Decartelization
is the transition of a national economy from
monopoly
control by groups of large businesses, known as
cartels
, to a
free market
economy. This change rarely arises naturally, and is generally the result of regulation by a governing body with monopoly of power to decide what structures it likes.
[1]
A modern example of decartelization is the economic restructuring of
Germany
after the fall of the
Third Reich
in 1945.
[2]
To truly understand the term "decartelization" requires familiarity with the term "cartel".
[3]
A cartel is a formal (explicit) agreement among firms. Cartels usually occur in an oligopolistic industry (
oligopoly
), where there are a small number of sellers, and usually involve homogeneous products (see
Homogeneity and heterogeneity
). Cartel members may agree on such matters as
price fixing
, total
industry
output,
market shares
, allocation of customers, allocation of
territories
,
bid rigging
, establishment of common sales agencies (
sales agents
), and the
division of property
or
profits
or combination of these. The aim of such collusion is to increase individual member's profits by reducing competition.
Competition laws
forbid cartels.
[4]
[5]
Identifying and breaking up cartels is an important part of competition policy in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put agreements to
collude
on paper.
[6]
Historical background
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Examples of alleged and legal cartels:
Debate
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The general debate with decartelization is a national economy controlled by monopolies and cartels, versus a free market economy. With a free market economy, the pros are very clear. It encourages individual initiatives; it determines price of goods through
competition
, and motivates people to work towards
financial independence
. Most individuals would prefer a free
market economy
, where there are many buyers and sellers in each market, and the prices are determined based on competition alone. The problem is, it is not up to the individuals. In most cases of cartels, these secret arrangements are done "under the radar", and these major companies know how to cover their tracks. It is very difficult to prove that companies have formed a cartel; therefore it is very difficult to dismantle one.
[7]
In the case with the
Third Reich
in Germany, the people had no choice. During the war, there was a school called
soziale Marktwirtschaft
, the "social conscience free market". Members of this school hated
totalitarianism
and had propounded their views at some risk during the Nazis' rule. Wrote
Henry Wallich
, "During the Nazi Reich period the school represented a kind of intellectual resistance movement, requiring great personal courage as well as independence of mind." The school's members believed in free markets, along with some slight degree of progression in the
income tax
system and government action to limit monopoly.
[8]
References
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External links
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