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| A '''coercive monopoly''' is a term used by some to describe a government ] - either a monopoly ] or one ]. The term may sometimes cover the theoretical possibility of a monopoly created by the ] actions of a private firm or individual, but usually the definition excludes this. The term is not widely used in ], but has been employed for example by ] and others associated with ] and her philosophy of ]. | |||
| In ], a '''coercive monopoly''' is a form of ] in which a ] maintains its status as the sole provider of a good or service by using ] (either legal or illegal) to prohibit competition. | |||
| The classical definition (eg Branden, 1962 ) of "coercive monopoly" essentially equates it with a monopoly based on government authority: "a business concern that can set its prices and production policies independent of the market, with immunity from competition, from the law of supply and demand." (] ) As Branden makes clear, "In the whole history of capitalism, no one has been able to establish a coercive monopoly by means of competition on a free market. There is only one way to forbid entry into a given field of production: by law." | |||
| Coercive monopolies are distinguished from other forms of monopoly in that they maintain their monopoly status via ''coercive'' ]. Whereas ''de facto'' or ], potential competitors are commonly said to be deterred from entering the market due to the "cost structure" of the industry, in coercive monopolies potential competitors do not enter the marketplace because of the existence of a use or threat of physical ''force'' that deters or prohibits them from doing so. This coercion may be initiated by the government, by the firm itself, or by a third party. Coercive monopolies can be divided into three broad categories, based on who holds the monopoly and who enforces it: | |||
| * ]s, in which a private firm gains monopoly status by forcing competitors out of the market using ] or other ] means | |||
| * ], in which a private firm is granted monopoly status by the government and competitors are prohibited from entering the market by ] | |||
| * ] (also known as '''state monopolies'''), in which a government agency is given monopoly status and competitors are prohibited from entering the market by ] | |||
| == Types of Coercive Monopoly == | |||
| A ] which successfully engages in ] to prevent competitors entering the market operates a coercive monopoly. A firm may use illegal or non-economic methods, such as ], to achieve and retain monopoly status. A company which has become the sole supplier of a commodity through non-coercive means (such as by simply outcompeting all other firms), may exploit its position to maintain a monopoly --typically, engaging in activities that result in what are commonly referred to as "]", although it is a matter of debate whether particular barriers to entry are coercive in nature. For example, some say high costs required to compete are a barrier to entry, but free market advocates would say that the market is still free since competition is allowed to anyone that can raise the funds to compete, and that hence it cannot rightfully by called a "coercive monopoly." | |||
| In a ], an agency under the direct authority of the government itself holds the monopoly, and monopoly status is sustained by the enforcement of laws or regulations that ban competition, or reserve exclusive control over ] for the government. The state-owned ] companies that are common in oil-rich developing countries (such as ] in ] or ] in ]) are examples of government monopolies created through ] of resources and existing firms; the ] is an example of a government monopoly created through laws that ban potential competitors such as ] or ] from offering competing services (in this case, first-class and third-class mail delivery).<sup>]</sup> | |||
| ] often closely resemble government monopolies in many respects, but the two are distinguished by the decision-making structure of the monopolist. In government monopoly, the holder of the monopoly is formally the government itself and the group of people who make business decisions is an agency under the government's direct authority. In government-granted monopoly, on the other hand, the monopoly is enforced through law, but the holder of the monopoly is formally a private ], or a subsidiary division of a private firm, which makes its own business decisions. Examples of ] include ] and ] providers in many municipalities in the ], exclusive petroleum exploration grants to companies such as ] in many countries, and historically, lucrative colonial "joint stock" companies such as the ], which were granted exclusive trading privileges with colonial possessions under ] economic policy. | |||
| == Political Debates == | |||
| In ordinary language, describing a practice as ] usually entails a condemnation of that practice. But it should be remembered that "coercive monopoly" is a technical term within economics which describes a particular form of monopoly without necessarily making any claims about whether such a monopoly should or should not exist. Thus, there are at least two distinct questions involved in political debates over coercive monopolies: | |||
| # Whether or not the methods through which a particular monopoly is established are, in fact, coercive | |||
| # Whether or not a coercive monopoly in a particular market is ''justified'' | |||
