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Volkswagen, Lufthansa: Do Excessively Close Links Between Politics and Industry Distort Competition?

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Listed:
  • Nils-Peter Schepp
  • Achim Wambach
  • Florian Schuhmacher
  • Birger P. Priddat
  • Justus Haucap
  • Andreas Mundt

Abstract

The German State of Lower Saxony is a major shareholder in Volkswagen, while the German federal government provides guarantees for Air Berlin. Are these competition-distorting political interventions that arise from special relationships between business and politics, or do they merely represent favourable framework conditions for healthy competition? Nils-Peter Schepp, Monopolies Commission, and Achim Wambach, Monopolies Commission and ZEW, Mannheim, stress that it is the public sector's task to promote a high employment rate and steady, adequate economic growth, but that this does not mean supporting individual companies, or even national champions. To prevent distortions of competition, excessively close links between politics and individual firms should be avoided. Florian Schuhmacher, University of Vienna, reminds us that one of the greatest achievements of modern competition theory is to have established the framework policy that individual economic decisions are to be taken by market players; in other words by companies as well as consumers. A key component of competition by this definition is that all companies are active in the market under the same conditions. Birger P. Priddat, University of Witten/Herdecke, sees the federal government's guarantees for Air Berlin as a political intervention that distorts competition and arose due to special relations between business and politics. His proposal: for every lobby contact a joint scientific contact should be made to ensure that equally self-evident milieus arise for politics and academia, as those that have long-since existed for politics and economics. To better address distortions of competition that are deliberately induced in some cases, Justus Haucap, University of Düsseldorf, recommends the complete privatisation of Deutsche Telekom and Deutsche Post along with other public sector companies, as well as allowing all lawsuits regarding aid schemes filed by competitors and their associations to be heard before the courts of the European Union. Andreas Mundt, German Federal Cartel Office, highlights the importance of competition as a central driver of innovation: innovation is not generated by companies with comfortable monopolies or state industrial policies, but by competition.

Suggested Citation

  • Nils-Peter Schepp & Achim Wambach & Florian Schuhmacher & Birger P. Priddat & Justus Haucap & Andreas Mundt, 2017. "Volkswagen, Lufthansa: Do Excessively Close Links Between Politics and Industry Distort Competition?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(20), pages 03-15, October.
    • Handle: RePEc:ces:ifosdt:v:70:y:2017:i:20:p:03-15
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

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