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Why monopolies are considered to be harmful
Essay on monopolies
Essay on monopolies
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Recommended: Why monopolies are considered to be harmful
Introduction
Thesis: Deregulation has more negative effects on global economy than positive.
Deregulation, this word is heard on the news, economists use this word quite often, and government officials are somewhat terrified of this word. What does deregulation mean?
Deregulation is the process in which a government may remove or reduce certain restrictions in matters of business to have a more efficient operation of markets. By observing the effects that deregulation can cause on an economy, can help later generations not commit the same mistakes that the past or the current generations have done.
In today's global economy being regulated by the government is in the norm. Businesses that deal with a very competitive field are limited as to how much they can grow and how low they can make their prices. For example back in the 1800s Andrew Carnegie created a monopoly that was not regulated. By lowering his prices he caused others unable to compete with him. By doing this Andrew Carnegie drove others out of the steel-producing business. When one person not only has control over a specific area but is the only supplier of this item, this is called a monopoly. These days the government regulates actions such as the ones mentioned above.
What can happen if the government's let go of some of these regulation? Will businesses flourish while hurting the common people? Will deregulation help to push another depression? Will the environment be harmed while people benefit from their selfish desires? These questions will be discussed later in the paper.
Throughout the world governments are giving large corporations a lot of leeway or deregulation. In Russia for example, the government have deregulated their laws concerning in the electricity sector. Railroads and communal utilities are also something that was recently deregulated by the government. Both of these called for the development of better technologies, better and more efficient ways of using energy. Better ways of transporting people. At the same time this may have caused disturbances in the business sector. Control by one major company may cause somewhat of a monopoly. The cost and prices of transportation and electricity may be controlled by one major company. Can this be positive or negative? Deregulation in the Natural Gas Sector is being imposed from the EU (European Union) and the United States. Indeed this is a global economy in which one action may affect the whole world.
Consider the United States in the trends of S&Ls (Savings and Loans).
First the story of the Standard Oil Company briefly describes the limits of power. When Rockefeller was trying to take over the market he formed the “South Improvement Plan. When this occurred the public grew very angry with the price of trains, so nobody went on the railroads and Rockefeller eventually got the bill, until prices changed. This is an example of how the consumers, make the company run and when nobody wants to buy your product the individual must adjust. Another example would be when the Standard Oil Company was primarily the only oil company and was forced to split into thirty nine different independent companies. This shows that one business cannot control the entire market and interventions will need to be done accordingly so that a company does not have all the power.
During the nineteenth and twentieth century monopolizing corporations reigned over territories, natural resources, and material goods. They dominated banks, railroads, factories, mills, steel, and politics. With companies and industrial giants like Andrew Carnegies’ Steel Company, John D. Rockefeller’s Standard Oil Company and J.P. Morgan in which he reigned over banks and financing. Carnegie and Rockefeller both used vertical integration meaning they owned everything from the natural resources (mines/oil rigs), transportation of those goods (railroads), making of those goods (factories/mills), and the selling of those goods (stores). This ultimately led to monopolizing of corporations. Although provided vast amount of jobs and goods, also provided ba...
Unfortunately, these monopolies allowed companies to raise prices without consequence, as there was no other source of product for consumers to buy for cheaper. The more competition, the more a company is forced to appeal to the consumer, but monopolies allowed corporations to treat consumers awfully and still receive their business. Trusts were bad for both the consumers and the workers, but without proper representation, they could do nothing. However, with petitions, citizens got the first anti-trust law passed by the not entirely corrupt Congress, called the Sherman Act of 1890. It prevented companies from trade cooperation of any kind, whether good or bad. Most corporate lawyers were able to find loopholes in the law, and it was largely ineffective. Over time, the Sherman Anti-Trust Act of 1890, and the previously passed Interstate Commerce Act of 1887, which regulated railroad rates, grew more slightly effective, but it would take more to cripple powerful
...derstanding the multifaceted concepts behind the market can prove to be a beneficial endeavor. The ability to identify and apply economic ideas can thoroughly broaden the scope of consumer awareness. After all, economics is all around us!
