My last article was on why I think “competition is stupid” for modern individuals to uphold as a cherished value that benefits individuals and society. One important reason that competition is received as a self-evident benefit is its connection to American capitalism. In No Contest, Alfie Kohn states that, “Capitalism can be thought of as the heart of competitiveness in American society” (p. 70).
This is a reasonable argument to make regarding how the specific circumstances in America have turned out, but should not be taken as true in general. Capitalism does not necessitate competition. Competition is zero-sum by definition. When you win, I can’t. Capitalism is not. Ergo, there is no innate reason for competition to be the sine qua non of capitalism.
So while I agree with Kohn’s overall points in building a case against competition, I don’t view them as a huge strike against capitalism per se. I’d like to reflect in greater detail on:
Warning: This post will be a bit more “classroom lecture-y” than I’m typically like, but you can skip to the conclusion for all the main points if you’d rather not see how I arrived at them.
I can understand why Kohn would make his above statement. American capitalism and the beliefs we hold as a culture do promote competition. We have been sold a belief that competition is what drives capitalism and that “only the strongest shall survive,” which is partly true.
In a market that can only reasonably support one firm, such as natural monopolies like utility services and railroads, often the firm with the cheapest product will capture the entire market and all other firms will go under as a government lends their support to the firm’s efforts to provide some large-scale infrastructure to ensure supply.
The above example does fit with Kohn’s definition of competition as attaining a mutually exclusive goal. If two firms want to remain open and dominate the market, but only one can, then they have mutually exclusive goals of being that firm. This reflects the fact that both firms have the same goal - to remain open - more than it reflects an inherent aspect of capitalism. Americans could simply decide to vote that large-scale natural monopolies be run by the government, which would take away the goal of being the firm in that market.
Another aspect of American capitalism that promotes competition is inherent to our legal system, which mandates that firms maximize profits for shareholders, thereby dictating the goal by which firms measure themselves. This is again not innate to capitalism, but part of our socially constructed legal system and therefore possible to change.
We could legally obligate firms to chase different ends besides maximizing profits, such as maximizing employee and consumer well-being. This is certainly more difficult to quantify and I am not arguing otherwise, only that it is theoretically possible to select different goals. Two examples of projects that look in this direction are the developments of the Human Development Index and Gross National Happiness, which attempt to capture well-being in a more holistic way than simply GDP. Surely if entire countries and the UN can make the effort to measure things such as these, our legal system could figure out a manageable way to set different goals for firms if the desire were there.
So if competition is not the central characteristic of capitalism, what is? The central characteristic of capitalism is individual decision-making and choice, as opposed to any sort of centralized decision-making.
Free markets allow individuals to make their own choices about what is in their best interests and for firms to respond by producing goods and services to match those desires and needs. This should make a connection to well-being quite obvious. It is much easier for me to decide what will contribute most greatly to my own well-being than for some central authority to do so. Capitalism allows this to happen rather efficiently through the use of markets.
Karl Marx originally wrote about his economic theory of communism as an endpoint in a trajectory he saw playing out through his analysis of history. It was much more an observation of history, with a prediction for the future, than a prescription.
He observed that humanity initially lived at the subsistence level in a state of equality during the hunter-gatherer era. Everyone was equal because essentially everyone was poor. They had equality through poverty.
This changed over time as technology improved, but led to feudalism where powerful aristocracies could control the labor tied to the land it worked on. With the continual evolution of technology, this situation eventually shifted to capitalism as merchants became rich and uncontrollable by the aristocracies.
Seeing this pattern of shifting political-economic landscapes, Marx predicted that eventually the laborers (proletariat) in a capitalist society would grow tired of having a lower quality of life than the owners of capital, who would become a smaller and smaller percentage of the population with more and more of the total wealth.
This inequality would lead to an overthrowing of the oppressive capitalists by the laborers and result in the formerly oppressed laborers being the oppressors. Marx, however, did not see this “dictatorship of the proletariat” lasting very long and predicted that eventually the new oppressors would do away with institutions because all would decide to live in a state of equality where laws and police weren’t needed.
