When Only One Will Do

The Security of a Monopoly 

One of the most insidious and debilitating effects of a monopoly is that the consumer has to take what he is given.  A monopoly is Henry Ford's dictum writ large: "You can have any colour you want, as long as it's black."  A monopoly is supply driven and controlled, not demand controlled.  A monopoly reduces the consumer to the status of a "take-it or leave-it" beggar. 

Competition turns this perverse circumstance upon its head.  In a competitive market place, the consumer is king, the supplier/manufacturer is the servant.  In order to win customers the supplier must provide what the customer wants. 

One by-product of this arrangement is a perpetual discipline of cost control.  A high preference factor for most consumers is value, which translates into purchasing the best quality for the lowest possible price.  In a competitive market place, suppliers are perpetually disciplined by customers to control and even lower their costs.  Those who don't, go out of business. 

Monopolies have no regimen for cost-controls.  Since the customer is captive (he has nowhere else to go), he must end up paying whatever the monopoly ends up charging. 

Government monopolies are no exception.
  In fact, they are the worst kind of monopolies.  Naturally, they end up overcharging.  Costs rise steadily, if not exponentially.  When the state has a monopoly over health and education services, costs rise well ahead of general inflation. 

Education provides the most telling example in New Zealand.  Here the government firstly has made education compulsory, then has set itself up as the monopoly provider of schooling.  The upshot?  Incessant price increases. 

As education scores deteriorate, the standard political response (from almost all political parties) is more spending on education--which is just another way of increasing the price of schooling.  In New Zealand we have a mixed funding model for schools.  The vast majority of the funding comes from the taxpayer, and that poor creature ends up paying a higher and higher price for schooling through the taxation system--as one would expect in a monopoly market.  But parents also pay directly, through various school levies, charges, and fees.  That also experiences a relentless rise in costs and charges.  As you would expect.

"In the past we have always convinced ourselves that a government education is a free education," ASG chief executive John Velegrinis said. "But not when you actually think about all of the inputs, every time the parents have to put their hand in their pockets."  The cost of education had risen by one and a half times the rate of inflation in the past 10 years, a situation that was unlikely to change, Melbourne-based Mr Velegrinis said. [NZ Herald]

Of course that situation will not change.  It's a monopoly after all--actually, the worst kind of monopoly--a statist monopoly legislated and maintained by the powers of the government.  And the laws of monopoly are inviolate: costs and charges rise in real terms, whilst quality declines.  

This will remain until the monopoly is surrendered and broken down.  Ironically, there is an easy mechanism to do this: the education voucher.  The state spending per child per annum is a readily available figure.  Let the state provide vouchers to parents who want them, to be redeemed at the school of their choice, provided places are available.  Overnight, the consumer would have buying power--and, therefore, negotiating power.  Prices and charges of the kind to which Mr Velegrinis is referring would drop--relatively quickly, we expect. 

But there is a downside.  In fact, this would mean that some schools would be winning, others losing.  Some schools burgeoning, others languishing.  Some children would be getting a better education, others a sub-standard education.  This reality would strike at the ideological, egalitarian heart of the nation. 

But in reality egalitarianism has always been a myth, serving as a security blanket to coddle the feeble minded and the naive and the covetous.  Under that blanket, educational quality has waned, and illiteracy rates and truancy rates have risen.  But it feels not-so-bad because we choose to believe the myth that the government monopoly is providing free, universal, secular education to all children in the country.  It is a "just so" story. 

And, to be fair, it has given some certainty after all--we can be sure there will be inevitable, relentless, rising costs coupled with diminishing quality.  Which is a kind of security, is it not?