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Competition Policy, Bailouts and the Economic Crisis

Author

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  • Bruce Lyons

    (Centre for Competition Policy and School of Economics, University of East Anglia)

Abstract

The aims of this paper are twofold. First, I explain the economics of bank bailouts as distinct from bailouts for other sectors of the economy. Why do all the rules of good competition policy appear to fly out of the window when the banks get into trouble? Does this mean that we should abandon the rules equally for car manufacturers and other industries in trouble? I argue that a unique combination of two characteristics make it essential to bailout or nationalise the banks in the current crisis. No other sector of the economy can claim the same justification. Second, I review the threat of a retreat to politically-determined industrial policy and the need for vigilant implementation of economic effects-based competition policy.

Suggested Citation

  • Bruce Lyons, 2009. "Competition Policy, Bailouts and the Economic Crisis," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2009-04, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaccp:2009_04
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    Citations

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    Cited by:

    1. Calò, Silvia, 2019. "Bailouts: The lesser of two evils?," Journal of Policy Modeling, Elsevier, vol. 41(1), pages 84-98.
    2. Shawn Donnelly, 2014. "Power Politics and the Undersupply of Financial Stability in Europe," Review of International Political Economy, Taylor & Francis Journals, vol. 21(4), pages 980-1005, August.
    3. Ioana Nitulescu & Ichim Nela Ramona & Pavel Elena Mihaela, 2010. "State Aid And Participation To International Trade Flows. Romania'S Case," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 133-140, December.
    4. Stephen Wilks, 2009. "The Impact of the Recession on Competition Policy: Amending the Economic Constitution?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 16(3), pages 269-288.
    5. Brandi, Giuseppe & Di Clemente, Riccardo & Cimini, Giulio, 2018. "Epidemics of liquidity shortages in interbank markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 507(C), pages 255-267.
    6. Voszka, Éva, 2013. "Államosítás, privatizáció, államosítás [Nationalization, privatization, nationalization]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1289-1317.
    7. Bruce Lyons & Minyan Zhu, 2013. "Compensating Competitors or Restoring Competition? EU Regulation of State Aid for Banks During the Financial Crisis," Journal of Industry, Competition and Trade, Springer, vol. 13(1), pages 39-66, March.
    8. Várhegyi, Éva, 2010. "A válság hatása a magyarországi bankversenyre [The effect of the crisis on bank competition in Hungary]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 825-846.

    More about this item

    Keywords

    credit crunch; state aid; bailouts; banks; competition policy; nationalisation;
    All these keywords.

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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