The
Pathology of American Competition
By LARRY
ROMANOFF – September 24, 2020
Economic
textbook theory tells us competition will provide increased social benefits,
but is pitifully thin on evidence to justify the claim.
The one place where competition might have social value is in the case of a
monopoly, where the dominant firm abuses its position to charge inflated prices
and offer poor service, which is why monopolies are discouraged and why
governments tend to break them up; the resulting fragments haven't the same
power to abuse the population. But this is quite unrelated to 'competition' in
any meaningful sense of that word, but instead relates to the natural tendency
of corporate executives' greed to approach infinity as regulation approaches
zero. I have lost the source of this quote, but its content is important:
"The monopolies or quasi-monopolies
created by mergers and acquisitions are effective mostly to expose the public
to the worst excesses of capitalism, excesses which have not much changed in
the past 100 years. In 1911, speaking to a Senate Committee, US Supreme Court
Justice Louis Brandeis said that American corporations managed to thrive only
because of their dirty tactics, and by illegally fixing prices and purchasing
or destroying competitors. He said that with a level playing field, "these
monsters would fall to the ground"."
The most common understanding of the term
'competitive' is for products or services to be more or less equivalent in
terms of price and value. This philosophy of competition assumes that some
amount of pressure or hardship will force us to grow and perhaps do our best.
If we have demanding customers, we may strive to meet their expectations by
improving our service to a level we would not otherwise have offered. If we
have two vegetable markets in close proximity, customers will frequent the one
they feel is most attractive or offers the best quality or service. To that
extent, they keep each other honest and the prospect of losing customers may
serve to improve the service or maintain reasonable prices. Yet every city in every country has many
shops offering similar or identical products but the service and prices tend to
be average. China has more than 50 million businesses. If that isn't enough
competition, I don't know what would be, but with all this so-called
competition, what do we have? High prices and lousy service, so where are the
benefits to consumers? The simple answer is: there are none, and the economic theory of the benefits of
competition is a textbook myth. But in a sense, this is a small thing and not
in any way what the Americans mean when they talk about competition, which is
related only to achieving market domination and destroying other suppliers in
the market.
