Supports of capitalism argue the benefits of capitalism is competition. Lets stay there are two countries, country A and country B. Country A is a socialist country where all enterprises are stated owned. Country B is a capitalist country where enterprises are privately owned. Country A has a supermarket chain which is state owned and this is the only supermarket chain in the country. The supermarket has guaranteed customers and no competitors. Supermarket managers are under no obligation to provide reasonably priced and high quality goods or innovate. A capitalist may argue that this illustrates a problem with state ownership of the means of productions is enterprises not having to face competition.

Country B has several supermarket chains. As each supermarket chain faces competition they have to provide reasonable prices, high quality goods and ensure their shelves are adequately stocked. If a supermarket chain doesn’t do these things and their competitors do, they will loose customers. Comptetition is an incenctive for the supermarkets to innovate. A capitalist may argue that this illustrates the advantage of capitalism is firms having to compete with each other makes them provide good customer service.

One of the supermarket chains decides to stop buying from a clothes manufacturer which puts workers out of work and instead uses a manufacturer in a poor country where workers work in horrific conditions and are paid a pittance. The supermarket can now sell clothes cheaper. The other supermarkets decide to do the same so they can sell clothes at competitive prices. Another supermarket chain cuts prices by cutting staff wages, sacking staff and employing workers on worse terms and condition. Other supermarkets do the same to remain competitive. A socialist may argue this example illustrates one of the problems with capitalism is firms are forced to engage in cut throat competition and forces them to take harsh measures which have a negative impact.

I would like to hear the opinions of socialists and capitalism about the impact of competition.