If you are a consumer (and all of us are), you should be glad that you live in a country with a free enterprise capitalist system, because this system is particularly partial to entrepreneurs. They thrive in this system and, could not survive in a socialist system. The free enterprise capitalist system is made to order for entrepreneurs and rewards them greatly, because for such a system to grow and prosper, it needs to have people who are prepared to venture and take risks. Without entrepreneurs, very little would get done, things would stagnate, then deteriorate, then come to a standstill.
Entrepreneurs venture and take risks because they see clearly that there will be a worthwhile financial reward at the end of their endeavours. They are the ones who make it possible for us to be able to buy services and commodities of all kinds which are necessary in a modern society, some of which are essential.
Entrepreneurs carry on their business in what economists call the MARKET. Where an entrepreneur finds a service or commodity which he can sell to the people at a good profit, other entrepreneurs will soon enter the market to provide or supply the same service or commodity to compete for the consumer’s patronage. If the market in a particular service or commodity is large enough, more entrepreneurs will enter it competing for a share. The quality and the price of the service or commodity will determine what the entrepreneur’s share of the market will be and, in such circumstances, the consumer has the privilege to choose between providers and suppliers.
Free enterprise capitalism is at its best when consumers can choose their providers and supplies based on quality and price and, if a provider or supplier of a service or commodity does not deliver good quality or sells at an uncompetitive price, their business will fail.
Competition is at the heart of a free enterprise capitalist system, which is at the heart of democracy. In fact, I don’t think that democracy could exist without a free enterprise capitalist system. That doesn’t mean that governments in democratic countries should allow capitalism a free rein to do whatever it pleases or, as the Mighty Sparrow said, capitalism could go mad, as it appears it has in the United States of America.
The opposite of competition is monopoly, which if not an evil in itself, can put a hurting on the consumer. Some monopolies spring up because in small countries like Belize, the government has to provide necessary services like electricity, water and telecommunications. Government has to do this because, private enterprise can get more profit from merchandizing and other ventures and is not prepared to invest in these services. This is what our government did: it established the Electricity Board to provide electrical services, the Water Board to provide a water system and Belize Telecommunications Authority to provide telecommunication services.
It is characteristic of monopolies in general, and government monopolies in particular, that they are not customer friendly, not quality conscious and are inefficient. BTA was an exception. So. It should be better for the consumer to have private corporations provide electricity, water and telecommunications.
Now, let us get down. Belize Electricity Limited (which succeeded the Belize Electricity Board) and Belize Telemedia Ltd. (which succeeded BTA) are both private corporations, which means that their primary objective is to make a profit for their shareholders. Belize Water Services is a public corporation which seeks to make a profit also, but that is not its primary objective.
The idea of a monopoly is not completely antithetical to the concept of a free enterprise capitalist system in a democracy but, to have an essential service like water, electricity or telecommunications in private hands, is. This is so because at the heart of an economic system in a democracy is the competitive principle. The goods and services which the people can’t do without, should be of the highest quality, in plentiful supply and at the lowest price possible.
A monopoly in a product that the people can’t do without, is a dangerous thing, especially if the authority responsible for regulating and supervising monopolies is weak or ineffectual.
Monopoly status is a privilege which the people of a country bestow on an entity through its political leaders acting in the people’s best interests and therefore, the government has the duty to ensure that the company provides service of an acceptable quality at a reasonable price. By a reasonable price is meant that the company’s profit margin should be less than those which do not enjoy monopoly status.
It is not desirable, for the reason already stated, to have a monopoly in an essential service in private hands. Too much power is concentrated in individuals whose primary objective is not the national interest. Belize Electricity Ltd. is owned by Fortis, which is a foreign company, and Belize Telemedia Ltd. has a majority shareholder with dual citizenships. In such a situation, it is imperative that the Public Utilities Commission exercises its regulatory and supervisory powers with the utmost resolution to protect our citizens from the tendency of such entities to take too much advantage of their position of being the only provider of a service our citizens cannot do without.
Investing in a monopoly like electricity or telecommunications is almost as safe as saving it in the treasury. There is little or no risk of loss. Why then should the owners of these companies be allowed to enjoy profit margins as if they were investing on the stock exchange? Last year Fortis made huge profits from BEL, but is not prepared to accept a down turn this year in changed circumstances. Telemedia has been doing as it pleases in rate fixing through the years and has been overly generous with payments for services to its majority shareholder. Apparently PUC has been too indulgent.
If an investor ventures and takes risk in an undertaking and earns a profit margin of 20% or even more on his investment, we should not begrudge him his good fortune, because he runs the risk of losing it all. This is what an industrialist who builds a cement, condensed milk or steel factory does. Which is not the case in investing in a monopoly like BEL or BTL. A profit of 10%, or at most 12%, would be a fair return.