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OP-ED: Competition, a dirty game

  • Published at 09:35 pm September 5th, 2021
market competition
Collected

Few survive in the business of identical products. The entities surviving in the long run become monopoly operators

Competition is commonly used in market economy.

In a simple language, it is a war among parties to survive in the market as a leading player.

To become so, there needs strength to accommodate market demands. The failure to do so, the market system kicks the players out of the field.

In an economy, people need work. People cannot do all the work to meet their needs.

Division of work was invented to support it.

Money is a player to facilitate the division of work.

As a result, the output of work is money which makes people become jacks of all trades.

People can be a car driver to move themselves, a cook to fill stomachs and so on with the support of money.

Without having respective qualities, people can enjoy all if they have output in the form of money.

Division of work

Division of work brings physical output which is traded in the market.

Players compete against each other in the market.

The competition, it is said, brings fair value of the output.

Consumers purchasing outputs at fair value or at reasonable price enjoy benefits from the results of competition.

But there comes a question regarding what is happening to the competing entities which cannot sell at the so-called price of fair value.

Surely, they will lower the price to survive.

Such price cutting activities result in survival of the entities - is a question to arise. In true sense, entities failing to compete by way of fair value in pricing need to leave the market if their products are common.

Strategic or unique or intellectual products do not face such competition. Facebook, Google, Apple, Microsoft and few others enjoy monopoly.

Concept of fair value is applicable for business entities enjoying monopoly. But the fair value in the real sense is the price set by the entities themselves.

The trading takes place by the dictated price which is not the price as deemed to be qualified as fair.

Survival for the fittest is applied in competition.

All cannot survive in fighting with others.

Few survive in the business of identical products. The entities surviving in the long run become monopoly operators.

And what about the others leaving the market?

Simple answer is that in career planning at an earlier age, many people wish to avoid jobs.

This results in entrepreneurship development for a short time. Micro entities are established with ownership of young entrepreneurs.

The startup fund injected into the venture comes from parents, and near and dear ones.

This is real angel financing, they are in lack of devil financing from banks until they survive in the long run.

Different agencies are talking about the entrepreneurs with different so-called policy supports. But reality is that the support in real sense is a question: entrepreneurs actually get institutional support at debut?

Rickshaw pulling is a profession in Bangladesh. In a few areas, rickshaws are found in queues.

They are being hired serially.

The price of fare is fixed by the community concerned.

None, being at last in the queue, can avoid the rules and take a passenger at a lower price. This system ensures equity in income distribution.

On the other hand, such a system is not practiced in other localities where rickshaw pullers compete with each other in off peak hours.

The competition they do is based on fare. The competition is very dirty.

Old aged or new comers-pullers cannot survive in the competition. It is the reality in economic activities of the market economy.

In the short run of economic activities, high competition prevails.

In the competition, few survive through selling goods at so called fair value.

Survival in the long run facilitates the entities to operate as monopolists.

Hence, competition is a dirty game which breeds monopolies in the long run by making others leave from markets.

The consequential effect is that entrepreneurs become sellers of labor to the surviving entrepreneurs.

Cycle of market economy

This is the cycle of market economy, whatever economists say in their theory.

The touting activities done by the intellectual community are none but servants of some entrepreneurs either from the public sector or from the private sector.

The concept of market economy does not support fixing price administratively.

People in the work market cannot be turned into entrepreneurs.

A few of them with a dynamic attitude can go for entrepreneurship. Fixing prices can make them survive but it is not possible.

Alternative ways are to support institutionally by way of conducive policies as infrastructural playing field, access to pre-sales and post sales financing, existing support in case of worst case scenarios.

Economic development depends on different parameters.

Economic models can be target oriented such as industrialization by way of import substitution or export oriented activities.

These are basically mutually exclusive.

It is not easy to adopt both models since export needs market access for which same facilities are required to be extended to counterparts.

Waiver of tariff leads import substitute industries to face competition with low price imported goods.

So import substitution cannot work for the cases under which export needs market access facilities from counterparts.

Both can be workable provided that policy tools are fine-tuned in line with the circumstances.

Without market access, it is not possible to export - is a question.

In a real sense, it is possible. Bangladesh without market access to the USA, exports goods there. How is it possible?

USA importers need to pay substantial duties for import from Bangladesh. There come questions why they import from Bangladesh. This deserves analysis.

One of the criteria under which export trade survives is cross border sales at undervalued price on credit.

Such a way of sales needs policy support with regards to low cost pre-shipment financing and safeguards to realize payments from importers abroad.

For later cases, post shipment financing before the bill matures needs to be arranged from external sources on non recourse terms.

Such arrangement with export to the USA helps our exporters to sustain in this market despite market inaccessibility.

These policy tools as noted may be workable for export sustainability.

WTO requires waiver of tariff walls.

But there is a tricky game under which trading partners create different walls barring imports to protect their industries.

Same is applied for the protection of import substitute industries.

Economists claim trading activities are run by economic theory. 

But it is not within the concept rather executed under beggar thy neighbor policy.

As such, competition cannot bring an economy to the immediate upper level of development, it works as a dirty game, indeed. Dictation is needed at every step.

 

The author works in the development sector and can be reached at [email protected]