I posted this video on YouTube this morning.
As I said of it on YouTube:
Monopolies exist when one or a very few companies or organizations control a market and can exploit consumers as a result. The modern economy is riddled with monopolies, many of which are very powerful. Until governments are willing to stand up to them we are all at risk of being ripped off.
The transcript says:
Monopolies are always bad news when it comes to economics.
What do I mean by a monopoly? A monopoly exists whenever one or a few companies - when technically we call it oligopoly, but it amounts to much the same thing - one or a few companies control a marketplace so that effectively they can control the prices that you and I, as consumers, will pay, and they can make sure that other people cannot enter the market to provide effective competition to them. That's what a monopoly is.
Now, there are some natural monopolies. Water supply is one. Education is another if everyone is to benefit from it. Railway companies are a natural monopoly because you can't run lots of parallel sets of tracks between places to create genuine competition. But we also see monopolies in many other parts of the economy as well.
Let's be blunt, Amazon is a monopoly because frankly they totally dominate the online delivery market.
Some of our retailers look remarkably close to monopolies, or at least to oligopolies. There aren't very many supermarkets and yes, they might say they price compete with each other, but that doesn't mean to say they can't put a ceiling below prices at which they guarantee that we'll all still pay sufficient so that none of them can fail.
In other words, they still have the opportunity to abuse us, even if there appears to be some veneer of competition laid over it.
Our banks are in much the same position. Most of them offer remarkably similar prices. products and services. The downside of this is that we can be exploited. They have all the power.
They are large.
They have economic clout.
We, as individuals, can't go elsewhere.
We can be exploited.
This means that any government has to have a policy to manage monopolies.
Now, those that are so natural, like water and rail, and education and health care for everyone, need to be run by the state. There is no way around that. Those are so strong as monopolies and the need is so essential that the state must nationalise them.
In other sectors, there must be strong regulation of the companies involved to guarantee they don't exploit this. This needs a genuine Competition Commissioner who can control prices, control profits, and if necessary, demand that there be a real opportunity for other companies. to allow competition to enter the marketplace if they are dominant in certain places. Rarely does this happen at present in the UK; normally only on takeovers.
We need to have more aggressive control by governments of monopolists to make sure that we aren't exploited, because at present it's almost certain that we are.
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And, of course, it’s not only consumers of monopolies who are being exploited, but employees of them.
Sometimes
The senior employees often gain, considerably, buying them into the abuse.
Thanks; I meant to say the employees at the bottom end of the wage scale.
I do not know how you maintain your current level of activity so it is with apprehension that I suggest that the impact that monopolistic markets have on their suppliers is also worth a look.
On one occasion in order to further a discussion I was having with a major multinational they showed me their aged accounts payable listing. It averaged 9 to 15 months. I had never seen anything like it and said so.
Their defence was that as a very large and regular customer of suppliers they were entitled to treat them as a credit facility.
In reality, we have them over a barrel and if they complain we will put them out of business.
I doubt that things have become any better in the intervening 30 years.
It is worthwhile
I will not be worried about returning to themes in this series, because there will be multiple angles to all of them, and repetition never does any harm anyway
From what I see from time to time from the Road Haulage industry I am far from convinced that unfettered competition can be a good thing either.
There is clearly a price for many goods and services that you simply cant go below without something going badly wrong. The challenge is to balance the two.
JK Galbraith distinguished between two economies.
Firstly, we have the heavily oligopolistic corporate sector which is estimated to cover about 60% of the entire economy, but 80% of food retailing in the UK, (so lots of lovely opportunities for price gouging), I’d suggest that the defence industry may well be even closer to 100% oligopolistic.
This sector is not only monopolistic by nature and intent and controls selling prices, but is also monopsonistic and can exploit and control supplier pricing too.
The UK dairy industry has been devastated by the power of the supermarkets in this case.
Then we have a broadly competitive market of a much larger number of SMEs and local service providers. This is Smith’s idealistic free market, undoubtedly utopian.
He despised both rentiers and monopolists for obvious reasons.
Thankfully, most people are not economic men, or even optimisers, and many small and family businesses serve their local communities and specialist markets, operate on the basis of social obligations, mutual support within their sector, and reciprocity, mostly to make a reasonable living and not merely to maximise profits.
Polyani went further and argued that human motivations are directed more towards non-economic than economic ends, and those economic ends are more important for safeguarding people’s social standings.
It is in the interests of the SME / competitive sector / suppliers to oligopolies / and work forces of monopolies to have very powerful regulation indeed to protect their own freedoms as they see fit, without being exploited. Regulation is there to protect us all from the abuses of power that monopolies have, including oppression of the market sector of the economy.
The petit bourgeouis have nothing to lose but their chains.
I’d claim that the version of Clinton’s corporate liberalism that spawned Blair’s 3rd way is entirely beholden to the corporate sector and has actively prevented full and proper regulation of the oligopolistic sector, and have merely reinforced the very worst tendencies of neoliberal dogma.