| Debates on the first question are usually tied to debates over the nature of ]; since coercion (in the economic sense) is tied to force used against person or ''property'', it is sometimes a matter of controversy over whether a particular use of government enforcement is or is not coercive because it is a matter of controversy whether what is being restricted by the enforcement is or is not the legitimate property of the person trying to use it. For example, ] who hold a possession theory of property sometimes allege that ] capitalism as a whole is itself a form of coercive monopoly, because it depends on the enforcement of titles to land and capital that (on their theory of just ownership) are not actually the legitimate property of the capitalists who claim them. (Advocates of ], of course, typically hold a different theory of ownership and regard the titles to land and capital as legitimately enforceable.) Similarly, debates over the legitimacy of legal protections for ]s and ]s often revolve around the legitimacy of ] claims -- that is, whether or not intellectual objects such as creative works and techniques can be proper candidates for ''exclusive ownership''. If they ''can'', then the government is simply enforcing property claims when it imposes restrictions on unauthorized copying or use of a technique; if they cannot, then the government is enforcing a coercive monopoly. | |||
| But as we have mentioned, in either case, you might ''accept'' that something is a coercive monopoly but still ''defend'' it. Debates on the second question typically focus whether or not ] or ] are morally or legally justifiable. (There are relatively few explicit defenders of private ].) Advocates of ] economic policy usually oppose all government-enforced monopolies on principle, as restraints on the ] (which they condemn either as a violation of ], or as inefficient on ] grounds, or both). Defenders of ] often claim that without government intervention, ] is able to dominate economic activity to the detriment of workers and consumers--possibly by forming private ]s or ]--and that state monopolies or government-granted monopolies are one tool — along with others, such as ] legislation — by which a democratically accountable government might be able to exert popular control over ] and promote the people's legitimate interests. | |||
| Some free market advocates argue that these fears are misguided, in part, because coercive monopolies are the ''only'' form of monopoly that can remain economically stable in the long run: they point out that many of the usual claimed examples of ]--such as ] or ]--weren't actually natural monopolies at all. For example, Standard Oil had 64% of the oil refining market in competition with over 100 competitors at the time of trial which ordered the breakup of the trust. And, in the case of AT%T, it is claimed that they gained much of their profits and their dominant market position from government granting them monopoly status. They argue that under free market competition, any firm that tries to exercise ] will ''thereby'' create economic incentives for competitors, and thus undermine its own monopoly status. Advocates of this line often reject the concept of a natural monopoly as a myth used to justify what they regard as irrational intervention into the ]. | |||
| ==Footnotes== | |||
| 1. ] started the commercially successful ] in order to compete with the United States Post Office by providing lower rates. He was successfully challenged by the U.S. government and exhausted his resources trying to defend what he believed to be his right to compete. | |||
| ==See also== | |||
| ], ], ], ] | |||
| ==External links== | ==External links== | ||
| * "Coercive monopoly power does not emerge from the transitory outcomes of the voluntary exchanges that comprise the marketplace. It is hoped that policymakers will come to recognize that government cannot protect the public from monopoly power, because it is the source of such power." | * "Coercive monopoly power does not emerge from the transitory outcomes of the voluntary exchanges that comprise the marketplace. It is hoped that policymakers will come to recognize that government cannot protect the public from monopoly power, because it is the source of such power." | ||
| * "a coercive monopoly is closed entry that can only be achieved by an act of government intervention in the form of special regulations, subsidies, or franchises" | * "a coercive monopoly is closed entry that can only be achieved by an act of government intervention in the form of special regulations, subsidies, or franchises" | ||
| * examines "whether active competition does inevitably lead to the establishment of coercive monopolies" | |||
| * | |||
| ] | ] | ||
Revision as of 11:53, 10 October 2005
A coercive monopoly is a term used by some to describe a government monopoly - either a monopoly granted to a private firm or one operated by the state. The term may sometimes cover the theoretical possibility of a monopoly created by the coercive actions of a private firm or individual, but usually the definition excludes this. The term is not widely used in economics, but has been employed for example by Nathaniel Branden and others associated with Ayn Rand and her philosophy of objectivism.
The classical definition (eg Branden, 1962 ) of "coercive monopoly" essentially equates it with a monopoly based on government authority: "a business concern that can set its prices and production policies independent of the market, with immunity from competition, from the law of supply and demand." (Alan Greenspan ) As Branden makes clear, "In the whole history of capitalism, no one has been able to establish a coercive monopoly by means of competition on a free market. There is only one way to forbid entry into a given field of production: by law."
External links
- Antitrust Policy As Corporate Welfare by Clyde Wayne Crews Jr "Coercive monopoly power does not emerge from the transitory outcomes of the voluntary exchanges that comprise the marketplace. It is hoped that policymakers will come to recognize that government cannot protect the public from monopoly power, because it is the source of such power."
- Antitrust Laws Harm Consumers and Stifle Competition by Edward W. Younkins "a coercive monopoly is closed entry that can only be achieved by an act of government intervention in the form of special regulations, subsidies, or franchises"