Competition (Lat., 'a seeking together') has been well defined by Dr Johnson as 'the act of endeavouring to gain what another endeavours to gain at the same time.' In political economy it is simply the form taken by the struggle for existence as applied to industry. Formerly, prices and generally the economic relations of men to each other were regulated by custom or authority. The growth of freedom has now brought it about that these relations are determined by individual effort. The general rule is that each man must be responsible for his own economic well-being. The workman brings his labour to the market and gets what he can for it. The capitalist engages labour on the terms most favourable to himself, and sells his produce at such price as it can bring. The owner of land generally takes the highest rent he can obtain. In short, the industrial world is a world of conflicting or competing interests.
As we have said, this system of competition is an outcome of modern freedom, and the rise of it may be historically traced. In medieval times the relations of men were fixed by custom or authority. But the restraints of custom and authority were felt to be vexatious, oppressive, and injurious, and in the various spheres of human activity, in religion, politics, and economics, the free individuality of men sought and found wider room to develop itself. This great movement began with the revival of learning, the discovery of America, and the Protestant Reformation, and has been continued through the revolutions of the 17th, 18th, and 19th centuries. In the industrial sphere it means that whereas in former times a man's calling, place of residence, and the remuneration of his industry were fixed for him, he is now at liberty to decide them for himself as best he can. Each man is free to do the best he can for himself, but as he finds numerous individuals who exercise the same freedom within a limited field, there arises the prevailing system of competition.
No one conversant with the facts will deny that the system of free competition has been attended with enormous progress, and that it has acted as a powerful stimulus to human energy and the spirit of improvement. But the development of the system has brought with it most important limitations, some of which may be noted. While such a system must always be limited by law and justice, and the necessities of political union, legislation has been obliged to provide special safeguards against the evils of competition, notably in the English Factory Acts. The English trades-unions are an attempt to regulate competition in the interest of labour. Employers' combinations have a like object in the interest of the capitalist. In America especially the development of 'trusts' tends to make competition a dead letter. These trusts are combinations of capitalists with a view to regulating prices. The protective system of countries like France, Germany, and the United States is intended to maintain native industries against British competition. Lately France and Germany have imposed duties on cereals in order to protect their agriculture against American competition. It should be noted also that even yet custom is largely influential in many spheres, and that not a few of the evils of competition are mitigated by the kindly feeling which prevails in all the relations of life. Employers do not generally bring wages down to the lowest level attainable by competition. Thus in actual experience the competitive system is modified by a great variety of influences. On the other hand, the 'sweating system,' by which starvation wages are given for long hours of hard work, is rendered possible by the keen competition of many, otherwise unemployed, for such unremunerative labour.
Competition for situations in the public service is very different from the system above described. Competition as applied to the public service is regulated by the state. The salaries in the various grades, and the conditions of employment, are fixed by authority. The chief material stimulus is the hope of promotion. See CIVIL SERVICE. For the advantages and disadvantages of competitive examinations in education, see articles in the Nineteenth Century, the Universal Review, &c., for 1888.