Marx shows that Proudhon's logic, here, is faulty. The immediate object of industrial emulation is not profit, but the product. In a socialist society, based on cooperative production, the aim would be the maximisation of social wealth, in the form of use values/products, not of profit. One means of achieving such maximisation is not only the cooperative production, proceeding on the basis of an overall plan, but would be the sharing of best practice within and across enterprises. All sorts of incentives for individuals and enterprises to innovate, and develop best-practice, can be introduced, without the requirement of the whip of competition, applied within bourgeois production.
“Competition is not industrial emulation, it is commercial emulation. In our time industrial emulation exists only in view of commerce. There are even phases in the economic life of modern nations when everybody is seized with a sort of craze for making profit without producing. This speculation craze, which recurs periodically, lays bare the true character of competition, which seeks to escape the need for industrial emulation.” (p 134-5)
Such was seen with the Tulipmania, The South Sea Bubble, John Laws Mississippi Scheme, Railwaymania, The Tech Bubble, and, indeed, the whole period since 1987 to today. In Marx's time, even as the ruling class had become a class of money-lenders and coupon clippers, separated from the realm of real capital, they were focussed, primarily, on this activity of “coupon-clipping”, i.e. receipt of interest in the form of coupon payments on bonds, and dividends on shares, rather than speculation. But, in the last 30 years, underpinned by capital gains, generated by central banks' policies of QE, and other liquidity injections, the ruling class has not only been focused exclusively on such speculation, but has necessarily had to constrain real capital accumulation to do so.
Marx quotes Proudhon's statement,
“Ordain that from the first of January 1847, labour and wages shall be guaranteed to everybody: immediately an immense relaxation will succeed the high tension of industry.” (p 135)
This is nonsense, whose modern day equivalent is the idea of Universal Basic Income, or “Work of Full Pay”.
“If we imagine that decrees are all that is needed to get away from competition, we shall never get away from it. And if we go so far as to propose to abolish competition while retaining wages, we shall be proposing nonsense by royal decree. But nations do not proceed by royal decree. Before framing such ordinances, they must at least have changed from top to bottom the conditions of their industrial and political existence, and consequently their whole manner of being.” (p 135)
Proudhon sought to maintain commodity production and exchange, and, thereby, competition. However, to sustain competition, he sought to regulate it, and mitigate it, by providing everyone with a basic wage. In other words, its aim is to prevent competition destroying the small producers, just as the Narodniks sought to do, and as the proponents of UBI seek to enable everyone to be some kind of artisan or small producer, in a romanticised fantasy world, whose implications are deeply reactionary.
Marx quotes Proudhon's assertion that competition is a principle, even higher than political liberty. He responds,
“So, since the French of the 18th century abolished corporations, guilds, and fraternities instead of modifying them, the French of the 19th century must modify competition instead of abolishing it. Since competition was established in France in the 18th century as a result of historical needs, this competition must not be destroyed in the 19th century because of other historical needs. M. Proudhon, not understanding that the establishment of competition was bound up with the actual development of the men of the 18th century, makes of competition a necessity of the human soul, in partibus infidelium [literally, “territory of the infidels”; here, meaning, “beyond the realm of reality.”]” (p 136)
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