(A Case of the Dominican Republic)
Dominican Republic’s trade market is developing and is not subjected to a monopolistic economy, whereby few individuals or corporate entities decide the fate of the people, and the country with a population of almost 11 million citizens in 2020, according to UN country data (World Bank, 2020). A monopoly economy limits the government’s involvement in running the country’s economy and determines its direction. It is supposed to be the other way, that the government controls the direction of the market economy.The Dominican government is to develop and expand its market economy from agro-economy to other sectors, such as services delivery, mining, tourism, as well as to create an opportunity for investors to come into the country and invest. (Banco Central, 2021).
The negative impact of monopoly market on consumers
A country operating a monopoly economy allows the consumers to feel the negative impact of such a market economy in different ways. In a monopoly market economy, the consumers are rendered powerless in bargaining right because only one corporate entity is allowed by law to produce, market, and sell a particular product with no substitute to that product. The consumers are at the whims and caprices of the seller of the monopolized product, with no right to complain and no other staple to make a choice. A monopoly market economy entrusted the seller with bargaining power over the consumers, thus, the consumers are deprived of any customers’ rights and privileges to enjoy in a free market economy. Some critics argue that a monopoly economy stabilizes the market despite its adverse effects (Masterclass, 2021). However, its negative impact in a liberal society far outweighs its gains, if any, as suggested by proponents of the monopoly market.
A monopoly market is a restricted economy system that does not allow a competitor to participate in the economy. The monopolist has been given the exclusive right to market a brand product to sell to the consumers, with no alternative market for the consumers to buy same or similar product to the one the monopolist sells. Moreover, the consumers are at the mercy of the monopolist when it comes to price control and content delivery. Since a monopolist is the only provider of that product, it has absolute control over price-fixing. It can decide anytime to increase or decrease product price with no recourse to consumers’ stance. Moreover, a monopolist does not worry much concerning product quality and no plan to improve the product because customers have no substitute. The monopolist determines the economy’s growth and direction, so the fate of the people lies in its hands.
Meanwhile, the problems and challenges of a monopoly economy are beyond the economic constraint placed on consumers. A monopolist can become an authority unto itself to the detriment of the consumers. Some big companies are so large and have become economically powerful, and extensively developed their substantial political influence, to easily manipulate the political system and regulatory process to their advantage. In some cases, local laws and rights of consumers become completely ignored to the detriment of public order. Companies whose leadership lack basic qualities such as morals, reasonableness, conflict resolution and respect for the law and rights have the potential to begin calculated risk vs reward analytics to create new forms of profits or maintain what already exists from an abusive, illegal and/or rights violating practice. These sort of activities are synonymous with a sort of cat and mouse game where the burden of proof is places on the consumers who need to navigate public institutions to hold accountable a company violating their rights . In these cases the company is motivated to impede, evade and hinder those processes by inducing confusion or creating obstacles to fulfill a profitable objective to the detriment of consumers and public order.
The monopolies can cause inflation in a country since they are the determinant of the market prices of products (Amadeo, 2020). The country’s law can empower the monopolist to be the sole seller or producer of a product. Therefore, it has the right to decide when to increase production and create a surplus in the market, thereby lowering the price. Also, the monopolist has the power to lower production and create scarcity to push up product prices. In all these mentioned cases, the consumers are the ones at the receiving end in the monopolized economy. It puts consumers in a dire situation in which they feel helpless because the monopolists operate under the law.
Many people heavily criticize monopoly market economy because of the intended adverse effects on the consumers, such as: denying consumer of the right of choice, sub-standard delivery, poor customer care services, no interface with consumers, including compelling consumers to pay more than the worth of a product or service received because of no alternative market for them to patronize. Monopolies can create artificial scarcity, hoard goods, and even decide not to sell to consumers. Moreover, monopolists can use their economic influence in the country for a political negotiation if the need arises to win government favor. They can also become economic saboteurs if government policy is not in their favor.
