The Competition Solution: The Bipartisan Secret Behind American Prosperity

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.