Capitalism as a natural economic order has a huge resemblance with the human nature. I say so because basically it is designed to thrive based on competition and individual self interest, which are both natural phenomenon to man.
Self interest is the reason why you have done or engaged in many of the most productive activities of your life. Check it, your education – did you go to school because you just love college? Did you save your money with your bank because you simply love your banker’s face or new advert? Even when it concerns love issues, love and intimacy are premised first on elements of attraction that are specific to different individuals.
The point where the self interest of two parties are duly met during an agreement or transaction of any sort is where the idea of free market is celebrated. It is at that point that conscious actions begin to birth many originally un-intended benefits and outcomes.
If you doubt the fact that competition is natural to man, then why does the world stand still to the excitement of the Olympics or the intrigue of the World Cup? To take competition out of man is to reduce his essence.
More interestingly, the market system sees to ensure that both concept – self interest and competition – add up to common good.
The motivation of every producer is profit. And many think that that by itself can be detrimental to the primary interest of consumers which is to get utmost satisfaction at the most sensible price. But the self-regulating nature of market capitalism is that the system by itself is constantly readjusting to reach equilibrium. From another perspective, it’s a democratic system, where the greatest good for the greatest number is the guiding principle.
This is how it works, when demand rises, the price rises until the supply of good meets the demand where equilibrium price will be reached. When supply increases beyond demand, prices at this point will have to go down. The producers won’t be taught that they have to sell at a lower price. The beauty, in fact, is that at this point the producers start competing to sell at a lower price. And anyone who doesn’t comply or who is not innovative enough will be kicked out of the market. Anyone who denies that this kind of competition is healthy for market growth and economic prosperity would deny anything!
A commentator recently said the price war between producers of the same commodity is an exceptional case that reverses the saying that when two elephants are fighting, the grass suffers. The opposite is the case in the free market economy. When two production giants are at war, the consumers appetite for satisfaction gets all the benefits.
KFC & Chicken Republic War
From the above illustrations it would be less stupid and counterintuitive to say that competition is cooperation. At least from the point of Adam Smith’s invisible hand theory, one can easily understand that competition will aid the collective good of the market. It’s like cooperation in the long run.
It is actually not the role of the government to stiffen or encourage competition, the free market system by itself will take care of that.
I like the way one of the economic analyst on stlouisfed.org put it when he said “The bread you buy at the store arrived as the result of hundreds of self-interested people cooperating without a government bread agency managing production at each step along the way. The farmer grew the grain, the mill prepared the flour, the bakery produced the bread, the truck driver delivered the bread to the grocery store, the grocer stocked the shelves and sold the loaf to the consumer all without a Government Secretary of Bread Production telling any of them what, where, when, or how much to produce.”
The essential role of the government should be centered on punishing those who involve in market activities with unscrupulous tendencies. In fact it is a lot safer to curb such activities before the materialize. Else, they give the free market system a bad name which makes it easier for the antagonists to hang it.
It’s clear that producers won’t agree to the essence of competition since it keeps them on their toes. But the bright side to it is that many producer don’t have the slightest idea of why and how they should up their games in terms of innovation and market strategy, if they are not forced into competition.
Therefore, competition is the driver for innovation, productivity and consumer satisfaction. And the truth is, with these great qualities, a country’s economy will always thrive towards prosperity which is the overall significance of market competition.
Many economies world over have benefitted from market privatization which opens market to greater competition. If African nations really want to stand a better chance to prosperity and economic well being, African governments should cease from coming up with regulations and policies that does not aid free market or the healthy competition that free market needs to thrive.
***Lanre Olagunju is an hydrologist turned freelance journalist. He has a degree in hydrology from the University of Agriculture Abeokuta and a professional diploma in journalism from the American College of Journalism. Lanre advocates on several international platforms for the prosperity and absolute well-being of the African continent. He's @Lanre_Olagunju on Twitter
The views expressed are solely that of the author.