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Advances in Social Sciences Research Journal – Vol.7, No.7
Publication Date: July 25, 2020
DOI:10.14738/assrj.77.8455.
Taliashvili, A. (2020). Fair Competition as the Basic Problem of Market Economy. Advances in Social Sciences Research Journal, 7(7) 86-
90.
Fair Competition as the Basic Problem of Market Economy
Alexander Taliashvili
Professor, Faculty of Law and International
Relations, Georgian Technical University
ABSTRACT
In the Economy, both the level and forms of competition significantly
determine market structure, investment opportunities, trade balance of
the country as well as the degree of fairness and transparency in the
process of distribution of public wealth and income. The existing
injustice in both economy and business has revealed new themes and
directions that are exactly in line with the times. In EU countries the
legitimate questions about justice are the following: Why did the
economic development create a huge level of property inequality under
the conditions of globalization, in economically successful countries?
Why do transnational corporations violate the conditions of fair
competition? How pervasive is the problem of inequality in our world?
and How inequality is reflected between the objective perception of
reality and its subjective understanding? Does the competition have the
natural ability to regulate market relations without causing a sense
ofinjustice and inequality? Economists, lawyers, philosophers and
political scientists try to find a logical answer to these questions. We
think that the fair competition is a fundamental problem of the market
economy. It must ensure the sustainable development of society, reduce
the recurrence of economic crises and limit both the process of business
expansion and total formation of monopolies. The problem of fair
competition requires special research and we have paid great attention
to it in our paper.
Keywords: Market Economy, Justice, Unfair Competition, Market Relations,
Antimonopoly Law.
INTRODUCTION
Competition is the most important stimulus for the development of a market economy, which
increases the efficiency of production in business and reduces production costs as well as improves
product quality and leads to progressive, organized and structural reforms.
In the XVIII century, the development of industry in the UK has given a serious impetus to the
research onthe competition which was actually the merit of the representatives of the classical
political economists including Adam Smith, David Ricardo and others.
Adam Smith - one of the founders of classical political economy - introduced the concept -
“competition“ - in scientific economics terminology. He mentioned it for the first time in his work -
"On the Nature and Causes of People's Wealth". Adam Smith considered competition as a category
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of behavior related to the success of a market competition between producers and sellers of goods.
Hewas the first who studied the connection of competition between supply and consumption of
goods and determined that the main reason for this controversy was the price of the goods. Adam
Smith also highlighted the role of competition in both efficient distribution and use of economic
resources.[1]
The formation of fair competition is influenced by lots of interrelated factors, including economic
and financial capabilities of the participating entities, historical traditions and culture of
entrepreneurship, range and quality of manufactured product, level and character of state market
regulation, access to market information and so on.
The Universal Business Dictionary defines the immanent (internal) nature of competition as
follows: “Competition is the emulation between producers, sellers, any economic or market entities.
So this is a struggle aimed to earn higher incomes, profits and other benefits in order to conquer the
key market for goods.[2]
The main idea of fair competition is related to freedom of choice. In a market economy, producers
and consumers have a free choice. According to their own will and risk, they determine what kind
of product to supply to the market and what to buy. But freedom of choice does not automatically
guarantee economic success, as the success can be achieved only the fair competitive struggle.
THE RESULTS OF DISCUSSION
The idea of freedom is unalterable for politicians and economists with liberal views. They think that
the fair competition is the basis for market existence and they consider it as a prerequisite for
natural and normal development. They argue that the market relations do not require excessive
interference from government, as the freedom defines both the fairness of supply and demand in
the market and the normalization of economic processes.
According to the well-known German economist, public figure and founder of the theory of social
economy, Ludwig Erhard: "Liberalization and the restriction system on currencywork together like
fire and water as any form of the restriction system on currency is a symbol of all evil for me.
