Saving Communities

Bringing prosperity through freedom, equality, local autonomy and respect for the commons.

The Ethics of Democracy

by Louis F. Post

Part 5, Politico-Economic Principles
Chapter 2, Free Competition

THAT free competition has had its day and is destroying itself, is regarded as one of the established facts, not only by superficial observers of economic phenomena, but also by the "scientific" cult in economics. Why a notion so manifestly erroneous should be regarded as scientific, is itself a problem. It may possibly be explained by the abuse in economics of what is known as the "scientific" method. Economic "scientists" are so deeply absorbed in the contemplation of multitudinous and multifarious minor data that they often give but scant attention to familiar and simple major data. They cannot see the forest for the trees, nor the city for the houses. They overlook the mean level of economic tendencies in their statistical studies of economic undulations. In their perspiring effort to accomplish a monstrous and impossible task in synthesis, they neglect logical analysis altogether. Overtraining seems to have undone them. It is known to have that effect upon the body; why not upon the mind?

But whatever the explanation of this "scientific" absurdity may be, the proposition that competition has had its day and is destroying itself is false in both its branches. It is false in its assumption that there has been, in fact, an era of free competition within historic times; and it is false in its theory that competition destroys competition.

What everybody means by free competition is free bargaining. This is not to say that the term is never used to include more than that idea. Unhappily it is so used altogether too often. But as it always does include that idea, it cannot comprehend another and discordant idea without carrying a double meaning. Anyone has a right, of course, to use words with double meanings; but persons who do so are necessarily ruled off the forum of sane and serious discussion. No degree of liberty in the choice of words, nor any extent or antiquity of verbal usage, will justify in scientific discussion or investigation the ascription of discordant meanings to a distinctive term. Inasmuch, then, as free competition always does comprehend the idea of free bargaining, and cannot, therefore, be legitimately used for economic inquiry as including any idea inconsistent with that one, we are fully warranted in saying that free bargaining is synonymous with free competition.

Divested thus of the conflicting and confusing meanings of loose usage, competition is instantly recognized as the name of a principle of social or industrial life which has never been given full play. Though it has approximated freedom at times on the frontiers of civilization, and within the narrow boundaries of those primitive communities has worked well both in economics and morals, there is no record that the civilized world, considered as one community, or even any nation so considered, has ever had an opportunity to test it.

For monopoly in some form has always characterized historic civilizations; and when and where there is monopoly, and to the degree that there is monopoly, then and there and to that degree competition, or free bargaining, is impossible. Where slavery is, competition is restricted; the slave cannot make free bargains. Where private corporations control the highways of commerce, competition is restricted; producers and consumers cannot make their reciprocal trades without paying tribute, and tribute is inconsistent with free bargaining. Where protective tariffs prevail, free bargaining is prevented, not only obviously but also with deliberate intent. Where revenue tariffs and taxes are imposed upon producers and consumers, as such, free bargaining is obstructed. Where mines, and oil wells, and salt deposits, and forests, and rights of highway, and terminal points, and farming places conveniently located, and city building-lots, and water power, and all the innumerable provisions which Nature has made for human use - where these are monopolized, free bargaining is nothing but a free farce. There cannot be free bargaining when either of the bargainers in a trade has a legal or institutional advantage, or staggers under a legal or institutional disadvantage.

It is true that in modern times monopolies themselves are subjects of free competition between monopolists. We have "free trade," so-called, even in that greatest and most fundamental monopoly, the monopoly of the earth. But this does not alter the question. If monopolies obstruct competition, they will obstruct it none the less for being made subjects of competitive purchase and sale. Though this may operate to shift the monopolists, the monopolies still hold sway; they still abridge free bargaining, still interfere with free competition, on the part of all whose transactions come within the influence of their tribute-exacting power. What of it, if all are free to bargain for an interest in a railroad right of way or terminal privilege? What of it, if anyone may have a place upon the earth if he can get it by bargaining? To argue that this is free competition, that this is free bargaining, is like saying that there is no slavery where slaves have the right to buy their freedom at the market price. Freedom to trade one's own labor for a right which in common justice belongs to him without labor - as the right to breathe, the right to be free, the right to work, the right to go to market, the right to a place upon the earth, the right to share in the benefits of common development - is not free bargaining.

