Peace and Security: Competition Depersonalizes Conflict
Peace means the absence of violence and strife, both within the community (internal peace and harmony) and from the outside (external peace). It relates to security Opens in new window in the first meaning.
Peace in a community tends to be enhanced when potential conflicts are depersonalized by rules that commit the members of the community to non-violent conflict resolution.
One way of depersonalizing inter-personal Opens in new window or inter-group conflicts Opens in new window is to reduce the coverage of what is decided collectively by governments to the minimum, namely ensuring that life, the institutions and material assets are protected, as well as funding the administration of this protective function of government. The allocation of incomes, property and production are then left largely to the impersonal mechanisms of competition.
When income and wealth allocation, the stabilization of business conditions Opens in new window and the production of more and more goods and services become the business of government, these matters become politicized. Then, collective antagonism can easily take hold.
Once emotions are whipped up by self-seeking political operators, internal harmony and the self-responsibility of citizens suffer. This is conducive neither to internal peace, nor to positive engagement and creativity.
It is no coincidence that the massive new government interventions to shore up banks and businesses in the wake of the 2007 financial crises and the subsequent need for budget cuts have led to angry, though poorly informed protest movements, such as Occupy Wall Street Opens in new window.
One important function of market competition is that the power of individual and corporate suppliers and buyers is contested and thereby controlled by other competitors.
Competition not only controls economic power, but also political power which ever so often flows from economic monopoly positions.Another function of competition in markets is to make the control of economic effort impersonal:
Sellers make offers for self-seeking, motives, but do so voluntarily; and in doing so, they satisfy potential buyers—a beneficial side effect.
Those sellers who cannot obtain prices sufficient to cover their production and transaction costs—in other words, who fail to make a profit—will be inclined to blame the anonymous market forces for their failure, rather than specific competitors or buyers.
This means the ever-present conflict between sellers, who want a higher price, and buyers, who want a lower price, is depersonalized and de-emotionalized. This contributes to peace, both within countries and in international relations.
An example of how the impersonal institutions of the market can help to defuse potential conflict is a free, deregulated labor (labour) market. If employers are driven by their pursuit of profit, they will hire the workers who promise to offer them the best productive value for the wage cost.
As a consequence, employers have to be blind to race, creed or gender. By contrast, those who discriminate, for example on the basis of race, incur a profit penalty and may eventually have to get out of the business.
This is typically a more effective way to integrate a diverse society than cumbersome and costly policies to enforce positive discrimination, for example on racial grounds, which is a difficult-to-measure quality (Rabushka, 1974; Sowell, 1990; 1996).
People from greatly differing cultural backgrounds, who have little in common, can interact productively and peacefully when they deal with each other in markets. With time, they may learn from each other and even gain respect and a liking for each other.
By contrast, political directives and controls often emotionalize interracial relations and create divisions which political agents may well be tempted to exploit (Sowell, 1994). It was revealing that Bosnians, Serbs and Croats, who fought an armed conflict in the 1990s, were able to deal with each other civilly in market places, even when political reconciliation proved unmanageable.The same holds true internationally:
Nations whose citizens share growing trading interests and are prevented from imposing political controls (such as tariffs) tend to see advantage in keeping the peace (Gartzke, 2005).
Conflicting economic interests can only be depersonalized if competition is widely accepted as an ordering principle. This also means that all distributive and other consequences of free competition are accepted and political agents are kept from intervening.
Once certain agents intervene to constrain the competitive process (for example by forming cartels) or use their power to coerce (for example by setting up barriers to market entry), peace and security is likely to suffer, precisely because conflicts become personalized, emotionalized and politicized.
The philosophers of the eighteenth and early nineteenth centuries were optimistic that the spread of commerce and the shift to motivation by self interest and voluntary action Opens in new window would enhance morals and the spontaneous adherence to fundamental values, in particular social peace and security (Boulding, 1969; Hirschman, 1977).
Twentieth century observers, however, were unable to share this optimism, as the competition they observed was frequently not even-handed, that is, among equals, but among powerful and powerless people or groups. Positions of economic and, consequently, political power were then used to entrench market power further.
It is, however, not permissible to conclude from this experience that open competition confers no benefit for peace and security. Rather, the fostering of competition should be seen as an effective means to control concentrations of power, and with it abuses of power that endanger security Opens in new window, peace and freedom Opens in new window.
Well-functioning competition always has consequences for individual security, as market participants are invariably exposed to unforeseen changes in supply and demand. They can never expect total security.
Moreover, people face the risks of being unable to be productive for personal reasons, for example because of illness or old age, or because they are hindered by socio-economic conflicts.These risks to personal security have to be met by private wealth buffers and insurance.
There may also be a consensus in a community that some of these economic risks should be addressed by collective action (public provision of security, social security). It is, however, not valid to eliminate the insecurities of the market by suppressing competition. That only leads to much greater insecurities in the longer run.
It is an empirical fact that ham-fisted political interventions eventually lead to haphazard, costly change, rather than steady evolution.
Nor can government promise total material security to all citizens, because the entire economic system would rigidify and moral hazard and loafing would spread.The cost for this would have to be borne collectively and anonymously by taxes, whereas the gains in material security are personal.
Public guarantees of material security therefore create an asymmetry, which results in limitless, open-ended claims for more and more social provisions of security.
In electoral democracies, political interests will then derive policy making increasingly towards a focus on security and away from other fundamental values Opens in new window. This process is illustrated by the experience of late medieval corporatist city states in Europe, China under the Ming and Ching dynasties, the socialist regimes and the welfare states of the twentieth century.
In all these cases, the securing of personal income and wealth positions by political intervention led over the long run to unmanageable public debts, societal dislocation, cynicism, burdens on subsequent generalizations and hence inter-generational injustice.
As of the early twenty-first century, most Western governments have made untenable concessions to well-organized public-sector unions (on salary levels, work conditions, pension entitlements and so on), which are now leading to disruptive fiscal deficits and public agitation.
We must conclude that security can only be provided—and should only be demanded and promised—by carefully observing the trade-offs with other fundamental values.