Competition

price and quality. They constantly try to obtain a short-lived monopoly edge over their competitors through product improvement and differentiation. Competition helps drive innovation.

Monopolies take away consumer freedom of choice. The pressure is removed from them, they adopt a take it or leave it attitude. Monopolies can compensate for inefficiencies by reducing payouts to producers and increasing charges to captive consumers and service users. Government services are generally in an uncompetitive monopoly situation. This is a reason for splitting up many of these services and placing them into the private sector. Also strong competition legislation is needed enabling for the splitting up of private sector monopolies and oligopolies. A good example is the oligopoly of the two major supermarket chains in Australia. A policy of this oligopoly has become to avoid using small producers and to only deal with large distributors and suppliers. How can small innovative producers grow and become successful in such an environment. The home brand policy and giving large home brand suppliers an advantage is taking away product differentiation and stifling innovation ultimately reducing consumer choice. Good competition law would result in these two supermarket chains being split into about six chains. It would also ensure that there was no collusion between these retailers.

Bankruptcy is a part of a healthy competitive economy (it is better if entrepreneurs are able to cut their loses and bail out before they lose everything). The private business person can lose everything. Bankruptcy is the markets way of efficiently allocating resources. Nothing, however, could be more devastating for the entrepreneur involved. Society needs to recognize the role and risk entrepreneurs take on. Some of the world’s most successful entrepreneurs have been through bankruptcy before achieving success. When you never make mistakes, you never make anything (those who do nothing don’t make mistakes). It is easy for those who never make anything to criticize. Entrepreneurs need friends when things go wrong; a friend is someone with whom you can be weak.