The law of competition: the concept, the basis of the economy and the principle of action


From the moment when price liberalization took place in our country, the law of competition unknown heretofore began its work. Pricing was entirely out of the hands of the state, which had previously always independently set prices in both retail and wholesale, and they remained firm for decades. At present, this process is extremely flexible, and it is controlled only by the law of competition.



The law of competition began to act immediately, as soon as pricing was oriented toward supply and demand, at maximizing profits, when capital was able to flow freely, then the triad of the market, motivation, and competition triumphed. There were antitrust laws, which spread more and more widely and over time, were observed more and more strictly.

Previously, the law of competition was replaced by competition among manufacturers, and this was also an incentive, but the "live" profit is much more conducive to increasing productivity, and therefore technological progress is developing faster. With regard to the productive forces of monopoly, they never hesitated to create utter arbitrariness. However, now a much larger part of the profit is increasing due to an increase in labor productivity.

A bit of history

Antimonopoly legislation was not created all of a sudden, gradually establishing the most rational combination of competition and monopoly, preventing the destructive consequences of ill-considered actions. The first foundations of the law of competition appeared in 1890 (the Sherman Act, or the Antitrust Act) in the United States. Thus, for the first time, competition was taken under the protection of the state itself.

In the USSR, the laws of product sales were fundamentally different from capitalist ones. The economy was planned, where the absence of principles of competition law did not create conditions for anarchy of production, and sales were calculated regardless of the problems of surplus value and did not create the need to look for the most profitable markets. The capitalist is obliged to choose special commercial operations, for the success of which any way is justified, including advertising fraud, tampering. The main thing - to oust the competitor.


Such principles

For more profits, it is profitable for the capitalist to even artificially create difficulties in marketing one or another product, and the worse things go for rivals (including consumers too!), The more clearly the additional profit looms. The system of competition laws is such that universal human values ​​and even more so the development of individual countries are much lower in the list of priorities of the capitalist than the immediate and the highest possible profit.

For example, capital has been pumping out oil in the Middle East for many decades, in every way preventing countries that own resources from creating their own oil refining industry. Including our country drives only raw materials for sale, since it is these conditions that global business creates, these are the laws of competition in the economy of capitalist countries.


And just like other owners of rich fields, our country buys from foreign capital petroleum products made from our own oil, but at a higher price than those that would have arisen from on-site oil refining.

Artificial deficiency

Has the capitalist ever been interested in the fate of consumers? The main condition of the economic law is free competition, but this remains so in words. In reality, the opposite happens. The capitalist needs to raise prices as high as possible in order to get more income at the expense of consumers. Therefore, it is beneficial to the shortage of a product, which is created artificially. For example, the sale of petroleum products is almost always regulated.


The economic law of competition should lead to an objective process, when the quality of services and products is constantly increasing, and their unit price decreases. However, judging by the realities, this principle works poorly. All substandard and all too expensive products should be flushed out of the markets. But for the implementation of these processes, we need at least a well-functioning antitrust law.

It should be

Entrepreneurship is a way to make a profit by satisfying the demand of consumers with their offer of exactly those goods that consumers need at the moment. But here, too, we see the effect of the law of competition, regulated not in favor of public needs. Even if the direction of activity is chosen successfully by an entrepreneur, if there is an ability to produce goods of the best quality at the lowest cost, the entrepreneur may not win in the competitive struggle.

This is due to the invisible laws of the market. Competition is almost never fair. It should have a very strong impact on the behavior of each market entity. And renders. The laws of supply and demand are much less effective. With truly free competition, all excessively high and too low prices should move to averaging, to the equilibrium point.

However, for some reason this does not happen. Equality of the opposing sides in the competition does not work. Surely there are other rules of a competitive game, without the direct involvement of competing competitors in identifying the equilibrium price and a clearly defined number of necessary goods.

Strategic decisions

For successful work in a market economy, an optimization approach is needed with the establishment of a relationship between economic, technical and organizational indicators. It is necessary to study market mechanisms: laws of saving time, scale, competition, other dependencies.