Individual countries have been able to come up with the idea of suicide through careless actions
such as: restriction on successful competition”. [3]
At the same time, it should be noted that at the present stage of public development, in both
scientific circles and the political spectrum consider the above mentioned view as not the only
proposition in view of the fact that the real market is a combination of interrelated transnational
industry and local markets, which are not able to balance each other.
There are lots of arguments representing the need for state intervention in the regulation processes.
Like neoliberals they argue that in business elimination of inequality is a utopia. Moreover, they
consider an inequality as the basis for the market economy which gives both prospectsand
opportunity creating a better business environment.
"The motivation is: to reach personal well-being, to increase profits and establish a place
in the environment. On the one hand,it is quite easy to live in such a world: think about
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Taliashvili, A. (2020). Fair Competition as the Basic Problem of Market Economy. Advances in Social Sciences Research Journal, 7(7) 86-90.
yourself and take care of your own well-being and never worry about the romanticism
of "World Sorrow" and the moral imperatives of freedom and justice. On the other hand,
it is very difficult to live in such a world, because in the world there are 66 billion people
who have the similar intentions”. [4]
In the conditions of competition, injustice must be discussed in two aspects: 1) when the chances of
market participants are unequal in the conditions of competition and 2) when the situation in the
market is unfair.
The inequality of opportunities is primarily due to the different quantity and quality of both
property and financial assets of market participants. Consequently, financially strong participants
have more chances to manipulate and regulate prices, achieve both successful advertising and PR,
improve theirmanagement and marketing, make various deals and agreements with other
participants, expel unwanted competitors from the market and so on.
As for market injustice, it can be found in many aspects of business, including the conditions of
registration of business entities, investment environment, ecological conditions, tax regimes,
mechanisms for both distribution and redistribution of public wealth, unjustified benefits, and so
on.
On the market, the state is one of the leading figureparticipating at the process of establishing
balance and restoring justice. The state should adopt and protect antimonopoly legislation, promote
small and medium-sized businesses, introduce a fair taxation system, and, if necessary, pursue
reasonable protectionist policy.
What should be done not to make the rich even richer and poor even poorer? What measures should
be taken to fill the property gap? What kind of economic and political mechanisms are needed to
overcome injustice in a competitive environment? Is justice really achievable in the economy? Is it
just an illusion?
In recent decades, in the background of property polarization the prospect of overcoming the above
mentioned challenges are becoming increasingly hypothetical. Though we think that our society
will find the right solution encouraging both competition and free enterprise, which could eliminate
the injustice of public relations in this area.
In order to study the problems of fair competition, it is necessary to analyze the social processes
and changes that took place in the process of a market formation.
The main sign of our era is the rapid industrialization, followed by emergence of large cities and
factories, the creation of urban industrial centers and massive urbanization. The poorer rural
population moved to the cities, followed by the formation of two new social groups, including
employers and employees.
Industrialization and a market economy have changed worldviews. The main focus was on the
values of the market economy. The value created by competition, which was an object of
distribution of fair public wealth became a fundamental issue in a market economy.
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Competition can be considered fair if there are many relatively small and medium enterprises which
are unable to manipulate commodity prices due to their volume and if there exists no risk
preventing a market participant from taking a well-deserved advantage
Fair competition should provide the conditions for new entrants to enter as well as exit the market
freely. All market participants should have equal access to business information.
In order to reach fair competition, the state must establish a system of market regulation in which
market participants will not be able to make any deals and agreements against each other.
Competition will be fair if competition and the business environment can provide the following
conditions: competition must be a natural regulator of commodity prices, competition must protect
the interests of consumers, competition must take place within the framework of legal regulations.
The creative nature of competition is its main driving force and stimulus together with other
important conditions. These two important circumstances determine businessman’s interests: in
order to make a profit, produce more products and sell them.
"The production process requires from the entrepreneur both initiatives and courage to
create something new and the willingness to take risks. If a person has these qualities,
If a person has these qualities that means that he has the spirit of an entrepreneur”. [5]
The motivation of the business is to increase the value of his own assets and get more profit out of
them. In this struggle, there are used methods of both fair and unscrupulous competitions,
supporting entrepreneurs get their place in the market as well as gain (in some cases undeserved)
advantages. In most cases, the reason for the struggle is to determine the profitable price for goods.
