Alphabet of Liberalism: Competition

competition
Florian Schmetz on Unsplash

Do you know what the driving force behind economic progress is and that we are getting a little better all the time?” Is it scientific knowledge? Technological progress? Are entrepreneurs behind it? New investments? Or a combination of all of these? One process is behind all these reasons. Competition.

You know it from many sports. Competition is forcing us to be better. And it is competition that is the mechanism behind capitalism through which it creates wealth, too. Competition means that producers of goods and service providers compete for customer favor. They apply for it in an effort to reduce costs and increase the quality of their products so that they better meet the customers’ taste.

Competition could be compared to the path of discovery. Entrepreneurs are constantly discovering new ways to serve the needs of customers. However, classical liberals do not forget that market competition must be accompanied by the “fair play” principle.

Many left-wing activists often argue that companies’ market share determines whether a competition is or is not present. If there is only one producer in the industry, then we talk of a monopoly that can dictate prices and deliver services in an inefficient way due to the absence of competition.

However, classical liberals speak differently about competition. Competition is when there is a free guarantee of entry into the industry. Even one manufacturer must pay attention to prices and quality if the sword of Damocles hangs over him, and possible competition might appear.

Similarly, monopolistic prices are corrected by competition from abroad if the country is involved in international trade.

Many examples of monopolies and the absence of competition are due to the fact that the government has created a legislation tailored to a specific company, which classical liberals do not consider as “fair play”, regardless of the fact that a domestic producer might be supported. Promoting competition through political decisions should mean creating a business environment that allows free entry into any sector. That is a “fair play” policy.

Is there anything to add at the end? I maintain that competition defined as free entry into the sector with minimum requirements for entrepreneurs is certainly beneficial. It forces entrepreneurs to improve the delivery of their goods and services, and we, customers, are better off. And that’s pretty cool.


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