The Different Currents of Political Economic Thought - Essay Example

Political Economic Thoughts on Competition Name Institution Course Professor Date Political Economic Thoughts on Competition Introduction In understanding the relevance of economic thoughts, it is imperative to recognize the position of globalization. According to Gilpin, globalization integrates the political and economic affairs on an international level (2011, p. 3). Economic thoughts developed from theories of independent thinkers, having looked at the close link between politics and economy. In the contemporary period, political economy incorporates aspects such as the economic system, political setting and institutions influence one another. Moreover, based on Gilpin global economies is a contribution of the international policies and the markets. Through the policies, rules become established, which govern the relationship between countries towards an economic benefit. Consequently, economic power contributes to the structuring of the governing policies (2011, p. 34). The market functions as an outside force influencing the direction of the political and economic policies. Therefore, this paper addresses the issue on competition through a political, economic perspective. It specifically examines the matter through the classical, Marxian, Neoclassical and Keynesian political, economic thoughts. Competition in Economies The structure of the market dictates the type of economic competition. It goes further to determine the behavior of firms in the competitive market towards achieving profit. Based on Su, three primary factors in competition include its characteristics, structure and economic outcome (2016, p. 2). Research in competition identifies four significant structure including monopoly, oligopoly, perfect competition and monopolistic competition. In a market economy, competition serves as a force influencing the use of resources where they are most useful. The imperative is the role of supply and demand in controlling the intensities of competition. Classical political-economic theory on competition advocates for self-regulating markets operating under minimal government control. Moreover, the approach upholds the accomplishing of the individuals' interests through competition. According to the theory, competition creates order through generating personal and economic progress. The school of thought supports free market through perfect competition (Alexander 2014). The personalities crediting the theory strongly opposed the use of monopoly. Comparatively, Keynesian theory addresses the imperfect competition in the industry. Based on Lukacovic and Francis, it supports regulation in money and economy by the government. In light of stagnation and economic challenges, the policy suggests that it is only through government manipulation of the market that such problems become overcome (2016, p. 54). Moreover, the theory gives powers to firms in controlling the price of commodities relevant to the demand and supply ratio. It views competition as a means to achieving dominance in the market. In Marxism, competition is the phenomena enabling the prediction of the economy. According to Palemo, Marx views compares competition to war. Competition is an outcome of the conflict between labour and capital (2014, p. 7). The theory provides that competition achieves a single market price. It also establishes a standard rate of profit, with different production costs in various industries and stable pricing with various prices setting for firms competing in the same sector. It is imperative to realize that the theory compares competition within industries and that between industries. The method accommodates perfect competition; although it goes further to explore the role of competition in creating the. According to Palermo regarding Marxian concepts, competition is not an outcome of the market structure. It is more of a social coordination operating in all available markets (2014, p. 2). About neoclassical approach on completion, Palermo, describes different assumptions, which support perfect competition. According to the discussion, competition is a natural process in the market. The theory assumes that the market system will produce a fair and just allocation of income and available resources. In supporting perfect competition, the theory defines it as a price- setting behavior (2014, p.1). Moreover, the method argues that the more the number of participants in the industry, the lesser the control they exert on the market. Perfect competition is always present in the market. Types of Competition According to Gal and Fox, the monopoly market structure involves a single company dominating the market. It carries the characteristic of a single seller producing products without substitutes. The advantage of the structure is the ultimate power to control pricing leading to the attainment of maximum profits. Although the structure attracts multiple benefits to the producer, it faces challenges such as high cost of entering the market, social restrictions, and political reasons (2014, p. 22). Capitalistic nations prevent firms from joining monopolies as a means to regulate the control over limited resources. The control of the market through monopoly negatively impacts the consumers, in particular through the pricing of commodities. Governments are in a position to create a monopoly, especially in managing its scarce resources. A utility company is an example of monopoly permitted by the government of the particular country. Comparatively, monopolistic competition involves many companies producing different but similar products. The price of the outputs is set depending on the individual company’s cost of production. For these firms to obtain market power, they incorporate differentiation of products to attract the largest share of customers. About perfect competition, it is the availability of numerous buyers and sellers producing similar products. The concept involves few barriers to the entry of these markets. The result of a pricing is an outcome of