Pros of monopoly: why is it underestimated?

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

Almost every country has antitrust laws. Governments fight unfair competition, ostensibly trying to protect small entrepreneurs. Of course, the intention is noble, but the advantages of a monopoly should not be underestimated either. Why, then, is the fight against monopolists almost the main goal of governments? Maybe it's not about protecting small and medium-sized businesses, but about the fact that transnational corporations pose a threat to the existence of states?

What is a monopoly?

Monopoly is a state of the market in which there is no competition: there is one manufacturer supplying a unique product. The monopolist sets the price he wants, because he has no one to compete with.

For this reason, companies with undeniable market dominance often prefer not to care too much about product quality, but pursue the goal of making as much profit as possible. Thus, the disadvantages of monopoly include:

• overpriced products;
• mediocre quality at a high price;
• insufficient production of products in order to artificially create a shortage and increase the price of it;
• Reluctance of the company to improve its product due to lack of competition.

Negative impact of monopolization on the economy

With one company controlling the market, there is little opportunity for other manufacturers to carve out a niche in the sector. Young firms are pressured through legal and illegal methods, and eventually they have to leave the market. The lack of development of small and medium-sized businesses has a negative impact on the overall economic condition of the country.

Pros of monopoly

The absence of competition in the market allows a monopoly firm to receive 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 his product and consistently maintain high standards of production. If the monopolist keeps his position honestly, it is a necessity for him. After all, there is always the possibility that a company will appear that will present the best analogue of the product. Thus, the benefits of a monopoly include:

• the ability to conduct research and development to improve the quality of the product and find alternative products;
• presence of common production standards;
• Introduction of technological innovations to optimize production processes.

Thus, having onea large firm 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's management.

State monopolies

One way or another, but the monopoly is present in all spheres of life, and the states themselves often act as the main monopolists. But if in some countries the fact that the main share of the largest enterprises belongs to the state is absolutely not hidden, in others the appearance of a free capitalist society is created.

However, all the major sectors of the economy-water, energy, railroads, etc.-are often owned by the state, or by a single firm that has received government approval 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 their glory. The main ones are the uninterrupted supply and the availability of the use of vital resources for the population of the country. However, in practice, governments manipulate prices just as much as commercial monopoly firms.

Natural monopoly has the same pros and cons as any other. And here, too, everything depends on the conscientiousness and goals of the leadership. In this case, the government of the country. The same can be said about firms that have received the legal right to solely provide a service and product to the market: the pros and cons of a legal monopolysame.

Pure competition is a utopia

In today's 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 subject to the influence of several major players - central banks. What can we say about other areas of the economy.

The free market only at first glance may seem so. In fact, in every area there are a handful of monopolists who move prices in a favorable direction for themselves, agree among themselves. The more civilized a society becomes, the more manifestations of monopoly it has.

Monopoly is bad, but competition is good?

Monopolization is not always a bad thing. The pros and cons of monopoly and competition go hand in hand, and only the good faith of market participants determines which is more. If you think about it, the methods for competitive struggle are not always legal and honest, and many monopoly 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 it is impossible to find a more customer-oriented approach to work in the world.

The struggle for a place in the market sooner or later leads to the emergence of several large producers and the disappearance of small entrepreneurs. In large cities, this can be seen especially clearly, where supermarket chains literally sweep away individual suppliers of goods, and smallspontaneous markets do not compete with shopping centers.

The world is moving towards globalization. Transnational corporations contribute to the acceleration of 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.