NuNuLabour would do well to recognise it has been captured by corporatism, (as if their elite cared), but also that many left of centre voters are not so stupid that they can’t see that.
Agree 100%.
The UK population has been in a shell & peas game for 40 years. Politicos have convinced them that “competition” & “monopolies” can work. But it gets worse.
Richard old chap – just lend me your watch. Thanks.
Now – I will sell it to you for £40 – this is an absolute bargin given the watch cost £200.
That is what Thatcher & Major did – sold to UK serfs what they already owned & then: a) under regulated said monopolies b) allowed parasites such as Macarie et al to buy them up and +/- asset strip them. Different routes have been taken with schools and the NHS, but the end result is the same: shit services, reduced services, over-paid owners/managers.
Yes, very true.
There was always going to be the danger that when creating privatised monopolies, that in the self-interest of making profit, abuse would follow. We see that at its worse in what has happened to water. I tend to think that when you turn something that is a “need” over to the market, abuse of being given that power, and the money that can be made from it, Will follow. We now have all the proof that this is the case.
I would also add housing to that monopoly list, as when the Tories sold off council housing (a need) and, alongside changing laws to benefit landlords (against tenants needs), they deliberately destroyed affordability. Some would say that there is competition in the housing market, but I would argue that it is a market that is only genuinely “free” when prices are going up. Once they look like falling, powerful vested interests then lean on Government to do something about it. The Government is only too happy to oblige, given the votes it provides. This approach has led to housing crisis after housing crisis, when the only real answer to affordability is a decent state alternative.
The lack of that state alternative leads to situations like this, which I think is quite disgusting.
Woman facing eviction told she would cope sleeping rough
https://www.bbc.co.uk/news/articles/cd18gy0yjl3o
Your point about retailers is also an important one. I often notice that when the price of something in ASDA (for argument’s sake) goes up, you can bet your bottom dollar that within a dau or so the same item in the Sainsbury down the road will also go up (and others will soon follow). During this cost of living crisis, I have seen that happen many, many times. It’s as if they are working together. Now, they wouldn’t do that, would they!
The only “good” thing to come out of the Tories’ obsession with privatising as much of the state as possible is that we have seen at first hand what happens in reality. The fantasy that the private sector always does things better. People now know what the reality is.
Unfortunately, this change in the public mood seems to have gone over the heads of Labour’s leaders. The reality now is that renationalisation would be difficult to reverse by a future Tory Government, because everyone knows what a failure it has been on so many levels. How would the Tories ever convince people that water should be private again? All Labour would need to do is point to the end result of mostly Tory rule and privatisation failure since 1979 (while hoping that no one remembers the Blair/Brown interlude).
Thank you
“Let’s be blunt, Amazon is a monopoly because frankly they totally dominate the online delivery market.”
An example of why Amazon is a monopoly in the USA.
I want to and always try to support local brick & mortar stores (independents and chains) over Amazon when possible. I needed a book. I went online to see if my local (8 miles from my house and across a toll bridge) brick & mortar book store (a chain) had the book in-stock and what was the price. The price was USD $35.99 and it was in-stock. I next went to Amazon online for a comparison look. The price of the book was USD $21.99 with FREE next day delivery. This is one of the many reasons Amazon is a monopoly due domination the online delivery market.
Do you need three guesses where I bought the book from?
I will admit many times in comparison shopping, I find Amazon the same price, higher or only slightly lower than the than local brick & mortar stores (independents and chains). However, in the case of the book, it made total economic sense and was in my best interest to purchase the book from Amazon.
How could Amazon be regulated???
I am frequently told Amazon sells things for less than other retailers can buy them…
It is don to volume
“I am frequently told Amazon sells things for less than other retailers can buy them… It is don to volume”
Richard, You are 100% correct.
How can this monopolistic benefit be regulated to even the playing field between other online delivery sellers and local brick & mortar stores (independents and chains)?
The Balanced Economy Project is trying to address this issue, working with SOMO in the Netherlands.
… and the fact that it is fast becoming a monopsony – the only place you can sell.
True
“… and the fact that it is fast becoming a monopsony – the only place you can sell.”
Does eBay operate in the UK??? SME in the USA seems to well on eBay as opposed to using Amazon based on what I have been told.
EBay works for SMEs here….
I use it for hobby activities
Amazon does lots of things very well, and my instinct is that we should take advantage of that.
Amazon does some things things badly (exploit its workers, avoid its tax obligations), and we could regulate them in order to improve them.
Is there a workable compromise?
Maybe….
Usually, there has to be
David Byrne writes:
We need to address the impact of other cartels:
-very little competition in fuel and energy markets
-a rigged insurance market where pricing is not based upon risk. We now have people having to give up driving owing to unaffordable insurance premia.
The list could go on……