LibUK Articles
Monopolies, the individual and the State |
| Posted by Administrator (admin) on Dec 04 2007 at 7:21 AM |
| LibUK Articles >> Business |
Roger Thornhill argues that monopolies are being entrenched by the EU and the UK government and that, if unchecked, it may result in indentured servitude or even slavery.
For me the concept of monopolies and their cousins, the cartels, are important in regard to the relationship with the State, for the biggest, most obvious and unavoidable monopoly in our lives is the State itself.
Monopolies tend to have general characteristics of inefficiency, complacency, stifling of innovation, cost, poor customer service and inflexibility.
Monopolies fall into three main categories: State, private or State regulated but privately run.
State monopolies are such things as the Fire Brigade, Healthcare (de facto), Education (de facto) and used to be heavily in transport, water, electricity, gas etc. in the UK. State run monopolies have political interference/oversight, which can either be a blessing or a curse depending on your point of view or the prevailing circumstances. It is usually illegal to compete with State monopolies. Often the State sequesters funding at source to render competition impossible in the normal sense of the word, e.g. Education in the UK. You could say that the last point is using the law to demand people become customers. When the State provides the service directly there is at least some mild and weak redistribution at play due to the chances of over-manning, tax subsidised pricing coupled with the traditional not-for-profit status. Cold comfort, I know.
In many cases pure state provision has become a busted flush. However, the new "wheeze" is if we have the State outsourcing to Private entities, almost always clumsily—more on this later.
True Private monopolies are quite rare and when they occur they tend to occur as cartels. They can usually be and often are challenged by outsiders or regulators. People are legally entitled to circumvent or challenge a private monopoly. However, much profiteering can go on before that occurs, especially when barriers to entry are high. Even so, the issue is only of importance when the service is not a pure luxury or brand-related (e.g. nobody cares about the behaviour of the Champagne cartel—if they overprice their product it is not going to affect anyone's liberty, but an oil or energy cartel is a real threat). Unlike State monopolies, free-standing private monopolies cannot have access to tax revenue to mask their inefficiencies, so are more visible. In some cases what appears to be a private monopoly may include some form of concession, license or other political involvement in maintaining that monopoly or cartel and as such is in reality the third kind, below.
The third kind is the private entity operating under a State mandate, concession or contract. Transport and Health seems to be most afflicted by this kind. They operate often with an exclusive license and often one that is poorly negotiated in favour of the provider. The Private Finance Initiative or PFI is a major new form of this beast. The State mentality is to prefer one provider, not create a market. As far as I can tell the State is systemically inclined towards a monopoly of provision. This mentality holds sway both internally, in terms of who supplies the State, and externally, as in who supplies the population at large. If the State is involved it often appears to have all the autocratic tendencies of a Robber Baron in trying to corner the market, with the added danger that it does not know it is doing wrong but sincerely believes it is "doing good"—Education and Healthcare are classic examples. Instead of engaging with the private sector to use their hospitals on a per patient basis, which could be dynamic, fluid and competitive, the PFI concept appears to be for the State to get the private sector to build a hospital and then rent the entirety back to the State for decades. It creates massive, inter-generational lock-in to a private provider. Of course, it is also a convenient off-balance-sheet dodge that should never be tolerated.
With State mandated provision comes the enormous scope for corruption. Contracts are huge and margins can be high. There is just so much to win and once won it is almost an unassailable position defended by a most effective enforcement and legislative system eager to maintain the status quo. Private companies court politicians and politicians dream up more situations to put themselves into such an arbitrary position. The EU and present UK government seem keen as mustard to do this at every opportiunity.
The more the State does, the more monopolies we have and the less chance we get to chose for ourselves who will provide services for us. The more it does, the larger the scope for corruption.
There are rare exceptions to monopoly = bad in my view. An example is in 'last mile' utility provision. I would think that most people would see that water, electricity and gas DELIVERY INFRASTRUCTURE and sewerage are examples when it is not practical to have multiple companies selling pipelines direct to the individual householder, as that householder is not free to shift provider rapidly or regularly. However, this does not need to cover water purification, sewage processing or electricity generation, for example. In the UK, broadband is provided by a plurality of companies but underneath the last mile is provided by BT Wholesale. Although it is a private company, it is very strictly regulated right down to its operating margins (IIRC). It is not an ideal solution, but it is pretty close to a least-worst option. Water is still a geographic monopoly, which is far from ideal.
There are other examples of necessary evils and unnecessary ones, such as Transport for London (TfL), which manages, amongst other things, the entire London Bus and Tube network. It regularly tenders logical/logistically cohesive sets of bus routes, which is a least-worst option as the tenders do enable passengers to see one network of red buses using one ticketing scheme, while operators bid on price and quality of service at regular intervals. TfL does not do everything right, however, as the Underground has multiple maintenance contractors but they have exclusive, long term geographic monopolies. Result: Metronet is in a mess and Tube Lines is not, with little scope to push more work in the direction of the more capable provider. That is most certainly NOT a least-worst solution!
In summary:
Monopolies are against our best interests except where logistics or physical barriers to entry (as opposed to innovation or intellectual property rights) would create a series of de facto private monopolies or a private cartel. Examples: defence, police, courts, prisons, regulatory bodies and 'last mile' utilities.
The State is systemically inclined to a monopoly of provision, often using the force of law or regulation. Examples – healthcare, education.
Private monopolies/cartels are not legally capable of regulatory stranglehold, but can be more dangerous due to profiteering, lack of public accountability and the risk of Robber Barons. Examples: Microsoft, Energy, Airports.
State commissioned private monopolies combine the worst of both the others and open the door to institutionalised corruption to boot. In almost all cases they fail the test of logistical necessity. In almost all cases they use legal force to pay for or subsidise their operation to an extent. There is an obligation to pay that no compulsion to deliver can ever compensate for. As a mechanism it is in essence undemocratic. It is tyranny of the majority and as such must be used sparingly, as one would amputation.
The trend in the UK is towards the last, worst kind of monopoly. It draws greater power and patronage into the hands of politicians and alas such a temptation seems to be greater than their moral and ethical strengths are capable of resisting. This situation is tragic, dangerous and dysfunctional. It should also be described as illegal. Unless it is reversed, the balance will continue to shift until eventually the State will pimp the taxpayer to the highest bidder. Slavery will have returned.
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