Of competition, monopoly and companies

Of competition, monopoly and companies

One day, a long time ago, I learned that under the conditions of the capitalist mode of production, monopoly is both the result and the negation of competition.

I also learned around the same time that monopolies existed long before the capitalist production regime took hold as dominant. In the feudal regimes that preceded it, the monopolies were a construction from power to guarantee rents regardless of their efficiency.

And I have learned during all these years of wanting to have efficient state-owned companies that doing it with your back to the competition seems not to be possible, in the same way that the existence of extended monopolistic situations will not help with that purpose either. Just looking at what is happening to us today with a part of the trade, dominated by two or three companies that “share” the “market” among themselves and can impose really high prices that significantly reduce the purchasing power of the population, gives us a idea of ​​how harmful monopolies can be.

We have today, despite the tremendous problems that our economy has, despite the almost insurmountable supply deficit, despite the tremendous limitations to acquire inputs, despite the centrally planned nature of the economy, companies that manage to obtain up to 150% profit and sometimes not meeting your sales plan! There are not three or four leading companies, they are 35% of the total state companies that provided information. And yes, it draws attention and a lot.

That a part of them may achieve these levels of profits because they took better advantage of market opportunities, may be possible and admissible, however, that a part of them obtain excess profits because they enjoy privileges granted in advance, it does not seem to be healthy for our economy, that they obtain these surplus profits for reasons far removed from efficiency, productivity, quality and innovation, cannot be good for the national economy either and that these surplus profits are not reverted to improvements in the processes and products they generate, it seems worse.

But it is true, the weak competition that exists in the Cuban economic system and the widespread monopolistic practice that characterizes it allow many companies to operate with excessive profit margins.

It is also true that in a troubled river… opportunity businesses and spurious profits.

design and reality

Probably what most caught the attention of this last meeting with state companies It is that rare situation of having companies —and not a few (35% of the total state companies that reported information)— that manage to obtain 150% of the planned or planned profits. That the companies that “decide the game” obtain high profits would be ideal for any economy, since it should be reversed in more offer, better products and services and more innovative processes that allow a more efficient use of resources, but it does not happen in this economy .

It happens that ours is not just any economy, but rather a very unique one where theoretically at least its centrally planned character should avoid inconsistencies such as those that allow companies to obtain high profits without an adequate counterpart of goods and services, so difficult to understand and accept. .

It is true, also “hunting down” in the plan allows high profits to be obtained even in breach of sales plans, but it is very difficult to find corrective mechanisms centrally.

In general, in those other economies it is competition that allows these situations to be corrected. It does not do it in advance, but it does and it happens through the displacement of other companies towards that sector where it is possible to obtain an “extraordinary profit” and this new competition manages to balance the balance.

The situation of at least one part of our economic system is the worst that can be presented, on the one hand there are monopolies, on the other, institutional barriers that prevent competition from working properly and also plans that can be managed at convenience. It’s like the perfect storm, especially if we place those ingredients in a context where access to resources is limited, sometimes centrally decided, and not infrequently not effectively allocated and not efficiently used.

But I don’t think that the solution lies only in demanding other behavior from companies. We already lived that story more than thirty years ago when the management and planning system of the economy, do you remember? That companies work in an atmosphere of competition is the best antidote, that monopolistic companies are reduced to the bare minimum is fundamental, that a business environment with sufficient transparency be achieved, that the increase in the concurrence of national companies of all types and of foreign companies can help in the purpose of avoiding repeating stories already known and never fully resolved.

With dominated markets, with excessive profits —even without fulfilling the sales plan—, with appropriation of spurious rents, then why does the company need to innovate, improve its processes, introduce new products on the market, strive to export and make those exports sustainable?

It is not that competition is the “magic wand” that solves everything. It’s not like that at all. It must also be regulated, in the same way that care must be taken that it works well so that it produces the only thing it could produce: efficiency, competitiveness and innovation.

Because the economy is one, its laws are enforced even if they are not broken, I also learned that a long time ago.

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