One of the claims against a free society is that monopolies cannot be avoided because there are certain physical limitations. For example, it is unlikely that several companies providing water or electricity could operate in a single building simultaneously. Living in a certain place, you will in any case have to accept that some services will be provided by only one supplier, meaning they will be able to manipulate the prices and quality of these services as they please, since you will still have no way to opt out due to a lack of alternatives. This is why political control and regulation of the activities of some service providers are necessary.
This argument often confuses many supporters of the ideas of freedom, but the answer is actually quite obvious. Let’s consider what happens when a state-owned company (or a state-regulated private company) and an independent private company try to inflate the prices of their services and lower their quality.
If you cannot simply switch to an alternative, people in such a situation usually begin to boycott the unscrupulous service provider. They stop paying them money, organize rallies at their offices, block entrances—in short, they hinder the organization’s ability to continue its activities in every way possible until the problem is solved. How, exactly, does a boycott affect the activities of different types of companies?
For a state-controlled company, a boycott is not scary at all. It can always receive subsidies from the state to cover all associated costs. People are more likely to give up and accept high prices and poor service quality than the boycotted company is to suffer any damage. Of course, there is a chance that through their boycott, people can influence political power, but even in such a case, improvements are not guaranteed. Most likely, one politician will be replaced by another who promises improvements to appease the people, but will also do nothing much himself.
For an independent private company, a boycott is quite critical. It can rely only on its own income, which simply will not exist in the event of a boycott. There is no one to provide it with subsidies. Any unwillingness to please consumers can lead to bankruptcy. The company would have to be run by complete idiots not to react to a boycott appropriately, as anything else would lead to a loss of profit. But even if there are actually idiots there—this company will simply go bankrupt, and another company with more adequate management will take its place.
As we can see, private organizations are quite easy to boycott, even if they hold a monopoly position, because their profit still depends on voluntary payments from customers and the fact that they will not hinder the company’s work. Boycotting state-controlled companies is almost useless, because they do not care if they do not receive profit through market means—they will receive it from your taxes.
The conclusion is simple: natural monopolies arising in a market environment do not threaten you in any way, because you always have the option to boycott their activities. However, you have almost no chance of defeating a state monopoly and demanding that it fulfill its duties with quality.
