The Idea of a Natural Monopoly is a Fallacy

In this debate my opponent will not only have to show that there has never been a Monopoly without Government intervention but also show how such a situation could never arise. For me to defeat the resolution I must either provide examples on Monopolies that have existed without Government intervention OR show that such a situation is feasibly possible. I will first start with my opponent’s case before making my own. A Natural Monopoly Has Never Occurred My opponent starts with a bold claim and provides examples of companies that are typically referenced when discussing Monopolies and attempts to show they are not monopolies. What is interesting is that his very example shows a Natural Monopoly which was then broken up due to federal government intervention! Standard Oil: Standard Oil was an integrated oil producing, transporting, refining and marketing company. In 1904 it accounted for 91% of the entire American refining capacity and 85% of the sales <1>. In the 1890s it expanded to China as its production started to exceed US demand <2>. The definition of a monopoly, as provided by opponent, is “where all (or most) sales in a market are undertaken by a single firm”. In this case the market is the US market for which Standard Oil accounted for 91% meeting both definitions of a Monopoly. My opponent then explains how this Monopoly was broken up by “rent-seeking”/government lobbying until they intervened 1909 and broke the company up. To conclude I have shown not only that my opponents example was indeed a Natural Monopoly I have also shown that the Government was in fact responsible for breaking it up which leads nicely onto the next point. Government Can Only Create Monopolies My opponent first provides a quote from Murray Rothbard and gives examples of Government made monopolies. I concede that Governments can and do create monopolies. This is however irrelevant to the debate which is “The Idea of a Natural Monopoly is a Fallacy” Governments can create Monopolies but they often break up Monopolies as the Standard Oil example above shows. I will show in my arguments how monopolies can and do form without involvement of Government My opponent then provides a quote from Friedrich A Hayek stating why monopolies are bad for everyone. This is again irrelevant to the debate. We are not discussing the pros and cons of a Monopoly only whether “The Idea of a Natural Monopoly is a Fallacy” The Impossibility of a Natural Monopoly on the Free Market My opponent provides 2 quotes in bold listed below but fails to explain why competition would make a Monopoly impossible. “Competition on the free market eliminates the possibility of a natural monopoly as long as there is no regulation hindering the competition on the free market.” “A natural monopoly cannot exist because there is always competition on the market.” I concede that competition helps reduce the possibility of a Monopoly forming, however I strongly dispute that competition “eliminates the possibility” or means that it “cannot exist”. As such I am sure there are many examples where competition meant that no Monopoly formed. I actually disagree that my opponent’s examples show this but as I concede the concept therefore there is no need to waste character space arguing this further Contention 1: Barriers to Market Entry are the cause of Monopolies My opponent states that only through Government intervention can Monopolies be formed. Here I will provide a list of other conditions which may cause a monopoly. a) Technology: If one company develops or invents a new product that others can’t replicate or don’t know how to replicate then this company immediately has a Monopoly of the market b) Resources Control: There is only one source of the product. A news item I read yesterday is a funny example where Novak Djokovic<3> bought the entire world’s supply of Donkey Cheese. He now controls 100% of World sales at least for now. c) Economies of Scale: This is where one entity becomes so big it can utilize more efficient production techniques to produce goods cheaper than competition. It then prices them out of the market exactly as Standard Oil did in the example above. Contention 2: Unethical Business Practices in the Free Market Excluding Competitors Practices: An entity can become or maintain a monopoly position through unfair business practices such as colluding or threat tactics. An example might be the various drug gangs/mobs each controlling their own “markets/cities” through threatening/killing the opposition. Another might be a company with large capital reserves producing and selling goods at a loss until all competition has been priced out of the market. Contention 3: Examples of Natural Monopolies To be fair to my opponent I will only list one example per round which he should show is only caused by Government intervetion Microsoft Windows: Microsoft currently controls over 91% of the market in terms of what Operating System you use. <4> Back to my opponent <1> Daniel Yergin, The Prize, New York: Simon & Schuster, 1991, p.79 <2> http://en.wikipedia.org... <3> http://sports.nationalpost.com... <4> http://marketshare.hitslink.com...