What’s most important to realize about this economic theory is that it is still largely individualistic. The laborers simply “gain class consciousness” of the unequal situation and realize that they are not benefitting from the capitalist system as much as they could be due to the owners of capital capturing the majority of the wealth. This is almost exactly what happened in the Occupy Movement that chanted, “We are the 99%”.
Individuals in Marxist communism are deciding what best maximizes their well-being. The political will of the majority of the population chooses to live in a state of equality, rather than a state of inequality that benefits only a small percentage of elite capital owners. It is a turn away from competition and inequality toward cooperation and equality by choice. This is not how communism as turned out in practice.
Communism in Practice
While capitalism and its organic evolution into Marxist communism focus on individuals making decisions by cooperative and collective means, communism as it has been historically implemented focuses on collective “equality” through centralized decision-making. In practice, this has consisted of an authoritarian government doing the decision-making, but as will be discussed in the Democracy section does not have to be the case.
In order to reach a state of equality in practice, people like Vladimir Lenin believed it was necessary to create a “vanguard of the proletariat” to push the working class into moving towards and adopting communism. This allowed the “vanguard” to simply become a new set of elites and begin making decisions. Once in power, these vanguards operated as both political and economic decision makers with little accountability from a democratic voting public.
That turns out to be the main problem of communism in practice. Trying to decide what is best for individual well-being that is not your own is very difficult, especially if you are responsible for the individual well-being of millions of individuals in a large nation-state as a central planner. There is simply no way that a central decision-maker can go about that task in an optimal way. They would literally need to know millions of pieces of information in order to figure out how to distribute and utilize a nation’s resources.
Who should get what goods and services? How much should they get? Do any innovations or discoveries need to made in order to produce the goods and services needed? How many researchers are needed? The list of questions that need answers in a large economy are way beyond any central planner once you begin asking them. With all this in mind, it is easier to recognize that centralized planning in communism is a historical byproduct of authoritarian governments more so than Marx originally intending it.
All of this brings us to democracy, which is the political theory that favors individuals making decisions instead of an authoritarian figure deciding for them. Rather than trust absolute power to a single person or small group, it is better to decentralize it to as many people as possible. A voting public is able to hold elected officials accountable for their actions with the threat and ability to remove said officials if necessary.
Democracy is a political system, not an economic one like capitalism and communism are. Therefore, it could hypothetically be decided in a democracy to create a central economic authority that could act in a traditionally communist fashion. This isn’t likely to happen, however, as most nation-states that value individual liberty in politics are also likely to value the same thing in economics. The political will of the people just isn’t likely to turn over autonomy to a central economic planner in a democracy.
Instead, it is much more likely that democracy turns to an economic system like the world is seeing in Scandinavian countries. These countries operate as social democracies. These political-economic systems are much more stable and sustainable than the traditionally unequal capitalist societies or historically authoritarian forms of communism.
This is because social democracies allow individuals to make political choices through voting just like traditional democracies, but unlike authoritarian regimes, while also allowing individuals to make economic choices through free markets just like traditional capitalist systems. The difference is that the populace has collectively decided to live with high taxes in order to support socially beneficial programs after the market has already been allowed to create wealth, which as you will remember is much more efficient than a central planner attempting to do so. The population has chosen the taxation and redistribution, not been forced into it.
So there you have it. Capitalism does not require competition. Capitalism is about individual economic choice and decision-making. Marxist communism can be viewed as an organic evolution of capitalism towards more equality through the collective will of the individuals within society. Communism in practice has been much more about authoritarian and centralized political and economic decision-making, which is its main problem. Capitalism and democracy both allow maximal individual autonomy over economic and political decisions respectively, which is why they work so well together and allow society to move towards systems such as social democracy found in Scandanavia where people choose to cooperate for the benefit of all members of society.