This article was originally published in Democracy Journal in 2016.
American liberalism has never been of one mind where competition is concerned. Many liberals favor an ethos of cooperation, finding competition ugly and morally destructive. Others worry that a competitive economy can drive a race to the bottom, with firms cutting wages and long-term investment in order to undercut rivals. Finally, still other liberals looked to large, stable firms as a more attractive target for inculcating corporate social responsibility through professionalization and various forms of soft or indirect pressure.
As Lina Khan reminds us, liberals have long been divided on the value of competition. The early New Deal was a contest between those who favored corporatism—including industry-wide standards negotiated by incumbents—and those who wanted to bust up precisely that kind of insider collusion. In truth, the collapse of the National Recovery Administration in 1935 did not lead the New Deal to an uncomplicated embrace of competition. In fact, while the Federal Trade Commission was opening the way for competition between firms, other parts of the New Deal were busily encouraging geographic constraints on competition (most famously in banking) in order to protect local firms from outsider challenges.
Many of the fights we see today, and which are represented in this symposium, are in fact a continuation of this long conflict between two different liberal visions of competition. Uber and Lyft, for instance, have liberal fans among those appalled by the poor service of local taxi monopolies, minority riders with long-standing complaints about racist taxi drivers, and others who appreciate the flexibility it offers to drivers whose increasingly complicated and fractured lives can’t be shoved into a 9-to-5 job. But other liberals have been terrified by Uber, worried that competition is driving down wages. Just as important, they have been worried that competition is only a way station on the path to monopoly—but now, a monopoly much larger and more politically powerful than the crummy little local taxi monopolies Uber replaced.
A similar battle between liberal factions has been raging for decades over charter schools. Liberal advocates of charter schools are frustrated by the intransigence of district schools, which they see as monopoly providers whose teachers’ economic interests trump those of poor children. They like the idea of pursuing egalitarian ends through giving poor people more choice, and forcing providers to serve their needs. But other liberals oppose charters, seeing competition as anathema to teacher professionalism and as a scheme to weaken teacher unions.
The essays in this symposium generally come down on the side of what I call competitive egalitarianism—a commitment to using law to structure markets so that they generate effective competition, and so that they compete in ways that serve the broad public and unleash the vast potential for economic growth that is hampered by current practices and rules. Unlike conservatives, competitive egalitarians emphasize that markets do not simply spontaneously emerge, but are creatures of law and custom that may be designed to generate more equality or less, more growth or less. In fact, generating competition is an ongoing struggle, as market participants seek to create monopoly rents and to capture government power to protect those rents. Encouraging competition means allowing the factors of production, whether capital or labor, to move around, challenging geographic monopolies and moving to where opportunity rests.
Competition and mobility are vital to the American economy because, unlike countries such as Germany and Sweden, we are not particularly skilled at complex state-led coordination. We have a recent record of less than spectacularly well- implemented physical infrastructure projects, and we come up far short of many of our competitors in working closely with firms to develop and upgrade skills. In fact, our human capital is as good as it is only because we invest so much in higher education, and make students spend so many years there, that the resources are bound to produce some value even if poorly designed. We should try to get much better at this basic coordination function—matching our state investments to a coherent economic strategy, without inefficiently siphoning off a ton of resources to producers—but it is highly unlikely to be our competitive advantage.
Instead, our competitive advantage has traditionally resided in our ability to quickly move capital from less efficient to more efficient places and projects. We have been good at attracting people from other countries to fill many of our economic needs, and moving people around our huge internal market. Our high levels of economic competition have made it difficult for zombie firms to survive for long, sucking up capital along the way. Low barriers to entry and a capital market oriented to new firms have made it relatively easy for new business models and ideas to get a chance. We have compensated for our relatively low levels of effective coordination with a very high level of flexibility.
Aplausible liberal politics needs to accommodate itself to what we are good at. Competitive egalitarianism combines an aggressive attack on constraints on competition with a much larger, more national and transparent system of social insurance. That means, as David Schleicher urges us, waging war on all the ways that incumbent homeowners collude to protect their home values by constraining building in high-growth areas. But building a more flexible, national labor market also, as he reminds us, requires us to reconstruct social welfare programs that currently hamper movement from declining to rising places. A more competitive economy would be one that can smoothly attract talent from around the globe, as Alex Nowrasteh urges. But it also means nationalizing the impacts of increased migration, rather than focusing them on border communities and places where migrants disproportionately settle. Competitive egalitarianism would embrace the opportunities for economic growth promised by the automated production that Devin Fidler and Marina Gorbis envision, while constraining that automation’s risks of market consolidation and rebuilding the welfare state to ensure that its fruits are widely shared.