Competition as a Panacea?

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Com­pe­ti­tion is the Vit­a­min C of con­ven­tion­al eco­nom­ic the­o­ry: there’s no eco­nom­ic prob­lem that can’t be solved by a dose of more com­pe­ti­tion.

As you might expect, I’m less than con­vinced by this “one cure fits all” approach to eco­nom­ic pol­i­cy. Com­pe­ti­tion in bank­ing led to a “race to the bot­tom” in lend­ing standards–both to house­holds in the last decade after the Wal­lis dereg­u­la­tions, and back in the 1980s, (when then Trea­sur­er Paul Keat­ing allowed 16 for­eign banks to enter the mar­ket, who then duly lent buck­et­loads to such respon­si­ble busi­ness­es as Bond Cor­po­ra­tion and Qin­tex). What we need now is less lend­ing, not more, and we’re hard­ly going to get a reduc­tion in sup­ply out of an increase in com­pe­ti­tion.

I’ll be post­ing more on this short­ly, but for starters, here is an inter­view “Bank Com­pe­ti­tion Will Only Make Things Worse”, record­ed with Phil Dob­bie of BNet Aus­tralia.

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About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.