Political Competition vs. Market Competition

[Editor’s note: In this selection from The Society of Tomorrow, Gustave de Molinari (1819-1912) discusses how competition in the political and natural worlds differ greatly from competition in the marketplace. We find Molinari makes some observations similar to those of Ludwig von Mises in identifying the consumer as the ultimate arbiter of who “wins” in market competition: “The most powerful rival still takes the first place, but it no longer rests with the victor to proclaim, or to assess, his own victory. This function has passed to a third party—to those who consume the products or services which the competitors offer.” In a market economy, it is not the warlord or strongman who seizes control. Rather, it is the common man as consumer who sets the terms of the marketplace.]

III. The Natural Law of Competition For a Subsistence

1. Animal Competition.—A struggle to acquire the means of living has been called competition for a subsistence. It invariably appears so soon as the natural supply of material ceases to suffice for the demands of every member of the community, the weak and strong alike. Early man, as yet uninstructed in artificial production, depended solely upon the provision of nature, and the consequences of a deficit were soon felt in a society living on the products of hunting and the natural fruits of the earth. The more effective members, the fleet hunter and skilled forager, excelled and lived; the feeble and less fitted for these tasks languished and passed away. Hence the original struggle, first manifestation of a principle which rules all created things, and which we have named Animal Competition.

2. Destructive Competition, or the State of War.—A progressive restriction in the natural sources of supply soon compelled even the most effective individual to pay a higher price for his accustomed share, and increased cost entailed increased suffering. With the amount of labour and effort, required for the purchase of a livelihood, increasing in inverse ratio to the shrinkage of supply, palliative measures became inevitable. Two alternatives presented themselves—to restrict competition, or to multiply the sources of subsistence.

Now the sum of knowledge required for artificial production of the material necessaries of life is such that the highest intelligence fails unless accompanied by long experience. This is so true that, to this present day, it is beyond the capabilities of many backward tribes. Very simple, on the contrary, is the alternative as viewed by a strong man. Strength knows its own value as against a weak competitor. When, more, we see how incapable is the rest of brute creation to grasp this elementary calculation, we may find the first glimmering of man’s superiority in his early appreciation of its truth.

The enterprise did, without doubt, involve a certain amount of labour and a certain risk. But victory in the struggles of unequals—and nowhere is there greater inequality than between members of the human race—does not always entail profound exertion, or the taking of dangerous risks. In any case, the strong soon learned that it was more profitable to prey upon the weak than to continue the previous system of sharing an inadequate food supply. Where it was customary to devour the actual body of the defeated, the new system was by so much the more productive. In other words, the effort or suffering involved in destroying an inferior was held preferable to the alternative of dwelling in amity but eating insufficiently. The invariable choice of this alternative measures the expectation of profit which it offered. Where cannibalism intervened as an accident, the person of every victim was at once a meal gained and a meal—very many meals—saved.

This second form of destructive competition is the pure State of War. First originating in man’s struggle for mastery over the beasts, the issue became one as between man and man. A State of War was, thenceforward, inseparable from human existence. As the prime motive of the construction of a vast armoury of destructive agencies, it directly assured the triumph of humanity over the beasts, though nature had often endowed them far more efficiently. Indirectly, it determined those industrial discoveries which have enabled man to multiply and artificially supplement nature’s provision of the material bases of existence, instead of bowing his head with the beasts when spontaneous production lags in the race with his demands. Thus it came to pass that the strong no longer found it profitable to massacre, despoil, or yet devour his victims. Instead, obligations are imposed, and the victim survives as a serf or slave. Political States are formed and competition in the form of war is waged between communities, possessing territory and subject peoples, against the hordes, still in a state of savagery and dependent upon the chase or pillage. The communities afterwards compete among themselves, seeking in territorial expansion either an extended area of supply or an increased holding in slaves, serfs, or subjects. Self-aggrandizement and self-protection are practically the sole ends of modern warfare.

