Thou shalt not covet; but tradition
Approves all forms of competition.
Arthur Hugh Clough
There was a time in the not-too-distant past when the practice of war – the killing and subjugating of other people – was considered by many of our ancestors to be a noble, heroic, and beneficial activity that permitted the regular exercise of some of the noblest human qualities – bravery, sacrifice, discipline, valour, endurance, fortitude, strength, cooperation, obedience, determination, and ingenuity. In all militant societies, war is or was considered to be one of the most important and honourable of all human endeavours, and to criticize it would have brought upon oneself ridicule, hostility, and condemnation. Today, most people no longer espouse this view. We regard our ancestors’ readiness to wage war and delight in its practice as a barbaric custom of a less enlightened age, which fortunately we have managed to leave behind us, along with other brutal and unjust practices such as slavery.
In today’s world, it is widely believed that economic competition is good, and therefore its operations should never be restricted, checked, modified, corrected, or compensated for in any way. In introductory economics textbooks, the authors invariably preach the badness of monopoly, but they do not criticize competition because it is a Fundamental Economic Commandment of Utility (or FEC U) that competition is always good, and therefore the more competition there is, the better: Thou shalt not monopolize, but thou shalt compete in all things, at all times, with all people, and in all places, especially in terms of price. The result of this false belief is that a great many people have become wholly blind to the many harmful effects of unbridled competition.
If we examine this matter more closely, we will see that economic competition has many features that resemble war: competition is often described as cutthroat; individuals, companies, and countries vie with each other for the spoils of commerce, finance, and industry; there are winners and losers, and the losers die economically by going out of business, losing their jobs, or by being enslaved – meaning bought or taken over – by their conquerors; companies try to steal market share from other companies or eliminate their rivals by selling products below the cost of production; large companies routinely slash thousands of jobs in order to remain competitive; individuals, companies, and even countries or their national governments care only or primarily about themselves, while they are usually indifferent to the effects which their actions have on others; and, as is true of war, unbridled competition produces many casualties, which grim toll includes injuries and deaths.
Just as our ancestors were forced by the dominant model of war to participate in its bloody excesses even when they didn’t want to, such as by becoming its innocent victims, we live today in a global society where many people are forced to participate in the rigidity and excesses of free-market capitalism, even when they don’t want to. As with all ideologies that become dominant, those who advocate free-market principles like free trade, privatization, and the elimination of government programs, regulations, and subsidies fail to realize that they are imposing their dogmatic beliefs and practices on all people, including those who don’t agree with them, in the mistaken conviction that they know better than everyone else how societies should be ordered, how things should be produced, and the way that all human beings should behave.
It is truly ironic that, after making numerous and ongoing efforts to eradicate the evils of war, many people have unquestioningly accepted an economic system that has much in common with war. That this less bloody form of competition can produce harmful and deadly effects is evident wherever free-market principles are applied without regard to their harmful effects, in the conviction that they will produce a better standard of living for all, or at least most, people in the long run.
In spite of the material prosperity that presently exists in many countries, many people still have a fear of scarcity, hunger, and famine. The memory of starvation, want, and penury is too recent in our species’ collective memory for us to be sure of our present material overabundance. Moreover, we are reminded of the spectre of scarcity whenever we see images of people in other parts of the world who are poor, dirty, ill-clothed, and insufficiently nourished. Hence, many people unreservedly support an economic system that allows them to buy the things they need and want at the lowest possible prices.
The dogma of unbridled price competition means that things will be produced at the lowest possible price, so that the profit margin per unit of production is only marginally above zero. It is this simple fact – that the per-unit profit margin is so low – that accounts for many of the harmful effects of unbridled price competition. In many cases, this doctrine dictates that the worst, in the sense of oppressive, unsafe, illegal, polluting, exploitative, wasteful, cruel, and unjust, rather than the best practices become the dominant models in an industry. For the only way companies can earn a decent amount of profit is by maximizing sales, that is, by selling as many units as possible, cutting wages paid to workers as much as possible, moving their factories to poor countries where they pay their workers a pittance, eliminating jobs by replacing human labour with machines, ignoring or shirking safety, environmental, and other laws that would increase their costs of production, and trying to minimize the amount of taxes they pay to governments.[1]
This downward price pressure has many undesirable effects, both on the production and consumption side. On the production side, workers are constantly pressured to work faster, produce more, or work more hours; in some industries, both the wages paid to workers and the total number of jobs have continually been reduced in order to lower costs;[2] often there is not enough money to pay the workers decent wages or benefits, or comply with safety and other regulations; and many factories have been relocated to countries where wages are lower and government regulations, along with the enforcement of them, are weak or nonexistent.
