Competition, as the theory goes, raises productivity and does it in an efficient manner. Globally, competition has been a dominant discourse for several decades. The IMF and World Bank are both major proponents of the theory and believe it holds the key for developing countries. In Australia, competition has been a major policy driver for at least the last fifteen years. In 1995 the National Competition Policy (NCP) was enacted. The NCP was a heavily centralised, federally driven policy that aimed to remove barriers to competition. The NCP is heavily influenced by the theory of contestability. The theory of contestability makes the distinction that a perfectly contestable market is not possible in real life; therefore we talk about the degree of contestability of a market.
From a business perspective, the more contestable a market, the better off a society will be. Individuals love choice - it drives innovation, development and works for the consumer. However, in a limited market, like regional Australia, the affects on the community can be different to those of their metropolitan counterparts. Drive down most regional centre’s main street and you will see that a street lined with small, independent business are a thing of the past. In fact, independent, small businesses are so scarce they become part of marketing strategy of towns that still have them – a relic of yesteryear. Regional businesses are for the most parts, clones of each other. The same stores, the same window shop fronts, the same employees. Gone are the independence, novelty and sense of community that used to personify regional town centers. But wait – wouldn’t a successful contestability policy mean that the same businesses wouldn’t keep appearing in regional towns? That competition would bring with it diversity and consumer choice? It’s clear that that hasn’t been the case.
The problem lies in the theory of contestability, which is different to perfect competition. Contestability does allow for larger firms to be dominate, just as long as there are a few small firms and the larger firms don’t engage in anti-competitive practices. However, that hasn’t been the case. Recently there has been a great deal of outcry from local business owners over the perceived anti-competitive behaviours of the tow major grocery giants - Coles and Woolworths. A recent assessment from the Commonwealth Bank found that both companies are opening up stores in areas without sufficient population to support them. In other words, these firms are willing to run at lower than normal profits (or losses) to dampen competition from other small firms. It mimics the anti-competitive behaviours of the global super chain – Starbucks- that became known for putting stores across the road from another, to secure majority consumer share.
Contestability in this form sets a precedent and we are seeing it in regional centers. If every grocery store is a Woolworths: if every hardware shop is a Bunnings and every coffee store is a Starbucks then we are losing something much more vital than choice, we are losing a sense of community.
But, like all good competition an underdog is bound to appear.
2012 is the international year of the Cooperative. A Cooperative or Coop is a democratically run, collective based association. A cooperative is different from other forms of private or public organisation in that its members, who directly run the organisation own it, make decisions democratically and use capital for mutual rather than individual benefit. Cooperative’s activities are primarily commercial, but in essence they are community members wanting to provide an authentic service for their town. More and more Cooperatives are appearing in regional centres because of need to put community before maximising profits.
The International Co-operative Alliance explains the core values of cooperatives and why they are vital to economic and social development around the globe:
“Co-operatives are enterprises that put people at the centre of their business and not capital.
“Co-operatives are business enterprises and thus can be defined in terms of three basic interests: ownership, control, and beneficiary. Only in the co-operative enterprise are all three interests vested directly in the hands of the user.
“Co-operatives put people at the heart of all their business. They follow a broader set of values than those associated purely with making a profit.
“Because co-operatives are owned and democratically-controlled by their members (individuals or groups and even capital enterprises) the decisions taken by co-operatives balance the need for profitability with the needs of their members and the wider interests of the community.”
These core values might seem too sentimental, even unrealistic – definitely not a full alternative to contestability policy. However, this collectivist model should not be disregarded entirely. While competition and capitalism promotes individualism, cooperative economics, looks to build society and it’s something regional towns should heavily invest in. For as long as competitive capitalism is left to dominate regional areas, the independent character of community owned town centers could disappear entirely.