Monopolism is Monopoly in the economy: consequences, methods of struggle and history

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:45

Monopoly is a state of the market when there is only one major producer of goods or service provider. He almost completely controls the production in his field and can directly influence prices. The monopolist seeks to maintain a dominant position and achieve maximum profit. To this end, it keeps competitors out of the market and imposes its terms on the choiceless consumer.

Signs of pure monopoly

One can speak about the complete monopolization of the market of any product (service) or industry when the following conditions occur:

• there is a major player (company, organization, union of producers), which accounts for a significant part of production and sales;
• he has the ability to control the price of the goods by changing the volume of supply;
• there are no goods or services on the market that consumers could replace what the monopolist produces;
• new companies that could compete with the monopolist do not appear in the industry.

Thus, monopoly is complete domination inin a separate area or in the market for a particular product of a large organization that imposes its own rules of the game on consumers. Today, with rare exceptions, such "ideal" monopolies exist only in the abstract. After all, there are practically no irreplaceable goods, and the insufficient supply on the domestic market is compensated by imports. Therefore, in modern conditions, one speaks of a monopoly when the market is dominated by one or several large players, whose share accounts for a significant part of the production volume.

Administrative monopoly

The emergence of monopolies in Russia is closely related to the actions of the state. The first large associations of companies arose at the end of the 19th century in order to meet the needs of the country in such areas as metallurgy, engineering, transport, etc. The phenomenon in which the creation and operation of monopolies is controlled by the state is called administrative (state) monopoly.

At the same time, the country's government is acting in two directions. First, it grants some producers exclusive rights to conduct some activity, which subsequently becomes monopolized. Secondly, the government is building a clear structure for state-owned companies. Associations of enterprises are being created that are accountable to state structures - ministries and departments. A striking example of such a system was the USSR, where the administrative monopoly was expressed in the dominance of power structures and in the possession of state funds.production.

Natural monopolies

In those areas where the emergence of many manufacturers is impossible, there is a natural monopoly. This phenomenon arises as a result of the company's ownership of a unique resource - raw materials, equipment, copyright. This kind of monopoly also occurs in industries where competition is theoretically possible, but highly undesirable, because in its absence, demand can be satisfied more efficiently. Examples of natural monopolies include railroad and energy retail companies, as well as services that organize central water supply.

Economic monopolies

However, most often monopolies appear as a result of the objective laws of economic development. Such economic monopoly can be called the most "honest" way to dominate the market. This is achieved in two ways: the concentration of capital or its centralization. In the first case, the company directs part of its profits to increase its own scale, gradually grows and wins the competition. The second way is to combine business or take over weaker rivals. Typically, economic monopolies use both of these methods in their development.

Cons of monopoly

Critics of monopolies point out their negative impact on the economy of the industry, which is associated with a lack of competition. Under these conditions, the monopolist can influence the price and ensure maximum profit. In other words, monopoly is the opposite of a competitive market. The following negative phenomena are observed in a monopolized industry:

• product quality is not improving because the monopolist has no incentive to work in this direction;
• increasing the company's profits is achieved not by reducing costs, but by manipulating prices;
• the need to introduce new technologies and stimulate scientific research is also absent;
• no new companies appearing on the market that could create jobs;
• Capacity and labor efficiency are slowly declining.

Why is a monopoly not always a bad thing?

However, market monopoly has some positive features that cannot be denied either. Proponents of monopolies point out that the concentration of production provides more opportunities for cost savings. This is achieved through the centralization of some support services - financial, supply, marketing and others. In addition, only large companies can afford to invest in new projects and finance research, thereby contributing to scientific and technological progress.

Historical examples

Monopolism dates back to ancient times, but this process was most actively developed in the 19th century. In its second half, monopolies began to have a significant impact on the economy and almost became a threat to competition. At the turn of the century, developed markets, in particularAmerican, covered with a wave of mergers and acquisitions. During this period, large monopolies such as General Motors and Standard Oil emerged. In the next couple of decades, another wave of monopoly formation took place. By 1929, that is, by the beginning of the Great Depression, the main sectors of the economy were monopolized in the United States. And although experts have not yet come to a consensus on why the country's developed economy plunged into crisis, it is obvious that monopolization played an important role in this.

Consequences of monopoly

So, the lessons of history say that monopoly in the economy slows down progress. The advantages of the enlargement of production, which the defenders of monopolies talk about, are not decisive. Due to weak competition, large companies or their associations concentrate in their hands all power in the area in which they exist. Over time, this leads to the fact that the management of the monopoly and the use of resources is inefficient. Political monopoly is often added to economic monopoly, which contributes to the development of corruption and in every possible way destroys the foundations of a market economy.

Control measures

One of the most important tasks of the state in terms of economic development is the regulation of monopoly. It is carried out both through direct impact on companies through the mechanism of antimonopoly legislation, and through the creation of conditions for the development of he althy competition. The state controls the concentration of capital - monitors the processes of absorption and mergercompanies, and also exercises control over already formed monopolies. In addition, laws are being developed to protect the rights of small and medium-sized companies, as well as financial support measures - tax incentives, affordable loans, and more.

As mentioned above, the creation of economic monopolies is a natural process as the most successful company gradually grows and conquers the market. Oligopoly prevails in advanced economies - a type of production in which a large part of the market volume belongs to a limited number of producers. The antimonopoly policy of the state is carried out, among other things, by protecting the oligopoly. This option is considered more acceptable than monopoly, since it provides a certain balance of "competition - monopoly".

In modern economic science, monopolism is considered a negative factor, and governments of states keep this process under control. The antimonopoly policy of different countries is somewhat different, since each national economy has its own characteristics. However, in any case, antitrust measures should be aimed at ensuring that there are manufacturers on the market who can provide high quality products at a fair price and a fairly wide range.