I have been hooked about discussing every nook and cranny relating to business and economy for a while now.
Humans had foraged bushes, hunted numerous animals, and moved to another location to do it again. This nomadic lifestyle continued for a prolonged time until they discovered how to plant and cultivate plants. By nurturing vegetation, people felt that they must settle for a more reliable way of living. Thus, trading was invented to funnel yields more easily.
The importance of trade can't be underestimated. This invention is a thousand years older than the pyramid, and nations will still crumble if they can't control their transactions. Furthermore, there is numerous field of study that is dedicated to predicting trading and the economy. This example reinforces the idea that people need trade more than they think.
Trades are made by mutually agreeing on exchanging certain items with another. This concept drives the main idea of Capitalism: mutual exchange should be for the market. Freedom and choice are the two most spoken words in every Capitalism book. Whether it's true or not, experts can't judge it. But there are certain situations in which the mass are obligated to buy only from one seller. This occurrence is known as Monopoly.
Playing Monopoly Game Is Fun, but Buying From a Monopoly Is Excruciating
A monopoly happens when a company or institution claims all market share in one industry. It exercises its legal-like authority by pressuring any potential competition that tries to enter the same market. Nowadays, the Monopoly won't be a problem for people. The buyers have gotten smarter, so the chances of monopolizing them are low. But when dominance happens, there is a high chance that the greediness will choke all the buyers.
Most of the time, a monopoly will result in an unfair market condition for the buyers. For example, the pharmacy corporations in the USA monopolize the insulin drug. As a result, many people who can't afford the costs are either ill or worse. Moreover, the pharmaceutical industry is a special type of which need high-level labor to wage and maintain. So, the chances of individuals to have the necessary fund to compete is none.
Still, people misunderstood that Monopoly is the dream of a capitalist. The free-market could indeed pave the way into a monopolistic economy. And many left-wing people have the noble idea to prevent that from happening. But, Capitalism promotes competitiveness and the chances for everyone to implement their talents in society. Following this, the idea of monopolizing the market isn't true to the core idea of this ideology.
“Competition is always a good thing. It forces us to do our best. A monopoly renders people complacent and satisfied with mediocrity.”
— Nancy Pearcey
Although Some of Them Are Better
Contrary to popular belief, not all Monopoly is bad for the people. A natural monopoly is one of the bunch that is better for the public. A natural monopoly exists when a specific item(s) is better handled by one company. An example would be printing national currency. If there is more than one legal company to print money, there would be confusion and ineffectiveness in distributing the paper. Hence, it is better to have a natural monopoly rather than a competitive market in this situation.
For another example, coercive Monopoly is a condition of the uncompetitive market created by the buyers. Most people can buy another brand for their footwear, but most people would enjoy buying Puma or Nike rather than other products. There is no obligation to purchase these brands because there is plenty of different sellers to trade.
Price discrimination is also a widely discussed issue. A certain trade could be called price discrimination when people pay different amounts of cash for the same item. It may sound unfair, but companies had practiced these ideas for a long time. As an illustration, booking a flight a month prior is cheaper and best for college students. But a busy man won't mind paying double the amount if he's in a hurry. It is fair and justified.
How the Government Helps by Ratifying Antitrust Laws
In the 1880s, a hundred companies are racing to compete in the railway industry. This trend was seen to be lucrative and easy. One company bought all the minor firms in this industry and turned into the only seller in the market. So, Capitalist in the USA disproved this uncompetitive behavior and called the Government to do something about it. As a solution, the Government legalized a series of acts in 1887, 1890, 1914, 1936, and 1950.
In Sherman act 1890, antitrust laws put anyone who tries to monopolize crime sentences. And in the 1914 Clayton act, the merger between two or more large market-holders in any industry is prohibited. These acts forbade any attempt to exercise a Monopoly or make a monopoly in the market. As an effect, AT&T was the sole provider of phone services in the 1970s. But this company was mandated by the United States Department of Justice to dissolve itself into seven lesser companies because of its powerful Monopoly.
As for attempted merger, the antitrust laws served its purpose many times. In 1963, the second and third largest bank in Philadelphia was set to merge. But its merging would lead to a 30% market power. As a rule, this action violated the Sherman Act, prohibiting any person or company from monopolizing the market. The Supreme Court picked up the dispute, and they decided that it was unlawful for a company to hold such market-share.
What Should People Do as Ordinary Individuals?
People must understand that a monopoly in an industry will lead to excessive buying power to compete in another market. Therefore, they must stop a monopolizing company by observing which company may hold all the consumers' goods. If these companies are halted before monopolizing, the damage will be dampened.
“These days, the bigger the company, the less you can figure out what it does.”
— Michel Faber, The Book of Strange New Things
© 2020 Azka Fariz Fadhilah