Monopolies, private enterprise and competiton

[BOZG]

I have a question for the capitalists here who support private enterprise rather than state monopolies and see competition as the only way to bring prices down. My question is "What is fundamentally different about private enterprise and state monopolies other than management?" I think most people who agree that state monopolies as they exist today are inefficient and waste a lot of resources but is this inevitable? If a company existing in competition can maintain itself at lower prices, why can a state monopoly, under proper management not do the same? If such a situation could happen, then does this not reject the entire idea of an open and competitive economy as more wasteful and inefficient. I think it does unless there is some sort of fundamental difference between monopolies and private enterprise

[Osman Ghazi]

I tihnk that it is greed that makes the differnece. The money would go to the managers of the businesses in a capitalist society but in a communist society it would go to the people so there isn't as much incentive to improve productivity. I think that is actually a big factor of capitalism's more efficient nature. Still, id rather have $1000000 equally distrubuted the world over than $50000000 in the hands of the rich elites.

[BOZG]

That is one argument for the case but it's not 100% fool proof. Why people do things would obviously change with their consciousness? When I said a state monopoly, I wasn't focusing entirely on a communist society. State monopolies can exist under capitalism aswell, where the incentives are all the same.

[Hoppe]

"What is fundamentally different about private enterprise and state monopolies other than management?"

The first is subject to competition and the second is protected.


I think most people who agree that state monopolies as they exist today are inefficient and waste a lot of resources but is this inevitable?

No, unfortunately not. A state monopoly can't go bankrupt, so there isn't a huge incentive to work efficiently.


If such a situation could happen, then does this not reject the entire idea of an open and competitive economy as more wasteful and inefficient. I think it does unless there is some sort of fundamental difference between monopolies and private enterprise

Read up on your economics :D You cannot find a honest economist who embraces the idea of monopolies. It is true that in an ideal world without scarcity competitive markets are unnecessary but unfortunately we don't live in such a place.

[Ahura Mazda]

Uh, yeah...Hoppe answered the question, pretty much. Free Enterprise monopolies can still fail, while state monopolies always will have government backing.

[BOZG]

The first is subject to competition and the second is protected.

Obviously.



No, unfortunately not. A state monopoly can't go bankrupt, so there isn't a huge incentive to work efficiently

Yes it is very unlikely that a state monopoly will go bankrupt but in a mixed economy, the threat of being privatised exists. I would find that an incentive to try and run a service efficiently and resourcefully.



You cannot find a honest economist who embraces the idea of monopolies.

Now you're just being ridiculous. Only capitalist economists can be honest?



It is true that in an ideal world without scarcity competitive markets are unnecessary but unfortunately we don't live in such a place.

Seeing as I need to read up on my economics why is competition a necessity in a scarce society?

[Hoppe]

Yes it is very unlikely that a state monopoly will go bankrupt but in a mixed economy, the threat of being privatised exists. I would find that an incentive to try and run a service efficiently and resourcefully.

Ok, answer this question: do you know any government which doesn't waste money? which has superb customer service opposed to private companies?

In Europe we have had privatisations of telephone companies in the last decade. Prices went down and service went up. How's that possible?


Now you're just being ridiculous. Only capitalist economists can be honest?

No. but economics is not moral philosophy.


why is competition a necessity in a scarce society?

Scarcity means that individuals have to make decisions. Competition ensures that scarce resources are used in the most efficient way.

[Saint-Just]

A monopoly is not as awful as capitalist economists often view it. The state controls a monopoly, as a result they put various measures in place to ensure efficiency, quality and a low price, of course these measures may not work as well as a free market. Also, a monopoly, being bigger can benefit from efficiences related to size, the higher the output the lower the individual cost of each unit. Also, monopolies can allocate a higher budget towards improvements in technology, so products are of a higher quality.

You cannot find a honest economist who embraces the idea of monopolies.

Yes, partly true, but many economists see that state provision is necessary for merit goods such as education and health.

