True competition recognises “the smart other”
True understanding of Competition in the free-market economic sense requires understanding of both demand and supply sides. On the supply side, collectively, we seem to lack a mature understanding of the freedoms and dignity due to the supplier, the role of the entrepreneur, the freedom to carry on businesses unhindered by government agencies once the ground rules are specified, etc. Any minor misdemeanour by the supply class becomes a case of greed and an occasion to build further “safeguards”. The cynical attitude is carried not only by politicians and bureaucrats but also laypersons.For free market to succeed, we need to internalise that
1. A truly competitive economy seeks to create a large number of healthy suppliers to match the needs of a large number of buyers. Together they work it out in the marketplace that leads to higher efficiency and effectiveness in using different factors of production.
2. The supplier is no saint and it requires the collective wisdom of the buyers to keep him on his toes! But then, he is a necessary entity. The balance of power between the buyer and supplier keeps the system in fine mettle. Adopting market forces to mediate the economic affairs of society rather than leaving it to the machinations of politicians and the whims of bureaucrats requires this realistic understanding.
3. Long-term healthy suppliers would rather seek out other combatants who are alive and healthy with whom they enter into a social contract without value-reducing hit-and-run guerrilla warfare (or, at the other extreme, cartelisation). Bad suppliers fight to the last and leave no fruits for anyone to enjoy.
4. Good suppliers automatically prevent bad suppliers from entering the arena. The dynamic balance of power between suppliers and buyers (and amongst suppliers) ensures a minimum entry barrier.
5. The supplier exists not because of an executive order from the government by the legitimisation provided by the buyer.
6. Applied to any society, the Competitive Paradigm carries bigger and nobler ideas of “choice to the customer” or “efficient utilisation of resources” “enlightened civil society-backed businesses” etc. Competition as part of state policy should only be a manifestation of higher societal norms.
7. True competition recognises “the smart other”. This carries possibilities for cooperation. Within such recognition resides possibilities for creating positive-sum games with entities not traditionally thought of as partners. Cooperation need not be cartelisation.
(Appeared in “TAPMI - Creation of Wealth” Series in Business Today, August 15, 2004) posted by Sankaran at Sunday, February 26, 2006 Location:TAPMI, Manipal, Karnataka, India
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