Thursday, September 10, 2015

Monopolies - Why do we allow them


It is generally accepted that Monopolies are bad – why – because they let people charge as much as they want for a given product; assuming it has a completely inelastic demand. In Canada we have situations where the government actively forbids competition, medical services for one and effectively the School System. Where there is competing service providers there is disruption, products and services get better and less expensive – where there are no competing service providers, products and services stagnate, and  their price remains the same or increases.

1919 the Anti-Combines Act was introduced to prevent any one entity from monopolizing the distribution of any one good or service. Then in 1985 the government introduced into law the Competition Act. The point is that no one was screaming in protest in defense of corporate monopolies, why then to people get so upset when people suggest we need more service providers of Medical & Educational services; it maybe that some are afraid of competition. There is simply no justification for government to withhold from the public options for service. In British Columbia I am forced to buy car insurance from one company, the Insurance Corporation of British Columbia – why is that okay.

There are other challenges with government monopolies, they grow and they become less accountable to the people they serve and seek more to service the people they employ. People working in government monopolies are in the vast majority good people, educated people and motivated people – big organizations by their nature tend to stifle individuals and frustrate innovations. Government monopolies are bad because they have political masters, it is a difficult byproduct of our democratic system that government attempts to isolate itself from criticism from the population and the people operating the government organizations attempt to isolate themselves from criticism of the government. There is no motivation to be rigorous in reporting, when reporting’s only outcome is punishment. It is this double tiered obstruction to accountability that attacks the ability for services to rationalize to demand or to reduce the cost of delivery.
Given societal substructures and sub - currents, government monopolies are dangerous in that they offer a conduit for systematized persecution or discrimination. If a restaurant refuses me service I can go to another one or if a restaurant says I have to wait three months for a meal, I can go to another one.

There are several factors in government organizations that cause operational rigidity or institutional inertia, the cost of change precludes change; in the business world when companies get like this they fail or change, government monopolies always have the funding for inefficiency. This has nothing to with individual people in big government monopolies; this has everything to do with the realities of organization behavior.

In the case of medical services for example, the government can still ensure universal access to services by insuring for medical services and permitting anyone to offer the service. In the case with the education system, the government can still finance the process – it just needs to allow easier access for other service providers. It is so oblivious that multiple unrelated service providers offer a benefit to society, I am always perplexed why people are so intent on forgoing a rational solution.     
Post a Comment