In the case of animal farming, cruel practices such as confining egg-laying hens in tiny cages for their entire lives, force-feeding cattle an unnatural corn diet and raising them on huge lots where they are made to lie or stand in their own excrement, raising pigs indoors where they never see the light of day or breathe air that is not tainted by the fetid odour of their urine and feces, and castrating male animals without anaesthetics – all of these barbaric practices were adopted because the profit per unit of production, whether per dozen eggs, per chicken, per litre of milk, or per pound of meat, is so low that the only way one can make a profit is by treating these sentient animals as if they were unfeeling objects that are raised and fed into the voracious, uncaring, and strictly regimented machine of free-market capitalism. Certainly these practices have increased the efficiency of animal farming, but they have done so at the cost of our humanity, for there is no other species on Earth that mistreats its fellow living creatures in the way that we humans do in order to obtain the meat, eggs, milk, cheese, and other animal products that we consume at the lowest possible prices.[3]
On the consumption side, companies must continually try to increase demand for their products, with the result that they are constantly developing and introducing new products or modifying existing products in order to stimulate demand for them artificially, with the result that we consume far more than is necessary. There are many harmful or undesirable effects of this practice: in the case of food products, the result is widespread obesity; in many industries and products, such as containers and packaging, single-use items have replaced multi-use items, with a consequently vast increase in the amount of garbage we produce; companies have a strong incentive to produce products that will break down or need repairs after a certain period of time; instead of fixing something, it is often cheaper to throw it out and buy a new replacement; and we are encouraged to discard things before they break down or have to be replaced by constant changes and innovations in fashions and styles. In the housing market, the tendency in some countries is for dwellings to become bigger and bigger because real estate developers can make more money by building bigger and more luxurious houses and apartments, which can be sold at a higher price, and hence, at higher profit margins.
In the financial sector, unbridled competition can have harmful effects by pressuring executives and employees to take greater and greater risks, as was illustrated in the United States prior to the 2008 financial crisis.
Competition outside the financial sector normally leads to cost reductions, product innovations, and lower costs for consumers. In the financial markets, however, the typical result of sharp-edged competition is that institutions begin to seek higher profits by engaging in speculative lending and trading practices and by leveraging their already thin capital structures even more.[4]
As we can see from these considerations, although unbridled competition does ensure the lowest possible prices by eliminating certain kinds of waste and inefficiency, it is also the cause of a prodigious amount of waste in the form of unnecessary consumption. This is the important but generally unrecognized Paradox of Unbridled Price Competition: when things are sold too cheaply because of competition, then manufacturers and retailers must find other ways to make a profit, such as by maximizing sales, with the result that large quantities of resources are used, and the end products discarded, in a manner that is very far from being efficient or even sensible.
To the economist’s argument that unbridled competition is necessary in order to motivate people to work harder and eliminate waste and inefficiency, I reply that people’s behaviours are actually determined by the models of behaviour they have observed. Whether a person is lazy or industrious, intelligent or stupid, or capable or incapable of doing certain things are traits that are determined, not by the presence or absence of market competition and monetary incentives, but by the models which they have observed or not observed.[5] Even the ubiquity of competition in today’s world is due to the observation – and in some cases, the imposition – of the model of competition on more and more people in all countries around the world.
Why should the knowledge or observation of what other people do have an effect on our own behaviour? For the very simple reason that we human beings are imitative creatures. Most people living today, especially those who live in capitalist countries, are walking bundles of unfulfilled desires, a great many of which are completely artificial. A donkey does not care that another donkey has a pretty ribbon tied around its neck, or that its hair is neater and more glossy, or that it is wearing nicer shoes or clothes than one has, or it eats its hay out of a golden dish, or it possesses a bigger stable, or it has won a prize, award, or Olympic medal in braying or kicking, or it has the latest cell phone or other electronic gadget, or it owns a trendy product made by a certain company, or it has travelled to many different places and countries around the world, or it owns a bigger yacht or plane, or it has more money than one does. But we human beings clearly do care about such things. And thus are born all the artificial desires with which so many of us have entangled and complicated our lives, the strong and heavy chains that bind us to jobs that we dislike, to lifestyles in which we don’t have enough time to do all the things we want to do, but which still leave many of us dissatisfied, while we wonder what the purpose of our lives really is. Sadly, many people never find the answer to this question before they die.
