Competition can be quite a motivator when it is used as a means to an end. When it becomes the end in itself, it becomes quite destructive. For example, Alpine School District's knowledge bowl academic competition motivates participating students to learn as much as 6 grades ahead of where they are in school in a particular subject every year. Educators who think that competition is harmful to kids' are wrong.
On the other hand, some conservatives believe that competition is the silver bullet that will solve all of education's problems. They try to implement that with merit pay and/or vouchers. In these cases competition becomes destructive and interferes with good education. It turns educators away from focusing on the children. Instead they are forced to focus on competing - for money, for awards, etc. Competition then becomes the end in itself and defeats the purpose it was supposed to help.