Abstract

"Co-Creating the Market: Governments, International Cartels and Creative 'Reconstruction'"

Susanna Fellman, University of Gothenburg (susanna.fellman@econhist.gu.se) and Martin Shanahan, University of South Australia

In their discussion on Schumpeterian growth theory (Aghion, Akcigit and Howitt 2015), is year’s Nobel laureates highlighted that a distinguishing feature of Schumpeter’s approach was (a) the role of competition and market structure (b) firm dynamics and (c) the relationship between growth and development. Using international cartels, international markets and governments as our test field, this paper focuses on the application of Schumpeter’s ideas on market structure, firm dynamics, and market collaboration.
First, we argue that governments and private businesses create, recreate, and co-create market structures, in efforts to influence market competition. However, this interaction fluctuates over time, in response to changes in both internal factors (e.g., technological change) and external factors (economic fluctuations, structural change).
Second, Schumpeter’s concept of ‘creative destruction’ not only applies to the creation of new products or services, it can also be applied to the creative reconstruction of business forms and strategies that firms and cartels use to grow, respond to threats and gain market control.
Using case studies from six industries, we provide examples where international cartels operated for a period only to apparently ‘cease’ in the face of economic, political, or technological change. Our examples reveal that ‘new’ cartels often emerged in those same industries. These re-formations might occur several times, reflecting varying roles of government intervention, internal agreement renegotiations and industry responses to changing internal and external conditions. We argue that Schumpeter’s concept of creative destruction can be applied to the organisation of firms and cartels, to their strategies, and to market structures. The way international cartels reinvented their forms and activities are evidence of this. While the activities of a particular cartel may be dissolved, and externally the arrangement considered to have ended, ‘new’ agreements and participants often emerge in the same industries in a process we label ‘creative reconstruction’.