Monopoly, the board game, is banned in our family as it causes arguments on a scale not seen since the Biblical times. The reason why it causes arguments is that it is a game which is fundamentally unfair. There’s always one, usually me, who hordes property, usually at least one of every colour, before making a strike. A strike into the heart of other players’ bank balances. After a long, drawn out cackle, it’s over. The board, and pieces, have been thrown across the room in disgust at my victory. The moral of this story is that no one likes monopolies.
Monopolies restrict choice and the market. They cripple consumers because they can. To stop monopolies from occurring, governments have competition laws. However, there are areas of the economy in which nothing else but monopolies can exist: railways and the utilities.
If railways were to be made competitive, another company would have to build a parallel track alongside the existing track. Different companies do share parts of tracks but not an entire line. This is because of technological failure. If you’ve ever been on a train, you will have at one point encountered delays – this is invariably due to signal failure or engine failure. If the different companies were all competing on the same line the competition would soon collapse because one train would be stuck and all the others behind it would be stuck. Railways are extremely uncompetitive and are natural monopolies.
Utilities, though open to more competition than railways, are also natural monopolies. The utilities I refer to are mainly water – though energy is more of a cartel than monopoly. The reason why water companies are monopolies is because of space. There is only one, large water pipe running into your house and another larger sewage pipe running away from your house. If you were to inject competition into this sector, there would be more pipes than rooms in houses.
When natural monopolies exist, it is for the prevailing majority to propose privatisation because private companies are more efficient than nationalised companies? And is it not correct that the markets destroy monopolies? Generally this is all correct. Private companies do tend to be more efficient than nationalised companies because profit and cost become an influencing factor. Monopolies are destroyed by the market – eventually. But this does not apply to natural monopolies.
In my opinion, and an opinion that is generally widely received on the Left and I hope that it will be received on the Right, is that if monopolies must exist then they should exist to serve the community. For some this would take a normal nationalised process whereby the state runs everything. For others, this would be a co-operative. As a co-operator, I believe that when monopolies must exist they should be co-operatives.