Shouldn't we all work together to get through this recession?
People do work together under Capitalism, just not in the same sense in which you're thinking. The OP doesn't go into much detail, so I'm going to create a list of common arguments made against capitalism and explain how those arguments are flawed.
First, I'll start with your comment.
Shouldn't we all work together to get through this recession? or
Why should markets thrive off competing with one another instead of working with one another?In an idea world, people help each other out. When people are competing, they aren't helping each other, which is why competition merely holds society back. At least, that's the common logic people have.
We need:
* to not only look at competing businesses, but consumers as well.
* to clarify how competition benefits consumers.
* to clarify why lack of competition is dangerous.
Often, when people talk about how detrimental it is for businesses to compete with one another, they only think of the businesses involved with a certain good or service. The consumer is often forgotten. Many people feel that as one businesses profits, another businesses goes into debt, and they focus on how this is a bad thing. However, it's easy to forget that we must also consider the consumer.
You're probably thinking, "Okay, well, let's consider the consumer. Wouldn't the consumer still be better off if businesses worked together?" Competition happens because businesses want to make a profit. Businesses can only make a profit by selling goods that people want. When one business has more customers, often the other business has less. This means one business is going to find it harder to profit. This business must then figure out how they can persuade people to buy their product. They persuade others to buy their product by providing goods/services that are more desirable than their competition's goods/services.
There are a number of ways to make goods more desirable. One way is to provide cheaper goods. Another way is to provide better quality goods. The ultimate goal, however, is to come up with goods that are not only cheap, but also good quality.
Without competition, businesses can provide lower quality goods at higher prices. For example, when the iPhone first hit the market, there were few phones that were as good of quality as the iPhone. Because we live in a free market, other companies are providing goods of similar quality at cheaper prices. If there was no need for competition, there would be no incentive to create better goods. However, even if better goods were created, we must also remember that goods are in limit supply because resources are limited. I will talk more on limited resources later.
Under capitalism, businesses are forced to make a profit. If a business doesn't make a profit, then they go under. This means businesses will sell goods at a higher price than what it cost to create that good.I suppose we should talk about price. To talk about price, we need to understand value and why different goods and services have different values.
Resources are limited. Because they are limited, they have different values. Rarer resources are often more expensive than common resources because everybody wants the rarer resource. We use prices as a way of allocating resources. If all resources had the same value, then everyone would buy the most rare of resources, which means people who create inferior products will likely waste those resources. Because prices are different, people can't buy rarer resources and waste them. They smut make sure they don't waste the resources. The people who do waste the resources don't make a profit, which means less resources are wasted.
For example, let' say I use a cheap metal to make disposable razors, while another makes more expensive razors with rarer metals. If all goods had the same value, I could take the rarer metals and make better quality disposable razors. The razors may last longer, but I'm only making disposable razors, which means they likely won't last as long as the quality razors made with the same metal. More people will be able to buy better quality disposable razors, but the rarer metal will be wasted. This will lower the supply of the rarer metal by such a great amount that eventually the businesses selling quality razors will have to use an inferior metal.
So how do we determine if a resource is being wasted or not? Supply and demand. If a company profits, the material is being used for goods that people ultimately want. If they aren't making a profit, they they are either making goods people want but can't afford,or they are making goods nobody wants. A product, in this case, is only wasted if is undesirable for one reason or another. The one thing capitalism can do that other -isms can't, is to allow CONSUMERS as a wrong to determine the value of a good/service. This is why you hear people, like myself, say, "People vote with their money." When it comes to allocating resources, money is how the people vote, which is more democratic than having the government decide the value of goods and services.
Why don't we let the government decide the value of resources? Because the government is made up of regular people, and they can make errors too. It's better to let people vote for how resources should be allocated buy buying products they want than it is to allow the government to determine the value of resources, and to allocate them in unfavorable and detrimental ways.
Profit is good because it is a sign of success. When one profits, we know they are providing goods and services people want. Without profit, there is no way to measure whether a good or service is serving the people at their fullest potential. Without profit, smaller businesses can waste rarer and more valuable materials, which would normally result in failure under a free market.
That is the importance of cost.
That's all I'll get into for now. Even those two statements resulted in more typing and more depth than what I originally imagined.
