The pros and cons of being a monopoly

The world today is one big monopoly, or an oligopoly if shared. It also seems that business strategies of today are all but mergers and acquisitions towards further market control and big profits.

Back when I had no white hair, I was amongst hundreds of high school graduates who went into either Business Administration or Civil Engineering, both being the go-to majors at the time. As I went on to study the former, none of my tutors went beyond explaining how a monopoly differs from an oligopoly. The money-making aspect of it was never mentioned.

Rather, we were taught that all you need is a unique business idea, a unique product or service, or a unique selling point, and you will be set on your way to riches and to possibly have your own McDonald’s at home. Wrong.

Monopolies and oligopolies seem to be both the stage of initiation and the stage of prominence for companies and corporations, with stages in between for competitors to enter the market for a while before dying out. If you cannot establish your own, all you have to do is come up with an interesting idea for a business that you can later either sell into an acquisition, or list publicly via an Initial Public Offering (IPO). Nowadays, and given recent IPOs, you can list even when reporting losses one quarter after another.

Eventually, and in both cases, consolidation of similarly-oriented businesses, into a larger company or corporation, will bring about economies of scale and turn net losses into net profits.

Whether it is big pharma, big tech, or the big five in control of the global food system and by extension its food security, those corporations have realized that control of the market is key. To achieve that, they expanded outreach through their value chains by acquiring downstream and upstream businesses.

Similarly, acquisition of competitors led to streamlined operations, cutting down of costs, and net profits for businesses that have been losing money all along. To illustrate, think here of what chance does electric car pioneers stand once major, well-established car manufacturers master its technology and mass production.

Monopolistic tendencies, observed at a national as well as at an international level, is justified by the strive towards being more competitive in a globalized economy where scale and magnitude are everything. However, this comes at the expense of free markets that allow for fair competition and better quality at competitive pricing. That being said, moving towards markets that are monopolistic or oligopolistic in nature will fundamentally solidify control of the markets in the hands of a few, with negative effects extending from quality and price for certain products and services, to the more serious health pandemics and food insecurity.

At the national level, negative externalities go down with the country’s market openness, which prevents few domestic companies and corporations from raising price and lowering quality. If the country decides however to restrict its openness to protect and promote its own domestic industries, without encouraging those industries to compete regionally and internationally; negative externalities are maximized.

At the international level, monopolies, or more appropriately oligopolies, are best positioned to decide how best they can serve global markets. For instance, big pharma could choose to utilize their scale into further research that includes life-saving medications or methods to deliver vaccinations to remote areas. Likewise, big pharma could subsidize leasing its patents to developing countries that can produce medications there at lower costs, whilst maximizing the number of individuals getting those medications.

Another example could be that of tech and how they can make use of their advancements in partnership with governments, whether such partnerships are towards a more dynamic form of governance and e-governance, or to improve services.

At the international level, monopolistic and oligopolistic markets seem to be the norm, not the anomaly. Initially, there are no benefits in maintaining a monopoly or even an oligopoly in a single country’s market unless those protected industries are crucial for job creation and for the country’s economic future. Even then, such companies or corporations need to be pushed out of their comfort zone to be regionally and internationally competitive. What things would come down to ultimately is how those big companies and corporations would act when it comes to the world’s longevity and its economic growth.

The last thought that I want to leave you with: can the same be said of the few corporations controlling the global food system from farm gate to market shelf?