And when in the history of our civilization have the obstructions to competition noted above - when have some or all of those monopolies, with their complex variations, not been in vogue? One of them, the monopoly of the earth, has attended the development and strengthened with the advances of civilization from the earliest times. Yet economic "scientists" teach that free competition has had its day!

Not only have we never had an era of free competition, but such limited competition as we have had or have now is not being destroyed by itself. That it is being destroyed is quite evident; but competition is not destroying it. What is destroying it is the natural antagonist of competition - monopoly.

As already indicated, our civilization is impregnated with institutional monopoly. Though its outward form is competition, and though more or less freedom of competition has vitalized it, the seeds of the monopoly disease have always been in its system. Under the influence of miraculous progress in the production of wealth, this disease has rapidly gained headway, and as it has advanced the influence of competition has naturally receded. Only by ignoring the fact of institutional monopoly is it possible to infer with even an approximation to scientific precision that competition is destroying itself. To consider the fact of monopoly, but to regard it as the natural (or must we say "scientific") outcome of competition, is a little like regarding weeds in the corn row as the "scientific" product of seed corn in the hill. Whenever of two conflicting forces - and that is what competition and monopoly are - one comes under the sway of the other, it is not usually considered scientific to conclude that it has destroyed itself and produced the other. The usual, not to say necessary, conclusion is that the one force has for some reason been overcome by the other. Yet economic "science" encourages the notion not that monopoly is overcoming competition, but that competition is overcoming itself and creating monopoly!

Briefly stated with reference to current problems, the misleading theory of such "scientists" is that free competition has had a trial in which it has destroyed itself and produced monopoly in the form of trusts. And this absurd misconception has taken root in popular thought. The industrial pressure which is forcing masses of the people deeper into a condition of helpless dependence, where squalid poverty and carking fear of poverty in the midst of luxury make life bitter and unwholesome, has tremendously stimulated economic discussion among the masses of the people. The most pronounced characteristic of this discussion, however, is its confusion. In that respect it may be fairly compared with the confusion of tongues at Babel. Such variety of opinion prevails among different schools of social reformers that effective concert of action is hopeless. The luxurious and domineering beneficiaries of the existing industrial regime might safely say to these reformers: "When you agree among yourselves upon what to do, we promise submission to your decision." There would be no decision to submit to, because there is no community of opinion.

Yet the reason for the confusion may be traced to disputes about the single economic principle - or, may be, it is only a misunderstanding of the significance of the single economic term - competition. Whenever there are grounds for supposing that a dispute, instead of turning upon the substance of an idea, turns upon the significance of a word, it is best, if possible, at the outset at any rate, to avoid using the ambiguous word. That many disputes do turn upon mere words is matter of common observation. It is inevitable that they should do so. For words connote or suggest, quite as distinctly as they denote or specify. Indeed, the ideas that words connote are often more vivid than those they denote. Though you define your term never so nicely, yet if it be a common word with different connotations in different localities or to different minds, mental confusion and consequent disputes cannot easily be avoided by precise definition. This is especially true with minds untrained in precise thinking. It is true also with those that are trained to loose thinking.

Illustrations are abundant. For example: The term "provincial" has the same primary meaning wherever English is spoken. Yet the ideas which it connotes to the British Columbian are in one respect opposite to those which it connotes to the Londoner or the Bostonian. As the inhabitant of the Province of British Columbia has learned to contrast his municipalities with his Province, somewhat as we contrast our States with our nation, "provincial" is to him a term of large significance, like our term "national." When he wishes to dignify an industrial enterprise or a political measure, he describes its character as "provincial," thereby intending to suggest that it is vastly more important than if it were an enterprise or measure of merely local concern. But to the Londoner or Bostonian, "provincial" suggests a contrast of what is local with what is metropolitan. To the latter, therefore, the term connotes ideas of pettiness or inferiority, while to the British Columbian it connotes ideas of greatness or superiority. How easy it might be, then, for a Londoner or a Bostonian to fall into interminable dispute with a British Columbian over some question of "provincialism" regarding which they were really in agreement. It would be almost unavoidable even if they began with a precise definition of the term "provincial." For notwithstanding their agreement as to the denotation of the term, its conflicting connotations to which they were respectively habituated would constantly obtrude to promote misunderstanding between them.

