Why Capitalism Is Open to Compeition

Competition

How does competition relate to communism, socialism, capitalism and monarchy?

As for capitalism, it thrives on competition, and is "legitimized by competition" (Kasper). In fact competition is a way of redistributing a society's wealth and helps to prevent concentrations of power in the hands of one company. Competition is absent in communism (the communist committees govern prices and have controls on all regulations) and also in most socialist countries; in fact "Property is theft," Kasper writes on page 4. In monarchies the government imposes "coercive regulations" to protect state interests. Fascist governments are all-controlling and competition is a foreign word in this style of government. People are not free to form new businesses in fascism, communism and in monarchies.

To what extent does capitalism include "crony capitalism" and why?

Cronies sometimes form "competitive truces" (Kasper) to cut deals on prices and that is actually a violation of anti-trust laws. The world's airlines have in the past formed what Kasper called "The International Air Transport Association," which agreed to cooperate with each other by fixing airfares, schedules, and this group of airline owners " ... even such petty details as meal services" (Kasper). When crony capitalists get together to stifle competition, Kasper explains on page 3, they "hide behind" a number of excuses for their illegal behaviors: a) "safeguarding jobs"; b) "ensuring public health and safety"; and c) "protecting national from foreign competition." Crony capitalism (until a fair government shuts it down through anti-trust regulations) gives an unfair advantage to the companies in collusion, and that's why they do it.

What roles are played by competition?

Competition does many things that are positive in an economy. It "obliges" people be alert and -- for example -- to do the research when buying a house. Buyers in industry have a chance to view the whole available field when it comes to purchasing raw goods that will be used in manufacturing. Competition works very well when private property rights " ... are protected and people are free to make contracts under the rule of law" (Kasper, p. 3). When there is honest competition, prices that are competitive "work like radio signals," Kasper writes on page 1. That is, everyone knows what the different competitive prices are, and a person in the market doesn't need to know where the prices came from only that they are out there.

What roles are played by prices?

A good thing about prices is that it when there is competition, say, between two gasoline stations are a couple blocks away from each other, there can be fierce competition between then to be a few cents lower -- and this is to the advantage of the driver. Prices for gasoline, when high, encourage drivers to buy hybrids and dump their gas guzzlers. While a hybrid might cost a bit more than a V-6 or V-8 gas guzzler, in the end, because gasoline prices are high, the hybrid makes sense.

Is competition confined only to prices, or does it extend beyond prices?

Competition does go beyond just prices. For example, a car company advertises a good, long warrantee program, say, 100% drive train and engine warrantee for the first 100,000 miles. A consumer may well see that he or she is protected if something goes seriously wrong with the car, and hence though the car with the long warrantee may cost a bit more, the future savings is attractive to the buyer (notwithstanding a higher price).

Do competitors relish competition, or do they try to avoid competition? How do they avoid competition? Kasper writes (p. 2) that competition is "uncomfortable and costly to competitors"; and to avoid competition they turn to "innovation," which does not involve prices but gives a competitive advantage if the innovation works successfully