Therefore, if a private trader sells soap at a profit of one farthing a box, the State or Municipality can sell soap one farthing a box cheaper, other things being equal.
It is evident, then, that the trader must be beaten unless he can produce more cheaply than the State or Municipality.
Can he produce more cheaply? No. The State or Municipality can always produce more cheaply than the private trader, under equal conditions. Why? For the same reason that a large firm can beat a small one, or a trust can beat a number of large firms.
Suppose there are three separate firms making soap. Each firm must have its separate factory, its separate offices, its separate management, its separate power, its separate profits, and its separate plant.
But if one firm made all the soap, it would save a great deal of expense; for one large factory is cheaper than two of half its size, and one manager costs less than three.
If the London County Council made all the soap for London, it could make soap more cheaply than any one of a dozen private firms; because it would save so largely in rent, plant, and management.
Thus the State or Municipality scores over the private firm, and co-operation scores over competition in two ways: first, it cuts off the profit; and, second, it reduces the cost of production.
But that does not exhaust the advantages of co-operation over competition. There are two other forms of competition still to examine: these are adulteration and advertisement.
We all know the meaning of the phrase "cheap and nasty." We can get pianos, bicycles, houses, boots, tea, and many other things at various prices, and we find that many of the cheap pianos will not keep in tune, that the bicycles are always out of repair, that the houses fall down, the boots let in water, and the tea tastes like what it is—a mixture of dried tea leaves and rubbish.