The theory of monopoly in economics states that;
There is a monopoly if in the market only the sellers exists. The firm is also the industry. This happens when for example there is one firm operating a diamond mine. All people who want to buy diamond must buy from that firm. During the one party era, there was one broadcasting corporation the Malawi Broadcasting Corporation (MBC). If you wanted to advertise your product on air, you had to go to MBC, there was no alternative.
There is a monopoly when a single seller sells a produce for which there is no close substitutes. The seller faces little or no competition. Air Malawi used to be a monopoly for internal service. It had no close substitute in the form of another airline but it had distant substitutes in the form of cars and busses. A person who wanted to travel from Blantyre to Lilongwe had the option of going either by aeroplane of by bus. But the facilities were not identical, with the aeroplane he could arrive in less than an hour whereas a bus could take about four hours.
There is monopoly when are extremely high barriers to entry. It requires many billion of dollars to build a motor vehicle factory. Hence many firms shy away from entering the automobile manufacturing industry because of the costs. Low average total costs (low unit costs) are obtained only through large scale production.
Where economies of scale are necessary on grand scale so that in an industry only one firm can survive the times that services is known as a natural monopoly. Examples of natural monopolies are public utilities such as water boards and electricity and postal corporations. Because they provide essential services they usually owned by the state. Though they operate like private corporations, the prices they charge require approval by the government. Water boards and electricity corporations often operate at loses because they undercharge their services and often they are over staffed.
Monopolies may be classified as government monopolies and market monopolies. Government monopolies are those set up by statute. Legally no one is allowed to compete with them. During the one party era, the Agricultural Development and Marketing Corporation (Admarc) was the sole buyer of smallholder cash crops. It used to make a lot of profits, some it invested in other companies from peasants since it was buying reduce below market price. It was also an agency where the government made savings.
Tin the 1990s, there was pressure on the government from donors to liberalise the market by allowing private traders to compete wit Admarc. It was hoped that smallholder farmers would obtain better prices if the monopoly was abolished. Whether smallholder farmers now obtain better prices would require investigation.
Liberalisation has created problems for both Admarc and the government. Admarc no longer makes hefty profits it used to make. When the buying season arrives, it asks the government to give it working capital. Any economic system we devise will have both advantages and disadvantages.
Some monopolies arise rent-seeking: people lobby the government to give them exclusive licences of to impose high tariffs so as to keep out foreign competition. The monopolies may not be obsolete still, they inflict harm on the public. It is rent seeking that destroyed that Malawi SAVINGS Bank (MSB). In rent-seeking, someone earns extra profits without providing extra services.
Legally imposed monopolies are conducive to economic growth where they come in the form of patents. People who invent new products or devices for production are given exclusive franchise to produce that product for a period of about twenty years. Other business people are not allowed to copy that product instrument. If patents were not granted, people with talents would be reluctant to spend a lot of money and time to make an invention if other people would be free to copy it and undersell then.
In politics, there are also monopolies in the form of one party system or life president. Usually, in such situations, freedoms of speeches, assembly and religion ARE SUPPRESSED. But some monopolies of power have served a country better than a muilt-party system. It is now fair enough to say under the multi-party system and life [presidency, Malawi developed faster than under the multi-party system. However, in life, apart from material things, people cherish moral things such as freedom, under the one party system, there was freedom of speech, and assembly. People were continually subjected to propaganda through one broadcasting station.
Monopoly power in Uganda has brought development which plural parties had failed. Uganda’s Makerere University’ alma mater of Goodall Gondwe, Professor David Rubadiri and several other prominent Malawians. It is the best between sub-Sahara and South Africa, thanks to Museveni’s thirty year rule. n