Another illustration of the difficulty of avoiding confusion of thought by separating the ideas that a word connotes from those which it specifically denotes is afforded by the subject here under consideration. Most if not all the disputes among social reformers over the justice or injustice, the wisdom or folly, the righteousness or wickedness, the benefits or injury that are due to competition, rest upon conflicting impressions as to the significance of the term. In economic thought, when precise, "competition" is a term which denotes individual freedom in industrial affairs - free bargaining, as we have already defined it. It excludes all idea of arbitrary industrial control of any person by others. But through colloquial and other loose usage, the term has come to connote ideas the very reverse of this. For that reason a discussion of the law of competition which begins with a definition of the word, is in danger, notwithstanding precision in defining, of being misunderstood by persons to whom the word habitually connotes ideas at variance with the definition. Since, therefore, the use of the term "competition" may turn attention away from the essential idea under consideration, and produce needless conflict of opinion, we should seek other forms of expression until we can bring clearly within the apprehension the substance of the idea involved. The idea is the thing, not the word. In what follows let us aim to conform to this principle.

Economic adjustment always must offer for adoption two, and only two, possible forms - the monopolistic, and the cooperative. Monopoly implies compulsion, and is the opposite of cooperation. It does, indeed, resemble cooperation, for it is a form of united industrial effort. But slave systems resemble cooperation in that sense. All production is through union of industrial effort; but compulsory union is a radically different thing from voluntary union. What distinguishes monopoly from cooperation, and puts them at opposite poles, is the compulsory character of the one and the voluntary character of the other.

Monopoly is a form of economic adjustment which is to be avoided whenever and wherever possible. For compulsion is abhorrent to democratic principles. To empower any man to compel others to serve or to put them at a disadvantage in contracting to serve, is to establish the principle of slavery. Monopoly is, indeed, a species of human slavery. Nor would it be any the less slavery if government instead of individuals or corporations were the master.

With the development of industry, some kinds of service become naturally monopolistic. The water supply of a city is an illustration. Cities cannot be supplied with water except through monopolistic methods. In all such instances there is no choice between monopoly and no monopoly; the choice is only between monopolists. And when that is the case there can be no reasonable question that as between the public or community as a whole, and private individuals or corporations, the public is the preferable monopolist. But so long as an occupation is not necessarily and essentially monopolistic, the minds of free men will justly revolt at the thought of turning it into a monopoly under either private or public control.

To cooperation, then, as distinguished from monopoly, the democratic mind must turn for industrial development and industrial justice, barring only those exceptional occupations which are necessarily or in the nature of things monopolies.

But cooperation must mean something different from what is usually understood by socialism. That is enforced cooperation, and therefore monopoly under another name. It is infected with compulsion, which is the distinguishing characteristic of monopoly. True enough, socialists insist that there would be no compulsion in the Socialist Commonwealth. But that is their inference. Others as competent to judge as they, infer that there would be compulsion.

Cooperation must also comprehend more than is implied by the organizers of profit-sharing societies and schemes, who have of late years appropriated the word. It must be taken to signify that world-wide combination of effort in supplying human wants which is effected by the voluntary interchanges of labor.

But in the interest of justice, how are these world-wide interchanges of labor to be regulated? Who shall work? How much shall the workers do? What shall they do? For whom shall they do it? How much shall they receive? And who shall decide?

Under a monopolistic regime those questions would be decided more or less arbitrarily for every one by superior authority - by trusts, if the regime were one of private and corporate monopoly; by governments, if the monopoly were public or socialistic. But in both there would be arbitrary compulsion, which is to be avoided if possible.

