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Capitalism: competition and affordable prices
June 5, 2015Posted by on
Introduction: no economic system can work without affordable prices. Without affordable prices, the people become poor and incapable to buy the basic goods they need to sustain their life as human beings.
One of the most important things in a functional capitalist system is a real competitive market. The economic agents must compete in order to be able to offer competitive prices for their products. The competition and the competitive prices make the goods affordable, so the people can actually buy them.
Without competition, monopolies and cartels can form, and they can inflate the prices of the goods. And when the prices of the basic goods are inflated, then the people become poor, because they won’t afford to buy those basic goods (food, water, electricity, housing, etc)
Therefore the government must make sure that there is real competition on the market, in order to have affordable prices for the basic goods.
The government must fight monopolies, cartels and speculation because these things are anti-competitive and the inflate prices of basic goods.
In the area of housing and real estate, because the land is in limited supply, the price of the land and of houses tend to grow constantly. A limited amount of land can only fit a limited number of houses, so the houses can not be produced indefinitely like for example food.
In the field of real estate, competition is not enough in order to ensure the affordable prices. The only real solution here is the government to interfere and to rent houses and land to the people, for a profit, but at a decent price. Nobody should be able to rent two houses from the government. If someone wants more houses, they can buy or rent them from the private market. But they should not get from the government more than one house, because such thing will prevent someone else to have a house.
In conclusion, the competition is very important in order to make a system functional. But the real goal is not the competition in itself. The real goal is to get to the affordable prices. And sometimes the competition alone is not enough. The government should rent houses (or — better — apartments) to the people who want such houses, in order to make sure that the people can have access to affordable housing.