Competition, Marxist

Competition, Marxist

BIBLIOGRAPHY

The treatment of competition captures the methodological difference between the neoclassical and materialist (Marxist) approach to social and economic relations. In the former, competition is the interaction of individual economic agents through exchange in pursuit of self interest, be they consumers, workers, or owners of capital. The principle conditions necessary for competition are many buyers and sellers, and free entry to and exit from the market. Thus, competition is a question of numbers. Competition declines as the number of producers declines; monopoly is the absence of competition. In this analysis competition is an equilibrating force that brings efficiency to markets. The restriction of competition by government action undermines this efficiency. Private sector barriers to competition, such as collusion among producers, represent market failure.

Marx criticized this approach as an “absurdity of regarding [competition] as the … existence of free individuality in the sphere of consumption and exchange. Nothing can be more mistaken” (Marx [1858] 1973, p. 649). Briefly stated, Marx argued as follows: Capitalist production arises historically from the separation of labor from the means of production; in order to produce and live, workers must be employed by capital (“free wage labor”). This labor relation gives capital its mobility, both geographically and across sectors of production. Competition among producers (or “capitals,” Marx’s term) results from the conceptually prior competition between capital and labor: “Free competition … is first the free movement of capital and nothing else” (Marx 1973, p. 651). A producer may temporarily monopolize the production and sale of a particular commodity, but cannot monopolize the market for labor services (labor power).

From this analysis it follows that as the number of competitors in a sector of industry declines, competition intensifies:

In practical life we find not only competition, monopoly, and the antagonism between them, but also the synthesis of the two.… Monopoly produces competition, competition produces monopoly.… The synthesis is such that monopoly can only maintain itself by continually entering into the struggle of competition. (Marx and Engels 1976, p. 197)

By this line of argument, competition is not an equilibrating force, but a destabilizing conflict among capitalist enterprises, leading to imperialism and wars between capitalist powers (this is explained in Weeks 1981, Chapter 6). While this approach may seem strange to the point of bizarre to twenty-first-century economists, in the mid-twentieth century it was very much part of the mainstream. In 1947, K. W. Rothschild linked competition to conflict in an article in the Economic Journal, the most prestigious publication in the profession at the time. His argument is quite consistent with Marx’s analysis:

[A] theory of markets can be complete and relevant only if its framework includes all the main aspects of the struggle [by corporations] for security and position. Like price wars, open imperialist conflicts will not be the daily routine of the oligopolistic market. But, like price wars, their possibility and the preparation for them will be a constantly existing background … and the imperialistic aspects of modern wars or armed interventions must be seen as part of a dynamic market theory just as the more traditional “economic” activities like cut-throat pricing … for there is no fundamental difference between the two. (Rothschild 1947, p. 319)

In light of the international tensions, conflicts, and wars since the end of the cold war, in some cases involving access to resources, it is perhaps worth revisiting Marx’s analytical approach to capitalist competition.

BIBLIOGRAPHY

Marx, Karl. [1858] 1973. Grundrisse. Foundations of the Critique of Political Economy. Trans. Martin Nicolaus. New York: Vintage.

Marx, Karl, and Frederick Engels. 1976. Collected Works. New York: International Publishers.

Rothschild, K. W. 1947. Price Theory and Oligopoly. Economic Journal 57: (227): 229–320.

Weeks, John. 1981. Capital and Exploitation. Princeton, NJ: Princeton University Press.

John Weeks