Cooperation avoids it - cooperation, that is, in the fullest and broadest sense of the term, and as distinguished from monopoly - by making every man free to decide the questions for himself. Under a regime of cooperation each would work if he wished; each would work as much or as little as he wished and receive in proportion; each would work at what he preferred; and each would work for whom he chose, subject only to that person's corresponding right of choice. By what method cooperation would effect this result is the next point of inquiry.

No patent device for social reform is here set up. We are simply investigating, and trying to adjust social conditions to the operation of natural law. The natural law of social adjustments must be sought for in the laws of human nature. Seeking there, Henry George asserted the following as fundamental: "Men seek to satisfy their desires with the least exertion." This is a law which, as he explained, "is no more affected by the selfishness or unselfishness of our desires than is the law of gravitation." Let a man's desires be what they may, selfish or unselfish, in endeavoring to satisfy them he will seek the line of least resistance. It is this law, this universally recognized fact, and not an assumed principle of human selfishness, that regulates industry in free cooperation.

Monopoly, whether private or governmental, obstructs the line of least resistance and thereby forces men to seek the satisfaction of their desires, selfish and unselfish, with greater instead of least exertion. But all this would be changed by abolishing monopoly in every vocation in which it is not a necessary condition, and private monopoly altogether. Unnecessary obstructions along the line of least economic resistance would be thereby removed, and each man would acquire full economic freedom to satisfy his own desires in the way that seemed easiest to him. The only restraint upon this natural impulse of his would be the equal economic freedom of everyone else. And that would be restraint enough. He would then cooperate with his fellows, from time to time or all the time as he pleased, upon terms mutually desirable, and only upon such terms. Neither trusts nor governments would be his master. Selfishly or unselfishly, it matters not which, except to his own character, he would be master of himself.

But a cooperative regime in which everyone is master of himself must be a regime of free bargaining, of free competition. Not only does free competition alone make such cooperation possible, but so long as it exists competition will persist. Self-mastership and free competition are inseparable. To weaken or abolish either is to weaken or abolish the other. Monopoly implies mastery by some of others, be the monopoly private or governmental. Free competition implies individual freedom. It is only under free competition that all men can be at liberty to satisfy their desires, selfish or unselfish, with what appears to them under all the circumstances to be the least exertion.

In the absence of legal restraint, competition exists as an expression of the Georgian law quoted above - the law that men seek to satisfy their desires, selfish or unselfish, with the least exertion. But there are, as this law implies, two kinds of competition. They may be distinguished as "altruistic" and "egoistic."

If men were all unselfish, each seeking primarily the comfort of his neighbor, we might have "altruistic" competition, in which every one would compete for opportunities to give the most service for the least service in return. And if they were all free, the conflict between them would produce an equilibrium, not at the least return nor at the greatest expenditure of service, but at the point of fair exchange. For, traders to whom much service was offered in return for little, being as altruistic as the others, would generously refuse to take so much for so little, and a "higgling" would ensue until the just equilibrium had been established. So long as all were sincerely altruistic this would be the result of their dealings. It would make no difference for how much less than it was worth any man insisted upon rendering service. Since all would with equal strenuousness oppose receiving service except for its full value or more, the competition - "altrusistic" competition - would produce an equilibrium at the point of equality of benefit.

But "altruistic" competition could thrive only in communities where all were altruists. If there were an element of selfishness in the community, it would hopelessly disturb the equilibrium. Imagine the effect in physical affairs of atmospheric pressure at 15 pounds to the inch in some directions, and less than 15 in others, and you get some conception of what the economic effect of "altruistic" competition would be in a community where all were not altruists. There would be no equilibrium of exchange. When altruists offered to render service for less than it was worth, non-altruists would do no higgling, but would clinch the bargain at once. The final result in that community, if altruistic competition continued, would be a division into classes of altruistic poor and selfish rich. The altruistic class would render most of the service, and the other class would get most of the benefit. The nearest approach to altruistic competition of which we have any record prevails at the present time - not in spirit but in practice. Though the great working masses may be no more altruistic in spirit than the classes their labor enriches, they nevertheless exchange their labor upon altruistic terms, rendering more service than they receive in return.

