The two kinds of competition

20 February 2014
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(This policy bulletin is an extract from chapter 8 of Liberal Reflections by Michael C O’Dowd - FMF Occasional Paper No. 4 first published in December 1999 by The Free Market Foundation)

The word ‘competition’ is used to describe two different things, and while they are not unconnected they are so dissimilar that confusion between them leads to very serious misunderstanding. What makes matters worse is that the form of competition which is most prominent in the consciousness of the average person is not the form which is most important in the real world.

            The word competition comes from two Latin words meaning ‘seeking together’, and refers to the situation when a number of people are trying to gain possession of the same thing, or of similar things. What it does not specify is whether there is only one thing so that of all those who are trying to gain it only one can succeed, or whether there are many so that many or even all of those seeking may gain them, but probably not to the same extent. These are the two kinds of competition.

…        When people talk about ‘holding a competition’ they are normally thinking of an arrangement where there will be one (or a few prizes), for which people will compete. There will be a winner, or a few winners, and the rest will be losers. Competitive sport, which plays a large role in the lives of most people as spectators and followers if not as participants, is always organised on this basis. Games are always about winning or losing, and in addition to the fact that each individual game has a winner and a loser (such games as races, many losers), there are often further elaborate arrangements to produce an ‘overall winner’ or champion – leagues in football and similar games, championships in boxing and golf.

            It is worth noting in passing that the arrangements of the leagues and championships is highly artificial. There are in no sense genuine attempts to find out who is best (which is probably a meaningless concept anyway). Their purpose is to produce a winner or a champion and they have to produce one, even if, eventually they have to spin a coin to do so. The point is well illustrated by the refusal of some football leagues to accept drawn matches. Instead, a drawn match is ‘decided’ by a series of increasingly arbitrary procedures, like set shooting at goal.

            From the fact that all games have winners it is a small step to believing that the purpose of playing games is to win them. This is dubious. The purpose of most competitions was originally to encourage people to participate in an activity which would benefit them in some way. The Ancient Greeks regarded athletics as a vital part of military training. Its purpose was to strengthen all the participants, not just the winners, and the competitions and the prizes were simply a means to induce people to take part and to do their best.

            The idea that games were played for their own sake and not to win was strongly held in some quarters until quite recently, but the thing which has destroyed it is the overwhelming predominance of spectator sports played by professionals. The spectators want their team to win. For them (and they are the huge majority) winning is everything and the professional players have no option but to go along with this attitude. They are paid extra if they win. In games like golf and tennis the prizes for champions are enormous. They are professionals and they are actually playing for money, but the rewards are structured so that they are playing to win.

            From this came two ideas which are almost universally held today: ‘Competition is about winning’ and ‘Where there is competition there are winners and losers’. In fact this is only true of the one kind of competition, hardly at all of the other.

            Most of the ‘games’ kind of competition is artificial. Special rules are carefully crafted to throw up an unambiguous winner. In real life, outside of sport, there are few such situations. For one thing there are not unambiguous winners. The various pop-singers (or for that matter, concert pianists, or architects, or surgeons) in the world are in competition with each other, but who is the winner? If one asked a group of thoroughly knowledgeable people who is the greatest singer alive today, it is most unlikely that they would agree. There would be dozens of candidates, each with their supporters. And even if they did agree, another group would not agree with them. Real life situations do not throw up champions. Neither, of course, in any real sense, do games. A particular team wins the soccer league this year because the league is structured so that somebody has to win but somebody else will probably win next year.

The type of ‘capitalist’ competition which takes place not only throughout human society but throughout animate nature, is something quite different. Let us take as our example a particularly obvious and well-known example of capitalist competition: a retailer operating in a reasonably free market. We can consider later whether his case is indeed typical. The first thing that we notice is that the shopkeeper does not spend his days confronting his competitors or indeed dealing with them in any way. He spends his days dealing with his customers, with his employees if he has any, and with his suppliers, that is to say, with people with whom he co-operates. What he actually does in order to compete is to try and improve the quality of his co-operation – essentially to serve his customers better.

            His competitors are not a defined group, like an opposing football team. He may have a competitor next door, but he may not. He may be the only shop of his kind in his particular shopping centre but he is still in competition with others, all over the town and even beyond, possibly with others kinds of suppliers, like mail-order houses. Also, to a vague but real extent, he is in competition with people who sell quite different things. This is not a major factor in the life of a grocer, though it is not quite absent, but a seller of jewellery is likely to be very conscious that he is competing with the seller of sports cars and with the seller of overseas package-tours.

            The fact that ‘the competition’ is a vast and vague mix of different kinds of people, in different places and doing different things, many of whom the retailer does not know personally, and of some of whose existence he may be unaware, is a most important reason why competition seldom issues in overt hostility or conflict (though it can do, as we know from the taxi wars). In the vast majority of cases there can be no question of trying to destroy the competition and indeed of engaging in any kind of active conflict with them because they are too numerous and too largely unknown. In fact, our retailer seldom meets his competitors, and if he does it will not be for the purpose of competing but for the purpose of co-operating as in a chamber of commerce.

            Normally, attempts to destroy competitors make no sense because more will simply arise in their place. Grocer’s shops do not buy out the competitor across the street because if they do somebody else will come in. The idea of destroying the competition can only arise in one of two situations. The one is where the number of competitors is artificially limited so that if a certain number are eliminated no more can come in. This was the situation created by the old Liquor Act in South Africa. In a certain area only a limited number of licences were allowed. If you could acquire all of them you eliminated all obvious competition. You had not in fact eliminated all competition. Liquor is in competition with non-alcoholic drinks and with other ways of spending money and people can go to distant places to buy liquor, but you have eliminated enough competition to give yourself a major benefit.

            The other situation where the elimination of competition makes sense is one of lawlessness, where a group of people hope to be able, by violence, both to drive out all existing competition and to prevent any new competition from arising. This policy was followed on a large scale by the European maritime powers in the sixteenth and seventeenth centuries when first the Spanish and Portuguese and later also the Dutch and the British tried to establish monopolies of trade in particular areas and to keep out all competition by violence. The policy did not succeed and led to constant warfare, which in its turn led to the establishment of the rules which govern international trade today.

            Among human beings for competition to be a peaceful process requires law but when law is present competition does not (as its critics allege) give rise to a society dominated by internecine conflict. People do not compete by trying to destroy each other; they compete by trying to serve their customers better.

Source: This policy bulletin may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.


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