a) Competition on the economic level, i.e., of struggle for livelihood, had its origins in the market place. Sir Henry Maine, on the basis of his study of village communities, states in effect that the beginnings of economic behavior are first to be seen in neutral meeting places of strangers and foes.
In order to understand what a market originally was, you must try to picture to yourselves a territory occupied by village-communities, self-acting and as yet autonomous, each cultivating its arable land in the middle of its waste, and each, I fear I must add, at perpetual war with its neighbour. But at several points, points probably where the domains of two or three villages converged, there appear to have been spaces of what we should now call neutral ground. These were the Markets. They were probably the only places at which the members of the different primitive groups met for any purpose except warfare, and the persons who came to them were doubtless at first persons especially empowered to exchange the produce and manufactures of one little village-community for those of another. But, besides the notion of neutrality, another idea was anciently associated with markets. This was the idea of sharp practice and hard bargaining.
What is the real origin of the feeling that it is not creditable to drive a hard bargain with a near relative or friend? It can hardly be that there is any rule of morality to forbid it. The feeling seems to me to bear the traces of the old notion that men united in natural groups do not deal with one another on principles of trade. The only natural group in which men are now joined is the family; and the only bond of union resembling that of the family is that which men create for themselves by friendship.
The general proposition which is the basis of Political Economy, made its first approach to truth under the only circumstances which admitted of men meeting at arm's length, not as members of the same group, but as strangers. Gradually the assumption of the right to get the best price has penetrated into the interior of these groups, but it is never completely received so long as the bond of connection between man and man is assumed to be that of family or clan connection. The rule only triumphs when the primitive community is in ruins. What are the causes which have generalized a Rule of the Market until it has been supposed to express an original and fundamental tendency of human nature, it is impossible to state fully, so multifarious have they been. Everything which has helped to convert a society into a collection of individuals from being an assemblage of families has helped to add to the truth of the assertion made of human nature by the Political Economists.[196]
The extension of the relations of the market place to practically all aspects of life having to do with livelihood has been the outcome of the industrial revolution and the growth of Great Society. Standardization of commodities, of prices, and of wages, the impersonal nature of business relations, the "cash-nexus" and the credit basis of all human relations has greatly extended the external competitive forms of interaction. Money, with its abstract standards of value, is not only a medium of exchange, but at the same time symbol par excellence of the economic nature of modern competitive society.
The literature describing change from the familial communism, typical of primitive society, to the competitive economy of modern capitalistic society is indicated in the bibliography.
b) The history of competition as a concept in political economy goes back to the Physiocrats. This French school of economists, laying stress upon the food supply as the basis and the measure of the wealth of the nation, demanded the abolition of restrictions upon agricultural production and commerce. The Physiocrats based their theories upon the natural rights of individuals to liberty.
The miserable state of the nation seemed to demand a volte face. Taxes were many and indirect. Let them be single and direct. Liberty of enterprise was shackled. Let it be free. State-regulation was excessive. Laissez-faire! Their economic plea for liberty is buttressed by an appeal to Nature, greater than kings or ministers, and by an assertion of the natural, inherent rights of man to be unimpeded in his freedom except so far as he infringes upon that of others.[197]
While the Physiocrats emphasized the beneficent effects of freedom in industry to which the individual has a natural right, Adam Smith, in his book The Wealth of Nations, emphasized the advantages of competition. To him competition was a protection against monopoly. "It [competition] can never hurt either the consumer or the producer; on the contrary it must tend to make the retailers both sell cheaper and buy dearer than if the whole trade was monopolized by one or two persons!"[198] It was at the same time of benefit to both producer and consumer. "Monopoly is a great enemy to good management which can never be universally established but in consequence of that free and universal competition which forces everybody to have recourse to it for the sake of self-defence."[199]