The right to market monopolies

Consumer protection groups across the nation are deeply concerned about the merger between Sprint and MCI World Communications, two outstanding telecommunication companies. Such paranoia arises from some perennial myths surrounding market forces. The underlying assumption is that all monopolies are harmful.

In Hawaii, for example, labor unions and other special interest groups are fighting to stop the Honolulu Star Bulletin from folding and leaving the entire general newspaper market to the Honolulu Advertiser. Such groups argue that closing the paper would violate federal anti-trust laws, eliminate jobs, and damage the state’s economy.

Since not every law is just, let us leave legal issues aside for the moment and deal exclusively with the merits or demerits of monopolies. But before we do that, we must first distinguish between a market monopoly and a true monopoly.

A market monopoly arises from natural market conditions. Here no government coercion whatsoever is involved. A good example is the new Saipan movie theater. It is the only facility that provides this form of entertainment. It therefore can be said to have a market monopoly on the local wide screen film industry.

A true monopoly, by sharp contrast, is born out of government coercion. The Commonwealth Utilities Corporation is a perfect example of this instance, since, by law, only CUC can sell utility services.

A market monopoly is perfectly justifiable. It is consistent with freedom and free enterprise. No arbitrary coercion is involved.

A true monopoly is despicable, filled with inherent waste and corruption. It is both inefficient and immoral. Freedom of economic enterprise is seriously compromised.

Take the case of the new Saipan movie house. It is clearly a market monopoly. It has 100 percent control of the local movie theater market. Yet, is it harming consumers? Or is it giving CNMI movie patrons a first class movie-going experience? Should someone file an anti-trust lawsuit with the U.S. Justice Department?

Why is it that governments all over the world generally believe that they alone can be responsible for handling monopolies? You can trust the government with your utilities, but dare not leave it to the dirty, greedy private entrepreneurs.

In reality, the private business sector, motivated by profit and repeat business, almost always performs better than governments. How satisfied are you with the price and quality of your CUC service?

Referring back to the Honolulu Star Bulletin example above, even if some jobs are temporarily lost, it makes absolutely no sense to force a non-competitive, marginally profitable business to continue operating just for the sake of keeping a few jobs. Such a policy would represent a terrible misallocation of resources, and would, in effect, be essentially no different from keeping ailing Chinese state-run “enterprises” alive for political purposes. It is simply not economical. In fact, it would only harm the economy by preventing the capitalist from more productively employing his capital in more promising sectors of the economy.

Apart from pragmatic concerns, the main issue is the right to free trade and free enterprise. If Joeten wants to buy Payless and other grocery stores, I believe it has the right to buy if others are willing to sell. We have no right to prohibit a free exchange where the rights of others are not clearly violated. We have no right to a fixed price or to zero inflation.

Besides, Payless is free to reject Joeten’s offer, and other prospective grocers are still free to compete in a free market.