And strategic decisions require an extremely detailed analysis of supply and demand, the dependencies between them, the increase in unforeseen costs, the loss of profitability, the economic interrelations of production and consumption, the scale of production and much more.

Competition is an indispensable condition for the operation of economic laws, and analysis should be carried out not only at the level of the operating firm, but also at the industry level: how does the competition mechanism work, antitrust legislation, what are the forms of competition in the industry and what is its strength.

Market structure

A market economy can be represented by a monopoly or oligopoly, monopolistic competition or perfect, pure competition. The form of the market depends on the number of original goods with a patent, on the quality of information (advertising) about the goods needed by the consumer. The current law of competition should help predict prices, opportunities of competitors and factors determining this.

For example, several companies produce the same product. It can be compared in terms of the unit price (the ratio “price is the beneficial effect”, which reflects the consumer properties of the given product under certain conditions). All firms will try to develop a product model with the best performance. Competition is competition, when independent actions of economic entities do not provide an opportunity to limit the chances of competitors' success or otherwise influence the created general conditions of movement in the commodity market of these products.

Competitive fight

This is a tense struggle, where both individuals and legal entities are fighting for the buyer, otherwise, under the strict law of competition, the manufacturer simply cannot survive. It is necessary for each seller of goods and services to find more favorable conditions for the production of the product and its sale, to expand the market by improving the quality and lowering the individual value of the goods. Then you get additional profit (excess income).


And since competition is a prerequisite for the operation of economic laws, this forces the manufacturer to throw all available forces into the struggle for priority in the market space. If the market is occupied by producers-monopolists, who receive super-profits through the introduction of monopoly prices, competition weakens. As a result, the economy does not develop, production becomes less efficient. Then the state is forced to intervene in the development of competition.

Functions: Regulatory and Stimulating

Competition constantly has a huge impact on any costs of the business executive who produces the product. It is thanks to her that a market equilibrium must be achieved when selling goods.

Its main function is regulatory. An inflow of capital into the most profitable industries is ensured, since prices are set competitively, due to which there is a balance between needs and production.

Another function of competition is stimulating. Producers are confronted in the struggle for the conditions of production and the market, and this is an incentive for the development of business executives who are forced to introduce innovations and make optimal use of resources, both labor and raw materials.

Functions: controlling and differentiating

Competition should ensure the full development of technology, management efficiency and quality of resources. This is its controlling function: control over the comparability of costs and necessary costs in production, compliance with product quality, control over the changing needs of society.

In addition, differentiation is an important function of competition: manufacturers of the same product have completely different results on the market. The best conditions go to the manufacturer, who has bypassed competitors by increasing production efficiency, taking into account public inquiries and the like. Competitiveness determines the growth of profits.

The law of competition as a law of nature

Any phenomenon contains both features and general properties, that is, individual and specific. Economic laws are no exception. The common thing here is that any laws of nature or society are objectively independent of consciousness. This means that they will act even if we do not know anything about them.

The law of the market - cost, demand, supply, competition - also exists regardless of the knowledge of market participants. Labor market actors are wage workers and employers. The latter can be represented by any enterprises, firms (state, individual, partnerships, corporations, and so on). Hired workers are the owners of the labor force. Business unions and trade unions make the world market a single system with holistic trade, financial and economic ties.


At another level

Integration processes in the world are developing, and the most recent trends, such as the export of capital, for example, inevitably lead to a struggle that can also be called competitive, since it is subject to the same laws. Each subject of international relations is trying to ensure the superiority of their own interests.

The desire not only to create, but more often to appropriate, accumulate vital resources leads the subject of socio-economic relations to rivalry, which can also be explained by the laws of competition, which manifest themselves at a different, higher level - internationally. And here is revealed the strongest rival, who ruthlessly suppresses competitors.

Thus, strong countries that use competition laws for more than a long time, develop even more rapidly, by all means suppressing the economies of the Third World countries, whose development is completely disadvantageous to the players of the international market.

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