Chapter VII. Monopolies

A MONOPOLY in general is the exclusive right belonging to one or to a certain number to sell some commodity. A legal monopoly has its origin in the law, which sometimes reserves to the Government the right to sell some commodity or service, or grants the exclusive privilege of doing so to someone or to a certain number. Thus, in some countries the Government has a monopoly of salt or tobacco, as it has in England of the postal telegraph service. Copyright and patent right are private monopolies granted by law to an author or to the inventor of a patent. A natural monopoly arises from one or a few who band together and who are the owners of the sole source of supply of some commodity. When one or more capitalists obtain joint control over the sale of some commodity we have a capitalistic monopoly. The moral principles which govern the exclusive right to sell are applicable also to the exclusive right to buy, and we shall apply them to both in this chapter.

A legal monopoly is lawful provided that it does not militate against the common good. In England the Tudor sovereigns abused their privilege of granting monopolies, and the Parliament under James I made such grants illegal and void. Copyright, however, patent right, and certain other privileges of a monopolistic character, are’ recognized and protected by English law.

A natural monopoly, too, is of course lawful, but if the commodity or service which is thus monopolized is necessary or very useful for the common good, natural equity prescribes that the price demanded should be fair and reasonable, even if it be not regulated by positive law. If the subject-matter of the monopoly belongs to the class of non-necessaries and luxuries, as, for example, a mine of diamonds or rubies of special quality, it cannot be said that the price is fixed and determined by natural conditions, and the owner will be justified in taking any price that he can get without fraud or misrepresentation.

Even capitalistic monopolies of commodities or services which are necessary or very useful to the community are not morally wrong if the prices charged are fair and reasonable, and if there is nothing reprehensible in the method of conducting business. The public may derive considerable advantages from these monopolies. They are capable: of effecting great savings in the costs of production, advertising, distribution, and general management, and they may secure a large return on their capital and at the same time sell cheaply to consumers. They obviate, too, the wastes and the recurring depressions in trade which follow from unlimited competition.

Monopolies, however, are morally wrong when the prices demanded for necessary or useful articles of consumption are excessive, or when the methods of business are unjust, uncharitable, or generally unlawful. The prices will be excessive when much more than a fair return for the capital employed is obtained, after all the costs of production and distribution have been defrayed, and when as a natural consequence they are higher than would rule if there were no monopoly. When means are used to crush rivals in order to secure a monopoly, when bribery of public officials is practised to obtain from Government specially favourable laws or treatment, when discriminating rates are obtained from railways and other companies, when workmen are tyrannically and unjustly treated, when prices of raw material are unduly depressed and producers are robbed of a fair compensation for their toil and trouble, and in general, when fraud or force is used to accomplish the end in view, the methods of business are immoral, and monopolies which employ such methods are to be condemned.

If prices demanded by a monopoly are, in the estimation of prudent men, higher than are fair and reasonable, injustice is committed, and there is consequently an obligation to make restitution to the buyers who have been robbed. If the prices charged are not altogether unfair and unreasonable, but high, and above what in the circumstances would be considered moderate, there will be a sin committed against charity, in that private advantage has been unduly pursued to the detriment of the people, who have been compelled to pay higher prices for the enrichment of the monopolists.

From what has been said, it is clear that what are called “rings ” and “ corners” in wheat, cotton, and other such commodities, are morally wrong, in that they cause the financial ruin of many people, and produce wide distress and instability of trade. Trusts, too, and combinations in trade are full of danger for the community. They wield immense power, and the temptations to abuse it, especially as a company has no conscience, as the saying is, are too great for the common run of business men. It is well that the Government should have the right of examining and inspecting the affairs of such bodies, and of applying the necessary remedies in case of abuse.