WHAT IS IN THE BASKET? POVERTY AND COMPETITION

Today we are celebrating Saint Nicholas, the bishop from Myra who helped poor people. It is therefore excellent timing that the Hungarian Competition Authority (hereinafter: GVH) has organised a half-day conference examining the connection between poverty and cartels within the framework of the World Competition Day initiated by Consumer Unity & Trust Society from India. At the conference an OECD study written by a Hungarian author dealing with the role of competition in poverty was presented to the participants (the documents of the round table can be downloaded here).

Mr. Miklós Juhász, the President of the GVH, found it very challenging during his opening speech to draw a parallel between the two topics. There are a lot of examples from abroad (especially in Africa) and also in Hungary where competition authorities are helping less wealthy people by breaking down the cartel prices concerning basic food products. I do agree with Mr. András Tóth, the vice-president of the GVH, who believes that the protection of competition and the fight against poverty are only engaged in a distant relationship with each other. Competition law commences roughly where poverty ends: those people who are not able to afford prices that are near to the marginal costs, and which are a result of effective competition, are not on the map of competition policy. Malfunctioning in competition is certainly harmful for poor people and competition within unregulated circumstances and can easily lead to poverty – as can be seen by the problems stemming from mortgage loans.

However, it is important to note that even if competition law is not the best weapon in the fight against poverty, this does not mean that there is no need for the existence of a strong competition authority devoted to the protection of competition and that there is no need to fight against poverty with every possible tool. The following questions are worth considering – what is actually poverty? Who are the poor people? Is poverty a sin, a virtue, a temporal or a lasting-inherited life situation? According to the statements of the New Testament, Jesus placed himself in the position of poor people on many occasions and though he regaled thousands of starving people, he did not help them by placing bags of money into their pockets. We tend to interpret the parable on the camel and the needle’s eye favourably upon ourselves; however, rich people generally struggle to gain eternal salvation. Still, poverty will never be a desirable way of life, because just as richness does not involve by all means hard-hearted attitude, poverty to a degree is soul destroying.

The protection of free and fair competition is primarily in the interest of those who actually have money to spend. Competition law is the game of wealthy people. However, poor people are also afflicted by the effects of an exploitative local monopoly; in fact, they are perhaps afflicted even more than wealthy people. In line with one of the examples heard, it is scandalous if the owner of the only local store prescribes the price of three breads in case if a customer bought one bread at the end of the month as a credit. Is it possible to assume that if the customer was in fact his competitor, he would be forced to be more human?

If we were to ask a poor person about the usefulness of competition, he/she would probably respond with an uncomprehending glance. The theory of competition is often difficult to understand, however, poverty can be very concrete and tangible. The situation would probably be different if we could see competition as a field of possibilities, the playing field of economic freedom which is required for human dignity. Concurrency is not good, but what is before and behind: the possibility of realising my dreams, of trying to create and sell it to others, sounds attractive. Optimism and hope are driving forces behind competition and without hope; poverty could also truly be destroying.

Well-functioning local markets, “human-faced competition” could help poor people in two ways. If state administration does not make it impossible, and if there is entrepreneurship and a connection network required for prosperity, then it is possible for small businesses to operate. Individuals who are unable to launch small businesses could still find employment with the help of the state through different measures. Additionally, if local cartels do not increase the price of basic food products then individuals will be able to spend less money from their salaries on basic food items such as bread, sugar and flour.

One of the central questions of competition policy is: how much is needed from free competition and how much from the state? Who should be the flag-bearer in the fight against poverty: the welfare state or the market? As far as the latter question is concerned, many may have doubts about the role of the market, as tense competition often results in unemployment due to the corresponding reduction in the number of underperforming market players. However, it is true that whatever competition takes with one hand, it gives back with the other hand: lasting, true and value-creating workplaces do not originate from the state, but from market players. However, beside the interaction of the market and the state, no one should forget the third factor. We could definitely do more for poor people on the level of civil society, churches, foundations, associations or family communities. The welfare state should support the latter societies or the individuals. The state should only intervene directly where smaller groups of society have failed. State intervention is only beneficial if it takes place on an occasional basis. Excessive help could result in a loss of personal responsibility and in the will to act, but only if these have not already been destroyed by poverty.

Tihamér Tóth

 

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