Academic journal article China: An International Journal

Administrative Monopoly, Market Economy and Social Justice: An Anatomy of the Taxi Monopoly in Beijing

Academic journal article China: An International Journal

Administrative Monopoly, Market Economy and Social Justice: An Anatomy of the Taxi Monopoly in Beijing

Article excerpt

From 1992, China began to focus its economic reforms on building a socialist market economy. China's constitution has been revised several times in order to meet the rapid changes in economic reform by including the concepts of rule-of-law, human rights, private property rights and a socialist market economy. Considerable effort has been put into the building of a market economy including privatising state enterprises, transforming government functions and reforming the legal system. Market pricing systems and the forces of competition are gradually emerging in China. However, the market mechanism is still in a preliminary stage of development with the government continuously controlling and interfering in many aspects of economic activity.

This article attempts to address the problem of administrative monopoly in China through a case study of taxi monopoly in Beijing. The case reflects the conflict between building a market economy and working within the constraints of the old institutions. The article also attempts to provide answers to several questions such as the need for the taxi service to be under administrative control. Should the taxi service be controlled by administrative means at all? When should the government intervene in the market operation for the sake of public interests? In this case study, why has the government failed to rectify the situation when it is aware of the damages its intervention has caused to the interests of taxi drivers, consumers and the state? Is such government interference legal or just in the first place? Is it necessary to focus on administrative monopoly in order to foster market rules and competition? This study reveals that the biggest obstacle to building a market economy in contemporary China is administrative monopoly or government interference with market operation. Only when administrative monopoly is eliminated will anti-monopoly actions against other monopolistic behaviour be meaningful and justified. A management model for resolving the Beijing taxi monopoly is proposed.

Analytical Framework: Competition, Monopoly and Government Regulations

The Chinese economy is being transformed from a highly administrative and centralised planned economy into a market economy. One very essential reform is the transfer of economic decision-making power from the central government to the local governments and their various agencies to foster market mechanisms and promote competition. However, the transfer is not intended to remove regulated monopolies. Instead, it only allows local governments or economic sectors some decision-making freedom. (1) With the initiatives of fostering a market economy, the market forces and competition are emerging and growing. At the same time, however, the government's multiple roles as social and economic managers, owners of state assets and direct business operators remain basically unchanged. Administrative monopoly has prevailed and even taken root in the newly formed market through the formation of special interest groups between the government and business, which has undermined the competition and operation of market mechanisms in China.

Market Economy and Social Justice: Free Competition versus Monopoly

A market economy with free competition as its core economic structure, as opposed to monopoly, better serves public interests and social justice because of its contribution to improving people's economic and personal freedoms. As Hayek says, a society of free markets and limited governments will be beneficial to all citizens, providing each his best chance of using his own information for his own purposes. (2) He further argues that economic freedom does not only improve the lives of those who enjoy it but also of those who still aspire to it. (3)

Generally speaking, competition as opposed to monopoly contributes to promoting three goals: freedom, welfare and justice. (4) This is because first, competition is a highly effective means of maintaining a decentralised market structure so that every firm could expand its freedom of action by increasing its market power. …

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