The Competition Solution: The Bipartisan Secret Behind American Prosperity (Hardcover)

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Editorial Reviews

Product Description

The 1990s were an era of unexpected and, in some ways, unprecedented prosperity. Economist Paul A. London examines the history of America's economy over the last several decades and the sources of our recent success, and comes to surprising conclusions about what we can learn from it.

London argues that prosperity in the 1990s was the result of political struggles over several decades that opened up markets and increased competition within them, rather than the changes in monetary or tax policy that most economists focus on. Competition, not the Federal Reserve, ended inflation by making it impossible for businesses to raise prices; competition, not tax cuts, spurred investment by forcing companies to make investments that enabled them to cut costs and expand.

The Competition Solution contrasts the vibrant, competition-driven American economy of the 1990s with the oligopolistic, inflation-prone one of the 1970s. London uses anecdotes and examples to show how both Republicans and Democrats helped bring down the oligopolies and monopolies by backing open trade, supporting antitrust, and ending price fixing in key industries. He tells the story of how the courts and politicians helped competitors challenge the Big Three auto companies and the United Auto Workers; Big Steel and the steelworkers union; airlines and their unions; AT&T and the Communications Workers of America; the trucking companies and the Teamsters; the established eastern financial institutions; and even powerful local retailing interests. Our future prosperity, London argues, will require political leaders who are willing to take on these kinds of fights.

Just as the prosperity of the 1990s was driven by more intense competition, London argues that future prosperity will depend less on tax cuts and monetary policy than on having the political courage to maintain competition where it is strong and expand it in industries with still-rising costs, such as health care and education. Local monopolies dominate these two industries, making it hard to apply "the competition solution," but London suggests ways to promote competition in both.

About the Author

Paul A. London served as deputy under secretary of commerce for economics and statistics in the Clinton administration from 1993 to 1997. He wrote The Competition Solution while a visiting fellow at the American Enterprise Institute.

Product Details

• Hardcover: 227 pages
• Publisher: AEI Press (March 1, 2005)
• Language: English
• ISBN-10: 084474204X
• ISBN-13: 978-0844742045
• Product Dimensions: 9.1 x 6.1 x 1.1 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 4.8 out of 5 stars  See all reviews (4 customer reviews)
• Amazon.com Sales Rank: #1,259,712 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

3 of 3 people found the following review helpful:

5.0 out of 5 stars GREAT book for the lay reader!!, May 26, 2005

By	Sally Haver (New York, NY) - See all my reviews (REAL NAME)

Thank you, thank you, Dr. London, for your well- and clearly-written book, explaining your economics theory in an informative, entertaining and highly readable fashion! It was fascinating to learn how the Wal-Marts and Toyotas of the world reinvented their respective industries, and how free trade and deregulation help to provide better consumer products. I'm a fan!!
Sincerely,
Sally Haver

2 of 2 people found the following review helpful:

5.0 out of 5 stars Terrific exposition of the benefits of competition, February 4, 2005

By	Jerry H. Tempelman "[e-mail]" (New York, NY) - See all my reviews (REAL NAME)

In this excellent book, Paul London echoes the thesis of William W. Lewis (The Power of Productivity, University of Chicago Press, 2004) that it is increased product market competition that is responsible for the prosperity of the past two decades. Factors ranging from globalization to deregulation to financial innovation all led to this increase in competition. Globalization increased productivity by forcing the streamlining of domestic industries. Deregulation meant that protected, inefficient companies had to change their ways to survive against new market entrants. And new financial market segments ranging from the NASDAQ market to high-yield bonds made capital available to new companies that had not previously been able to exist.

London argues that the increase in prosperity was caused far more by increased competition in private industry than by federal monetary or fiscal policies. It was not the Federal Reserve's monetary policy of the 1980s-1990s that killed inflation, but rather increased competition, which meant that companies were no longer free to indiscriminately raise prises. Likewise, it was increased competition rather than lower tax rates that forced existing companies to increase their investment in productivity-boosting capital. Higher living standards were the happy result for consumers, employees, and investors alike.

Most of London's evidence is anecdotal rather than empirical, but on the plus side this makes the book highly readable. An enthusiastic five stars.

2 of 3 people found the following review helpful:

4.0 out of 5 stars Advocates that competition is a more potent engine for growth than tax or monetary policy, August 22, 2005

By	Craig Matteson (Ann Arbor, MI) - See all my reviews (TOP 50 REVIEWER)

Paul London provides a very interesting overview of the growth of the large industrial economy after the Depression and WWII and its death and transition into the more global and competitive economy we have today. He notes that the goal of the Depression focused the American economy on providing full employment. This led the government to support the rise of the huge steel, communications, automotive, mining, and other large corporations and those that supported them.

These corporations used their might (along with union might and supportive governmental regulation) to fight off and restrict competition. Mr. London sees this weak competitive environment as one of the causes of the inflation during the seventies. He also faults Richard Nixon for his wage and price controls and political influence on the Federal Reserve. He gives great credit to Presidents Ford and Carter for having the political courage to fight inflation and to take painful steps to right the economic cart.

He notes that it was Carter, not Reagan, who put Volcker in charge of the Federal Reserve and deserves the credit for Volcker's success. Mr. London also expresses some skepticism in the monetary and tax cut approach to encouraging growth. He goes so far as to say that Greenspan's reputation is inflated because he had little to do with the success of the economy in the eighties and especially in the nineties. For Mr. London, it was the competition with the Japanese that forced the automotive companies to increase efficiency and hold prices down. It was small steel companies such as Nucor that saved the American Steel industry. He also notes that breaking up the AT&T cartel that fought every innovation that has led to vastly increased service offerings at a much lower cost. He also tells the story of how competition has affected the airlines, our banking regime, and retailing (he notes that Wal-Mart keeping prices low has helped fight inflation).

I think he makes some very good points. However, I cannot go all the way with him. Taxation does play a huge role in our business environment and we have to be careful what distortions we build into our market system. And his dismissal of monetary policy is far to facile for me. Printing money too much money has always been a tool of governments trying to get away with something. It always brings inflation through a devalued currency (not just devalued exchange rates, which can be just fine).

Mr. London also talks about how competition can help our current problems in education and health care. His prescriptions are not very detailed, but I am encouraged in the different role he sees for government in fixing these problems. Rather than more government programs and greater government control, he encourages intelligent encouragement of private enterprise in both environments through regulatory incentives that will lower costs (for example, by mandating electronic medical records) and make a more level playing field for innovation.

This is a good book and well worth reading. And I like the breath of fresh air approach rather than a restating of the normal doctrines of our times from either the left or the right. Well worth reading and discussing.