The law of competition: the concept, fundamentals of the economy and the principle of operation

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:53

From the moment when prices were liberalized in our country, the hitherto unknown law of competition began its work. Pricing completely and completely left the jurisdiction of the state, which previously always independently set prices in both retail and wholesale trade, and they remained firm for decades. This process is currently extremely flexible and is controlled only by the law of competition.

Action

The law of competition began to act immediately, as soon as pricing became oriented to supply and demand, to maximize profits, when capitals were able to freely flow, then the triad of the market, motivation, and competition triumphed. Antitrust laws emerged and became more widespread and more strictly enforced over time.

Formerlythe law of competition was replaced by competition among producers, and this was also an incentive, but "live" profit is much more conducive to increasing labor productivity, and therefore technical progress is developing more rapidly. With regard to the productive forces, the monopolies have never been shy about doing complete arbitrariness. However, now a much larger part of the profit is being built up by increasing labor productivity.

A bit of history

Antimonopoly legislation was not created suddenly, gradually establishing the most rational ratio of competition and monopoly, preventing the destructive consequences of ill-conceived actions. The first foundations of competition law saw the light in 1890 (the Sherman Law, or Antitrust Law) in the United States. Thus, for the first time, competition was taken under the protection of the state itself.

In the USSR, the laws of product marketing were radically different from the capitalist ones. The economy was planned, where the absence of the principles of the law of competition did not create conditions for the anarchy of production, and sales were calculated regardless of the problems of surplus value and did not create the need to look for the most profitable markets. The capitalist is obligated to choose special commercial operations, for the successful implementation of which any path is justified, up to advertising deceit, commodity falsification. The main thing is to oust the competitor.

Such principles

For greater profit, it is beneficial for the capitalist to even artificially create difficulties in the sale of one or anotherproducts, and the worse things go for rivals (including consumers too!), the more clearly additional profit looms. The system of laws of competition is such that universal human values, and even more so the development of individual countries, are much lower among the priorities of the capitalist than obtaining immediate and as high a profit as possible.

Thus, capital has been pumping oil in the Middle East for many decades, in every way preventing resource-owning countries from creating their own oil refining industry. Including our country drives only raw materials for sale, since it is precisely such conditions that world business creates, these are precisely the laws of competition in the economies of capitalist countries.

And just like other owners of rich deposits, our country buys from foreign capital oil products made from our own oil, but already at higher prices than those that would be formed by processing oil on the spot.

Artificial Scarcity

Did a capitalist ever care about the fate of consumers? The main condition of economic law is free competition, but this is how it remains in words. In reality, the opposite happens. The capitalist needs to raise prices as high as possible in order to get more income at the expense of consumers. Therefore, he benefits from a shortage of one or another product, which is created artificially. For example, the sale of petroleum products is almost always regulated in this way.

The economic law of competition should lead to that objective process, when the quality of services and products is constantly increasing, and their unit price is decreasing. However, judging by the realities, this principle does not work well. All low-quality and all too expensive products should be washed out of the markets. But to implement these processes, at least a well-functioning antitrust law is needed.

The way it should be

Entrepreneurship is a way of making a profit by satisfying the demand of consumers by offering exactly those goods that consumers require at the moment. But even here we see the operation of the law of competition, regulated not in favor of social needs. Even if the direction of activity is chosen successfully by the entrepreneur, if there is the ability to produce the best quality product at the lowest cost, the entrepreneur may not win in the competition.

The reason for this is the invisible laws of the market. Competition is almost never fair. It should have a very strong impact on the behavior of each market entity. And renders. The laws of supply and demand are much less effective. With truly free competition, all excessively high and excessively low prices should move towards averaging, towards a point of balance.

However, for some reason, this does not happen. Equality of the opposing sides in the competition does not work. Surely there are other rules of the competitive game here, without the direct involvement of the competitiveness of competitors in identifying the equilibrium price and clearly markedquantity of items needed.

