Background information
There are two concepts that people often hear from the news, they are state-owned enterprises and private companies. A state-owned enterprise is “a legal entity that is created by a government in order to partake in commercial activities on the government’s behalf, it can be either wholly or partially owned by a government and is typically earmarked to participate in specific commercial activities”.(Kenton, 2020) While a private company is “a firm held under private ownership”. (Chen, 2020) There’s another keyword that often appears with state-owned enterprises which is monopoly where a single enterprise is the only or one of the few suppliers of a particular commodity.
Examples
Before we start to talk about commercial discrimination, let’s first look at an example of state-owned companies monopolizing the telecommunication market. In China, there are three main telecommunication companies and they are all state-owned enterprises. This is not a coincidence but an inevitable outcome since in China, individual enterprises are not allowed to enter the telecommunication market. In other words, a license to enter the market will only be given to state-owned companies. Similar phenomenons appear in other areas where important but not vital resources are allocated. Since individual enterprises do not have a chance to enter, several state-own companies often monopolize the whole market. In this example, there exists commercial discrimination since the government thinks it’s better to let state-owned enterprises control resources rather than giving the right of allocating these resources away to private companies. Here the concept of the “one” and “other” can be well applied. The government treats itself and state-owned enterprises as the “one” while treating private companies as the “other”. They are the group with power and are trying to use their power to eliminate private companies out of the market.
The problem of discrimination not only exists between companies but also between consumers and companies. Consumers often treat larger and famous companies as more reliable choices and avoid purchasing commodities from small companies that they do not know. However, the reason why some companies are well known is that they have more power or control the majority of resources in their field. They use advertisements to attract consumers and generate a virtuous cycle. This may connect to the concept of “subaltern”. Here, private companies are the subalterns who have less power and whose voices cannot be heard by the public. As a result, consumers will not buy their product as they haven’t heard about the company before and do not trust the company. Having fewer consumers, the company again earns less and further losses the power they have, forming a vicious cycle.
Besides discrimination against private companies, there is also discrimination against consumers. Companies charge differently on the same commodity while facing consumers from different social classes. This is again closely related to the power difference. The sellers often have more power and information. The consumers, on the other hand, do not have all information required for them to make the correct decision so is the group with less power. The theory of the one and the other can again be applied and consumers now become the other and sellers are the one.
According to previous information, we can conclude that there do exist commercial discrimination. However, is the government and consumers decision correct? Is it true that state-owned companies and monopolized companies are better than private and small companies? To answer these questions, we should first look at the advantages and disadvantages of the two types of companies.
Advantages and disadvantages
Since state-owned enterprises can receive financial support from the government, they can lower the cost of production and lower the prices of their commodity, making them affordable for more consumers. State-owned companies are also more competitive in international trade, taking their size and available resources into consideration. If a field was monopolized by a few companies, consumers might find it more convenient to manage and easier to operate. Take the payment system as an example, in China, there are only two main types of payment systems, the Wechat payment, and the Alipay and these two types of payment are supported in all places. When paying, people can simply show the QR code. While in Japan, there are more than ten methods of payment, and different shops have different supported payment methods. Consumers might find it inconvenient to switch from one type of payment to the other.
However, there are also disadvantages. When state-owned companies achieved a monopoly, private companies, therefore, will have fewer chances to develop, and the variety of choices that are available for consumers decreases. A decrease in diversity will also lead to a decrease in competition. Companies that already exist in the market will then lose their intensity to develop as they know that no matter they work hard or not, they won’t lose their resources. These phenomenons will dampen the enthusiasm of the entire market. Monopoly, at the same time, enables the state-owned company to control the price. They can, as mentioned above, lower the price and benefit the majority, however, they can also choose to keep the original price or even rises the prices, receiving more benefit as consumers cannot find any subsidy. If enterprises decide to do so, fewer consumers will be able to afford the commodity.
Private companies have all the disadvantages mentioned above but they also have plenty of advantages. Since many private companies are small in size, they can allow more flexibility. When facing management problems, they are more likely to adjust in a short period and can better adapt to the market when there are changes in the market. Employees working in private companies also face more competition which may force them to enhance their working efficiency. Competitions might also exist between private companies focusing on the same field. As a result, product diversity will increase as companies are all trying to attract more consumers.
To put it all in a nutshell, both state-owned and private companies have advantages and disadvantages. We cannot say that one is better than the other, but we may acknowledge that one type of company is more suitable in a field and the other is more suitable in another field. Though there exists commercial discrimination, this discrimination should be eliminated.
Solutions
To solve this commercial discrimination, we must first learn that small, private company experiences discrimination since they do not have a chance to display themselves. In another word, they are experiencing systemic injustice. Whether they can get a license or not is not dependent on their ability but their “identity”; however, companies cannot decide their own identity. A private company may do better than a state-owned enterprise but they still cannot enter the market. To make the wrong thing correct, this systemic injustice should be solved. One thing that leads to systemic injustice is a power difference. Private companies who have less power do not have the chance to display themselves and consumers cannot hear from these companies. The government should let more private companies enter the field which they used to monopolize. If the resources available are important and the government does not want them to be controlled by individuals, they can introduce more state-owned companies into that field, making sure that competition exists between these companies. They can also give private companies more chances to give publicity to their commodity, providing consumers more choices and showing them that private companies are also reliable. As the information inequality between consumers and companies decreases, and more companies get power, the problem of commercial discrimination will be ameliorated.
Commercial Discrimination further thinking
The problem of commercial discrimination does not only exist as the examples mentioned above. As long as there is a power difference between the two companies, the problem of commercial discrimination will exist. To better understand commercial discrimination, we can start by thinking what is the benefit of commercial discrimination? Why some companies want commercial discrimination to exist? The answer is profit.
Companies with more power monopolized the market, eliminating other companies to get all the profit in that field. These phenomena often appear when a private company monopolizes the market. In the case where consumers from different social classes pay differently when purchasing the same product, the sellers also aim to earn more profit. As a result, companies want to maintain commercial discrimination since it helps them to earn more money. After understanding their purpose, we can generate better ways of reducing commercial discrimination, solving the problem from where it was rooted. For example, the government can set up a limitation on the price of products, and set periodical checks to make sure that commodities have unified prices.
Although commercial discrimination is closely related to power difference, an appropriate degree of power difference can also have advantages. Under the situation where companies have the monopolized power, companies with less power may be encouraged to work harder and get more power, and companies which own more power will notice the benefit of owning more power. Noticing that others with less power are actively chasing, they do not want to give up their superiority and will work harder as well. Together the entire market will develop faster.
Work cited:
https://www.investopedia.com/terms/s/soe.asp
https://www.investopedia.com/terms/p/privatecompany.asp