[Hoppe]

Yes, partly true, but many economists see that state provision is necessary for merit goods such as education and health

True, though you can classify eveything as a public good, like socks or rosegardens.


A monopoly is not as awful as capitalist economists often view it. The state controls a monopoly, as a result they put various measures in place to ensure efficiency, quality and a low price, of course these measures may not work as well as a free market.

Precisely why most object it (except for the ones mentioned above)


Also, a monopoly, being bigger can benefit from efficiences related to size, the higher the output the lower the individual cost of each unit.

Partly true. But economies of scale can be found in a competitive environment as well, even more. As said, a monopolist doesn't have any need to control costs.


Also, monopolies can allocate a higher budget towards improvements in technology, so products are of a higher quality.

Will they now? I have thought about an example for this statement but I could only find ones contradicting this. It is illogical, why would you want to improve (especially since bankruptcy is no option)?

[antieverything]

I think that the question needs to be "tightened" a bit. The debate seems to be whether management of state monopolies can be as efficient as that of a competitive firm by being held accountable in the same way. Some think so...but as I will explain in the next paragraph, even this depends on a competitive market of some type: http://www.wiu.edu/users/miecon/wiu/yunker...er/postlang.htm (http://www.wiu.edu/users/miecon/wiu/yunker/postlang.htm)

The problem seems to be this: while the management of a state monopoly can be held accountable, the way in which it can be are limited. Customer satisfaction--as opposed to who? Cost per unit--as opposed to who? Management of a competitive firm are constantly searching for ways to improve efficiency. They are judged in relation to their competitors. A monopoly's management can only be judged on the basis of numbers with no comparisons...how do you measure their success in meeting the needs of the consumers? Can they take their money elsewhere? No.

Of course, this is coming from a market socialist perspective so take it how you will. I don't think that competition and markets are necessarily bad things--just that capitalist competition and markets are bad things.

[Hoppe]

The "market" is neither capitalistic nor socialistic Antieverything.

[kylieII]

Originally posted by [email protected] 25 2004, 03:10 PM
I have a question for the capitalists here who support private enterprise rather than state monopolies and see competition as the only way to bring prices down. My question is "What is fundamentally different about private enterprise and state monopolies other than management?" I think most people who agree that state monopolies as they exist today are inefficient and waste a lot of resources but is this inevitable? If a company existing in competition can maintain itself at lower prices, why can a state monopoly, under proper management not do the same? If such a situation could happen, then does this not reject the entire idea of an open and competitive economy as more wasteful and inefficient. I think it does unless there is some sort of fundamental difference between monopolies and private enterprise
The reason it is argued that competitive markets will be more efficiant than a monopoly is due to in the monopoly there being no price competition. This means that if the good is a neccessity good, then people have no choice but to pay what the monopoly demands. Whereas in a competitive market, this is not the case, with it being possible to go to a different supplier for a cheaper price, if one raises its prices.
This is related to efficiancy as with a monopoly, with no competition or rival supplier of a product, there is therefore less need to continue to drive average costs down. If wages or costs of resources go on, it can much more easily be passed on by increasing the price of the final product that the consumer purchases.
For this same reason, innovation and improvement are less likely to take place, because there is no other firm from which demand can be taken from, so there is little to gain.
Finally there is the possibility of allocative inefficiancy. This means not meeting accurately the amount of a product demanded. So it may be that there is an oversupply, wasting resources, or an undersupply, it being hard to tell as unlike in other market structures, supply has no effect on the demand of a product.

[cubist]

QUOTE
Also, monopolies can allocate a higher budget towards improvements in technology, so products are of a higher quality.


