Economists and politicians have argued over the value of monopolies for more than 150 years. In the meantime it has become evident that “monopolies hold back would-be competitors from introducing innovations that increase productivity, reduce marginal costs, and lower the price to consumers." (Bradford Delong)
Administrative bureaucracy, group thinking by a closed business elite, and red tape, arbitrarily used and abused by monopoly proxies in government, destroy the entrepreneurial energy of the market. They cause stagnation and a shrinking wealth for all.
The antiquated car fleet of Cuba, dilapidated and suffering from lack of innovation, repair, and maintenance, is amongst the most blatant examples that stand out in the media, of what government monopolies will foster. Communist, mercantile regimes, and often, brutal dictatorships are conspicuous in backwardness. Whether monopolies or oligopolies are favored, the results are the same.
In many countries, the prevailing political wisdom was that, at least, the government should own utilities, and those should enjoy monopolistic privileges. Energy and communication infrastructure require such enormous capital investment that only the collective of government spending can step up to the plate.
But confused, as administrators were from the onset, the consumers did not get to enjoy the products at marginal cost, as intended. Hefty depreciation costs, based on spent taxpayers money, were added on to monthly rates plus bloated overhead, profit margins, and phantom research budgets.
The result was always more or less identical, inadequate services to most consumers, antiquated technologies, and exclusive privileges to only a few, who happen to belong to the closed political elite. The fixed costs of utility services are often so horrendous that they render businesses uncompetitive and often into default. Consequently, governments in cahoots with monopolists struggle to impose even more protective, non-market conform barriers at the expense of consumers, and inevitably running their economies into the ground.
In recent developments, consumers, who became producers by installing solar panels on their roofs, had to face such discouraging regulations and costs that the incentive to innovation was quickly deflated, leaving most of sun-drenched Caribbean to fossil fuel generated energy production.
Populist politicians and straight-faced hypocrite administrators may have accommodated public acclaim for a short while but for most of them, the monopoly gravy train is too much of an enticement to pass up.
The bankruptcy of Puerto Rico, Venezuela and Cuba, and the lackluster economic growth of many Caribbean islands have become classical study cases for many Business Schools. But even for graduates and alumni of these elite training facilities, the lure of corruption prevails.
By Jacob Gelt Dekker,
Opinion columnist for Curaçao Chronicle.