Progress, under the direct or indirect impulse of this second form of competition has engendered a third form—Productive or Industrial competition. A brief survey of its history shows us that a continual menace of destruction, or at least of dispossession, compelled the communities which founded, and owned, political States, to apply themselves to the improvement of their instruments, and the consolidation of the material bases of their power. These instruments, and this fabric, may be divided into two categories. Their first constituent is a destructive apparatus, an army; their second is a productive apparatus, capable of assuring subsistence to the proprietary community within the State, and also to its dependents. It must, in addition, furnish those advances which are necessary, first for the erection, and subsequently for the maintenance in working order, of the destructive apparatus. Under pressure of the State of War—and the more so as that pressure grew and increased—State-owning communities were impelled not merely to improve the art and engines of warfare, but also to promote the productive capacities of industries whose function was not merely to provide sustenance, but, through the support of the defensive establishment, to become the final foundation of their powers of political aggrandizement. Now expansion in the productive capacity of any industry depends upon two conditions—Security, and Liberty.

Without some assured title to the fruits of his progress, a producer has no motive for undertaking such costly labours as the discovery of new processes, or the invention of tools and machines, which will increase his output. It is further essential that a manufacturer should be true to devote himself to that particular industry to which his abilities are best fitted, and to offer his wares in those markets which yield the highest returns. The highest place in the hierarchy of the nations has gone to that State which secured the fullest liberty, and the greatest security, to its industrial population. The dominion of such a State increases with its strength, and the security and liberty which it guarantees initiated and developed the third form of competition—Productive or Industrial competition. This form displaces the State of War as naturally as that replaced its predecessor in the series.

3. Productive or Industrial Competition.—Competition in the field of production, as in all others, benefits the species by affirming that: “The race is to the fleet, the battle to the strong.” But if the rivalries of war and of peace lead to one goal, it is by very different roads.

The means by which competition of the destructive, or warlike, kind proceeds, are direct. Two starveling tribes come to blows over a patch of vegetation or a tract of hunting ground, and the stronger—driving off, if it does not actually destroy, the weaker—seizes the means of subsistence which were the cause of their struggle. At the later stage, when mankind has learned artificial production of the material needs of life, the communities of strong men, which founded the commercial enterprises called States, fight for the possession of a territory and the subjection of its inhabitants. They, like their predecessors, seek the means of subsistence, and they hope to obtain them by appropriating the entire nett profit earned by the labour of their slaves, their serfs, or their subjects. They may annex this in the guise of forced labour, or under the name of taxes, and they may style their conduct political competition, but it differs in no single particular from the actions of a hunting or of a marauding tribe. Both move along the straight road of direct competitive destruction, and both actions are of the class of destructive or warlike competition.

Very different are the processes of industrial competition, although they too issue in the survival of the strongest, of the fittest. The most powerful rival still takes the first place, but it no longer rests with the victor to proclaim, or to assess, his own victory. This function has passed to a third party—to those who consume the products or services which the competitors offer. The consumer always buys in the cheapest market. When he has once ascertained the precise nature of the wares competing for his custom, his own merchandise—and this may be actual produce, service, or the monetary equivalent of either—invariably selects that market in which it can command the highest return. When two markets are equal in this respect, the balance of trade inclines to that in which the purchaser’s needs, or demands, are supplied with goods of the better quality.

The cheapest seller—all else being equal—commands the market, and the cheapest seller is the most powerful or effective producer. Productive or industrial competition, therefore, acts upon the producer by stimulating his powers and capacities of production. The less effective producer—whether of merchandise or services—is penalised by failing to sell; he cannot, that is, obtain those other services and goods which he himself needs, and upon which his very existence depends. To increase their powers or capacities of production, producers apply the principle known as the Division of Labour. They also seek to invent, and make practical use of, processes, tools, and machines, by the use of which an identical expenditure of labour and suffering are enabled to return products, or services, in a constantly increasing ratio.

[A selection from The Society of Tomorrow: A Forecast of its Political and Economic Organization, ed. Hodgson Pratt and Frederic Passy, trans. P.H. Lee Warner (New York: G.P. Putnam’s Sons, 1904).]

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