When false monopolies are created, for a certainty the laws of economics, the laws of fairplay and justice are being broken. For a certainty there will be repercussions. It may take five, 10 or 50 years but somewhere along the future the repercussions will manifest themselves.
The wealth that is accrued by a false monopoly or an oligopoly will not and cannot sustain itself. It will not be true wealth. The people who acquired wealth through a monopoly will almost certainly become less and less competitive.
In business most people will put in enough work and effort to yield them a certain amount of profits. The work and effort will be maintained to match the level of profits generated.
In an open economy with constantly changing business scenarios, the business people will be kept constantly alert and have to keep increasing their skill level to match newer and unpredictable challenges. This will translate into working and thinking ever harder.
This will happen almost subconsciously. The businessman will work harder to make that extra sale, he will upgrade his product to make that extra sale, he will craft a new marketing campaign to make that extra sale – to pay his overheads, his cost of materials, his rentals, pay the workers, pay the creditors etc and only then the remainder is his to keep as profit. His greater reward is the businessman swims in an endless ocean of business opportunities. Each day at work makes him tougher, more hardy.
In an artificially created monopoly, there is little or no change in the business scenario. There are little or no new challenges. Work will be done and effort will be made just sufficient to maintain the profits “available” in that monopoly. You do not have to work too hard.
To pay his overheads, his cost of materials, his rentals, pay creditors etc the monopolist businessman will NOT work harder to make that extra sale, he will NOT upgrade his product to make that extra sale, he will NOT craft a new marketing campaign to make that extra sale. Each day at work makes him softer and softer, less and less hardy. And this too will happen to him subconsciously. He will not even be aware of what is happening to him.
Even if an artificial monopoly generates extra cash (in the good times) to build new factories or generates huge amounts of taxes for a government, it is not based on good economic principles. The monopoly’s ‘source of earnings’ is perpetually weak.
As the real economy in the rest of the world advances and thrives based on real hard work and real effort, the artificial monopoly will ultimately crash.
In the simplest economic principles there is such a thing as “barriers to entry”. What it really means is how easy or difficult it is for another fellow to open a restaurant right next to yours.
Our own jewellery business has survived for 20 years now in KL based largely on this one single economic principle “barrier to entry”.
Ours was a ‘mom and pop’ operation. When we were still young (in our 30s) my wife and I used our little ‘mom and pop’ savings to start the business. We started the business with RM25,000 in 1998 ! ! Gold was sold at RM34 per gram ! !
It is quite impossible for a young ‘mom and pop’ couple (in their early 30s) to start a jewellery business in KL at today prices. Gold now sells for RM200 per gram. To open a presentable jewellery store in KL you will need at least RM1 million. Very few couples in their 30s will have RM1 million spare cash. So there is a barrier – the cost. If you can overcome these barriers by yourself you are already a fighter. You have a chance.
On the other hand, there is “zero cost” to create an artificial monopoly. Just control the licenses, control the permits, control the APs, control the approvals, control the funds etc and you create a ‘monopoly’. Overnite.
Then you just dish out the licenses to your chosen parties. The fine print actually says, “A license to become lazy”. After 20 years or 40 years you discover that you have created a whole generation of people who have become less and less competitive over the years.
Now, the oil money is running out. Plus the kleptocrats are running away with our money. There is trauma in the eco-system.
Some of the trauma was predictable (LIKE THE ONES I HAVE BEEN SHOUTING ABOUT FOR THE PAST 20 YEARS ! ! READ MY BOOKS. THE NUMBSKULLS EVEN BANNED MY BOOK ! !).
There is also much trauma (that impacts artificial monopolies) which keeps appearing and reappearing like : the rise of the Internet, the rise of China, Uber, digital cameras, smart fones, Ayy Tee (IT). These are all game changers.
So now, quite suddenly the lecturers and professors who run our public universities have been told that they must raise their own funds to survive.
So some of them have rented out their swimming pools, gym facilities, sports fields and hostels to the public.
Or they are creating short duration “certificate courses” for the public.
The latest are university “science fairs” for primary school children where they charge say RM65.00 per child. Maximum “participants” is 30 kids. (I think they are copy catting Dr Yunus – but Dr Yunus does not charge the students for the science fairs !! Dia kasi free.)
So 30 kids x RM65 = RM1950 ! !
I can guarantee their costs (if all the costs are added up) will be much more than RM1950. Their posters alone may cost hundreds of Ringgit. They will lose money. They do not understand business. It has been a “free ride” all along.
These are universities who have absolutely no clue how to survive in a more “competitive” environment. Maybe they will sell pisang goreng (or is it ‘goreng pisang’) at the university entrances.
To make things worse there is now a vibrant and highly competitive “private university” ecosystem in the country. In one private university there are long lines of ‘straight A’ applicants who qualify for their medical faculty. Then they shortlist the candidates. Even after short listing, there are still a minimum of FOUR straight A students “competing” for each medical seat. So they have to pick and choose. Only those best motivated, the most serious, the most committed will be selected.
These kids in turn will demand the best professors and the best lecturers to teach them. Plus their parents are paying for their education.
How will the public universities compete with the private universities? (It can be done – in a jiffy. But you have to listen to other people lah. Can listen to me also.)
Does anyone drive a BLACK Model A Ford anymore? To save costs Henry Ford painted his MILLIONS of Model A Fords in one colour only BLACK. Ford famously said, ‘You can have any colour you want as long as it is black’. That was at the beginning of the motor car age way back in the early 1900s. If Ford tries doing that now they will be kicked out of the market. You have to keep up with the market.
Highest quality for the same price as that other car. If “our” car sells for RM50,000 and the other car CAN sell for the same price, what is the quality and the different features that people can get for the same amount of money?
So what is the solution? Lets use the power of government. Lets create ‘artificial monopolies’. Taxes, duties, permits, licenses, APs – the whole works. A license to become lazy and noncompetitive.