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The perils of competition

Zahid Hussain's picture


Promoting competition is considered the best available option for increasing economic well-being. The recent global financial crisis prompted policymakers to reconsider basic assumptions, but the virtues of competition were not among them. However, gone are the days when practitioners slept sound thinking the economy, if left alone, is self-correcting.

The limitations of competition as a force for universal good are well-known. Consumers can be inadequately informed, making it possible for firms to take advantage of them. The intrinsic difficulty of matching skills to positions and the costs associated with moving jobs may make workers stay with abusive employers. More basically, in a world where people have imperfect information and workers can’t always leave their employer, firms may be able to respond by cutting corners and abusing consumers and workers.

Is the problem with competition itself or the legal and informal institutions that yield this type of competition? The answer depends in part on one’s ideological lens—namely the belief of competition existing outside a regulatory framework, necessitating governmental intervention in the marketplace versus the belief that regulatory forces help create, define, and nurture competition in the market, necessitating improvements to the legal framework if competition is failing.

Some policies that supposedly restrict competition are justified for promoting competition. Intellectual property rights, for example, can restrict competition along lets say the use of a trade name. But the argument is that intellectual property and antitrust policies complement, rather than conflict, one another in promoting innovation and competition.

Life will surely be more stressful if we needed to compete for everything. Cooperation is often more relaxing. Society and competitors at times benefit when rivals cooperate in joint ventures to address collective needs. Competition can make people less cooperative, promote free-riding, and reduce contributions to public goods, thus leaving society worse off.

The point is not all forms of competition are beneficial. Just as athletic contests distinguish between fair and foul play, the law distinguishes between fair and unfair methods of competition. Bangladesh’s garment industry is a contemporary case in point.  The collapse of Rana Plaza in Bangladesh brought to the fore the pathetic state of working conditions in many factories serving the global supply chains. The structure of the supply chain itself—the relationship among regulators, buyers, suppliers, and workers—is fundamentally related to these problems. 
The practice of subcontracting is routine in Bangladesh’s garment industry. The prevalence of competitive indirect sourcing strategies has resulted in a supply chain driven by the pursuit of nominal cost minimization. It has increased risks for business and workers by undermining prices, wages, working conditions, and investment in productivity and quality. The apparel units engaged in sub-contracting are mostly non-compliant particularly in paying wages and maintaining safety standards.

Question is why do compliant factory owners take recourse to such sub-contractors? Major global buyers see Bangladesh as a market where they can obtain the most competitive prices for a high volume of lower end products. Consequently, they set low price targets. The manufacturers compete for large orders by undercutting each other, further driving down the prices. They make delivery commitments far in excess of their capacity to produce without breaching compliance. When prices are dramatically driven down, the natural tendency of a garment manufacturer is to manage their unit at a least cost with regard to overheads and wages. The pressure to drive these down arise inevitably.

Getting the remittance system right for Africa?

Soheyla Mahmoudi's picture

The remittances sent home every year by the African Diaspora should create a doorway to still greater opportunities, and the key to this door is financial access. While remittances do impact the living standards of beneficiaries directly, the banks that pay out the remittances month after month should offer recipient families a basic financial package including savings accounts, payment services and small loans for microenterprise.  This should facilitate growth from current levels of remittances saved and invested.  Leveraging of remittances through financial inclusion is certain to increase their development potential.

'Tata Social Enterprise Challenge' to Support India's Best and Brightest

Kirsten Spainhower's picture

The Tata Group, in partnership with the Indian Institute of Management Calcutta (IIMC),has launched the ‘Tata Social Enterprise Challenge’, a quest to find India’s most promising social enterprises. The goal of the challenge is to create an ecosystem for social entrepreneurship and encourage sustainable, scalable and measurable social impact. Selected social entrepreneurs will be offered mentorship support, funding opportunities and an opportunity to be incubated at IIM Calcutta’s Incubation Centre

Teams who either have an early stage venture (not older than 3 years) or a promising idea with a plan that can create sustainable social impact can submit their business plans online by logging onto http://www.tatasechallenge.org.

Apps For Climate – time to vote for your favorites!

Tim Herzog's picture

Apps For Climate enters a new phase this week. The World Bank’s innovation competition, which was launched at COP-17 alongside the Open Climate Data Initiative and the Climate Change Knowledge Portal, attracted about 50 qualifying entries. These are now on public display on the Apps For Climate websiteTake a look.

For those who have been watching the competition and wondering what developers might cook up, now comes the fun part: trying out the dozens of interesting apps and voting for your favorites. Voting for the Popular Choice category is now open and runs through April 27, 2012, with the winner receiving US$5,000. The entry pool contains something for everyone, including web apps, mobile apps, visualization programs, and games. Some apps focus on taking actions to reduce greenhouse gas emissions and others on different aspects of development and adaptation.

Formal judging also kicks off this month. The judging panel includes Christiana Figueres, Rachel Kyte, Rajendra Pachauri, Juliana Rotich, Andrew Steer, and Patrick Svenburg. This group will be reviewing the qualifying entries, and making awards based on originality, design, performance, and potential impact. We will announce these awards in June. There are 15 awards in all, with the first place winner receiving US$15,000.

Disruptive Innovation needed, submit your ideas now

Jean-Louis Racine's picture

Henry Ford once famously said that if he had asked his customers what they wanted they would have asked him for a faster horse. If he had listened to his customers, the Ford Motor Company may never have existed, or would be called the Ford Faster Horse Company. The automobile became what is called a “disruptive innovation” meaning that it radically displaced the incumbent technology (the horse and carriage) by not listening to the demands of mainstream consumers, but trying to uncover their real needs.

