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The Joy of Competition

By James K. Glassman
Tuesday, September 16 1997; Page A17

Why are we so frightened of competition? We live in the richest nation in history, we're the world's largest exporter, we attract the most investment, we lead in nearly every sector (cars, microchips, agriculture, etc.). Yet millions of Americans are afraid to lower our trade barriers.

That's the issue in the debate over fast-track authority, which has allowed presidents since 1974 to negotiate trade agreements without having them nitpicked by Congress. Under fast track, there's a straight up or down vote on each trade deal as a whole – a sensible and necessary policy.

But the opposition to fast track is only a symptom of a broader problem, a paradox really. On the one hand, this country was built on competition, but on the other, each of us would rather have the field to ourselves.

The market provides the answer to this contradiction: Firms are forced to excel as they seek monopoly status, but (unless they get government protection) they can never achieve it. As soon as a company starts making big profits, a competitor arises. In this process, Americans at large reap the rewards of higher-quality, lower-priced goods.

That's why public policy should encourage wide-open competition by lowering tariffs, regulations and restrictions of all sorts. We should do this no matter what other countries do – not because free trade "creates jobs" in some sectors through exports, but because it creates a better life for all Americans through imports.

Consider shoes. U.S. shoemakers and their employees would love to keep foreign companies out. But what about the 270 million Americans who wear shoes? They benefit from wider choices and lower prices – and the domestic shoe industry may ultimately benefit, too. Our automakers, who now sell the most cars in the world, have thrived in recent years from competition with the Japanese.

Hesiod, the Greek poet who may qualify as the world's first economist, understood this phenomenon. He wrote 2,800 years ago: "When someone whose work falls short looks toward another, toward a rich man who hastens to plow and plant and manage his household well, then neighbor vies with neighbor as he hastens to wealth: this Strife is good for mortals."

Where this Strife, this competition, is absent, it's bad for mortals. Look at what doesn't work in this country, and you'll invariably find a lack of competition:

Schools. Public secondary education is a near-monopoly, funded with tax dollars. All the good intentions in the world – national standards, teacher training – can't cure the sickness. Competition can.

The truth is that competition finds the way. Right now, for instance, we don't know the best method of improving education, but if the monopoly ends and venturers are unleashed – as they're unleashed to develop better semiconductors or telephones – then they'll discover the best path through the process itself.

We can make current schools better by giving new ones the chance to lure their students away – with vouchers, scholarships or strong charter-school laws, like Arizona's, which let nearly anyone start a school. The bad ones will fail; the good ones will thrive, be copied and surpassed.

Mail. The U.S. Postal Service has two monopoly powers: It's the only institution allowed to carry first-class letters, and it owns the mail slot at your house. Under Marvin Runyon, it's become more efficient, but it lags behind Federal Express and UPS in service, and like all government-protected monopolies (remember long distance before the AT&T breakup?), it charges too much.

The solution is simple: End the monopoly. Let it stand on its own feet or be replaced by private competitors. Delivery to remote addresses? If that's a legitimate policy goal, let Congress appropriate the money, after putting the service out for bids.

The District. One big reason that the District of Columbia is a mess as a city is that it, too, is a near-monopoly. No matter what the local government does, the federal government will stay here. Kodak would certainly move its corporate headquarters if Rochester, N.Y., were run as poorly as Washington.

The way to solve the District's problems is not to give more power to a control board. What the city needs is less control and more freedom. The answer is to force Washington to compete. The city has deteriorated sharply from 1982 to 1997, yet it's still home to the same proportion of the federal work force – 12 percent, 328,000 employees.

Let's put department headquarters up for bid. In this age, the home of the Interior Department could easily be in Denver, Energy in Dallas, HHS in Minneapolis. Cities would pay good money – or at least offer good services, as Olympic venues do – to become a departmental H.Q. Washington could keep Congress and the White House, but if it wants to retain its 19,000 Commerce employees (out of a national total of 34,000), then it will have to fight for them by improving the city – again by finding its own way.

Critics say open competition is selfish and hurtful. On the contrary. Competitors succeed only if they focus on other people, if they give consumers a better life. "In a free market," writes David Boaz of the Cato Institute, "people achieve their own purposes by finding out what others want and trying to offer it."

That system has worked extremely well. In the battle for fast track, it's exactly what's at stake.

The writer is a fellow at the American Enterprise Institute.

© Copyright 1997 The Washington Post Company

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