The Real Price Wars

Everybody favors freedom, but…! Countless minds are filled with "buts" of every description and variety. So numerous are free­dom’s "shortcomings" that in most company it hasn’t a leg to stand on. State interventionism, social­ism, thus engulfs those who favor freedom, but…!

For instance, over and over again we hear, "I believe in free­dom but in a free and unrestricted market we have price wars; the big fellows cut prices below cost to run the little fellows out of business after which monopoly prices may be charged."¹

Such so-called price wars are the minor competitive pricing flur­ries between bakers, filling station operators, and the like. Recently, consumers in the New York area enjoyed a "coffee war." But these bids for more business are non­violent and, thus, are not wars at all. They are nothing more than intensified, competitive pricing, of­fers to serve mass markets.

Actually, competitive pricing is a device for cooperating; as con­sumers, we look not only at quality but at price to determine with which supplier we shall cooperate in trade. How else are we to de­cide what bread to buy, with which baker we shall cooperate? Many men may cooperate to produce an item, but their customers are co­operators of the business, too.

True, some businesses fall by the wayside as have some 1,600 different automobile manufacturers in the history of that industry in the United States. Intensive competitive pricing only steps up the rate of the dropouts; it does not alter the final decision. It simply lets all producers know sooner than otherwise how they rate in the struggle to serve self and others. And this is the way it should be. The alternative would be for consumers to subsidize every incompetent person or group in every enterprise ventured. Un­thinkable!

These so-called price wars and the monetary benefits they confer on consumers are not a social problem and do not merit special attention by the student of politi­cal economy. They are mere ripples in the mainstream of open com­petition.

Violent Methods of Pricing Mark the Real Wars

There are, however, mighty, economy-wrecking price wars —real ones — that are rarely thought of as such and seldom diagnosed with accuracy. As a consequence, remedial efforts often tend to ag­gravate the conflicts and to make peaceful cooperation and trade more difficult.

We should bear in mind that violence is the distinguishing fea­ture of war. We can infer from this that any pricing that rests on the use or the threat of force—violence—must be defined as a price war.

What, then, are the real price wars? Rent control qualifies, for it rests on coercive pricing. So does the minimum wage law; if anyone doubts it, let him absolute­ly disobey and observe the con­sequences. The prices of wheat, cotton, peanuts, tobacco, and so on are fixed by force. Every form of price control forces either buyer or seller, or both, to deal at prices not mutually acceptable.

The strike is the perfect ex­ample of a real price war. Why? The strike is a method of pricing; strikes rest on violence or the threat thereof; thus, all strikes are price wars.

The strike is the markup device used by trade unions, organiza­tions of otherwise independent sel­lers of labor having among their purposes the coercive manipula­tion of market price to their own advantage.

The striker is not content just to withhold his own services from the market; he is determined that no one else shall enter the market he has closed. Any trading must be at his price or not at all; and he will deal violently with any buyer or seller of services who crosses his picket line. Gov­ernments often sanction, encour­age, and uphold such violence — in effect, forcing taxpayers to sub­sidize (employ) the strikers.

Unwilling Exchange

Violence as a method of pricing is intimidation, not cooperation. Violence or its threat at best re­sults in unwilling as distinguished from willing exchange. For vary­ing periods the consequence is no exchange at all, and often ex­change between combatants is brought to a permanent standstill. Strikes are price wars; indeed, they are no less than civil wars. The object in war is not to serve the opponent but to injure him—to gain at his expense. The grave risk is that both sides may lose.

To observe which side comes out on top in warfare is not to be sure of a winner. The side on top may be as permanently fastened in that position as is the side being held down. Both sides lose in these unfree positions. Contrast this with the mutual gain derived from the peaceful voluntary exchange of goods and services.

We should assess all violence as it affects the quality of the ideas men hold. Evaluated in this man­ner, it is easy to see that violence not only destroys material wealth but also downgrades man intel­lectually, morally, spiritually, and ideologically. Reflect on the pros­pects for cooperation, for instance, when one slaps a spouse in the face! Each shot fired at a human being and each threat of violence, whether in shooting or price wars, is a step away from the ideal, a blow to the creative process.

The cure for wars — including price wars — is an intelligent in­terpretation of self-interest. How can I realize my creative potenti­alities except as I be free? And I cannot be free if I am holding you down. Or vice versa! My free­dom depends on yours and yours on mine.^³ This is so simple and self-evident that one wonders why it is ever questioned.

As to the price of labor — yours or mine — simply free the market by removing every trace of vio­lence or the threats thereof. Let competition be open and unlimited. Maximize, rather than minimize, the prospects for mutual gain through cooperation. And be not misled by the claims that trade unions or governments raise the wage level.4

In any event, let us confine the term "price wars" to those pricing activities resting on force, coer­cion, violence.

—FOOTNOTES—

1 Regardless of all the restrictions against competitive pricing in the U.S.A., in no other place or time in his­tory has it been so much practiced. And history has no record of little-to-big­ness growth so prevalent as in our country.

^² See Chapter III, "Strife As a Way of Life," in Anything That’s Peaceful (Irvington, N.Y.: The Foundation for Economic Education, Inc., 1964).

³ See "My Freedom Depends on Yours" by Dean Russell. THE FREEMAN, December, 1967.

⁴ See Why Wages Rise by F. A. Har­per. (Irvington, N.Y.: The Foundation for Economic Education, Inc., 1957).