One of the main principles of neoliberalism is the rule of the market which is aligned to deregulation of markets.
2. Provide an example of a government-created monopoly. Is it a bad public policy? Why?
The amount of government regulation, restriction, and intervention in the economy is substantial. No free markets, and rapid innovations in technology and communications, the need for government intervention in the economy is necessary to correct abuses or to promote general welfare.
In some instances however, monopolies could be good and they are not actually illegal in the United States. A monopoly can be good if they are using their power to consistently deliver a product or service. In cases such as electric and water, where the cost is extremely high to supply them, they are controlled by the government which protects the consumer from high prices. The government controls the prices that they set and allows them to recoup and obtain a reasonable profit for their services and products (Amadeo, 2013). In this way it shows that monopolies are not illegal, but they are tightly controlled under the Sherman Anti-Trust Act.
The current issues that have been created by the market have trapped our political system in a never-ending cycle that has no solution but remains salient. There is constant argument as to the right way to handle the market, the appropriate regulatory measures, and what steps should be taken to protect those that fail to be competitive in the market. As the ideological spectrum splits on the issue and refuses to come to a meaningful compromise, it gets trapped in the policy cycle and in turn traps the cycle. Other issues fail to be handled as officials drag the market into every issue area and forum as a tool to direct and control the discussion. Charles Lindblom sees this as an issue that any society that allows the market to control government will face from the outset of his work.
Since this debate still rages on, many people argue both sides of the story of the pros and cons. Many would argue that not breaking up monopolies actually increase the competition of companies that are attempting to break into some of the market share that the monopoly already has, more so than the free market that exists now. Proponents of the Sherman Anti-Trust act argue that “absolute power corrupts absolutely” (Martin, 1996) as originally quoted by Baron Acton. The idea that no competition within the business world establishes no risk and reward that is all part of the entrepreneur spirit of the U.S. spirit.
...government; it gave the government more control over social issues like welfare and scrutinizing the economy when it saw permissible. The New Deal reforms transformed the government in the long run but failed to accomplish immediate recovery from the Great Depression, it was not until World War 2 that the economy recuperated completely. The reforms were a landmark in US history, for the first time the government interfered, for the prosperity of the people.
Monopolies are when there is only one provider of a specific good, which has no alternatives. Monopolies can be either natural or artificial. Some of the natural monopolies a town will see are business such as utilities or for cities like Clarksville with only one, hospitals. With only one hospital and there not being another one for a two hour drive, Clarksville’s hospital has a monopoly on emergency care, because there is not another option for this type of service in the area. Artificial monopolies are created using a variety of means from allowing others to enter the market. Artificial monopolies are generally rare or absent because of anti-trust laws that were designed to prevent this in legitimate businesses. However, while these two are the ends of the spectrum, the majority of businesses wil...
Monopolies have a tendency to be bad for the economy. Granted, there are some that are a necessity of life such as natural and legal monopolies. However, the article I have chosen to review is “America’s Monopolies are Holding Back the Economy (Lynn, 2017)” and the name speaks for itself.
A monopoly is “a single firm in control of both industry output and price” (Review of Market Structure, n.d.). It has a high entry and exit barrier and a perceived heterogeneous product. The firm is the sole provider of the product, substitutes for the product are limited, and high barriers are used to dissuade competitors and leads to a single firm being able to ...
Angola's socialist turned capitalist market is full of such regulated areas where government intervened directly much to the disarray of the market. I can remember a time when you couldn't import tires into the country because Mabor the country's tire producing factory had the monopoly of the tire market. If a private company wanted to import tires they had to require an authorization from Mabor, which would result more than often in it being denied, or a request for a commission on the import wasn't uncommon either.