Monopoly Capital, Monopsony Too

New Delhi, May 10:
Bought some beer last evening from the government monopoly retail shop – the nearest one being a few kilometers from my house.

The government monopoly over the retail trade of alcoholic beverages is over 15 years old. The Congress, of course, started it. But even the BJP continued with it, although they claim to be a ‘party of traders’. This is a very lucrative trade.

So it must be even more ‘lucrative’ for a monopolist – only in this case, the monopolist will reduce supply (the shops are few and far between) and quality and thereby rake in monopoly profits at the consumer’s expense. I had to drive a few kilometers to get my beer. The government monopoly saved on the costs of opening more shops.

Yet, this is surely not what makes this trade ‘lucrative’ to Delhi’s politicians. There must be more to it. And of course there is.

This retail monopoly also gives the Delhi politicians monopsony powers over all who want to sell alcoholic drinks in Delhi – a huge market.

If you don’t keep the monopsonist happy, your products and your brands will not be available in Delhi – and many brands are kept away: like Goan feni or Khoday’s excellent rum, which sells great in the South.

But there are many other government monopolies as well, all operating in the same way: cutting supply; extorting lucrative political returns at public expense.

There is the water monopoly.

There is the roads and metrorail monopoly.

There is a real estate development monopoly – the DDA.

There is the police monopoly – over crime investigation as well as prosecution.

Because of government monopolies all these goods are scarce. The worst is the roads-cum-real estate “double whammy” monopoly, which has intentionally caused urban overcrowding in Delhi by restricting its outwards spread.

Makes you pause to think of all the bright ‘economists’ of Delhi – from Manmohan and Montek to the Delhi School of Economics to all the college professors and all the pink paper editors.

Bunch of duds.

Read my old piece: “We Don’t Need Economists”.