techniques such as total quality management. These authors also note that this bundle of specific concepts and practices has two variants: a ‘hard’ form that relies on rational systems of control based on measurement, rewards, and penalties to ‘make managers manage’; and a ‘soft’ form that ‘lets managers manage’ by enabling creative leadership, entrepreneurship, and cultural change oriented to customer service.

In both cases, this approach tends to fail. For, as Offe noted over 20 years earlier, whereas capitalist enterprises have a clear formal maximand that is easily measured in monetary terms (profit maximization), governments have confused, often inconsistent, and sometimes clearly contradictory substantive goals that are politically contested and hard to quantify, sometimes deliberately so (Offe 1975). In addition, the one-sided neo-liberal focus on the exchange-value and value aspects of economic calculation leads to neglect of the substantive use-value aspects that are equally necessary to capital accumulation (see above). Attempts to address the use-value aspects of private, public, and third-sector goods and services have been made through developing multidimensional, substantive mission-oriented targets, performance prisms, ‘balanced scorecards’, and the like (cf. Niven 2010). In the private sector, these measures were often used as leading indicators of future financial performance (thereby reinforcing the logic of profit-oriented, market-mediated accumulation) (Pidd 2012). In the public sector, they are constrained by budget cuts, demands for regular ‘efficiency gains’, and a shift towards enduring austerity and fiscal consolidation. This tends to undermine the balanced approach.

The high-point of neo-liberalism and new public management occurred in the early 1990s as neo-liberal regime shifts were being consolidated and before the limits of ‘more market, less state’ become glaringly evident. This led to recognition that the formula of ‘disaggregation + competition + incentivization’ (Dunleavy et al. 2006) was leading to fragmented, incoherent outcomes conducted by too many arms-length and unaccountable agencies in the private, public, and third sectors that needed to be reconnected through ‘joined up government’ or ‘governance in the shadow of hierarchy’ (Scharpf 1994; Bouckaert, Peters, and Verhoest 2010; Meuleman 2008; Pollitt and Bouckaert 2011). In terms of administrative theory and practice this prompted interest in ‘meta-governance’, that is, the governance of governance. Substantively, it stimulated interest in ‘Third Way’ efforts to create flanking and supporting mechanisms to soften the impact of neo-liberalism and enhance its legitimacy while sustaining its transformative momentum.

As evidence has mounted in the last two decades that each form of governance has its own forms of governance failure, attention has turned theoretically and practically from concern with specific forms of governance to efforts at meta-governance. This involves the judicious mixing of market, hierarchy, networks, and solidarity to achieve the best possible outcomes from the viewpoint of those engaged in meta-governance (Dunsire 1996; Jessop 1998; Kooiman 1993; Scott 2006). Governments have a key role to play here, but even this kind of ‘meta-governance’ is fallible. The emerging system is a complex, multi-scalar, hybrid, and tangled system of meta-governance. Yet the very complexity of the interweaving of forms of governance and government on different scales means that the resulting system is more complex than any state, or political or social entity, can understand, and its overall evolution lies beyond the control of a state or its society. This is evident, as indicated above, in the actions of the competition state and the limits of competition law. It also means that, compared to more traditional forms of state organization, based on constitutional law and public accountability, meta-governance, even when conducted in the shadow of hierarchy, is ineffably ungraspable and intransparent and, as such, inherently unaccountable. A post-bureaucratic and post-democratic political system in which competition becomes the governing principle and market completion on a world scale is the ultimate goal is a dystopian future.

7. Conclusions

General Stanley McChrystal, commenting about an offensive to retake territory controlled by the Taliban in southern Afghanistan, declared, hubristically:

We've got a government in a box, ready to roll in.⁵

For some 20 years we have been experiencing and witnessing the consequences of the naïve neo-liberal belief that ‘we've got competition in a box, ready to roll out’. In both cases, these consequences can be described in terms of ‘blowback’ (Johnson 2004). This article has addressed the effects of the fetishization of competition as a principle of societal organization and its role in subordinating society to the logic of profit-oriented, market-mediated accumulation. It began by noting the polyvalence of the ‘market economy’ (commercial economy, market economy, capitalist economy, financialized economy, finance-dominated economy) and the extent to which this could be exploited in efforts to legitimate neo-liberal financialization and the drive towards a finance-dominated accumulation regime that extends markets and capitalist (and even financialized) market proxies into areas where they tend to be far more creatively destructive than destructively creative. For competition has a formal, procedural rationality suitable for supplying standardized private goods and services (and even then is prone to unplanned disruption through Schumpeterian innovations) and is less rational, even in its own economistic terms, when dealing with customized commodities (where competition has not yet established socially necessary labour and turnover times) and/or where goods and services have strong elements of common pool resources or public goods. Competition is even less suited to the production and reproduction of the four categories of fictitious commodities and the supply of goods and services that advance human flourishing.

It was also argued that simple governance solutions to complex problems do not work and are especially inappropriate where there are multiple substantive goals that are hard to specify consistently, let alone measure in terms of a single metric. In this context, the rolling out of competition as a principle of regulation and governance has actually been just one in a repeated succession of attempts to overcome government and governance failure by turning to another mode of governance – which is equally doomed to fail, albeit in its own distinctive ways. The growing unaccountability of capitalist market forces and their tendency to generalize and intensify the contradictions and crisis tendencies inherent in the capital relation make it imperative – but also increasingly hard – to reclaim some measure of democratic accountability in material provisioning and the care economy by limiting markets to areas where the invisible hand works well, and restricting and regulating it where it produces substantively irrational results for humankind and the planet.

Acknowledgements

The final draft of this article benefitted from the challenging comments of two anonymous referees and insightful comments of the special issue editors.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes on contributors

Bob Jessop is Distinguished Professor of Sociology and Co-Director of the Cultural Political Economy Research Centre, Lancaster University, UK. He studied Sociology at Exeter University, received his PhD in Economics and Politics at Cambridge University, and has since worked in Departments of Government, History, Geography, and Sociology. His recent work includes: Beyond the Regulation Approach: Putting the Economy in its Place in Political Economy (2006, co-authored with Ngai-Ling Sum), State Power (2007), Towards a Cultural Political Economy: Putting Culture in its Place in Political Economy (2013, co-authored with Ngai-Ling Sum), Cultures of Finance and Crisis Dynamics (2014, co-edited with Brigitte Young and Christoph Scherrer), and The State: Past, Present, Future (2015, in press). His personal website and archive can be found at bobjessop.org.

ORCID

Bob Jessop http://orcid.org/0000-0001-8134-3926

Additional information

Funding

Research for this article was aided by an Economic and Social Research Council professorial fellowship [RES-051-27-0303].

Notes

1. Reich (1990), cited Reinert (1995).

2. ‘Formal freedom’ is counterposed here to the lack of full substantive freedom due to the multiple constraints on free choice. The institutionalization of formal freedom is a significant political accomplishment and major element in liberal citizenship, as well as a precondition for functioning (and dysfunctioning) market economies.

3. Profit-producing denotes the place of a particular capital (fraction) in the circuits of capital; it does not entail that every profit-producing capitalist always makes a profit.

4. This said, the principle of maximizing shareholder value is a valiant effort to find a functional equivalent to competition law.

5. Cited by Pollitt and Bouckaert (2011, 1) from Filkins (2010)