Competition is NOT the cause of evils you seek to confront. It is lack of the same on the supply side. The article itself has the following line,

“It is the competition in the supply side that ensures high quality and low prices”

The more competition on the supply side, the greater is the quality and lower is the price. When firms become too large relative to the market, competition goes down. And prices go up and quality comes down. That is an empirical truth.

The greater the “competition” on the demand side, the quality of the supply will be lower and prices higher. That is again an empirical fact.

So the merger of Wipro and Infosys would tend to reduce quality and increase price because it will reduce competition.

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Aseem,

The title of the post was deliberately provocative. What I left unsaid in the title was that it is “competition” on the demand side which is undesirable, just as competition on the supply side is highly desireable.

Lets talk about THE EDUCATED and THE SOCIALLY RESPONSIBLE getting into politics and reshaping the political arena for good. Lets talk about building a future generation of socially respobsible heros who have guts to take up politics as career and clean up the murky political waters.

If this sounds like a impossible task, then there is no right to criticize the existing political system and politicians.

Lets talk about THE EDUCATED and THE SOCIALLY RESPONSIBLE getting into politics and reshaping the political arena for good. Lets talk about building a future generation of socially respobsible heros who have guts to take up politics as career and clean up the murky political waters.

If this sounds like a impossible task, then there is no right to criticize the existing political system and politicians.

Consider the demand side as MNCs seeking the supply side as HRs ( Human Resource).

MNCs are after cheap labor ( easily available in countries like India ,China , Brazil )
to increase their productivity . Also because of the barriers that they have in using this resource in developed countries.( Labor laws , Less younger population etc )

So in countries like India competition on supply side ( HR competition [cheap+high qualty] ) gives much advantage to the demand side (MNCs)

Srinivas R Thota

A very important question which I have been asking myself is…How did the economic planners of our country during the 50’s 60’s and 70’s come up with these kind of policies? Where these policies the best solutions to the problems they faced then?

We must also realize that a huge section of our population lies outside the “economic system”.How can a free market enterprise system benefit them.

I hope you explore the theme of your article further. Thank you,

Dp Chalasani

Sure scale economies matter and the costs come down. But competition in the market is about prices. So imagine that there is only one producer due to consolidation of a number of smaller producers. The costs may come down but now the firm will have market power and can therefore charge prices much higher than costs and thus lead to social losses.

Monopoly is not a good idea. Oligopoly (a market in which there are a few large firms) is fine because they can keep each other in check while being efficient producers. So yes, if hundreds of small banks were to merge and we are left with a small set of large PRIVATE banks (and not one large PUBLIC sector bank), then economies of scale will obtain without the problem of pricing above cost.