Economists have made the mistake of assuming that the specific behavioural patterns that result from the adoption of the capitalist mode of production and its accompanying organization of society are due to innate human tendencies. This is like someone who, having heard no other language spoken except English, assumes that speaking English is an innate human tendency, and devises a theory of human behaviour based on this mistaken belief, while trying to force everyone else in the world to speak only English, in the conviction that it is the best language in the world.
Just as the fact that speaking a particular language or playing a certain sport is entirely a learned behaviour, competition is merely a particular model of human behaviour. Although many people believe that competition is an innate human tendency, it is actually a learned behaviour. Another important fact about competition is that it forces everyone to behave in a particular way, by eliminating, marginalizing, or penalizing other forms of behaviour, whether these are methods of production, the way one behaves towards one’s employees and one’s fellow workers, one’s aims in life, the things one buys with one’s money, and the nature of our relationships with other people, other organisms, and the environment in which we live and on which we depend for our survival. In this regard, competition can produce results that are intolerant, oppressive, harmful, and tyrannical. This is the paradox that lies at the heart of the “free” market – the fact that the free market forces many of us, whether we want to or not, to conform to its increasingly dominant and rigid capitalist and consumerist way of life.
A company that produces safe, reliable, and trustworthy products that consumers want, pays and treats its workers well, abides by all the laws and regulations in its industry or country, and is able to produce a profit should be the model company in a capitalist society. And yet, the recent economic trend is to regard such a company as archaic and inefficient. Whether it is publicly or privately owned, its workforce is slashed, safety regulations are sometimes ignored, it tries to eliminate or take over its rivals, it seeks to gain or maintain government influence or subsidies, it perverts and manipulates the legal system in its favour, or it constantly attempts to increase its sales regardless of whether this is beneficial for its customers and for society in general, all with the goal of making the company more competitive so that it can make more profits.
Even considered from the economists’ narrow and frequently erroneous viewpoint, profit maximization is not at all the same as utility maximization, for profit maximization usually benefits only a small segment of society, namely corporate executives and the owners of the company. This spurious but widespread substitution of improving the general well-being of society, or the maximization of its inhabitants’ total utility, by the much narrower goal of profit maximization is one of the main reasons for the growing inequality that is visible in many capitalist societies. When the rate at which some people’s incomes are increasing is much higher than the rate at which a country’s total production, or GDP, is increasing, this unequal outcome can only be achieved if other people’s incomes are decreasing or remain stagnant.[6] As is becoming increasingly evident in today’s world, laissez-faire or free-market capitalism takes from the many and gives to the few.
The mistaken assumption that is often made is that a company’s profit can only be increased by increasing its efficiency. Hence, according to this belief, higher profits are always a reflection of greater efficiency, and therefore they are always good and desirable. But this naive view overlooks the fact that it is also possible to increase profits by cutting costs, such as by cutting the wages paid to workers or firing large numbers of them, committing accounting fraud, substituting cheaper raw materials for more expensive ones, not complying with safety and other regulations because this would increase costs, selling things that people don’t really need, or by avoiding paying taxes by relocating, or transferring a company’s profits, to a low or no-tax jurisdiction or country. The reason why it has been possible to make these changes, not all of which are socially beneficial, is because corporations are not democratic entities. Hence, those who own or control corporations increasingly behave in ways that narrowly benefit them, regardless of the effects that their actions and decisions have on others, such as the corporation’s many powerless and voiceless workers, its customers, suppliers, competitors, and society in general.
The advocates of war believed that war was both right and necessary – right because the physically and intellectually superior races should dominate the weaker races for the good of humanity; and necessary because the superior races needed extra room in which to multiply and increase their numbers, while it eliminated the weaker races from the gene pool. Today, we recognize that these arguments are false. But many of us accept the fiction that we must allow and tolerate the form of economic war known as laissez-faire capitalism, which is based on the principle of unbridled competition, because we believe it is the only way to ensure the employment of all or a large number of the world’s inhabitants, together with the creation of enough material wealth and prosperity for all of us to live comfortably. Traditional war left death and devastation in its wake. Economic war has many of the same effects, for it too destroys or worsens people’s lives and causes significant societal and cultural damage. Unbridled competition has produced some of the same effects as war, as large multinational corporations have invaded and pillaged formerly protected, traditional, and relatively secure local economic systems, leaving devastation, disorder, higher unemployment, and ruined lives in their wake, all in the name of lower prices, increased profits, and the commodification and commercialization of more and more aspects of people’s lives. It is a cultural, economic, and societal invasion and imposition that is as harmful, insensitive, and wrong as former colonial, religious, and military intrusions into less technologically developed societies.
