Henry George
The Science of Political Economy
Book III, The Production of Wealth*

Chapter XII
The Office of Competition In Production

Showing That Competition Brings Trade, And Consequently Service, To Its Just Level

["Competition is the life of trade" an old and true adage -- The assumption that it is an evil springs from two causes -- one bad, the other good -- The bad cause at the root of protectionism -- Law of competition a natural law -- Competition necessary to civilization.**

01

That "competition is the life of trade," is an old and true adage. But in current thought and current literature there is so much assumption that competition is an evil that it is worth while to examine at some length its cause and office in the production of wealth.

02

Much of this assumption that competition is an evil and a wrong that should be restricted and indeed abolished in the higher interests of society springs from the desire of men unduly to profit at the expense of their fellows by distorting natural laws of the distribution of wealth. This is true of the form of socialism which was known in the time of Adam Smith as the mercantile system or theory, and which still exists with but little diminished strength under the general name of protectionism. Much of it again has a nobler origin, coming from a righteous indignation with the monstrous inequalities in the existing distribution of wealth throughout the civilized world, coupled with a mistaken assumption that these inequalities are due to competition.

03

I do not propose here to treat either of protectionism or socialism proper, my purpose being not that of controversy or refutation, but merely that of discovering and explaining the natural laws with which the science of political economy is concerned. But the law of competition is one of these natural laws, without an understanding of which we cannot fully understand the economy or system by which that intelligence to which we must refer the origin and existence of the world has provided that the advance of mankind in civilization should be an advance towards the general enjoyment of literally boundless wealth.

04

The competition of men with their fellows in the production of wealth has its origin in the impulse to satisfy desires with the least expenditure of exertion.

05

Competition is indeed the life of trade, in a deeper sense than that it is a mere facilitator of trade. It is the life of trade in the sense that its spirit or impulse is the spirit or impulse of trade or xchange.

* No introduction or motto supplied for Book III in MS. —H.G., Jr.

** No summary of this chapter appears in the MS. The summary here presented and inclosed by brackets is supplied for the reader’s convenience. -- H.G., JR.