A monopolist does not care about the market situation because it is an imperfect market under its control. Its main objective is to maximize profit since there are no market competitors to challenge its dominion over the self-regulated economy. In the absence of competition in a monopoly market, consumers are forced to adhere to the same product brand. The monopolist lacks the efficiency and innovation to upgrade the product since the consumers have no power of preference. Corporate monopolies’ abuse of market power can lead to systematic market failure with disregard to production and price mechanism, leaving the consumers to bear the cost of the monopolists’ failure and mismanagement.
Dominican government economic policies
A monopoly economy operating under the law is a system that allows an individual or corporate organization to monopolize everything with no rival or competitor in the open market. Empirical information has shown the negative impact of a monopolistic market system on nations and the domino effects on consumers. Thus, the Dominican government acknowledged the adverse impact of a monopoly economy and initiate policy measures to prevent such economy system from operating in the country. The government’s economic policies steps are to forestall few individuals from hijacking the country’s economy to the detriment of the majority of the people and hold the government to ransom. The main motive of the government’s economic policy drive is to protect the interests of the country and its citizens from the pitfall of a monopoly market. The government economic policies have been enacted into laws to have legal backing and enshrined in the constitution of the Dominican Republic. The laws protect the citizens from undue economic exploitation by individuals and corporate entities and the country from economic saboteurs.
In the exact law of the Dominican Republic, no individual has an absolute monopoly on any product and service, except under concession by the government as specified. In the Constitution of the Dominican Republic, as amended in 2015, Article 50 stipulates the ‘Freedom of Enterprise’ the State recognizes and guarantees free enterprise, commerce, and industry (Constitute Project, 2018). Furthermore, all persons have the right to freely commit themselves to the economic activity of their preference, without more limitations than those approved in this Constitution and those enacted by the law (Ibid). The government shall not permit monopoly economy except in favor of the state and its citizens. The creation and organization of these monopolies shall be made by law. The State favors and defends free and loyal competition and shall adopt the necessary methods to circumvent the damaging and restraining effects of monopoly.
Under certain circumstances, the Dominican government gives the concession to allow a monopoly in specific sectors to prevent the sectors from proliferation with unqualified market players, thereby delivering sub-standard service. For example, utilities like energy, schools, hospitals, security, and others are subjected to government regulations and control to ensure quality goods and service delivery. The government restrains some market operators from essential sectors in the country by issuing license and approval certificates to prevent the abuse and saturation of such sectors, which is usually the case in a free-market economy. In the first instance, it is the responsibility of the government to safeguard and preserve the country’s natural resources on behalf of the people while striving to provide vital services to the people.
The various anti-monopoly laws enacted by the Dominican government will help protect local businesses not to be overrun by foreign investors, and take care of the interests and rights of the people. The Dominican government’s economic policy is already yielding result. Thus, in the global economic freedom index rating, Dominican Republic scores 62.1, it is placed in the 88th position as the freest economy in the world in 2020 (Index ranking, 2021).
Research by Taylan Evrenler shows the decision of the Dominican Republic government to promulgate laws restraining the monopolization of its economy is for the good of the citizens and to protect its fragile trade market from hijacking by monopolies companies. The government laws permit a competitive open market to create opportunities for everyone to participate and grow according to its pace, and attract foreign direct investments into the country. The negative effects of a monopoly market impose a significant burden on the people without considering their limited purchasing power. Thereby it allows the country’s economy to be remotely controlled by the monopolies companies and the people at their whips.
References
2021 Index of Economic Freedom, (2021). The Dominican Republic. https://www.heritage.org/index/country/dominicanrepublic
Amadeo Kimberly, (2020). Monopolies: Pros, Cons, and Effect on Economies. The Balancehttps://www.thebalance.com/monopoly-4-reasons-it-s-bad-and-its-history-3305945
Banco Central, Dominican Republic, (2021). External Sector. Sector Externo. https://www.bancentral.gov.do/a/d/2532-sector-externo
Dominican Republic’s Constitution of 2015. Constitute Project. Org. January 17, 2018. http://extwprlegs1.fao.org/docs/pdf/dom187716Eng.pdf
Master Class Business, (2021). Economics 101: What Is a Monopoly?https://www.masterclass.com/articles/economics-101-what-is-a-monopoly
World Bank country data, (2020) Population, total – Dominican Republic. https://data.worldbank.org/indicator/SP.POP.TOTL?locations=DO