Monopoly is ... Monopoly in the economy: consequences, methods of struggle and history

Monopolism is a state of the market where it has the only major producer of goods or a service provider. He almost completely controls the production in his field and can directly affect prices. The monopolist strives to maintain a dominant position and achieve maximum profit. To this end, he does not allow competitors to enter the market and imposes his own terms on the consumer who is deprived of his choice.

Signs of pure monopoly

On the complete monopolization of the market for any product (service) or industry, you can speak when the following conditions occur:

• There is a major player (company, organization, union of producers), which accounts for a significant part of the volume of production and marketing;
• He has the opportunity to manage the price of the goods by changing the volume of the offer;
• There are no goods or services on the market that consumers could replace what the monopolist produces;
• New companies that could compete with the monopolist do not appear in the industry.

Thus, monopoly is the complete domination of a large organization in a particular sphere or market of a particular commodity, which imposes its own rules on the game to consumers. Today, with rare exception, such "ideal" monopolies exist only abstractly. After all, irreplaceable goods practically do not exist, and an inadequate supply in the domestic market is compensated by imports. Therefore, in modern conditions, monopoly is said when one or more major players dominate the market, which accounts for a significant part of the production volume.

Administrative monopolism

The emergence of monopolies in Russia is closely connected with the actions of the state. The first large associations of companies arose at the end of the 19th century in order to meet the country's needs in such areas as metallurgy, engineering, transport, etc. The phenomenon in which the creation and operation of monopolies is controlled by the state was called administrative (state) monopoly.

At the same time, the government of the country operates in two directions. First, it provides some producers with exclusive rights to conduct any activity that subsequently becomes monopolized. Secondly, the government builds a clear structure of state - owned companies. Establish associations of enterprises that are accountable to state structures - ministries and departments. A vivid example of such a system was the USSR, where the administrative monopoly was expressed in the dominance of power structures and in the state's ownership of the means of production.

Natural monopolies

In those areas where the emergence of many manufacturers is impossible, there is a natural monopoly. This phenomenon arises due to the company's ownership of a unique resource - raw materials, equipment, copyright. This kind of monopoly also arises in industries where competition is theoretically possible, but highly undesirable, since in its absence, demand can be more effectively met. As an example of natural monopolies, there are railway and energy sales companies, as well as services that organize central water supply.

Economic monopolies

However, most often monopolies appear due to objective laws of economic development. Such economic monopoly can be called the most "honest" way to take a dominant position in the market. This is achieved in two ways: the concentration of capital or its centralization. In the first case, the company directs part of its profits to increase its own scale, gradually grows and wins in competition. The second way is to merge the business or absorb the weaker rivals. Usually economic monopolies in the process of their development use both of these methods.

Cons of monopolism

Critics of monopolies note their negative impact on the economy of the industry, which is associated with the lack of competition. In these conditions, the monopolist can influence the price and ensure maximum profit. In other words, monopoly is the opposite of a competitive market. In the monopolized industry, the following negative phenomena are observed:

• The quality of products does not improve, since the monopolist lacks the incentive to work in this direction;
• Increase in the company's profit is achieved not at the expense of reducing costs, but through the manipulation of prices;
• The need to introduce new technologies and stimulate scientific research is also lacking;
• In the market there are no new companies that could create jobs;
• The efficiency of the use of production capacities and labor is gradually falling.

Why is monopoly not always bad?

However, market monopoly has some positive features that can not be denied either. Supporters of monopolies note that concentration of production provides more opportunities for saving costs. This is achieved through the centralization of some auxiliary services - financial, procurement, sales and others. In addition, only large companies can afford to invest in new projects and finance research, thereby contributing to scientific and technological progress.

Historical examples

Monopoly dates back to ancient times, but the most active development of this process was in the XIX century. In the second half of the monopoly they began to exert a significant influence on the economy and almost became a threat to competition. At the turn of the century, developed markets, in particular the American one, were covered by a wave of mergers and acquisitions. In this period, there were big monopolists, such as General Motors and Standard Oil. In the next couple of decades, another wave of monopoly formation took place. By 1929, that is, at the beginning of the Great Depression, the main sectors of the economy were monopolized in the USA . And although experts have not yet come to a consensus on why the country's developed economy plunged into crisis, it is obvious that monopolization played a not the least role in this.

Consequences of monopolism

So, the lessons of history show that monopoly in the economy inhibits progress. The advantages of the enlargement of production, which the advocates of monopolies say, are not decisive. Due to weak competition, large companies or their associations concentrate in their hands all power in the sphere in which they exist. Over time, this leads to the fact that management of the monopoly and the use of resources is ineffective. Economic monopoly is often supplemented by political, which contributes to the development of corruption and in every way destroys the foundations of a market economy.

Control measures

One of the most important tasks of the state in terms of economic development is the regulation of monopoly. It is implemented both through direct exposure to companies through the antimonopoly legislation mechanism , and through creating conditions for the development of healthy competition. The state controls the concentration of capital - it monitors the processes of mergers and mergers, as well as controls the already formed monopolies. In addition, laws are being developed to protect the rights of small and medium-sized companies, as well as measures of financial support - tax incentives, affordable loans and so on.

As stated above, the creation of economic monopolies is a natural process, as the most successful company is gradually growing and conquering the market. In advanced economies, oligopoly prevails - this is the type of production where most of the market's volume belongs to a limited number of producers. Antimonopoly policy of the state is carried out, among other things, by protecting oligopoly. This option is considered more acceptable before the monopoly, because it provides a certain balance of "competition - monopoly".

In modern economic science, monopoly is considered a negative factor, and governments of states keep this process under control. Antitrust policy of different countries is somewhat different, since each national economy has its own characteristics. However, in any case, antimonopoly measures should be aimed at ensuring that there are manufacturers on the market who will be able to provide high quality products at a fair price and a fairly wide range.