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Moral Aspects of Monopoly

1910 New Catholic Dictionary

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• Moral Aspects of Monopoly
• Monopoly, Moral Aspects of
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• Moral Aspects of Monopoly

(Greek: monopolia)

Signifies exclusive sale or exclusive privilege of selling. Present usage extends the term to any degree of unified control over a commodity sufficient to enable the person or corporation in control to limit the supply and to fix the price. The proportion of the supply that must be controlled in order to attain these ends ranges between little over 50% in some cases, and 70-90% in the majority. In all cases however, monopoly implies the ability to regulate the supply and prices beforehand and to fix both at some point other than that which would have been fixed by the natural action of the market under normal competition. A monopoly of itself is not immoral. Its morality depends entirely upon its actions and its effects. Specifically its morality is determined by the prices it fixes and the methods it employs towards actual or potential competitors. Monopolistic prices are not unjust provided they do not exceed the limits laid down by the objective, and subjective rules of justice, viz.: that a commodity should be sold at a price sufficiently high to fairly remunerate all who have contributed to the production of the article; and a price that is approved by competent and fair-minded men. This principle holds true even when the monopolistic price is higher than the price that obtained, or would have obtained, under the stress of competition. For the selling price of the commodity is the source of remuneration to all concerned in the production, and unless this insures a proper return, the price, no matter how low, is unjust. On the other hand a selling price more than sufficient to render fair returns to the different agents of production is also unjust. This just remuneration comprises:

204. a living wage to all laborers, and something more to those:

• who possess exceptional ability or skill
• who put forth unusual efforts
• who perform disagreeable tasks
• who turn out unusually large products

205. fair profits for the business man on account of his activities as director of industries
206. a fair rate of interest on the actual amount of money invested in the business, which rate will be determined by the rate prevailing in competitive businesses subject to the same amount of risk

This is the commonly accepted norm. Even where the monopoly has complied with the double rule of justice cited, there is no good reason why in the case of reduced cost of production, the monopoly should absorb all the benefits of the improvement. It should share them with the consumer in the way of reduced prices, as a compensation for the social dangers inherent in every monopoly.

Public opinion regards as immoral most of the methods used by monopolies to harass and to eliminate their competitors. Among the most notable are: discriminative underselling; the factor's agreement; railway favoritism.

• Discriminative underselling means a monopoly selling its goods at a low in the territory where it desires to eliminate competition, while imposing unreasonably high prices elsewhere. The unjustly high price is the moral cause of the act whereby the unprofitably low prices are established, and consequently of the competitors' ruin. The same holds true in cases where the monopoly universally lowers its prices only to raise them exorbitantly when competition is killed. However no injustice is done if the monopoly lowers its prices and keeps them lowered after the competitors have failed, or simply raises them to the profitable though just level because no unjust means have been used.
  

• The factor's agreement is a convention between the merchant and the monopoly, whereby the merchant agrees to handle no goods, or no goods of a certain kind, except those manufactured or controlled by the monopoly. The agreement always implies intimidation of the merchant on the part of the monopoly for in the event of the merchant's refusal to make the agreement, the monopoly refuses to sell him any goods at all. Thus the independent dealers are victims of a secondary boycott and lose the patronage of the merchant through intimidation. Since there is no good reason for the intimidation and refusal of intercourse on the part of the monopoly, and since the ultimate aim of the monopoly is to raise the price after the rivals are eliminiited, the competitors are unjustly victimized.
  

• Railway favoritism is the most serious of all monopolistic methods. Essentially it consists in the fact that the goods handled by the monopoly are carried by the railroad at a rate so mucli below that charged to independent dealers, that the latter are either ruined, or must be content with insufficient profits. Railway favoritism is immoral because:
• it is forbidden by law, being condemned by sound general opinion
• the railroad as a quasi-public agency is under obligation to treat all its patrons with the same distributive justice that the state would be obliged to accord them were it the owner of the railroad
• the lowered prices granted the monopoly imply exorbitantly high rates extorted from the independent shippers

The monopoly is a formal cooperator in this injustice in as much as it requests, urges and even intimidates the railroad into granting the preferential rates. The monopoly is always the beneficiary in such cases. Of itself then, monopoly is not necessarily unjust, but experience teaches that the power of committing injustice inherent in every monopoly cannot be unreservedly intrusted to the average man, or group of men. Hence it is the duty of the state to prevent tne existence of unnecessary monopolies, and to exercise strict supervision over the necessary ones, in order to prevent monopolistic injustice.