"Egoistic" competition, on the other hand, when operating in like free conditions, maintains the just equilibrium of exchange everywhere - in communities that are all unselfish, in those that are all selfish, and in those that are mixed. Under a regime of "egoistic" competition no one would offer his service for less than he believed it to be worth, and many would ask more. This would generate a conflict, not of each to give much for little, as in "altruistic" competition, but of each to give little for much. But if all were free the result of this competition would be exactly like that of "altruistic" competition. The competitive pressure being equal on all sides, it also would produce an equilibrium at the point of fair exchange

In the result, however, this difference would appear: Whereas selfish traders could disturb the equilibrium of "altruistic" competition, they could not disturb that of "egoistic" competition. The persistent equal pressure of self-interest in all directions would force them to make fair bargains. The better it is understood, the clearer it will be seen that "egoistic" competition is a natural law for compelling the selfish to be fair and the unrighteous to be just.

And it rests upon an immutable principle, namely, that every man must live his life from within outward. No one can live from others to himself. He must live from himself to others. Selfhood is the base line of all social triangulation. The principle finds its highest expression in the golden rule: "Whatsoever ye would that others should do to you, do ye even so to them." This is a law of justice, not of altruism. It would be impossible to give it altruistic expression. The law of justice demands, what, in economics, laws of human nature enforce, that each shall look out upon all his brethren as from the center of a circle. He knows his own sensations; he cannot know theirs. To be just, therefore, he must do to them as he would have them do to him. It is the only way. And when men engage in interchanging their labor or its products for mutual satisfaction, each must fall back upon his own sensations in laboring as the test of the reward he will demand from others. There is no other test. Then by the pressure of his offers and demands in an open and free market where all are equal, upon the offers and demands of his fellows, a just ratio of labor exchange is established. That pressure is competition, "egoistic" competition, which is the economic expression of the spiritual law phrased in the golden rule.

Even if this were less desirable than "altruistic" competition, the latter could be advocated only as an admonition to the individual and not as a social reform. For altruism enforced by law, if such a thing were possible, would be only less odious and no whit less menacing than monopoly enforced by law. Though it is every man's right, and may be every man's religious duty, to love his neighbor better than himself, it is no man's right, either as voter, legislator or czar, to compel another to do so.

The function of the law is to secure to all equal rights to satisfy their desires with the least exertion. Whatever is necessary for this purpose it is the right and duty of government to undertake. Beyond that, government cannot go without menacing liberty. So long as individuals satisfy their desires justly, without trespassing upon the rights of others, it is for them - not for government - to decide whether their desires shall be selfish or unselfish. Though altruism as a principle of individual conduct may rank highest in the list of human virtues, as a social reform to be enforced by law it is impossible of accomplishment, impertinent in design, invasive in conception and reactionary in tendency.

Let us secure to all men - not to some, but to all - freedom to satisfy their desires, selfish or unselfish, with the least exertion (which can be done only by freeing competition from monopoly), and we may safely let each man be as generous or as niggardly as he pleases.

When the real nature of competition is considered, it is difficult to understand why any thoughtful man should ever have doubted its usefulness. But thoughtful men have done so, and the reason is not very far to seek. In the first place, teachers of political economy have persistently taught that competition and selfishness - selfishness in the sense of greed - are synonymous, and that competition is an animal-like struggle for existence. Nothing could be farther from the truth. As we have already seen, selfishness may or may not be the motive in competition. Whether it be or not, in any given case, is immaterial to this inquiry. The part that competition plays in society is not as a minister to greed, but as a minister of justice in exchange.

As Henry George truly said in his posthumous book: "There is no measure of value among men save competition or the higgling of the market." It is only by this means that workers can measure the value of their work so as to exchange it among themselves fairly and justly. Each understands and can appraise the irksomeness of the labor he himself does, better than he can understand or appraise that of the person with whom he contemplates an exchange. It is natural, therefore, that he should endeavor to adjust his trades from the view-point of the irksomeness of his own labor, rather than from that of the irksomeness of another's labor. Yet each is checked from appraising his own labor exorbitantly, by others who would compete if he demanded a larger return than that for which they were willing to endure the same degree of irksomeness. And if all are free, with equal access to natural and social opportunities, this competition could produce but one effect - an equilibrium of exchange at a point at which neither party to the trade gets more or gives less than is just. While it is true that parties to trades may be actuated by selfish motives in their competition, it is equally true that they may be actuated by unselfish motives. And be their motives good or bad, the net result of their competition, if they compete in freedom, is a just equilibrium of value. It is justice, not greed, to which free competition really ministers.