This is the approach the World Bank is now prototyping in Indonesia: Trying to uncover the real clean energy needs of rural communities by understanding their underlying energy-related problems rather than simply asking them what technologies they want. The Indonesia Green Innovation Pilot Program is prototyping a new approach to fostering green disruptive innovation. The first stage of the program is being launched this week, and consists of identifying possible challenges – or problems – linked to energy in rural communities. In keeping with the logic of disruptive innovation, the program does not start with a market demand study, or a survey of clean energy solutions in the market, but with uncovering stated and unstated needs that affect the population of a rural community in their everyday lives. This is being done in three ways: One is through field research by a team of designers from Inotek and Catapult Design, a second way is through consultative workshops in Jakarta and in the rural communities,  and a third is through a “call for challenge” where the program is using a crowdsourcing approach to collect problems linked to energy in rural Indonesian communities. If you are in any way familiar with rural Indonesia and its energy challenges, the program invites you to submit a challenge through this website.

Apps for climate: Encouraging innovation through competition

Tim Herzog's picture

When the World Bank launched the Open Climate Data Initiative and the Climate Change Knowledge Portal last December, the goal was to make essential climate and climate-related data more readily available to the development community and others trying to address the difficult challenges posed by a changing climate. As was noted at the launch event, making data available is “one of the crucial steps toward building resilience to climate change,” as countries consider a range of measures to protect ecosystems, key infrastructure, and adapt critical economic sectors such as water and agriculture.

Availability of data, however, is only one piece of the puzzle. For example, while the Climate Change Knowledge Portal helps users interpret climate data in the context of development, it does not by itself provide solutions for all sectors or users. So what can we do to encourage the transformation of data into simple and innovative solutions and decision-making tools that accelerate climate resilient development?

Accelerating this transformation is the impetus behind Apps For Climate, an innovation contest currently underway and running through March 16 2012. Apps For Climate encourages people or organizations (World Bank employees are not eligible) to create climate data “apps”—an intentionally ambiguous term for anything from a website to a mobile app to a widget—and enter them in the contest. Winners, as determined by a judging panel, receive prizes up to $15,000, along with public recognition for their efforts. Such contests are increasingly popular tools for organizations to encourage innovative thinking and engagement beyond their traditional audiences. For instance, Apps For Development, the World Bank competition on which Apps For Climate is modeled, received over 100 submissions in 2011, many from developing countries.

Pakistan of My Dreams Slideshow

South Asia's picture

video platform video management video solutions video player

The World Bank organized an art competition among school children of grades 6 to 8. The theme for the competition was ''Pakistan of My Dreams" and it was held among the public schools falling in Peshawar, Rawalpindi and Islamabad area. The objective of the art competition was to tap into the artistic imagination and talent among school children. Twelve schools and more than 500 children participated in this competition. Here we are sharing the best thirteen drawings to encourage the youth to further nurture their artistic expression and achieve their dream of a peaceful and prosperous Pakistan.

Staying silent is a crime, so engage on climate change

TMS Ruge's picture

If you are like most people, the topic of climate change is not something you think about everyday. It was certainly not something that I thought about often. The subject seemed unattainable, incomprehensible and to be dealt with smart people. It was always a conversation where I thought I wasn’t qualified to engage in. What I have come to realize, is that climate change is part of our everyday conversation. We may not deal with the scientific terms or sit at the round table with think-tanks and heads of state, but we do talk about the effects of climate change in our own lives. We talk about the increasingly hot summers, or commiserate over pictures of the latest flood, or disucss the now unpredictable planting seasons. These are stories we share amongst ourselves without realizing they are small chapters in humanity’s tome to the subject.

Since climate change affects all of us, it seems appropriate that we all should have a voice at the decision-making table. All too often though, we only get to hear from the academics, the heads of state, or the violent protestors. Where are the voices of the common man, the single mother, the student? Where are the voices of the villagers in their garden on the outskirts of Marrakech, the shop owner on a busy street in Kigali, the sugar cane grower who can no longer predict the rains in Zambia? How do we determine our collective future if we don’t take time to listen to each other’s stories?

This is where the Connect4Climate team at the World Bank comes in. We are trying to reframe this critical conversation around a topic into a mutual exchange of listening and sharing. Ahead of the December 2011 United Nations Climate Change conference (COP17) in Durban, South Africa, Connect4Climate was launched with a photo/video competition for African youth, aged 13 to 30, in Bamako by Andrew Steer, Special Envoy for Climate Change at the World Bank.

Awards for Change: How prizes can help us achieve energy goals

Daniel Kammen's picture

What will it take to foster and spread the ideas and practices needed for sustainable development? One thing that has stirred innovative thinking are the positive results of recent prize competitions. 

Perhaps the most notable of these – so far – has been the Ansari X Prize. The Ansari X Prize was a space competition in which the X Prize Foundation offered a US$10 million reward for the first non-government organization to launch the same reusable manned spacecraft into space twice within two weeks. It was modeled after early 20th-century aviation prizes, and aimed to spur development of low-cost spaceflight. There is real brilliance in this idea, but in the specific terms of the prize, which prompted other competitors – each of whom spent far more than the prize money. The prize, claimed by Scaled Composites in 2004 for its Tier One project launched or accelerated a diverse portfolio of private space ventures, “spaceports”, and an industry now worth billions.

Since 2004, prizes have been launched. One, technology-focused competitions is the i6 Green Challenge by the US government which will reward $1 million to each of six teams around the country with the most innovative ideas to drive technology commercialization and entrepreneurship in support of a green innovation economy, increased U.S. competitiveness and new jobs. There are others with concrete objectives to addressing key issues in ecological conservation, social networking, transparent national governance, and democratic transitions of power (for example, the Mo Ibrahim prize).

Can this idea work in energy, climate, and development?


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