Anti-competitive practices and corruption

Sam Vaknin — A recent article by Ernest Dempsey on Digital Journal brought up the question of fairness in business, or business ethics, as explored by Dave Scotese in his article on GHN. Answering the question whether this is a form of bribery or corruption, let me clarify that such special offers would amount not to bribes but to “anti-competitive practices”, and though not corruption in the juridical sense – which applies to individuals – these corrupt whole markets.

Some explanation here. Corruption runs against the grain of meritocratic capitalism. It skews the level playing-field; it imposes onerous and unpredictable transaction costs; it guarantees extra returns where none should have been had; it encourages the misallocation of economic resources; and it subverts the proper functioning of institutions. It is, in other words, without a single redeeming feature, a scourge.

Strangely, this is not how it is perceived by its perpetrators: both the givers and the recipients. They believe that corruption helps facilitate the flow and exchange of goods and services in hopelessly clogged and dysfunctional systems and markets (corruption and the informal economy “get things done” and “keep people employed”); that it serves as an organizing principle where chaos reigns and institutions are in their early formative stages; that it supplements income and thus helps the state employ qualified and skilled personnel; and that it preserves peace and harmony by financing networks of cronyism, nepotism, and patronage.

We may ask what parallels they carry with bribes as they seem to limit consumers’ choices. Bribes too are paid in order to limit choice and eliminate competition. Consequently, in corrupt environments, consumers pay less than optimal prices. The difference between the competitive price and the new, post-corruption cost equals the amount of bribe paid in cash or in kind. Corruption amounts to a unilateral transfer from the consumers’ pockets to the manufacturers’.

But can we apply that example to other kinds of businesses? For example, if a popular bookstore in an area is offered this kind of incentive and asked to stock titles only of one or two presses, would it be fair for the bookstore to accept the offer? This can perhaps be fair, but not wise in the long-term. Consumers tend to shun “walled gardens”. This is why Android took over Apple’s iOS and why AOL is a relic.

In times of economic crisis, consumers tend to shop around (in other words: they prefer price competition and encourage it via their behavior). Producers/manufacturers tend to collude in order to fix prices. In recessions, businesses regard consumers as enemies and vice versa: producer-firms court consumers, but they also seek to limit their choices by “channeling” their purchases and determining their preferences.

About the Author

Sam Vaknin (http://samvak.tripod.com) is the author of Malignant Self-Love: Narcissism Revisited and After the Rain – How the West Lost the East, as well as many other books and ebooks about topics in psychology, relationships, philosophy, economics, and international affairs. He is the Editor-in-Chief of Global Politician and served as a columnist for Central Europe Review, PopMatters, eBookWeb, and Bellaonline, and as a United Press International (UPI) Senior Business Correspondent. He was the editor of mental health and Central East Europe categories in The Open Directory and Suite101. Visit Sam’s Web site at http://www.narcissistic-abuse.com. 

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