Competition as Cooperation Serves Society

Article / Produced by TOW Project
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A well-structured marketplace shaped by ethical competition also reduces economic conflict by encouraging value creation – that is, work and economic exchange that operate for mutual benefit rather than benefitting one person at the expense of another. Work can create value by reorganizing the raw material of God’s creation, and economic exchange can create value by moving resources from those who need a particular good or service less to those who need it more. By creating value, people can meet their own economic needs not by taking value away from others but by increasing the total amount of value in the world.

For example, a steel mill turns iron ore into steel girders. This benefits iron ore miners (by giving them an income) and city dwellers (by making it possible to build apartment buildings) as well as the mill owners and workers. It does not merely take money away from city dwellers and give it to ore miners and mill owners and workers, but instead leaves everyone better off. Work has created value because the product, steel girders, is more useful (i.e., has greater value) than iron ore. Economic exchange has created value because the city dwellers need (i.e., value) the girders more than the money they paid for them, while the miners and millers need (i.e., value) the money more than the iron ore they used up. All parties are better off after the manufacture and sale of the girders than before. In this way, sellers support themselves and their households not at the expense of customers but precisely by serving customers.[1] This is true even though a company is always in a certain level of competition with its customers over price. That is, the product creates value, but there is still a certain amount of tension over the price, meaning how much of the value accrues to the seller and how much to the buyer. The tension between the seller’s good and the buyer’s good can never be fully removed, and thus the temptation to benefit ourselves by harming others will always be with us. By giving each party multiple choices, ethical competition creates the most opportunities and support for pursuing value creation rather than merely transfer of wealth.

Ethically sound approaches to economics recognize that cooperation is the basic reality and that ethical competition serves cooperative ends. True, when the level of competition is increased it can create a social environment of rapid change, economic dislocation, migration and impermanent institutions. In every economy, provision must be made for those who cannot provide for themselves by competing. None of this proves that competition is not serving the needs of social cooperation. Quite the contrary, a highly competitive environment often serves the public good and facilitates social cooperation better than the available alternatives. Those who lose their jobs when a company goes out of business are in relatively good shape if there are many competitor companies where they may look for a new job, but not in such good shape if there are few or no competitors left in the industry.

Let’s look more specifically at how our participation in economic competition can align with our definition of cooperation. The definition requires coordination “toward a shared end.” If competition is to be a form of cooperation, this implies the existence of a common or public good that all companies pursue as they compete.[2] The proper, shared end of competition is the central purpose Scripture identifies for our work and exchange – to meet the economic needs of our households and communities, and to promote the general flourishing of our world. Competition is not always in fact directed toward this end, because many people and companies do not recognize this as a goal. However, competition is in fact oriented toward the public good when people and organizations identify serving customers and making the world a better place as their goal. This is a challenge to the view that prevails in some quarters that the primary or even sole purpose of business is to make money for shareholders; in fact, there is no reason a business cannot compete as much to serve customers as to deliver shareholder return, and the two are often compatible.

To the degree that competitors are not motivated by love of God and neighbor (or some other internalized ethic) to serve the common good, it is necessary for society to create laws and regulations to protect the common good. In a fallen world, this is inevitable. Yet regulation is a poor substitute for love. Society would be much better served if most or all of its people were committed to working, and even competing, based on serving a common good, rather than only their own interests. This is one of the purposes of a theology of work, to help people work and compete in ways that serve God and neighbor, and not only themselves.

Paul’s athletic metaphor is very rich in this regard. Athletes often talk about tough competition “bringing out their best.” In sports, following the rules and doing your best to beat the other team fair and square can be a way of cooperating with the other team to produce an outcome both desire – namely a good, enjoyable game in which both teams play their best and the better team wins. Excellence and accomplishment are promoted. Similarly, working hard to beat competing companies by serving customers better can be a way of cooperating with those competitors to produce an outcome both desire – an efficient marketplace that provides the best possible good and services while delivering returns to investors.

Ethical competition may not seem to involve coordinating, which by our definition is a quality of cooperation. Indeed, direct and explicit coordination between competitors in order to reduce competition is normally illegal and unethical because it involves colluding against customers. However, coordination between competitors does occur at a higher social level and can serve the common good. Tangible examples include trade organizations, publicity and lobbying for the industry as a whole, securing supply chains, setting industry standards, training institutes and (in countries where the law permits it) collective bargaining. These tangible forms of cooperation establish the existence of shared norms and, at the deepest level, the recognition of a common humanity across competing firms.

This, in turn, points toward an even higher social level of cooperation. The most important purpose of the economic system – especially in the price-setting function of markets – is to facilitate a vast coordination among competing economic actors. Buyers seek to buy better goods at lower prices; sellers seek to produce and sell more profitably. If the economic system and the larger ecosystem of social institutions are functioning as they should, prices will rise and fall to allow supply to find demand and vice versa. This allocates existing goods and services more effectively than any other system, and—perhaps more importantly—gives the most effective incentives for guiding investment in future goods and services.

This social coordination function of economic exchange, structured by ethical competition as a form of cooperation, is becoming more and more important in light of globalization. Market exchange is the only method yet discovered that is able to effectively coordinate the actions of very large numbers of very diverse people and organizations toward shared ends that benefit all. We will always need governmental organizations to accomplish the political good that economic systems cannot accomplish on their own. Conversely, we will always need markets to accomplish the economic good that political systems cannot accomplish on their own.

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