Strategic decisions

For successful work in a market economy, an optimization approach is needed with the establishment of a relationship between economic indicators, technical and organizational ones. It is necessary to study market mechanisms: the laws of economy of time, scale, competition, other dependencies.

And strategic decisions require extremely detailed analysis of supply and demand, dependencies between them, rising windfall costs, loss of profitability, economic relationships between production and consumption, scale of production and much more.

Competition is a prerequisite for the operation of economic laws, and analysis should be carried out not only at the level of the operating company, but also at the industry level: how the competition mechanism works, antitrust laws, what are the forms of competition in the industry and what is its strength.

Market structure

A market economy can be represented by a monopoly or an oligopoly, monopolistic competition or perfect, pure competition. The form of the market depends on the number of original goods with a patent, on the quality of information (advertising) about the goods needed by the consumer. The current law of competition should help predict prices, the capabilities of competitors and the factors that determine this.

For example, several firms produce the same product. It can be compared in terms of unit price (price-benefit ratio, which reflectsconsumer properties of this product in certain conditions). All firms will try to develop a product model with the best performance. Competition - competitiveness, when independent actions of economic entities do not provide an opportunity to limit the chances of success of rivals or otherwise influence the general conditions created for movement in the commodity market of this product.

Competition

This is an intense struggle, where both individuals and legal entities fight for the buyer, otherwise, under the tough law of competition, the manufacturer simply cannot survive. It is necessary for each seller of services and goods to find more favorable conditions for the production of the product and its sale, to expand the sales market by improving the quality and lowering the individual cost of the goods. Then you get additional profit (excess income).

And since competition is an indispensable condition for the operation of economic laws, this forces the manufacturer to throw all available forces into the struggle for priority in the market space. If the market is occupied by monopoly producers who receive excess profits through the introduction of monopoly prices, competition weakens. As a result, the economy does not develop, production becomes less efficient. Then the state is forced to intervene in the development of competition.

Functions: regulating and stimulating

Competition constantly has a huge impact on any cost of the business executive who produces the product. It is thanks to her thatachieve market equilibrium in the sale of goods.

Its main function is regulating. Capital flows to the most profitable industries as prices are competitive, balancing demand with production.

Another function of competition is stimulating. Manufacturers oppose in the struggle for production conditions and the sales market, and this is an incentive for the development of business executives who are forced to innovate and make the best use of resources - both labor and raw materials.

Functions: controlling and differentiating

Competition should ensure the full development of technology, management efficiency and quality of resources. This is its controlling function: control over the comparability of costs and necessary costs in production, compliance with product quality, control over the changing needs of society.

In addition, an important function of competition is differentiation: producers of the same product have completely different market results. The best conditions go to the manufacturer that outperforms competitors by increasing production efficiency, taking into account public needs, and the like. Competitiveness also determines profit growth.

The law of competition as a law of nature

Any phenomenon contains both features and general properties, that is, individual and specific. Economic laws are no exception. The common thing here is that any laws of nature or society are objective and do not depend on consciousness. This means that theywill act even if we don't know anything about them.

The law of the market - cost, demand, supply, competition - also exists regardless of the knowledge of market participants. The subjects of the labor market are hired workers and employers. The latter can be represented by any enterprises, firms (state, individual, partnerships, corporations, and so on). Wage workers are the owners of the labor force. Unions of entrepreneurs and trade unions make the world market a single system with integral trade, financial and economic ties.

On another level

Integration processes in the world are developing, and the latest trends, such as the export of capital, for example, inevitably lead to a struggle that can also be called competitive, since it obeys the same laws. Each subject of international relations is trying to ensure the superiority of their own interests.

The desire not only to create, but more often to appropriate, accumulate vital resources leads the subject of socio-economic relations to rivalry, which can also be explained by the laws of competition, manifested at a different, higher level - at the international level. And here the most powerful rival is revealed, which ruthlessly suppresses competitors.

Thus, strong countries that have been using the laws of competition for a longer time are developing even more rapidly, by all means suppressing the economies of the "third world" countries, the development of which is completely unprofitable for the players of the internationalmarket.