Then the competitors start deliberately to drive each other out of the market trying to impose their
own dominant conditions on consumers.
Where is the edge of an unfair competition? This is very difficult to determine. As the great German
philosopher Martin Heidegger believes, injustice as well as time and space are infinite. [6]
The problem of unfair competition existed in all eras, but it became especially relevant at the
beginning of the XX century, when the first monopolies began to form. In this period, the capital
began to concentrate in the markets. There were created joint stock companies and the market
participants began to fight for control over natural material and financial resources. Unfair
competition involves the use of both methods and mechanisms which are not in compliance with
legal rules and give undeserved advantages to the participants of the fight.
It is completely unacceptable for business ethics to spread inaccurate and misleading information
damaging either competitors or their business reputation. It is also inadmissible to deliberately
mislead consumers about the terms and quality of products produced by competitors.
In the conditions of scientific and technical progress and the latest technological and information
achievements, economic and industrial espionage have become particularly frequent in the field of
modern business. That is unlawful targeting and theft of both trade and commercial secrets. In
particular, when the state tries to grant more privileges or benefits to any business group by law or
other regulations, it creates an artificial barrier for others. The state is also unfair, when it acts as a
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Taliashvili, A. (2020). Fair Competition as the Basic Problem of Market Economy. Advances in Social Sciences Research Journal, 7(7) 86-90.
passive supervisor in the monopolization process. This passivity creates monopolies, which
completely control both sales and production.
The world is existential, and sometimes successful business groups can really feel or want to
convince others, that the world has become more harmonious through their successful business
"empires." We think that this is not true even in conditions of wealth accumulation, in the so-called
rich countries.
In the conditions of property polarization and imbalance, the propaganda of these views (using
their own press, television and other media outlets) hinders the process of public consensus and is
unproductive in terms of formation of civil society.
“The level of democracy in a country is measured by its contribution to establishment of
justice”. [7]
If a large part of the society does not have a sense of justice, even the efforts of a very small number
of very rich and successful people, spending lots of financial and human resources, will be a chimera
and an illusion.
CONCLUSION
Competition is like a sport competition, where you fight for leadership, which is the never ending
quest for better and (if you don't get out of this fight yourself) there is no stopping point. In many
cases, the victory is achieved through the use of fair methods and techniques.
We believe, that in a market economy, one of the priorities of the government should be to establish
justice, and therefore, it is unpromising to ensure compatibility of the principles of justice and the
mechanisms of the market economy only by realizing with free market and self-sustaining ideas. Of
course, the economy is a guarantee of the effective functioning of a social fair system, but at the
same time, the sophistication of social protection mechanisms is not less important.
P.S. In the research process we have to face new challenges related to pandemic effects. Today, it
can be said, that the economic crisis caused by the pandemic is catastrophic. However, it is clear,
that Coronavirus will be the starting point for new challenges in both the economy and public life.
References
1. Adam Smith, "The Nature and Causes of Wealth of People" translated from English by Philippe Gogichishvili,
Publishing House of Tbilisi State University 1938;
2. S. Kamarauli, "Universal Business Dictionary", Publishing House "Science", Tbilisi, 2002. P. 273;
3. Ludwig Erhard "Welfare for All" Tbilisi 2011, p. 364;
4. Davit Iakobidze, "Georgian Reality of Global Dynamics" Tbilisi, 2011, p.263;
5. Nino Lazviashvili "Risk Management", Publishing House “Meridian”, Tbilisi, 2010, p.26;
6. Irakli Batiashvili, Martin Heidegger, Another Way - Tbilisi;
7. Salome Khizanishvili, Irakli Gabisonia, Alexander Taliashvili, "Philosophical-Legal Aspects of Justice", Tbilisi,
2019, p.14.