A second reason for monopolies is national policy. Some governments are, or once were, proud to have a ‘national carrier’ in the airline industry. The mail service is frequently a symbol of nationhood, and this has certainly been true of both Canada and the US. Canada Post and the US Postal system are national emblems that have historic significance. They were vehicles for integrating the provinces or states at various points in the federal lives of these countries.
The down side of such nationalist policies is that they can be costly to the taxpayer. Industries that are not subject to competition can become fat and uncompetitive: managers have insufficient incentives to curtail costs; unions realize the government is committed to sustain the monopoly and push for higher wages than under a more competitive structure. The result is that many government-sponsored monopolies must ‘go to the government trough’ frequently to obtain financial life support.
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