supply and demand. Therefore the market determines pricing as opposed to setting a price limit for the producing industry. Consequently, it implies that the increase in the price of the commodity by company X, allows the customer to purchase similar goods from company Y, which sell at a lower price. The consumer receives most benefit where perfect competition exists. High competition characterizes the market of industries under perfect competition (Melitz and Redding 2014). Concerning oligopoly, Green, Marshall, and Mark defines the structure as interdependency between a few companies producing similar goods and competing for the same market (2014, p. 465). The firms create an industry where together they manage to control pricing and balancing supply and demand. The companies enjoy the benefits of the structure through establishing high prices (2014, p. 473). Forming oligopolies attracts the disadvantage of high costs, especially for new firms interested in joining the industry. A typical example of oligopolies in the contemporary society is the Transnational Corporations (TNC’s). According to Herkenrath and Bornschier, TNC promotes the economic and political power of the host countries. Although their presence seems to weigh in more benefits to the host nation, it also supports underdevelopment and inequity (2015, p. 105). TNC operate their business without considering the position of the people of that country. To a large extent, these companies practice an oligopolistic approach. These firms undermine the position of local enterprises in the market gaining more power and control. Moreover, these companies are provided with support from their parent corporations leading to their dominant exercising control in politics of the host government (2015, p. 109). TNC activities associate with increased levels of inequity and low economic growth. Moreover, as a consequence of its action affect the Gross Domestic Product (GDP) leading to underdevelopment. Examining oligopoly in Australia, an example would be the dominance of Dunlop tires. The company originates in Britain having diversified into multinational markets. Since its beginning in 1889 the company continues to enjoy the market power and control of the tire producing industry. Moreover, though its success in marketing, it has managed to include the production of other goods such as softballs, volleyball, and tennis balls. Much of its success in establishing ground as a multinational company is a great contribution to the oligopoly structure of the market. The industry operates on a minimum number of players, which provides the company with control of the market. Oligopoly minimizes competition, especially from upcoming firms venturing into the industry (Silva Lopes and Guimaraes). Competition is a vital process of the market. The contemporary political, economic thought agrees mostly with the proposals of neoclassical economists. The relevance of the theory in competition includes the need to improve economic growth through expansion of industries, to maximize the output. Therefore, it becomes necessary to encourage more participants in establishing industries through perfect competition. Oligopoly carries the disadvantage of limiting the control to a few firms. Consequently, the few companies do not provide an increased output. Diversity is actively discouraged through oligopoly, and monopolistic approached. Additionally, the economic giants of the current times are active innovators. Innovation includes the creation of better solutions to provide the consumer with the alternative in satisfying a need or solving a problem. Therefore, it is more important to apply a system favouring perfect competition to enhance innovation. Conclusion Globalization in today’s world influences both the economic and political outcomes. Trade and markets play a significant role in directing the policies to operate with, especially in meeting equality in the society. The imperative is the contribution of political-economic thoughts in the contemporary society in influencing decisions on a national and international level. In respect to the increased need for more production for profits and economic growth, it is important for the government to regulate the use of natural resources in the manufacturing industry. Nevertheless, the government should discourage monopoly and monopolistic competition, which are only favourable to the producers. Moreover, the society should adopt neoclassic approaches to solving both economic and political challenges. References Alexander, J. C., 2014. The Antimonies of Classical Thought: Marx and Durkheim. Theoretical Logic in Sociology, Routledge: New York, NY. Gal, M. S. and Fox, E. M., 2014. Drafting competition law for developing jurisdictions: learning from experience. New York University Law and Economics Working Papers, no.374, pp. 1- 69. Gilpin, R., 2011. Global political economy: Understanding the international economic order. Princeton University Press: New Jersey, pp. 3-24. Green, E. J., Marshall, R. C. and Mark, L. M., 2014. Tacit collusion in oligopoly. The Oxford Handbook of International Antitrust Economics, 2, pp. 464- 497. Herkenrath, M. and Bornschier, V., 2015. Transnational Corporations in World Development Still the Same Harmful Effects in n Increasingly Globalized World Economy? Journal of World-systems research, 9(1), pp. 105- 139. Lukacovic, I. I. and Francis, J., 2016. From The Classical School to Today: The Evolution of Stagnation Theories. Applied Economics Theses, pp. 1-51. Melitz, M. J. and Redding, S. J., 2014. Missing gains from trade?. The American Economic Review, 104 (5), pp. 317- 321. Palermo, G., 2014. Power, competition and the free trader vulgaris. Cambridge Journal of Economics, pp. 1-23. Silva Lopes, T. and Guimaraes, P., 2014. Trademarks and British dominance in consumer goods, 1876-1914. The Economic History Review, 67(3), pp. 793- 817. Su, T. Y., 2016. Competition between Firms in Economic Evolution: Its Characteristics and Differences to the Biological Sphere. Munich Personal RePEc Archive, pp. 2- 26. Read More