In order to free ourselves from the many harmful effects of unbridled competition, we must first recognize that competition is not always the benign or beneficial force that the economists claim it is; and this will require that we cease trusting the claims made by economists, especially those ignorant fools known as free-market economists, who have made a product’s price the sole or primary criterion by which its desirability, as well as the way in which it is produced, is judged. What we need to find is a balance between the increased productivity that is made possible by capitalism, and other important concerns that presently are not being addressed because of the increasingly tyrannical global dominance of free-market economic ideology.
So what is the solution to the many harmful effects of economic war? The answer is what I have called managed or cooperative capitalism, which is based on the recognition that there is enough business and profits for many individuals and companies, provided that no one is overly greedy, ruthless, or seeks to dominate over others. In the same way, most people in the world have recognized that war is not at all necessary, and it is much better to live in harmony, tolerance, and mutual respect with everyone else, rather than try to subjugate or eliminate them, as our prejudiced and uncivilized ancestors did. Our inability – or it were better to call it our refusal, for there is nothing that prevents us from doing so except the mistaken belief that it is wrong to try to restrain or restrict capitalism – to manage capitalism has resulted in the highly undesirable situation where the model of competition rules over us and determines the nature of many features of our lives and the societies we live in, just as war formerly ruled over the lives of many of our unfortunate ancestors, who lived and died in those barbaric, less enlightened times.
[1] Because of unbridled price competition, companies have devised other ways to make profits, such as selling unnecessary warranties, costly options, expensive upgrades, manufacturing products that break down or wear out after a certain period of time, and changing the design of their product or making minor changes to it to encourage consumers to buy the latest model, even when the old model still works – in other words, by incorporating planned obsolescence into the design of their products. From an environmental perspective, this widespread practice has been disastrous, for it has greatly increased the amount of energy and natural resources that are consumed, while it greatly increases the total amount of garbage that we humans produce.
[2] It is not hard to understand why many companies prefer to use machines or robots instead of people: robots do not complain or need breaks, holidays, or sick leave; they do not go on strike; they do not get tired, meaning they make fewer mistakes and their production is uniformly consistent; they can work at all hours of the day and do not demand pay raises, overtime pay, vacations, maternity leave, or paid holidays; when they retire (become worn out or obsolete) they do not ask for benefits or a pension; and they do not form unions. Machines and robots form the ideal labour force because they are obedient, efficient, industrious, reliable, predictable, untiring, uncomplaining, and easily replaceable, traits that are not always found in human workers.
[3] Although there are many other creatures that devour other creatures, they do not enslave them during their artificially shortened lives as we humans do. In other words, although they may terrify them occasionally during their lives, they only inflict pain and suffering on them at the moment of death. Moreover, creatures that live in the wild have a chance to live to old age, whereas the premature death rate on industrial animal farms is 100%. These days, with the artificial methods used by animal farmers to accelerate growth, most pigs and chickens raised for meat do not live to be a year old, while many beef cattle are slaughtered before their second birthday.
[4] On Money and Markets: A Wall Street Memoir by Henry Kaufman, p. 243. McGraw-Hill, New York, 2000.
[5] The true reason why so many workers today are unmotivated or inefficient at their jobs is because of the very foolish method of education which has been widely adopted in more and more countries. By isolating children in schools during the early and formative years of their lives, they are prevented from observing people working, which, before this foolish practice became widespread, was the way that children acquired the skills they needed to perform certain occupations, as well as the desire to perform them. As a result, they have neither the desire nor the competence to do those kinds of work, and so they must be paid money in order to motivate them.
[6] Another possibility is that the higher rate of increase is due to speculation, such as real estate or stock market speculation, in which case there will probably be a downward correction at some time in the future. An example of this occurred in Japan during the 1980s, when a massive real estate and stock market bubble eventually burst, plunging the country into several decades of economic stagnation.
Homo Stupidus 