Will they now? I have thought about an example for this statement but I could only find ones contradicting this. It is illogical, why would you want to improve (especially since bankruptcy is no option)?


i am a socialist but i did business at a'level
and although a monopoly is in the position to improve the technology, becuase of its "unbankruptable"(sp?) situation it is less likely to improve technology, competitive business release new technology to raise income as they have a new thing to be one up on the competition, think intel/amd or Nvidia/ATI they fight all the time for the top spot bringing out the faster larger graphics processors then cooling then 8X AGP etc etc why becuase its necassary in order to remain successful

monopolies can do it when ever they please there is no race!

[Osman Ghazi]

What the hell ever gave you the idea that resources were scarce? Contrary to popular belief, there is enough to go around. Or rather there would be if the West would just give back what they stole.

[Hoppe]

Originally posted by Osman [email protected] 27 2004, 02:23 PM
What the hell ever gave you the idea that resources were scarce? Contrary to popular belief, there is enough to go around. Or rather there would be if the West would just give back what they stole.
Oh thank you for this wonderfull insight. Suddenly economics isn&#39;t relevant anymore. <_<

[Saint-Just]

True, though you can classify eveything as a public good, like socks or rosegardens.

True, but Health and Education are more important than those things. Thus most economists see it it necessary that the state provide health and education. Do you disagree?

Partly true. But economies of scale can be found in a competitive environment as well, even more. As said, a monopolist doesn&#39;t have any need to control costs.

If you love your country you don&#39;t want to drive it into economic destruction, all that is needed is a bit of the stick with those who don&#39;t love their country to make state monopolies efficient. Anyway, a state monopoly has a limited budget, that budget is decided by politicians who are not directly involved in the running of that monopoly.


Also, monopolies can allocate a higher budget towards improvements in technology, so products are of a higher quality.


Will they now? I have thought about an example for this statement but I could only find ones contradicting this. It is illogical, why would you want to improve (especially since bankruptcy is no option)? ~Hoppe

This applies to free market monopolies. Although it is still true for state monopolies, if they have the money they will spend it on improving technology. All socialist countries made technological improvements. They simply told people to do it, they gave scientists a lot of money and told them to develop things. Science is often not driven by profit. The biggest improvements in technology often come in war from scientists driven by a sense of pride and achievement.

I have not studied socialist economics, however socialist countries have had great economic successes.

In my opinion the Free Market economy and Socialist economy have various benefits. I would not say that one is greater than the other, both administered properly they can flourish. The Soviet economy was hardly weak, in fact it achieved massive growth rates and great improvements in science and technology. The same thing can be done under capitalism of course.

[Osman Ghazi]

Hoppe what i meant is that you said that competition is necessary when there are scarce resources. If there aren&#39;t scarce resources, then we hardly need competition do we?
You seem to be forgetting that in a competition, someone must win and someone must lose. Socialists just don&#39;t want people to lose.
As for state monopoly, who says that they don&#39;t have to have any incentive to improve? The thing is that in a state monopoly, the incentive must be given, whereas it exists innately in capitalism.
If it were up to me, i would say that effiency would have to improve by a set amount every quarter or whoever was running it would get sacked. That seems like pretty fair incentive to me.

[cubist]

effiency?

what sort machine or operator?

operator efficiency will not follow an exponential curve it has to stop somewhere.

for an operator to make a set amount extra per quarter in the same time period is very bad, with out machine effienciency being improved with it, as surely the operators machine will be under extra demand too?

a fair incentive would be work and we will feed house and provide for you&#33;&#33;

[Hoppe]

True, but Health and Education are more important than those things. Thus most economists see it it necessary that the state provide health and education. Do you disagree?

No I don&#39;t. But the classification of a good as a public good is very flawed.


I have not studied socialist economics, however socialist countries have had great economic successes.

Like what? And if they did, was it all by themselves or copied from capitalist countries? I don&#39;t think that scientist in the USSR, China or Cuba didn&#39;t have or haven&#39;t got any access to western research.


If there aren&#39;t scarce resources, then we hardly need competition do we?

Your statement that scarcity doesn&#39;t exist is ludicrous.


