Tuskan Times Christmas 2013 | Page 8

Capitalism, Monopoly and the ISF Uniform Store

By Malaika Handa

America has almost become synonymous with capitalism--and because of its constant struggles with even wealth distribution, government bailouts, and a gridlocked government, capitalism is getting a very bad name. I’m not going to argue that it is the perfect system, or even the best system. When I lived in America, I saw only the flaws of capitalism. It wasn’t until I moved to Italy that I began to realize some of its benefits.

To put it simply, capitalism revolves around two basic principles: innovation and competition. The system is meant to reward people who have creative ideas, and enable them to profit from small businesses. In a perfect capitalistic society, anyone who was clever enough to innovate or invent something could immediately profit off of it. Competition comes in when multiple business make the same product. Consumers buy the product they like the best, and business constantly continue to innovate, competing with each other for the consumers’ money.

I began to realize the benefits of innovation and competition over the past two months that I’ve lived in Florence, but they really became clear during one situation: my interactions with the school uniform store.

I am sure I am not the only one who has noticed how slow the uniform store is. An order gets filled six weeks later, even two months later. They frequently run out of t-shirts, sweatpants, and polos with no information about when they will restock. It could be justified by saying that this is their first year providing the uniform--they have to outfit around 500 kids. That definitely takes time. However the monopoly it has on our business does not help.

A monopoly is defined as “the exclusive possession or control of the supply or trade in a commodity or service.” Or, to put it simply, when there is only one business that sells a product. The result of a monopoly is that every single consumer is forced to buy from that business whether they want to or not. Students don’t have a choice between companies: our school uniform store comes from 10 E Lode, and there is nowhere else that we can buy it. They have a monopoly.

Businesses love monopolies: it guarantees them profits. But a result of a monopoly is that a business has no competition--one of the basic principles of capitalism. (In fact, in ultra-capitalist America, monopolies are illegal.) Because they have no competition, they have no reason to improve. In the case of the school uniform store, they have no reason to hire new people, to figure out way to produce garments faster, to order more merchandise more quickly.

Ordinarily, if a consumer is not satisfied with a product, they switch loyalties. But under a monopoly, that can’t happen. Let’s say I went to a clothing store and ordered a pair of pants in the fall. After six weeks, they still haven’t made them. I have no pants and it is freezing cold outside. I would probably never return to that clothing store again. But let’s say that is the only clothing store in the world. Of course I would have to go back! Despite the poor job they did fulfilling my needs, I would be forced to continue giving them money and helping them turn a profit. They are guaranteed my business, so they have no incentive, no motivation to better their business.

If there two different school uniform stores--not two different 10 E Lode shops, but two completely different businesses who were given the same patterns to sew the same uniform--there would be instant competition and innovation. ISF students would have to actively choose which store to shop at--which store would receive their money. Immediately, the stores would begin to innovate. Maybe one would allow us to order online for ease. One might hire employees that speak English, to make shopping there easier for non-Italians. One could discover a way to sew the clothes, and thus place orders, faster. Maybe one would lower their prices. Perhaps one could create a delivery service where they drop the clothes off at our houses when they are ready. There are all sorts of ways that the system could be improved--but as long as one business has evaded competition by holding a monopoly, that innovation will remain untapped.