n044  1138  17 Oct 80
 
BC-ECONOMY-COLUMN ADV19
(For release Sun., Oct. 19)
Lester C. Thurow is a professor of economics and management at the
Massachusetts Institute of Technology.
 
By LESTER C. THUROW
c. 1980 N.Y. Times News Service
    NEW YORK - America should abolish its antitrust laws. The time has
come to recognize that the techniques of the 19th century are not
applicable in getting ready for the 21st. An economy where growth is
stopped and living standards are falling behind those of its
competitors cannot afford a legal system that cripples its industrial
future.
    The United States is no longer richer and more technologically
advanced than its competitors. It cannot afford to waste billions of
dollars in lengthy court battles. Those resources should be going
into investment. It cannot afford to force American companies to
independently invent the same wheel when they should be engaging in
cooperative research and development projects. It cannot hope to
compete in world markets if Americans are unable to respond to
Japanese trading companies with American trading companies.
    The futility and obsolescence of the antitrust laws can be seen from
a number of vantage points. With the growth of international trade,
it is no longer possible to determine whether an effective monopoly
exists by looking at local market shares. Regardless of its share of
domestic auto production, the General Motors Corp. is in a
competitive fight for its life with the Japanese and West Germans.
    If competitive markets are desired, then reduce the barriers to free
trade. Whatever good competitive effects the antitrust laws have had
on the behavior of the American steel industry, they are completely
overshadowed by the bad effects of the trigger-price system that now
keeps foreign steel out of the United States. The auto industry has
become competitive, but the cause was foreign trade - not antitrust
laws.
    America's shrinking share of manufacturing exports is a national
economic disaster, yet the bill designed to permit American trading
companies is opposed on the grounds that it would encourage local
cartels and allow banks to own an interest in industrial enterprises.
    The bill is certainly designed to encourage companies to cooperate
in exporting, and some of this cooperation might extend into domestic
activities. But when two nationally based cartels are fighting for
markets, you don't have a cartel. You have competition.
    Similarly, West German and Japanese banks, with equity interests in
industry, are much more aware of their responsibility to promote
industry as opposed to ''just making loans.'' If American industry is
to survive, it has to have the same kind of all-out support from its
financial system.
    Consider the antitrust case in the dry-breakfast-cereal business.
Let us assume that a few companies have established an oligopolistic
position and are charging more than what they could in a competitive
market.
    The Federal Trade Commission estimates that the extra charges cost
the consumer $1.2 billion between 1958 and 1972. This works out to be
0.1 cent per breakfast - hardly one of the nation's more pressing
problems. Then too, consumers can buy no-name corn flakes, or a
breakfast alternative, like bacon and eggs. Dry cereals are in a
competitive business even if there is no competition in the
dry-cereals business.
    Consumers may have been convinced of this very small extra psychic
utility from branded cereals because of advertising, but so what?
     Individual consumers may be making silly decisions, but it is
hardly the appropriate role of the antitrust laws to stop them.
People seem willing to pay large amounts to have brands located in
conspicuous places on their clothes. Should we use the antitrust laws
to correct this irrationality?
    Since established market positions are usually easier to defend and
create, oligopolistic companies may be able to extract a small price
premium from their customers, but this ability is inherently limited.
Customers have alternative uses for their income and potential
competitors are almost always waiting in the wings.
    It is also not obvious that anything of economic value is
accomplished if the government wins an antitrust case. Consider the
current IBM case.
    Suppose the government were to win and the International Business
Machines Corp. were to be broken into three or four companies. What
industry characteristics would change? By now we have had enough
experience to know that a three-or four-company oligopoly does not
act noticably different from a single company that faces potential
competition (the Japanese) where it is strong (large computers) and
actual competition where it is weak (small computers).
    If anything, we would weaken our industry and make it easier for the
Japanese to destroy it.
    In an economy as complex as that of the United States, no one can
say with 100 percent certainty just what would happen if the
antitrust laws were abolished. Perhaps we would find some
unacceptable results and some new regulations would be necessary. If
so, the regulations can be written when the abuses appear. This is
now an area so complex and so little connected  o economic goals that
we need to start over and see what a modern economy needs to remain
productive.
    But the key in any reformulation is that word ''productive.'' What
institutions and practices are necessary to keep America productive?
That is the one question that is almost never asked in current
antitrust cases, yet it is really the only important question.
    
ny-1017 1439edt
***************