You seem to be forgetting that in a competition, someone must win and someone must lose.

Is it bad that inefficient and lousy companies go bankrupt? Maybe for some workers but the overwhelming majority of people is clearly more satisfied with another producer. If you want to protect the minority then your actions are obviously stupid.

[antieverything]

The "market" is neither capitalistic nor socialistic Antieverything.
Perhaps I should have been a bit more clear. The problems of capitalism largely arise from the system of ownership/profit and the expansionary dynamic that arises from it. Capitalist firms expand until the market is saturated or expansion otherwise becomes unprofitable. Worker owned/controlled firms expand only to the point of maximum efficiency as this is the point where profit/worker is maximized (a worker-owned firm eliminates the wage system). Hence, there is no monopolistic tendency in firms of a socialist character.

[Hoppe]

Worker owned/controlled firms expand only to the point of maximum efficiency as this is the point where profit/worker is maximized (a worker-owned firm eliminates the wage system)

Then why not start a worker-owned company?

[kylieII]

Originally posted by Osman [email protected] 27 2004, 02:23 PM
What the hell ever gave you the idea that resources were scarce? Contrary to popular belief, there is enough to go around. Or rather there would be if the West would just give back what they stole.
Oh, I see. Really there is not limited resources, its just an trick by the evil kkkapitalist devils. You mormon. We live on a rock, called Earth. On this rock there is a limited amount of people, ie, not an infinite number.
The result? Limited amounts of labour power. These people themselves demand goods, and you see, people have unlimited wants. So with there not being an unlimited amount of people, these wants cannot be met. Hence scarcity.
There is also limited resources: the earth is only so big, we cannot fit 100 billion people on here, for example. Hence scarcity.
There is limited raw materials to be found on Earth, so we can only produce so many goods through these.
This is very basic economics.

[antieverything]

...which is exactly why markets are needed. Our resources are much too limited to use them wastefully.

The problem, however, arises that some people just don&#39;t have any money to play the "game". It is simply unconciounable to have anyone starving when there is more than enough food to go around (the myth of food scarcity is a dangerous one). When it comes to distribution and production of consumer goods, though, markets are the way to go in my opinion--granted a market in which worker-managed firms predominate.


Then why not start a worker-owned company?
Because this alone will do very little to promote global justice. Without legislation mandating that firms be worker-managed, they won&#39;t be able to take over because they play by slightly different rules than capitalist firms. The growth model they follow results in them being squelched by the larger, monopolist capitalist firms. The only real successes are those cooperatives which have become cooperative corporations complete with entrepreneurial divisions (Spain&#39;s Mondragon Cooperative Corporation&#39;s lending institution has for decades been one of the top 100 most efficient lending institutions in the world while lending almost exclusively to cooperative firms). Production cooperatives have been known to succeed but lack the ability, in most cases, to expand to the size needed to become globally competitive. This isn&#39;t to say they can&#39;t, only that they need support and vision not being offered currently. To think that this new sort of economy will arise on its own without revolution is, of course, niave.

[Hoppe]

Without legislation mandating that firms be worker-managed, they won&#39;t be able to take over because they play by slightly different rules than capitalist firms

Bullshit, a lot of countries, especially in Europa, have beneficial taxes for cooperatives.


Production cooperatives have been known to succeed but lack the ability, in most cases, to expand to the size needed to become globally competitive. This isn&#39;t to say they can&#39;t, only that they need support and vision not being offered currently.

this is ridicuolous, you are basically saying that private companies are better than cooperatives.

[antieverything]

What I&#39;m saying is that in a capitalist economy, capitalist firms usually (not always) outperform socialist ones. However, an economy based on socialist firms can be sufficiently efficient, making capitalism an obselete and indefensible system.

