5 replies to this topic

[Harut]

I'd like to say beforehand that my knowledge of Economics is limited and appologize if this sounds really silly, but I've had some thoughts about free market economy and more regulated economies.

The question that I have is that is it possible to have a complete, or close to, free market economy is small countries such as the current Republic of Armenia? My question does not consers the small scale businesses, but industries that require large companies and substential amount of resources to operate (e.g. telecommunications, large retail store chains, heavy metalurgical industries, etc.). Can a healthy competition exist in such industries in a small countries, where only a few, even if that many, companies will exist in each industry? Or eventually, in a short timeframe, it will turn into a monopoly? Or maybe it is better to have tightly controlled economy in those large industry spheres to ensure fair prices, growth, etc.?

The reason that I started thinking about this is, of course, ArmenTel. I was listening to the debate (arguement/exchange of insults/qfrtots?) between Arshak Sadoyan and the Minister of Justice David Harutyunian, as they were discussing whether ArmelTel should be disolved into mulitple companies to break the monopoly and lose the tight control that currently exist on it, or to keep it as is and keep enforcing the current and new regulations on it to avoid exploitations by ArmenTel.

What are your thoughts and suggesstions on ArmelTel in particular and this problem is general?

[alpha]

Harut,
Monopoly is not illegal in most countries I know of. However, it is illegal when a company that has a monopoly abuses it. When the government broke up AT&T, way back in 80’s it wasn’t because AT&T was a bad monopoly and Microsoft is, but because AT&T was badly abusing its monopoly. In countries like Armenia, where the market is fairly small Wal-Mart size stores are not practical, so chances are there won’t be any Wal-Mart in Yerevan in the near future. It’s the government’s responsibility to ensure that the Company that dominates the marketplace does not abuse its power. Government should create a competitive field that promotes fair competition not hinders it.

The government of Armenia does not promote free and fair competition, and in essence breaks the law. Article eight of the constitution of Armenia states the following:
”The state shall guarantee the free development and equal legal protection of all forms of property, the freedom of economic activity and free economic competition.”

This is not the first time that the government broke the law, so we are used to it.

[Anileve]

Harut,
Monopoly is not illegal in most countries I know of.  However, it is illegal when a company that has a monopoly abuses it.  When the government broke up AT&T, way back in 80’s it wasn’t because AT&T was a bad monopoly and Microsoft is, but because AT&T was badly abusing its monopoly.  In countries like Armenia, where the market is fairly small Wal-Mart size stores are not practical, so chances are there won’t be any Wal-Mart in Yerevan in the near future.  It’s the government’s responsibility to ensure that the Company that dominates the marketplace does not abuse its power.  Government should create a competitive field that promotes fair competition not hinders it.

I remember arguing with my microeconomics professor, when she mentioned that a gas station in the middle of the highway and no other one for couple of hundred miles is considered to be a monopoly. She insisted that since there is no other source of supply in the area, it is considered to be a monopoly. I rejected that example. Was she correct?

[Harut]

I rejected that example.

On what basis?

[gamavor]

Free market economy is just theoretical construction that after some time becomes oxymoron in itself. Free market economy suffocates itself; because of the freedom of the market players and can exist for a very short time. After that it becomes well-regulated, well-protected, well-franchised and well-monopolized economy with solid government intervention and participation.

[Harut]

This leads to my next question.
Should we expect certain industries to operate at no profit (operated or at least supported by the Government)?