Virtually every country has antitrust laws. Governments are struggling with unfair competition, allegedly trying to protect small entrepreneurs. Of course, the intention is noble, but the advantages of a monopoly also cannot be underestimated. Why, then, is the fight against monopolists almost the main goal of governments? Perhaps the point is not to protect small and medium-sized businesses, but the fact that transnational corporations pose a threat to the existence of states?
What is a monopoly?
Monopoly is a market condition in which there is no competition: there is one manufacturer supplying a unique product. The monopolist sets the price that he wants, because he has no one to compete with.
For this reason, companies with undeniable superiority in the market often prefer not to care too much about the quality of their products, but they aim to get as much profit as possible. Thus, the minuses of monopoly include:
- inflated cost of production;
- mediocre quality of goods at a high price;
- insufficient production to artificially create a deficit and raise its price ;
- the company's unwillingness to improve its product due to lack of competition.
The negative impact of monopolization on the economy
In conditions when one company controls the market, other manufacturers have practically no opportunity to occupy a niche in this sector. Young firms are pressured through legal and illegal methods, and ultimately they have to leave the market. The lack of development of small and medium-sized businesses negatively affects the general economic condition of the country.
The advantages of monopoly
The lack of competition in the market allows the monopolist firm to make huge profits, which its management can use not only for personal enrichment, but also for other, more noble purposes.
In addition, a conscientious manufacturer will strive to improve its product and always adhere to high standards of production. If a monopolist holds his position in an honest way, it is a necessity for him. After all, there is always the likelihood that a company will appear that will present the best analogue of the product. Thus, the advantages of monopoly include:
- the ability to conduct research and development in order to improve product quality and search for alternative products;
- the presence of uniform production standards;
- the introduction of technological innovations to optimize production processes.
Thus, the presence of one large company in the market can also be useful both for scientific and technological progress, and for consumers. From this we can conclude that the pros and cons of a monopoly depend on the integrity and goals of the company management.
State monopolies
One way or another, but the monopoly is present in all spheres of life, and the states themselves are often the main monopolists. But while in some countries the fact that the majority of the largest enterprises belong to the state is absolutely not hidden, in others the appearance of a free capitalist society is created.
Nevertheless, all the main areas of the economy: water supply, energy, railways, etc. - often belong to the state or to one company that has received government permission for the unique right to provide these products or services. In economics, this phenomenon is called a natural monopoly.
In this case, the advantages of monopoly are presented in all its glory. The main ones are the uninterrupted supply and access to the use of vital resources for the population of the country. However, in practice, states manipulate prices in the same way as commercial monopolistic firms.
The natural monopoly pros and cons has the same as any other. And here, too, everything depends on the integrity and goals of the management. In this case, the government of the country. The same can be said of firms that have obtained the legal right to provide a service and product to the market individually: the pros and cons of a legal monopoly are the same.
Pure competition is utopia!
In modern society, pure competition is as rare as rainbow unicorns in the real world. It is believed that the similarity of this phenomenon can be found in the foreign exchange market. But even here, the prices of financial instruments are influenced by several major players - central banks. What can we say about other areas of the economy.
At first glance, the free market may seem so. In fact, in each sphere there is a handful of monopolists who move prices in a direction that is advantageous for themselves, agree among themselves. The more civilized a society becomes, the more manifestations of monopoly are in it.
Is monopoly bad and competition good?
Monopolization is not always bad. The pros and cons of monopoly and competition go hand in hand, and only the conscientiousness of market participants determines which is more. If you think about it, the methods for competition are far from always legal and honest, and many monopolistic firms really make the world a better place. A good example of a “good” monopolist is Amazon. The company is the undisputed leader in the retail market, but in the world it is impossible to find a more customer-oriented approach to work.
The struggle for a place on the market sooner or later leads to the emergence of several large manufacturers and the disappearance of small entrepreneurs. In large cities, this is especially clearly seen, where supermarket chains literally sweep away individual suppliers of goods, and small spontaneous markets do not withstand competition with shopping centers.
The world is striving for globalization. Multinationals accelerate this process. Someday the concept of "monopoly" will no longer be perceived in a negative way, because the globalization of the economy is a natural stage in the development of mankind, which started at the end of the last century with the advent of the Internet.