JAMES PERON: Competition and co-operation

Markets are competitive — it’s a mantra we hear often, and I’m certainly not disputing it, at least when we are speaking of depoliticised markets. That is, markets that are not manipulated by the political class to benefit themselves, their friends, families and favoured special interests.

The Biden White House released a paper that set out the goal: healthy market competition is fundamental to a well-functioning economy. Basic economic theory demonstrates that when firms have to compete for customers it leads to lower prices, higher quality goods and services, greater variety and more innovation. Competition is critical not only in product markets, but also in labour markets. When firms compete to attract workers they must increase compensation and improve working conditions.

The World Bank lamented that many developing countries are not benefiting from competition because their governments impose structures that inhibit or forbid competition. Many markets in developing countries do not yet benefit fully from healthy and effective competition, and government interventions often fail to provide firms with the right incentives to compete. At the regional, national, and subnational levels, sector-specific rules and regulations frequently limit market entry or reinforce the dominance of a few firms.

In functioning markets there is plenty of competition and countries with less politicised markets tend to be wealthier and healthier on average. Competition means private ownership, not state-owned enterprises rigging markets to forbid competitors or restrict them to channel funds in their direction.

Consumers in competitive markets decide where they will spend their money; it isn’t a political decision made by officeholders in the pockets of special interests. But the depoliticised marketplace is also a place of co-operation. I would suggest there is more co-operation than competition, but it is done in a manner that makes it hard to notice.

Gladys opens a small spaza specialising in grocery items for the residents of her area. She buys some produce from local farmers and her sister takes a taxi to a large store and buys sale items to bring to the township, which lacks such amenities. In the process she saves local residents a lost travel day and all the costs associated with the trip.

The spaza does well and Gladys hires an assistant to man the shop. She considers opening a second one a couple of miles away. There is more co-operation here than meets the eye. She co-operates with her sister and her employee. She is also buying voluntarily from nearby farmers. She’s also buying from a larger store that willingly sells to her. The products in that store are created by businesses all around the world.

In addition, they contain ingredients from people who have never met one another but are voluntarily co-operating via the mechanisms of the market. Those growing the wheat don’t know the producers of the bags that contain the flour. They sell it and don’t know where it ends up, so they co-operate with people they’ve never met. It’s shipped in trucks with drivers who have never met the farmers and will never meet the customers to whom Gladys sells the final product.

Another spaza opens nearby hoping to get some of the success Gladys has seen. So there is competition, and Gladys has to search for ways to lower prices to keep her customer base. They benefit from it. But that competition is nothing compared with the enormous web of voluntary co-operation that exists in markets free of political manipulation.

• Peron, president of the Moorfield Storey Institute and author of several books including “Exploding Population Myths and The Liberal Tide”, is a contributing author for the Free Market Foundation. He writes in his personal capacity.