Yes, governments (even the American government) provide some support for cooperatives. This is why I said that they need a specific kind of support to thrive and are not getting it...the cooperative is encouraged but cooperatives tend to exist at the factory level and would be better served by support in developing a cooperative corporation. This does happen in Europe to some extent (Scandanavian economies have large, thriving cooperative sectors). But even if there were a program for supporting development of cooperative corporations, they would still be at a disadvantage to the more cut-throat capitalist firms. Mondragon, for example, has on occasion used non-owner third-world labor.

We can&#39;t build a just economy based on the rules of capitalism, you must change the rules and then build the economy on that&#33;

[synthesis]

Communism isn&#39;t about starting over with new, nicer corporations. It&#39;s about global seizure of the corporations that do exist, by the proletariat, for the proletariat.

[Y2A]

Originally posted by [email protected] 27 2004, 08:32 PM

Worker owned/controlled firms expand only to the point of maximum efficiency as this is the point where profit/worker is maximized (a worker-owned firm eliminates the wage system)

Then why not start a worker-owned company?
Because a worker-owned firm could not possiblly compete with a capitalist one due to the fact that the workers would not focus as much on efficiency but rather on worker&#39;s benifits and wages.

[antieverything]

...seeing as there is no such thing as a "wage," I don&#39;t think that this is true.

Workers recieve a percentage of profits, not a wage.

[Saint-Just]

Originally posted by Y2A+Jan 28 2004, 03:31 AM--></span><table border='0' align='center' width='95%' cellpadding='3' cellspacing='1'><tr><td>QUOTE (Y2A @ Jan 28 2004, 03:31 AM)
[email protected] 27 2004, 08:32 PM

Worker owned/controlled firms expand only to the point of maximum efficiency as this is the point where profit/worker is maximized (a worker-owned firm eliminates the wage system)

Then why not start a worker-owned company?
Because a worker-owned firm could not possiblly compete with a capitalist one due to the fact that the workers would not focus as much on efficiency but rather on worker&#39;s benifits and wages. [/b]
Are you aware of the Stakhanovite movement in the USSR? Do you know that in the DPRK there is a minimum 40-hour week.

[Hoppe]

Originally posted by [email protected] 28 2004, 12:31 AM
We can&#39;t build a just economy based on the rules of capitalism, you must change the rules and then build the economy on that&#33;
Come on, capitalism wasn&#39;t an invention of some scientist.


Workers recieve a percentage of profits, not a wage.

So, what if they are losing money?

[antieverything]

If they are losing money the firm is forced to disband and/or file for bankruptcy. Loans would work in largely the same way but banks would be nationalized/municipalized.


Come on, capitalism wasn&#39;t an invention of some scientist.
Capitalism isn&#39;t an economic system, it is a phase of history defined by the dominance of the capitalist class. This is why "free markets" will never happen...this religion only extends to the point where it benefits the ruling class. Subsidies to corporations sharply increased under Reagan, remember.

And let&#39;s not think that the ruling class doesn&#39;t see cooperative movements as threat. The US does not support cooperative movements in the third world, where they are most needed--hence the unilateral UN veto of every pro-cooperative resolution since they began in the early 80s&#33;

[antieverything]

Are you aware of the Stakhanovite movement in the USSR? Do you know that in the DPRK there is a minimum 40-hour week.
I&#39;m aware that the Stakhanovite movement was largely a lie created by the Soviet press to boost morale (as they admitted in &#39;88&#33;). I&#39;m also aware that DPRK avoids mass starvation only through massive food aid&#33;

[Hoppe]

Originally posted by [email protected] 28 2004, 07:43 PM
Capitalism isn&#39;t an economic system, it is a phase of history defined by the dominance of the capitalist class. This is why "free markets" will never happen...this religion only extends to the point where it benefits the ruling class. Subsidies to corporations sharply increased under Reagan, remember.

ow god, this crap again. :(

[Saint-Just]

Originally posted by [email protected] 28 2004, 08:14 PM

Are you aware of the Stakhanovite movement in the USSR? Do you know that in the DPRK there is a minimum 40-hour week.
I&#39;m aware that the Stakhanovite movement was largely a lie created by the Soviet press to boost morale (as they admitted in &#39;88&#33;). I&#39;m also aware that DPRK avoids mass starvation only through massive food aid&#33;
That was a comment for Y2A. Regardless of whether Comrade Stakhanov did as much work as was said there were a large amount of people who worked hard to emulate Stakhanov.

