- Hardcover: 227 pages
- Publisher: Aei Press (January 1, 2005)
- Language: English
- ISBN-10: 084474204X
- ISBN-13: 978-0844742045
- Product Dimensions: 6.4 x 0.9 x 9.2 inches
- Shipping Weight: 1.2 pounds (View shipping rates and policies)
- Average Customer Review: 4.8 out of 5 stars See all reviews (5 customer reviews)
- Amazon Best Sellers Rank: #4,420,823 in Books (See Top 100 in Books)
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The Competition Solution: The Bipartisan Secret Behind American Prosperity Hardcover – January 1, 2005
This month's Book With Buzz: "The Lying Game" by Ruth Ware
From the instant New York Times bestselling author of blockbuster thrillers "In a Dark, Dark Wood" and "The Woman in Cabin 10" comes Ruth Ware’s chilling new novel, "The Lying Game." See more
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.
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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.
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.