Saturday, May 05, 2007

On Competition

It would seem that competition is a fundamental aspect of capitalism. Anti-trusters, in their zeal to regulate business, would have us believe that a market without competition is coercive, and requires legislation in order to restore competition to it. Right-wingers have a zeal for competitive mechanisms, as they try to inject it into such government run programs as education (school vouchers) or health care (re: private insurance options). It is “competitive” mechanisms that will cure inefficient government programs.

But looking through the Objectivist literature, one is hard pressed to find much mention of competition as a fundamental of capitalism. It has a brief mention in the Lexicon, mostly related to government enforcement of such, and it has no mention in the entire OPAR section on capitalism. Competition isn’t an Objectivist virtue, like independence or productiveness so it doesn’t even seem to have an ethical basis. I know that independence and productivity are virtues, and that being “second-handed”, i.e. placing self-worth using others as a standard is wrong. I know that capitalism is the proper political system, and I sure see a lot of preoccupation with competition in capitalism. This leads me to wonder just what the proper attitude toward competition should be. Is it fundamental not? Is it good or not?

My family used to run a Labor Day race every year, A 5K run through the woods of northern Michigan. Our last running of this race found my step-son and I alone on the trail at the half-way point with about 15 minutes to go.

Kendall, I don’t think I can keep running. My legs hurt,” my son said through labored breaths.

hmm. Ok, well maybe we can stop to walk a bit. Tell you what though. See that runner up there,” I said motioning to a woman about 100 yards ahead who had been steadily falling back.


“Is she closer to us now than she was five minutes ago?” I asked.

“I think so,” he responded.

“OK, well that means she started out too fast and we’re going to catch up to her. Do you think you can keep going until we do?”

“Yeah, I think I could do that,” he replied, gauging the distance and the time required. And we stepped up the pace just a little and began closing the gap. He focused on the gap between us and the runner, and he increased his stride, ever so slightly.

After passing her, my son spoke up. “Hey, you know that guy up there looks like he’s falling back too. Maybe we can catch him. Do you think we can in time?”

“It looks like it,” I said. “We’ve got another mile or so to go.”

When I look at top tier businessmen that I know, I see similar responses to competitors. They take a keen interest in what the competition is doing, but never to the extent of allowing the competition to define their actions. Nor do they react emotionally to frustrating moves that the competition makes. Any emotions that are expressed are usually based in a sense of friendly rivalry or respect, especially for able competitors. Mostly, they learn from their competition and focus on their own goals.

Second and third-tier businessmen, however, show the signs of second-handedness. They are preoccupied with the competition. They may respond emotionally and with frustration at competitive moves and make strategy decisions out of a desire for retribution rather than true self-interest.

And so from these few examples I start to get a sense of the proper characterization of competition. It is a side-effect of capitalism. Competition is the natural result of men who practice the virtues of independence and productivity, within a society based upon rational self-interest, and man’s right to pursue it. It is an effect, not a cause.

“Competition is a by-product of productive work, not it’s goal. A creative man is motivated by the desire to achieve, not by the desire to beat others.” - Ayn Rand ["The Moratorium on Brains", The Ayn Rand Letter 1,2,4]

And the proper psychological attitude toward competition? Well, implicitly I understood this from the race with my son. It came to me explicitly as a result of thinking about a discussion on on personal motivation. Competition is a positive tool that we can use. It helps us to learn about the nature of the game we’re playing and to set intermediate goals. It gives us concrete gauges by which we can measure our own progress and performance. It is one of the ways that we turn productiveness into excellence. The same is true in business. The proper attitude is one of benevolence (and maybe a little rivalry) toward honest competition, and of respect and admiration for ability in our competitors.

And the implication for our would-be policy makers who fancy competition, as such? Simple. Focus on creating the causes of capitalism, namely namely individual liberties, and markets free from coercion. Only then will the effects be properly seen. However, if one tries to legislate the effects by short-circuiting the causes, failure is the only outcome.

The only actual factor required for the existence of free competition is: the unhampered, unobstructed operation of the mechanism of a free market. The only action which a government can take to protect free competition is: Laissez-faire! - Ayn Rand
My son passed three more runners that day, two (including yours truly) at the final sprint to the finish, which he initiated 200 yards before I would have. I never heard about the pain in his legs again. We have no idea how the runners we passed ended up, and it really doesn't matter, but I know that he ran longer and harder than he would have otherwise - because of the competition.

Tuesday, May 01, 2007

Chavez Nationalizes Columbian Oil Projects

In a follow-up to my post on Bolivia's Evo Morales nationalization of Bolivia's oil fields, it seems that Latin Socialists are at it again. This time, it's Hugo Chavez who is holding ceremonies to nationalize four Columbian oil projects, pushing out national firms (now that they've done the hard work, of course)

There is no denying that natural resource, especially oil, artificially prop up socialist dictators by masking the damage done by their policies. And Mr. Chavez is on a mission to damage the United States as best he can. From May 1, 2007 Wall Street Journal article on the same topic. long as Mr. Chávez is in charge, his government seems bent on favoring
state-run companies from governments he considers friendly. Consider the list of
winners of contracts handed out to companies to certify oil holdings in the
Orinoco region in the last two years: Vietnam, Iran, Brazil, and China. Last
month, PDVSA signed a deal with Belarus to work in the Orinoco. Meanwhile,
today's nationalization ceremony pushes out U.S. companies
Corp., ConocoPhillips and Chevron Corp., along with Britain's BP PLC, France's Total SA and Norway's Statoil ASA.

For a time I used to get frustrated about the artificial success of disgusting policies like these. I still chafe at the injustice, but I also know that once the oil becomes more expensive to develop and produce that the tarnish will show on Chavez' rhetoric and the rhetoric of those like him. The cost of extracting oil increases long before oil reservoirs are depleted (even Saudi Arabia's oil fields are nearing a marked increase in production cost once they shift to secondary production), but it happens slowly; enough time for at least one or two generations of socialist thugs like Chavez to prosper. Underneath however, one can see the impact that his policies are having.

However, Mr. Chávez's own policies may stand in the way of him carrying
out his plans. The leader's focus on social spending has turned PDVSA into a
poverty-alleviation ministry more than an oil company, and left the company with
little focus. Venezuela's output has fallen to 2.4 million barrels a day from
3.1 million barrels a day since Mr. Chávez took office in 1999. Mr. Chávez
recently paid off the last portion of debt owed the World Bank using Venezuela's
oil income and paid off all debts with the International Monetary Fund shortly
after taking office.

Raiding oil profits to pay off national debt and put the country on welfare (along with providing handouts to other socialist countries) will mean that when costs do go up. PDVSA won't have the resources to continue without help. Here's hoping that foreign oil companies don't give it to them, at least until someone better than Chavez is in office.