Chronicling capitalism

No wonder Karl Marx never really understood capitalism.

No wonder Karl Marx never really understood capitalism.

By Firth Calhoun
April 2001
Institutional Investor Magazine

No wonder Karl Marx never really understood capitalism. Capitalists rarely agree on what it is , or should be. This issue of Institutional Investor presents a telling case in point.

In “Europe Gets Tough on Antitrust,” beginning on page 28, we profile Mario Monti, the new European competition commissioner , effectively, antitrust czar , whose rigorous definition of free markets has put him in nose-to-nose conflict with a man some would call the very avatar of capitalism U.S.-style: General Electric Co. chairman Jack Welch.

Monti’s staff is currently investigating whether GE’s impending merger with Honeywell International would create such a colossus in the global jet engine market that the combined company would wield virtual monopolistic powers.

As London-based correspondent Tim Jones writes, Yale-trained economist Monti takes what he calls “a more economic approach” to assessing the competitive implications of mergers than did his predecessors. In particular, he relies on a controversial doctrine of so-called collective dominance: This holds that antitrust enforcers may be justified in blocking deals, even if powerful rivals would remain in a given market to provide plenty of competition.

The test is whether eliminating even one major competitor could conceivably induce the remaining companies to “tacitly collude” in raising prices.

In short, just how free must free markets be to operate at optimum efficiency? The irony, of course, is that here we have a quintessential European bureaucrat telling a famously entrepreneurial American manager that in effect he doesn’t appreciate free markets at all.

Similarly contesting views of capitalism are to be found elsewhere in the magazine. In “Scourge of the Chaebol” (page 62), Hong Kong Bureau Chief Kevin Hamlin tells of shareholder-activist Jang Ha Sung’s crusade to make South Korea’s chaebol, or conglomerates, more accountable to foreign and other nonfamily investors.

A feisty New York hedge fund, meanwhile, has been waging its own battle on the capitalist front to force Telecom Italia to pay shareholders more in a stock buyback that could affect the company’s future. Staff Writer David Lanchner gives a blow-by-blow account in “The Battle for Telecom Italia, Part II,” beginning on page 39.

Capitalism, in whatever incarnation, is seldom dull.