But under existing arrangements competition is not free. This is a second reason why some thoughtful men have been misled into supposing that competition is neither useful nor right. Monopoly having intervened, all competition is affected by it; so that what we are accustomed to regard as competition is not free competition at all, but at the best is only jug-handling competition.

When an importer who has been forced to pay customs duties in order to maintain protected monopolies, offers his goods for sale in competition with one who has smuggled his goods into the country, the competition is onesided. When a farmer, who has paid to a railroad monopoly in freight rates all the traffic will bear, offers his produce in competition with a favored shipper who is allowed rebates, the competition is one-sided. When landless workingmen, who must get work or starve, offer their services in competition with one another in a labor market which has been glutted by monopolization of working opportunities - when they offer their services in these circumstances to men who control more or less of the monopolized opportunities, the competition is one-sided. If, instead of the condition which these illustrations suggest, we had a condition in which there were no tariff duties to be paid by some and evaded by others; in which highway rights were equal, and no private monopolist could deal out highway favors; in which all land not in use were everywhere open to its appropriate use without blackmail; in which, in short, every exchange were essentially an exchange of labor - if that were the industrial regime under which we live, then the usefulness, the beneficence, the indispensability of competition would be as obvious as the usefulness, the beneficence, and the indispensability of gravitation.

And it is altogether a begging of the question to say that the present jug-handled regime is a natural and inevitable outgrowth of the competitive idea. As well argue that a one-legged man owes his misfortune to the fact that men have legs. If men didn't have legs, we should have no one-legged men. So, if it were not for competition, we should have no jug-handled competition. But one-legged men owe their misfortune to interference with legs, not to the leg idea. Likewise we owe jug-handled competition to interference with competition, and not to the competitive idea. It is monopoly, not its antithesis, that distorts, disarranges and demoralizes our industrial system.

A third reason has contributed to the error. This reason springs out of the mediation of money in trading transactions, coupled with the custom of trading monopolies indiscriminately with other things. As money is exchangeable for anything in the market, the establishment of monopolies enables monopolists to get money without laboring. The real character of competition in trading - exchange of labor for labor - is thus completely hidden from common observation, and also from a good deal of observation that is not common. Trade comes to be in appearance an exchange of something for money; and competition to be a struggle between those who haven't money, to get money from those who have it. The whole social organism is turned upside down and inside out. But it is the abolition of monoply, not of its opposite, competition, that would correct this. If monopoly were abolished, we should soon distinctly see, in spite of the obscurity which the use of money introduces, that trade consists essentially in exchanges of labor for labor, and that competition is the natural and only just regulator of values in these exchanges. For if monopoly were abolished, none could get products of labor except by laboring, and each would get these products in proportion to the usefulness of his labor. Money would then represent labor, and nothing but labor.

The true work before us, then, the work that will count both in the doing and in the fruition, is to abolish monopoly and restore freedom to competition. Where monopoly is inevitable, as in water supplies for cities and the like, the service that is subject to it must be assumed by the public, to the end that in other vocations competition may be freed; private monopoly in anything tends to destroy competition in all things. Freedom of competition must be the aim in every movement. The other direction leads to monopoly. To these two the choice is confined. There is no middle ground. Instead of trying to guard men in their economic relations with a legal network, let us set men free - free to labor as they will, free to trade where they will, and free to dispose of what they earn as suits them best - so that each can guard himself in his own economic relations.

If that is desirable - and really is it not the only thing worth fighting for? - then we must achieve it by making competition free. Free competition, and that alone, can secure economic freedom. Without it we have monopoly. And an economic state organized upon monopoly principles would be intolerable, whether governed by a trust magnate, a political boss, a trades union leader, a majority of the people, or even the most amiable altruist who ever loved his fellow men.