One idea that right Libertarians (pro-propertarians) often seem to propose is that competition is the mechanism by which an economic system, viz. a free market, operates most efficiently in maintaining stability. Here I shall set out to prove that this notion is false.
Competition is simply the means one business establishment uses in relation to another in an effort to increase their market share. The methods are varied: advertising campaigns, more skilled workers, better technology, etc. All however, strive towards the same purpose of gaining a greater market share. Market share is the proportion of one business's dominance over a given market. Competition thus creates a problem. Though the business with the better strategy comes out with greater profits, the others have lost market share. As a result, they are forced to keep up by using whatever method to try to gain more market share themselves. Failure to do so will result in bankruptcy or a merger with another company. But even if attempts are made to increase market share by competition, many businesses tarry behind, thus leading to even more business failure or combination.
Combination or merging companies created some of the most powerful corporations today, and continues to do so, most recently with the financial industry (Merrill Lynch being bought by Bank of America, e.g.). As this continues, competition becomes less and less prevalent. One concept that is often mentioned when discussing economics is the law of supply and demand. In a competitive market, as demand decreases, so does price. And vice versa. However, as competition declines and approaches zero (monopoly), the demand and the price become less dependent on each other. For example, in 1929, when the financial crisis that caused the Great Depression occurred, agriculture was a competitive industry, but agricultural machinery was not. That year, demand for ag. goods declined a mere 6%, but the prices fell 40%. Contrarily, ag. machinery demand fell 80%, but the prices only 5%. How do we know that ag. was competitive and ag. machinery wasn't? The farmers were literally destroying their goods on the roadside to raise their value (by lowering the supply), but machinery was not being destroyed.
What is my point in sharing that? That as mergers of businesses increase, and market share becomes more and more dominated by fewer businesses, competition declines, and thus prices are easier to control by a few companies. When very little competition is left among a few businesses, there is what is called Oligopoly. But the driving force of capitalism, profit, demands even greater market share, and thus more combination. This can create a monopoly, where a single company has complete domination of a market and competition ceases to exist.
This means that a "free market" is self-defeating because it depends on the same mechanism, competition, to both maintain it AND destroy it.
So what when a monopoly is reached? The right Libertarian usually cites the anti-trust laws our nation has and says the state should break them up. Even if that happened and competition resumed, there is nothing that would keep the broken companies from continuing with the ever centralizing effect that competition has on capital in its drive for market share, and thus profit. It would then be a cycle most easily summed up by Compete, Combine, Break, Repeat.
Why is that a bad thing? Libertarianism is built on the principle of anti-authoritarianism. If the whole economic system of right Libertarians is based upon a competitive market that depends upon the state for its existence by breaking up the monopolies competition creates, then it is both a betrayal of its principles, and such illogical repetition of the same old process expecting anything different must, indeed, be called insanity.
But even if libertarianism was not based upon anti-authoritarianism, the cycle denotes that competition does not fix everything, nor does a market ultimately correct itself.
For these reasons I contend that competition does not maintain economic stability of any sort, and ultimately causes its own destruction.
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- Lafayette, Louisiana, USA
- June 17
- University of Louisiana
- I'm a 20 year-old Junior at the University of Louisiana at Lafayette (Capital of les Cadiens) majoring in Political Science with minor in math. I'm a political and gaming nerd, bisexual, teetotaler, and pacifist. My politics can best be classified as Libertarian Socialist (i.e. anti-authoritarian far left). I'm a native of Texas, enjoy classical music, and am very bland in dress, cuisine, and speech.
My Interests include history, politics, gaming, sustainable technology, reading, futurism, socialism, alternative energy, poetry, and philosophy.
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