One of the ways that government can get bigger and bigger is by having the government take over some sector of the economy, where several for-profit businesses are competing against each other for customers, and replace all those separate businesses with a single nationalized, government-run monopoly.
Contrary to what some of you think, this way of doing things is actually bad for us. In fact, it’s terribly bad for us
I go into more detail about this subject in some other articles, particularly in “Socialized Health Care – Why It Doesn’t Work in Real Life,” but I’ll go ahead and touch on this subject again. But this time I’ll do it in terms of this subject matter – monopolies.
When a pro-socialist government decides that there shouldn’t be for-profit businesses competing against each other in some certain market sector, such as oil and gas production, or energy distribution, and that they should be nationalized, that is, they should become a government-owned monopoly, there is usually a two-step process.
First, take all the businesses that are competing against each other for market share in the sector of the economy that is going to be nationalized, and have them all merge together into a single entity that controls the entire market share – that is, become a monopoly. An alternative is that the government creates its own monopoly from scratch and forces all the private sector businesses to shut their doors.
Secondly, after the monopoly is created, then the government swoops in, takes control of the entire operation, and basically turns it into a department or bureaucracy of the government.
So, let’s break this down and analyze this scheme, shall we?
Like I’ve already said, private, competitive, for-profit businesses try to maximize their profits by keeping costs down, being more efficient, reducing costs to customers, raising their quality to customers, having good customer service, and innovating new products and services – all of which benefit the customer and makes such a format pro-people.
Monopolies are a different story. Private, for-profit businesses that are competing against each other have to do what I said in the previous paragraph to steal customers from their competitors to gain more market share to increase their profits, and keep their customers from going to their competitors, which means losing profits. Monopolies don’t have to worry about losing market share to competitors because they already have a monopoly on the entire market and don’t have to worry about any competitors. People can’t say, “This business is doing a terrible job! I’m going to their competitor, because they’re doing way better!” – there’s no competitors to turn to. Because of that, these government-run monopolies have no motivation to do any of the things mentioned above, like lowering costs, increasing quality, improving customer service, that are good for people.
Let me restate this again, just to make myself clear. As a customer, you have no other choice. If you don’t like the monopoly’s products, services, or customer service, you can’t just leave and go with someone else because there is no one else. You have no choice.
So, why is this the case? Let me explain in more detail.
If a monopoly is still a private company that is trying to make a profit, they will go about it very differently than they would if they were in a competitive marketplace vying for more customers and market share. In the case of a for-profit monopoly, all they have to do is look at supply and demand curves, and find out at which price they can make the biggest revenues before the demand curve drops out – in other words, they can maximize the price they charge for their goods or services. Compare that to a competitive marketplace where they minimize their prices to draw in more customers.
But wait, there’s more. Like a competitive business, monopolies will do everything they can to reduce costs to maximize profits, except in this case, what it usually means is more shoddy, lower-quality service or products that are really crappy, and at as high of prices they think they can extract from their customers. But they don’t care because you can’t go anywhere else. I should also mention that this also means that customer service is really bad, or nonexistent in monopolies. Why have good customer service to try to keep your customers from switching over to one of your competitors when no competitors actually exist?
If you think private, for-profit monopolies are bad, nationalized, government-owned monopolies are even worse. They do all the bad things private, for-profit monopolies do – high prices, shoddy products and services, bad customer service, etc. – and more. This “more” I already talked about in other articles, but I’ll bring it up again.
Government-owned monopolies, just like any other government bureaucracy, have no motivation to be efficient with their money, but to be as inefficient and wasteful as possible. With the nationalized monopoly, just like with any bureaucracy, they don’t care if they’re being wasteful because, because if they are, government will just allocate more money to them.
Let me restate something I said earlier again: one of the primary reasons why big, oversized governments around the world are the size that they are is because some politicians decided to take over some private sector in their nation’s economy and nationalize it, making that sector of their nation’s economy a government-owned monopoly rather than a free market where businesses compete against each other for customers.
As you can see, that’s not good for people at all. Politicians like to claim that nationalization of an industry would be better for everyone, and make nationalizing some industry, or economic sector, part of their campaign platform, but the end result is bad service, wastefulness, inefficiency, and all the other things that make a nationalized, government-owned monopoly bad for everyone, at least from the ownership side of the equation. Please note – this also includes nationalizing health care.
The Other Side of the Equation
One of the arguments used by those who believe in nationalizing entire sectors of the economy is the belief that the government can then use the profits from that economic sector for the public good. According to socialists, it’s a way to allow that wealth to be spread throughout society in a more equitable manner. But there are a couple problems with this argument.
First, all that really means is that a powerful elite, a group of politicians, can decide how to use that money. In this case, that money does not actually get used and spent in a way that “spreads the wealth out”; instead, they use it in order to secure their own political power. If they are an elected politician, that means working to secure more votes. In the end, the poorest people in the country are not wealthier, but they are…well, this brings me to the next point.
Many of the programs that are created and run with money from nationalized economic sectors, such as social welfare programs, do not actually make the beneficiaries better off, nor do they even push the beneficiaries in a direction that leads to their own prosperity and improved well-being; the only thing many of these programs do is make those people more dependent on the government. And this dependency all too often traps those people in a place where they stay in poverty and don’t get out.
In other words, nationalizing an economic sector with the intended goal of “distributing the nation’s wealth more equitably” almost never accomplishes that goal. Those at the bottom end of the wealth ladder don’t become better off. You don’t see wealth disparities decreasing, but staying the same, or becoming even worse as a result of that dependency.
And if all of this is the case, it would be better to just keep that economic sector the way it is, with multiple businesses competing against each other for customers, rather than nationalize that entire sector into a state-owned monopoly. By taxing those privately-owned businesses, a nation will still be able to utilize some of that money in a way that can be beneficial to the nation, although it will be less money than it would be if the nation took all of the profits. You should have no problem with this, as this is not the best way to improve a nation and the well-being of its citizens.
In Summary
QIn other words, don’t nationalize industries that are doing well in the private sector. All that does is bloat the size of government and make it even bigger, as if it’s not big enough already, all while turning those industries into crappy versions of themselves. And the money the state gets if they nationalize rarely if ever improves the lot of those at the bottom, but only causes more dependency. Keep those industries private and keep government out of it.
