The Virtues of the Market: Civil Competition

The entrepreneur is not he who cuts his piece of the market. It’s he who takes care of “producing pies”. He takes advantage of opportunity, without being afraid of benefitting others. It’s the challenge of “civil competition”: a winning idea for getting out of this crisis.

Civil Competition. I win and you win. Enough with killer economy

By Luigino Bruni

Published in the weekly Vita, January 28, 2011 

Logo_Virtu_ENG_ridCompetition, if well understood, is one of the main virtues of the market. But, even in this case, we have to clear the field of mistaken or partial understandings of competition. Competition is a virtue when it works as that social mechanism which civil economists of the 18th century, like the Romagnosi from Milan or Cattaneo, called civil competition. What does it deal with?

The dominate vision today tends to consider competition among businesses as a race between Business A and Business B, in which each one wants to win by battling the other. Sometimes, this vision is even nourished by an incorrect and misleading use of a sporting metaphor (or even by Darwinist caricatures) that shows the market as a place where we all run, and in the end we have winners and losers. Such a vision views competition as a business matter between A and B, which can can have the unintentional effect of producing market price reductions to the advantage of Clients C.

If we look at the market in this way, different from the idea I proposed in the first installment of this series, it would be obvious that competition has nothing to do with cooperation. Rather, it would be the exact opposite, because cooperation between “competing” businesses comes from the cartel or trust perspective, which are established at the expense of citizens and market efficiency.

Instead, what is market competition as seen from the perspective of civil economy? The market game appears much different from this perspective, and it’s not focused on the race between Business A and B, as market competition becomes a process centered on the axes A-C and B-C. That is, every business tries to satisfy clients (in a wide sense) better than the others, and the business that is the worst at doing so has to leave the market. But this is only an effect, and in a certain way it is unintentional. From our perspective, the goal of Business A becomes cooperating with citizens, clients and suppliers C, within a relationship of reciprocal assistance, of a team, and not one of “battling” with Competitor B, and vice versa. 

But up to what point can we push ourselves along this road of civil competition? Many questions arise, and some are very relevant. Perhaps we’ll answer a few of them below. 

To give an example that is not irrelevant to social economics, let’s imagine that the market of social economics is still dominated by public “race” and contract – therefore, by a vision of competition as a zero-sum game, made of winners and losers. This vision, which I have called “upside down subsidiarity” in other writings, has its hub in a public that defines projects and calls cooperatives to “vie” in a race that often has a very dangerous fall. This perspective would be radically changed within a vision of civil competition. In civil competition, social enterprises are the ones that are touch with the needs of the people and that “see” opportunities for mutual advantage with citizens. Then, these social enterprises turn to the public (perhaps not always) in order to transparently and efficiently bring about that project, which is no longer “guided by supply” but by the “demand” of the people. There is still much to do to get to that point.

Then, there are other difficult questions. What role does the division of “exchange earnings” play in such a vision of the market? How can we define the “pie pieces” of the earnings that each of the participants will have once added-value has been generated? To those who would ask these legitimate and due questions to someone who wants to start a business or cooperative, I would answer – along with Genovesi, Mill and Sen – “when you see an opportunity to create value, don’t spend too much energy in defining how to divide future profits. Seek the most obvious and normal division,  establish it as a norm, and concentrate your commitment to creating common benefit”. A piece of advice that ought to be given to the group of participants in such an exchange, as reciprocity is implicit in this vision of the market, is this: “only behave like this with people who share your same market culture”.

But, let’s ask ourselves this question: is it good advice to recommend such a culture or philosophy to individual entrepreneurs or workers when there is no guarantee that others with whom they interact share the same culture of reciprocity and fraternity? I believe so. Someone who follows such a norm will, sometimes, end up with a lower quota of earnings compared to one who obtained his earnings with a stricter and more attentive attitude towards the division of earnings. But, to compensate, he will spend less time and energy, and will be less likely to open contentions and conflicts with others, which often block contracts, business deals and affairs. Over a long period of time, this person will live his life more calmly and will probably not be too poorly off economically either. Finally, institutions have a role in this: their plans can incentivate either the search for mutual advantage or individual opportunism. 

We can then summarize this civil market culture with the following norm: “when you do business together (especially during difficult times), don’t worry too much about establishing the ‘piece of the pie’ that you will create. Instead, worry about the pie and about creating many pies so that over time, if you weren’t opportunist and unfaithful, you’ll converge towards an equitable norm of redistribution. First one will earn more, then the other will earn more, but the important thing is to grow together”. Such council is very efficient especially when dealing with youth, because it greatly reduces costs of transactions, reinforces feelings of mutual trust, and creates a positive and optimistic understanding of commons. Also, insisting on guarantees or relatives ties to (possible) future earnings is never a good way to start a relationship with an associate, supplier or client. It is actually the best way to block business before it begins. Generosity and an open mind are some of more important virtues in an entrepreneur’s success (actually, of anyone’s success). And as I wrote a few installments ago, this is also true because the entrepreneur, thanks to his capacity to innovate, is a “creator of pies” and not a “cutter of pies”.

Today, we know that one of the first factors in cultural and economic backwardness is made of a mental scheme with which we read market competition and civil life. Communities, peoples and persons grow when they see economic and civil relationships as mutually advantageous, and they remain blocked in traps of poverty when each one sees the other as someone to take advantage of or from which to defend oneself.

A civil economy sees the market as a great and dense network of mutually advantageous relationships, on many levels. Civil competition is the energy that flows in this network of relationships in which the market is established, and whoever is part of it gives advantages to himself and others. Creating an always denser network of exchange opportunities means linking people in joint actions, where each one grows with and thanks to the others, and weaves threads of the network that keeps cities and societies together. This is civil economy, this is civil competition.

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