(This policy bulletin is an extract from the book "The O’Dowd Thesis and The Triumph of Democratic Capitalism" )

Capitalism is often criticised, particularly at a popular level, on the grounds that it is based on competition and that competi­tion is either harsh and inhumane or inefficient and wasteful. There are two totally different issues here.

            The belief that competition is inhumane is based on a misunderstanding of the nature of capitalist competition. When people talk about competition they normally think of the kind of competition that occurs in games, where there is a winner and a loser. The object of the game is to win, and there is room for only one winner.

            However, capitalism is not about winning and it is not about defeating others. It is not normally the objective of a capitalist to become the biggest or the best, and still less is it his objective to defeat or destroy his competition. In fact, it is usually neither possible nor in his own interests to do so. What the capitalist tries to do is make a return on his capital. In order to do this he has to produce goods or services that other people want to buy. Where competition comes in is that he will not be able to sell his product if others do a substantially better job of producing it than he does. He does not have to defeat the competition, but he does have to keep up with it.

            Capitalism is not primarily a system of competition at all, but a system of co-operation in which competition (as properly understood) serves an important purpose. Capitalism is about trade, and trade is a voluntary exchange for the benefit of both parties, an essential form of co-operation. The employer co-operates with his employees to create the combination of entrepreneurship, management, capital, labour and land that can produce wealth for both of them, and the capitalist co-operates with his customers to give them something that they want and are prepared to pay for. His day-to-day life is spent in co-operating. He has competitors, but he may never meet them, and sometimes he may not even be aware of their existence.

            Nevertheless, competition is an important part of capitalism. Nobody has an established right to supply another's needs and to command that person's income if somebody else can do it better. Nobody can say to another: "If you want legal services, medical services, groceries or clothes, you have to get them from me or go without." Conversely, nobody who believes that he can meet the needs of others better than they are being met at present can be precluded from attempting to do so. Clearly, then, the absence of competition means:

1.The absence of freedom to sell one's services or to use one's ability. It is in fact contrary to the concept of "the right to work". The absence of competition means exclusion.

2.The absence of freedom on the part of the consumer to obtain what he wants where he wants it. The absence of competition implies monopoly and privilege. Among other things it removes the incentive of the producer to meet the desires of the consumer to the best of his ability. This is amply illustrated by the standard of service provided by State-run monopolies such as the Post Office. The absence of competition means the absence of service.

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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