Competition and Inflation

Inflation is dealt with monetary, economic and legal measures and policies.  

Monetary policy – specifically rises of interest rates, appreciate capital and absorb excess liquidity.  

Economic policy – specifically investments in real economy, for example infrastructure for utility, power business development and economic growth in either side of the equation, production and consumption.

Legal policy – specifically the due enforcement of free market competition rules and regulations, contains price rises and speculation, while drives invention, innovation and growth. In addition free market competition draws from the holy grail of market economics which is friendly, satisfactory and beneficial products and services to users, customers and consumers. Free market competition and commercial common sense therefore promotes equitable transactions for (added) value in business.

In theory therefore anti – inflation is a standard two level monetary and two step economic and legal policy. First moderate rise of interest rates to check excess liquidity especially speculative, then investment for public infrastructure and utility services available for all and above that free private participation and dynamic competition in regulated markets. Notably, in politics the debate is about the composition of the policy mix in the said given fundamental economic framework which stays more or less standard. The political left usually draws the line between the public resources and the private competition higher and goes for more market regulation. The political right usually draws the line between the public resources and the private competition lower and goes for less market regulation. The difference is in the management of economic and business dynamics (adding collateral social and political dynamics). This having said, market regulation is standard law enforcement rather than policy issue. For this  reason the political differentiation in market regulation is important but less pronounced. For the same reason, lumpen phenomena are noted, where the right outflanks the left in matters of competition protection, usually on the principle of liberalism.

In the practice of international anti-inflation policy, for example in the anti – inflation policy set in the U.S., the monetary part is nearly done, the economic part is partially done and the legal part is not really done. The last two are important because for the stated reasons, for real investment and especially market competition beat inflation without need to raise interest rates above normal and to consign the economy to deflation or stagflation and so recession.

Market competition is especially important for the additional reason that violations thereof as well as ultra-soft monetary and liquidity policies commonly precede inflation as trigger factors.  

Enforcement of antitrust rules range from the break-up of monopolies (trust bust), the sanction of concerted practices (cartels) and the abolition of overt or covert unlawful state aid, to market regulation and proportionate tax of special, favoured or dominant interests. Tax is reverse tax, because inflation is effectively private taxation which the beneficiaries distorted competition impose on the public, especially on the less affluent majority. At the level of trade and transaction, law enforcement refers to crack – down of unlawful practices, like market manipulation, insider trading and price fuelling and fixing.

In general, the anti – inflation policy and law enforcement measures proactively upend inflation (and recession) nursing conditions and reactively check and correct inflationary practices.

International inflation which develops in international markets of financial and other services, goods and commodities including energy, is imported and added to domestic market inflation. International inflation relates to international trades so it is more complicated and technical to address. Nevertheless, the aforementioned inflation fighting monetary, economic and legal policies and measures broadly apply in jurisdictions worldwide.  

At business and corporate level, inflation moves the economic and business model from the previous central company driven business model to the next decentral market customer, user and consumer driven business model. User includes, labor, operations, supply and outsource provision. The business then becomes, friendly, helpful, satisfying and beneficial products and services to users, customers and consumers at commensurate prices.

Past the inflationary condition, offer and provision of this level of products and services to the market requires adaptation of businesses to the new competitive environment. This adaptation frequently requires technological upgrading, management focus and corporate reorganisation. Investment incentives and related funding from the national, international and European funds have this meaning. Incentives include high-level framework upgrades and digital transformations enabling companies to elevate product and services specifications to the new standards, move to the competitive market (condition) and profitably seize the opportunities of the unfolding dynamics.