The food aid in the DPRK is not massive, and it is becoming far smaller. Also, any lack of food in the DPRK is not down to the fact that they have a socialist economy. In the 1970s the DPRK was economically outstripping South Korea. The current food problems are a result of a lack of trade, a lack of basic raw materials and there was never mass starvation. In addition, the various human rights groups put a lot of the blame on the droughts and floods that occured in those 2 years. The number of people affected by food shortages went sharply up and then decreased somewhat. The country has economic problems, but it did not create them itself.

[antieverything]

1. North Korea did create much of its own economic problems. The food aid IS massive.
2. North Korea still maintains almost complete literacy and a respectable life expectancy despite a high infant mortality rate and a huge problem with child malnutrition.

I&#39;m not buying into the propaganda machine here. Don&#39;t worry&#33; In many aspects, North Koreans are better off than those in "capitalist" Russia. Still, it sucks. This really isn&#39;t the place for this anyway, I appologize for my arrogant confrontationalism.

Hoppe, the fact that capitalism is a system of class dominance is basic and obvious. It doesn&#39;t take a Marxist to figure it out (look at me&#33;). This is a basic assumption that is crucial for any productive dialogue. Arguing with someone who doesn&#39;t accept the fact that capitalism is a social system as well as an economic system is like arguing about US foreign policy with someone who refuses to grasp the simple facts of imperialism&#33;

[Saint-Just]

How exactly did the DPRK create its economic problems. Surely they are taking the steps necessary now to revive the economy in creating some free trade zones.

[Hoppe]

Hoppe, the fact that capitalism is a system of class dominance is basic and obvious. It doesn&#39;t take a Marxist to figure it out (look at me&#33;). This is a basic assumption that is crucial for any productive dialogue. Arguing with someone who doesn&#39;t accept the fact that capitalism is a social system as well as an economic system is like arguing about US foreign policy with someone who refuses to grasp the simple facts of imperialism&#33;

I will only go sofar as to governments as the "ruling" class, the rest is just simply crap. You cannot have a productive dialogue in this way because it will always end up with me saying that your social system is extremely more repressive than mine. Because every time these discussion go something like "look at the exploitation of third would countries by imperialistic pigs etc etc etc.". "Bla bla bla, your ideology cannot but end in Stalinistic despotism.......". "You know nothing about communism, that has nothing to do with it." et cetera, et cetera, et cetera.

[antieverything]

:huh: Fine.

The North Korean economy is incredibly centralized with central planners allocating all resources...there is no correlation between production and consumtion. Thus production is horribly inefficient and consumer goods are hard to come by. We really can&#39;t get a good picture of how inefficient DPRK&#39;s economy because they publish few statistics and these are far less reliable than any other country&#39;s...even than those in the USSR&#33;

[Saint-Just]

Originally posted by [email protected] 29 2004, 07:34 PM
:huh: Fine.

The North Korean economy is incredibly centralized with central planners allocating all resources...there is no correlation between production and consumtion. Thus production is horribly inefficient and consumer goods are hard to come by. We really can&#39;t get a good picture of how inefficient DPRK&#39;s economy because they publish few statistics and these are far less reliable than any other country&#39;s...even than those in the USSR&#33;
What about the problems with trade and lack of energy production, are they not harming the economy? In the 70s the DPRK was more economically developed than South Korea, and they had a centrally planned economy then too.

I should imagine the producers in the DPRK have a good idea how much of any particular good is in demand. They are not making many luxury goods. The kind of goods they are supplying are necessities for which the information you need to work out supply is very simple.