It is widely accepted that in most cases monopolies are not
very good for the economy and society. It is inefficient and lead to increase
in price paid by the consumer. In olden days many industrialists used muscle
power and/ or political patronage to muster monopoly power. Over the years the
policy frameworks have evolved and matured, reducing opportunity for monopoly leading
to a more competitive industry structure that encourages innovation and foster
efficiency. Disruptive technologies also played a role in unseating established
monopolies.
But we are now seeing a new trend in market monopolies. Technology
innovations with the support of money power fuelled by PE funds are
manipulating the market to build and enable monopolies. For some time it will
appear that the consumer is benefitting. But once these new breed service
providers decimate their competition and establish difficult to break monopoly
on top of the network effect might give no option to the consumer from their
monopoly pricing or lack-lustre service. Dr Ajay Shah has published a blog on
this topic building on a paper published by him along with Smriti Parsheera, Avirup Bose This paper discusses some of the regulatory
innovations that is required to address this concern.
This is not just a matter of concern with respect to
industry. It is also a matter of concern in politics and in governance. The
strength of democracy is that the common man through the majority vote can make
a selection of who should govern his country. Though individually nobody would
be knowledgeable on all matters, the “wisdom of the crowd” enables collective
decisions that is more right in most of the times than even the expert opinion.
But democracy may not be very efficient always. Fragmentation of political
parties and / or absence of decisive leadership may lead to periods of wild
uncertainties. Different countries in the world have experienced this in
different periods of time. When a country pass through such uncertainty for a
long time hampering growth a large cross section of the society would yearn for
a benevolent dictator (a monopoly). In short term this appears like a panacea. .
At this point of time if a leader rises and come up with an appealing theme, he
will be able to win the heart of the majority.
If he is good leader he be able to make a big difference and
could stimulate economic growth and wider acceptance. But if such
super-popularity built on emotional themes it could also eventually slip to
autocracy. Especially if his team has a large contingent who have no vision or
capability they, instead of providing a balanced support structure to the
leader, will focus on deification of the leader. Then like the PE funds finance
monopolies, a powerful few start selling specious dreams and unfounded fears
towards meeting their hidden agendas. When they manage to buy or suppress media
the story is complete.. Then the “wisdom of the crowd” becomes mob frenzy which
fails to see reason and start dancing to the catchy slogans and clever public
relations campaign almost like sheep.
This is what happened in Germany after the First World War.
The degeneration of German economy made worse by Versailles’ Treaty made Hitler
and his Nazi Party the hope of the German Society. In the first few years of
his rule the German Economy turned around and helped recover the “lost Honour” from
with the reparations forced by the allied forces. He and his cronies were able
to build on this and eventually he became a cult figure. When people lifted
their phone instead of a “Hello”, “Hail Hitler became the norm. Those who did
not qualify as per the ‘majority norm’ were marginalised and eventually eliminated.
One of the key elements of success of any democracy is how
we prevent degeneration to autocracy. India managed when Indira Gandhi through
her emergency rule attempted this. Only with the sacrifices of many thinking
members of the society we were able to manage to curtail her. That is why we
need to nurture a strong opposition who has the capability and popularity to
provide strong check and balance and avoid media surrendering it independence. We
should not just get carried away by the “Uber Pricing” fuelled by PE funding
and should we willing and confident to raise questions where it us warranted if
our democracy is to sustain.
It would be folly to argue that the people
cannot make political mistakes. They can and do make grave mistakes. They know
it, they pay the penalty, but compared with the mistakes which have been made
by every kind of autocracy they are unimportant. Calvin Coolidge
