Vive la compétition !
Facing a difficult re-election campaign, French President Nicolas Sarkozy recently threatened to pull France out of a 27-year-old open borders agreement between nations in the Schengen Area unless the European Union tightens restrictions on immigration. At the same time, he declared, “I want a Europe that protects its citizens. I no longer want this savage competition,” advocating a “Buy French” law under which government spending would favor domestic industries. In doing this, Sarkozy is basically reviving old-school mercantilism, which says France can improve its economic position by paying more money at home for goods that could be produced much more cheaply abroad.
Although this is not the first time a politician has resorted to such tactics to win votes, protectionism has been out of fashion in the last few decades among neoliberal European leaders, who have generally accepted the arguments in favor of increased trade and globalization. Judging by Sarkozy’s surge in the polls since the speech, however, it seems like voters may no longer want open borders and free markets in France, where populist stirrings are trumping the conventional economist’s view.
French voters are not the only ones to flinch at the term. The word “competition,” like its cousin “capitalism,” often evokes an image of the cutthroat industrialists squeezing every cent of surplus value out of their poor laborers. However, in reality, competition manifests itself in all political and economic systems, whether they are capitalistic, collectivist, or a hybrid of the two. Even if Sarkozy were to succeed at reducing competition from foreign markets in certain industries, this would only lead to fiercer competition for French people in other areas of life. Taxpayers, for example, would have to compete more intensely for a smaller pool of resources if they were paying more for the same services from the government.
An even starker example is provided by the Soviet Union, where an attempt to completely abolish private enterprise resulted in a treacherous competition for favors from the nomenklatura, a class of politically-connected administrators who de facto controlled the means of production. For regular citizens, refusing to participate in the battle over administrative clout sometimes meant starvation, while offering a bribe to the wrong bureaucrat carried the possibility of harsh punishment.
The human inclination to out-compete strangers and provide for one’s self and close relatives is deeply ingrained. Aggressive competition is hardly a result of increased trade and specialization, as Sarkozy seems to suggest, but rather of our biology. Accordingly, modern humans must harness our competitive primal instincts by defining the “rules of the game” in a way that produces the greatest benefit. Just like in a soccer tournament, rules and referees encourage healthy competition and entertainment while minimizing chaos and player injury. Sarkozy paid lip service to this point during the speech, claiming that he supports “fair competition” (concurrence loyale) but will not tolerate vaguely defined “unfair competition” (concurrence déloyale), referring to policies in other countries that encourage artificially cheap exports. Donald Boudreaux of Cafe Hayek artfully summarized the logic behind an escalating trade war when he gave the economist’s translation of a threat by President Obama directed at China: “If you don’t stop abusively taxing your citizens in order to grant unjust privileges to your favorite industries, we will more-abusively tax our citizens in order to grant unjust privileges to our favorite industries.”
Ironically, Sarkozy’s counter-productive proposals are a result of one of the most savage competitions of all: politics.
Existing institutions are adept at channeling competitive forces in recreational activities like sports, and are variably successful in different markets around the world. While democracy and other checks and balances on power have reduced the risk of a future Hitler or Stalin, no institution has yet managed to harness people’s competitive instincts to produce truly beneficial outcomes at the governmental level. Advocates of competitive government therefore need to clearly and concisely convey the rules (or meta-rules) that enable the competitive process to produce the best policies, free of savagery. Since most people won’t tolerate savagery from their government if they have other options, a simple framework might begin with, “Let people leave.” Unfortunately, the incentives currently embedded in our political institutions are swaying Europe in the opposite direction, towards an increasingly closed society.