Celebrating competition

A culture of free and fair competition is a remarkable thing. It encourages candidates without privilege but who are capable to join the fight and aspire to win


The government’s introduction of Bharat Interface for Money (Bhim) has forced economic participants to reduce the cost of payment transactions to zero, thus distorting the fairness of the market. Photo: Priyanka Parashar/Mint
The government’s introduction of Bharat Interface for Money (Bhim) has forced economic participants to reduce the cost of payment transactions to zero, thus distorting the fairness of the market. Photo: Priyanka Parashar/Mint

The Bharatiya Janata Party’s (BJP’s) thumping victory in the Uttar Pradesh (UP) elections came about for many reasons. One spokesperson for the party offered five reasons for the victory: (1) the charisma of Prime Minister Narendra Modi, (2) the organizational genius of party president Amit Shah, (3) the structure of the party led by the two, (4) an overarching vision reflected in the manifesto inspired by them and, (5) a large and growing party base sparked by the two gentlemen.

The undertone of the article was a breathless celebration of personality. I would like to offer a sixth and perhaps more pertinent reason. The party chose candidates who were acceptable to the cadre in each voting district, who were capable of hustling and winning—not necessarily by winning a majority of votes but by winning just enough vote share to vanquish the opposition in our first-past-the-post system.

Every party ostensibly attempts to do the same thing, but often confuses the task by picking candidates acceptable to the “high command” or regional party leader or by choosing based on simple-minded calculations of caste or religion.

This lack of rigorous homework and the confusion related to the nature of the competition led to the loss of many others. The Congress lost for these reasons and more in UP. It won in Punjab for many reasons, including anti-incumbency. But it mostly won because the regional leader in Punjab—Amarinder Singh—was similarly allowed to choose candidates capable of winning.

A culture of free and fair competition is a remarkable thing. It encourages candidates without privilege but who possess one competence or another—administrative, political, speech-making and storytelling, to name just a few—to join the fight and aspire to win. An “appointocracy”, on the other hand, encourages a culture of access-seeking and sycophancy. Over time an organization that follows that model comes to be dominated by “yes-men”. The carnivores leave the system and seek opportunity in a culture that values their ability to compete.

In nature, competition occurs between animals that occupy the same geographical territory. Charles Darwin’s theory of evolution celebrates competition both for natural selection and for adaptive evolution of species. In the same way that the goal of natural selection is survival and procreation, the objective of political competition is to get elected and that of economic competition, to make a long-term return on capital. Vince Lombardi, the legendary coach of the Green Bay Packers team, put it best when he said, “Winning isn’t everything but wanting to win is.”

A cherished principle of economics is that market competition generates consumer surplus. It does so by creating choice and encouraging quality and innovation: which results in lower prices. While many economic principles have not been able to stand the test of time, the idea that competition is central to progress is perhaps the most resilient idea of all.

Adam Smith famously spoke of self-interest as one of the cornerstones of the invisible hand that guides economies. Less widely appreciated is that the way self-interest is regulated in a market system is through the force of competition. In a modern society, the role of the regulatory authority or system is to enable free and fair competition.

To many, this exposition of competition would seem rather obvious. And yet we forget so often and so consistently.

Let me give you some recent examples. The Congress party simply does not seem to understand that unless they allow for true competition, their long-standing brand will vanish into irrelevance. Their members, old and new, must not only be allowed to compete, they have to believe that they have a shot at the top job. As Lombardi says, that will is what makes the best want to join the party. In its absence, the spiral of defeat is inevitable.

If you think this idea is restricted only to the opposition, think again. The government has done a great job of encouraging the growth of digital payments through what has come to be known as the “India stack”.

However, they have suddenly felt the need to not merely enable economic participants but to interfere, thus distorting the fairness of the market, by introducing a government-created and -managed app called Bharat Interface for Money (Bhim) and by forcing economic participants to reduce the cost of payment transactions to zero.

This destroys the fairness of marketplace competition since the price is now an administered price and the Prime Minister advertises the app for free on national television. The irony is that Bhim (who would have thought that the mighty Bhim of the Mahabharat would become software) will eventually go the way of the now defunct Modern Bakery: because the government will not be able to effectively listen, adapt and innovate with an evolving market.

For India’s progress, free and fair competition in every field is key. It is a simple, effective and well-understood idea. Alas, it is forgotten too often.

PS: “My grandfather told me there were two kinds of people. Those who do the work and those who take the credit. Try to be in the first group, there is less competition,” said Indira Gandhi.

Narayan Ramachandran is chairman, InKlude Labs. Read Narayan’s previous Mint columns at www.livemint.com/avisiblehand

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