11.04.2020 Feature Article

Why Govt Need To Control Monopolists In This Era Of Covid-19 For The Benefits Of All Especially Low Income Earners

Why Govt Need To Control Monopolists In This Era Of Covid-19 For The Benefits Of All Especially Low Income Earners
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There are a lot of markets when it comes to Economics such as; Perfect Competition market, Monopoly market, Monopolistic Competition (imperfect competition), oligopoly market, Duopoly market, Monopsony Market, and Duopsony market. But when it comes to monopoly market, a lot need to be done because of their manipulative nature to consumers.

In Economics, the word “market” has a different meaning to what we know in the layman’s view.

Market to the average man or woman on the street, is a precise place, possibly a special building or a specified open place or space where commodities are sold and bought, e.g. Mafi-Kumase Market in Volta Region, Makola Market in Accra, Ho Market in Volta Region, Kumasi Market in Ashanti Kumasi. (Francis Pious Egoeh definition of market).

Economists have broader definition of a market. In economics, a market needs not to be a fixed place. What this means is that when you meet any of this “Abotsi Abotsi” guys on the street of Mafi-Kumase and you stopped him to buy one Togo Gens automatically market has taken place. Very simple.

Market is defined as any effective arrangement or organization for bringing buyers and sellers into contact (close) with one another.

Now, we are going to focus more on the Monopoly Market and why the Government of the day need to control their activities to benefit the low income earners.

Monopoly market is a market structure in which there is a sole producer or seller of a commodity that has no close substitutes. In Ghana, Electricity Company and Water Company are the only example of monopoly market. But I would like you to know that they are not the best of example of monopoly market. Just take it like that for better understanding of the concept under study.

The close substitute here means, there is no keen competition when we are considering the commodity or product in question.

Monopoly market has the following features or characteristics:

  1. The monopolist faces a downward sloping demand curve. It means that the monopolist can only sell more of his or her commodity by reducing price. The demand curve slopes to the right and the individual and the market demand curves are the same. Note: The monopolist can also fix the quantity and leave the pricing to be determined by demand conditions.
  2. One producer of a product: Here, there is only one seller or producer of a product or service in monopoly market. There may be many buyers but the firm and the industry is the same.
  3. Price maker or searcher: Because the monopolist is alone in the industry, it controls the supply of the product and therefore decides on how much to charge for the product.
  4. Barriers to entry: Normally potential competitors are sent away to avoid competition.
  5. No close substitutes: The product is unique. There is no other product that can give the consumer the same need or satisfaction.

Below are some of the reasons why Governments promote Monopolies:

  • To protect young or infant industry from both internal and external competition.
  • When huge capital and technology is required.
  • To promote the applications of a new technology.
  • For strategic reasons.
  • To prevent duplication and waste of resources.

Now that we know some of the reasons why government promote monopolies; I would like government of Ghana to use the same medium available at their disposal to control monopolists in Ghana in this trying moment for us all as citizenry. Thus, government should make use of the following methods or tools which they have to use to control monopolies especially the private ones which are more of exploitative to the consumers especially the low income earners.

One, government should use the pricing regulations method now: One thing the government need to do when it realizes that consumers are being exploited by monopolist is to use its powers to force monopolist to charge a lower price by equating the marginal cost to the price. It means that when government is forcing monopolist to charge lower prices for consumers to be able to afford, it does it in such a way that the monopolist will not be making losses.

Two, tax regulations: When a monopolist is making supernormal profit through the exploitation of consumers, government have to slap a huge tax on the monopolist which will reduce the profit margin of the monopolist. Once this is done, the ability of others entering the industry will be controlled since, one reason for preventing competition is the huge abnormal profit.

Three, government should encourage close substitutes: This is done when government either take away the patent right or decided not to renew it for the monopolist. When this happens, then other competitors can enter the market and consumers will have variety of products to purchase from. Or government can allow the importation of close substitutes from abroad. But this cannot work now because of the restrictions brought about due to the Covid-19 pandemic which made the closure of boarders and major airlines. So, my advice to the government of the day is that it should encourage other producers of similar products to produce now.

Four, government should control monopoly participation.

Lastly, I would like the government of the day to use the legislative instrument or tool to completely break up or veto the monopolists for now.

I want to put it on record that, government should come out with anti-monopoly laws to be enacted with immediate alacrity. Or if there is such laws, it should be enforced now.

Credit: Francis Pious Egoeh
[email protected] .
Brief Profile about the Author.
Currently, Francis Pious Egoeh is the Administrator & Secretary at Anim Psychological Counselling Services at Danfa-Accra.

Francis Pious Egoeh had his first degree in Economics and Geography from the University of Cape Coast (UCC), Ghana.

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