Monopolies and Oligopolies in China: Entrepreneurship Deterrent?


Few things are more conducive to entrepreneurship-driven economic growth than a level playing field, than an economic reality which enables anyone with a dream to go for it. Think of it as the difference between achieving centralized economic growth that is “orchestrated” by the state and achieving “organic” growth in a free market framework by unleashing the productive capacity of a country’s citizens.

Even all the way back in 1776, economic thinkers such as Adam Smith pointed out that the wealth of a nation lies not in its natural resources but in the productive capacity of its people, with examples such as the (in)famous “Dutch disease” (an economic predicament that occurred in the Netherlands after significant natural gas resources were identified as a result of economic resources shifting from more labor-intensive industries to industries surrounding natural gas extraction, which were less so, with an end result that was hardly impressive) making it clear that it is difficult to go wrong by unleashing the productive capacity of the average individual.

In stark contrast, as made abundantly clear by the situation in let’s say Russia, it is hard to get it right in a monopolistic or oligarchic framework, where a few (politically and otherwise) well-placed individuals have free reign over various industries. So hard, in fact, that the extremely resource-rich Russia is under-developed to such a degree that despite its sheer size, natural resources and everything else it has going for it, it “boasts” a GDP that barely exceeds that of Spain and is lower than the Italian GDP. In no small part, this is a result of the Russian economy being practically choked by various politically-connected interest groups, with the chunk of Russia’s population that might have otherwise been entrepreneurship-inclined representing collateral damage.

Let’s just say that on the Eastern front, the situation when it comes to monopoly and oligopoly threats seems dire.

What about the Western one?

In theory, if we were to judge things through a “democracy + capitalism” paradigm, things would appear to be excellent. After all, Western systems revolve around personal freedom, be it the freedom to conduct business or the freedom to elect leaders. Such a system should leave little room for monopoly/oligopoly predicaments, should it not?

Unfortunately, as time passes, a major discrepancy between theory and reality started manifesting itself in the West to such a degree that monopolistic pressures are definitely not what one would call negligible for a wide range of reasons, such as:

  1. Capitalism occasionally morphing into “state capitalism” or, in other words, some companies have grown so large and influential that they can essentially (directly or indirectly… primarily indirectly) buy themselves a special status. Sometimes through more or less transparent means such as lobbying in jurisdictions where it is permitted such as the United States, sometimes through other channels. The bottom line is that in an environment where larger players tend to be “more equal” than others, monopoly/oligopoly-related concerns are most definitely valid
  2. Bureaucratic red tape which is piling up in the West. Even if the various restrictive requirements for starting a business in various sectors have the best of intentions behind them (such as protecting the consumer), things oftentimes go too far and the end results is a legal/bureaucratic framework through which the average entrepreneur has difficulties navigating. Paperwork, countless permits, fines, controls and other examples don’t exactly encourage entrepreneurship on a granular level, with larger entities that have teams which specialize in the bureaucratic dimension once again having an edge
  3. Ideological considerations, with even the proverbial American dream losing its luster and an increasing segment of the population “dreaming” of a cozy and stable government job more so than about making it on their own no matter what

To put it differently, while not nearly as serious as in the East, the West has problems of its own.

Where does that leave China?

As pretty much always, with a fairly unique set of circumstances.

On the one hand, the highly centralized Communist Party of China-oriented status quo seems to be the “perfect” climate for monopoly and oligopoly-type situations to manifest themselves. Even more so, to combat the major discrepancies that exist between urban and rural regions due to severe fragmentation, even more centralization is being prescribed. However, compared to Russia, a compelling case can be made that the concentration of too much wealth/power in the hands of a select few is seen in a far more negative light in China. As such, situations involving oligarchs who flaunt their wealth/power, control media outlets and are pretty much perceived as invincible aren’t in the spotlight nearly as much in China. This doesn’t mean there aren’t individuals with tremendous wealth and influence over in China (hint: there are), it simply means there tends to be considerably less ostentation surrounding monopolies/oligopolies in China than in jurisdictions such as Russia.

On the other hand, as a bit of a paradox, the “Wild West” situation China finds itself in when it comes to many industries facilitates the debut of entrepreneurs without as much red tape as in the proverbial West. Even when it comes to highly volatile and oftentimes frowned upon industries such as cryptocurrency mining, entrepreneurs have found ways to do very well in China despite the many turbulence-related problems that exist. Yes, there is a high degree of uncertainty and yes, the businesses in question can be only one legislative change away from having to re-locate or worse but compared to the red tape associated with this industry in the West, many entrepreneurs view starting up in China as the lesser of two evils.

To conclude, it is safe to say the quasi-mantra of is most definitely valid when referring to monopolies and oligopolies: this jurisdiction is without a doubt different, with particularities abounding, which makes it difficult to simply cast a verdict and compare China to the West or East. Simply put, it… well, depends.

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