Let’s play Monopoly..in a bigger scale?

I think, no word in Economics could have invoked more fear, outrage and rare enough, a consensus among Economists that its existence is detrimental than MONOPOLY. Those who have taken the Principles of Microeconomics of the “dismal science,” can easily tell you that Monopolies offer lower total utility(or a negative one) to the community and is a form of market failure. (Unless of course, if it is a form of natural monopoly, in which this will be regarded as much more “desirable).

P/S Bear with the unless of course, on the other hand, and sentences like then again…this is a perennial trait of economists or would be economists.

Firms can morph into a monopoly, and governments around the world have enacted laws to safeguard or enforce market competition and to prevent monopoly. The spirit of competition laws then is to preserve market competition (again, in the exception of natural monopolies, though the shift of paradigm might change this).

So if governments around the world share the consensus that market competition should be safeguarded or enforced for the benefits of all, is it safe to conjecture that the same notion should be enforced in the global level? China is gradually morphing into the equivalent of a monopolistic player in the global arena source , and its unbridled growing capacity is creating a great sense of unease.

Will China’s rise be detrimental to everybody else? There seems to be no spillover effect to some of its neighbours, and rising negative sentiments from disenchanted neighbours and other nations are starting to jeopardise the growth brought about by China’s export oriented model. With the demise of free-spending American consumers, China is finding it increasingly difficult to sustain this promising double digit economic growth. Factoring in its weak domestic consumption, a net flow of jobs towards a region where most of the population in its vast rural areas are incapable of spending on items that aremore than necessary, what we see is a bleak picture for all the players involved in free trade. (This argument is not new, for those who have read my essays, papers or attended the seminar in class where my partner and I presented on the topic of globalisation and outsourcing).

So back to the ultimate question, should the WTO, the body “overseeing” international trade, introduce the equivalent of competition laws to safeguard and enforce competition among nations in the global arena, in view of China’s monopolistic dominance? I could foresee some arguments against such a move, and it will mostly be based upon the logic that the reason why China is able to dominate is because of its comparative or absolute advantage in producing what the world needs. My response is : Really? Just how much of China’s growth is because of relative factor endownment(the abundance of natural resources) or relative factor intensity( the availability of necessary infrastructure and labour with skills to keep it easy)? True, the aforementioned factors played a huge role, the question is do these factors play a bigger role or is it more because it is a bubble fueled by an artificially and forefully devalued currency? I reject the notion that China is the country that has the comparative or absolute advantage in producing everything (this is a truism).

Hopefully, the question on whether or not to introduce the equivalent of an international competition law provides motivation to study this issue in international trade and to enhance global and public discourse on China’s monopoly.

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2 Responses to Let’s play Monopoly..in a bigger scale?

  1. Zen says:

    do they teach this in class? if they are, looks like the lecturers are good, even if dont, good job.

  2. GoatKY says:

    Well we covered it a little. The most attractive part of the programme that I am doing is that it is student centered, so academic freedom is the tenet of their education philosophy and approach. It is a little bit like university level, they give you a task and let you do it in your way. For econs, I wrote a paper and my teacher graded it, after putting it through rigorous plagiarism test.

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