Theoretically, the free enterprise market economy produces a situation in which the law of supply and demand, in conjunction with a competitive economic environment and well-informed consumers guarantees consumer sovereignty. The consumer possesses a significant advantage over suppliers who must compete for their custom, effectively placing economic power in their hands. However, problems arise when this theory is applied to the realities of national and international business economics. These disparities will be examined further in this paper.
To begin with, it should be noted that at present no truly free market economy exists anywhere except in theory. Western liberal democracies, particularly the US, proclaim, promote and actively enforce the virtue and practice of free market capitalism, whilst stoically clinging to mercantilist principles of protectionism and monopoly control.
[...] As the concept of the free market is based on the concept of rational self- interested individuals the large corporations and their activities makes it impossible for consumers to make well informed, rational decisions, as accurate information is difficult to find, and is fast becoming a rare commodity. Thus the free market concept is undermined. The UK, despite continuing to posses a non-corporate owned information service, the BBC, is still suffering a high level of consumer power retrenchment at the hands of TNC's and prevailing political/economic trends. [...]
[...] Many TNC's now seek to control wider shares of their own and other profitable market sectors in order to lessen the impact of consumer trends and economic crises, the latter being the more frequently quoted. As previously mentioned, the more market variables a company controls, the more stable and profitable its position within the market economy. Unfortunately, one of these variables is consumer choice. Diversification and vertical integration have created a situation where companies can control multiple subsidiaries under the direction of a parent company. [...]
[...] The most stable situation for any corporation is to fully control the market, and since insufficient measures have been taken, or indeed advocated to address this, the consumer is no longer sovereign in the free enterprise market economy. Iain McLean and Alistair Macmillan; Oxford Concise Dictionary of politics, Second Ed, PG Oxford University Press, Oxford. David Begg, Economics-Seventh Ed. Pg McGraw-Hill, Maidenhead, Berkshire Smith, Adam, The Wealth of Nations Prometheus Books, New York Begg, David, Economics, 7th Ed, p41-54, 2003; McGraw-Hill Education, Berkshire. [...]
[...] The vast majority of consumers are voters, therefore governmental action can be seen as indirect consumer action and it is in this area that consumers retain a level of powerful influence. It is vital that government provide increased corporate controls both at the local, national and international levels, providing they are in line with the majority view of there electorate, the consumers. Once an economic community grows over a certain size, once its number of consumers grows beyond that which can effectively collaborate and share information to counter advertising and media propaganda the balance of power within the economy shifts away from the consumer and in favor of the supplier. [...]
[...] By doing so it creates a more elastic demand curve, tightening its grip on the consumer and increasing its market share as much as possible, while maintaining greater capital flexibility than would otherwise be possible, it is therefore understandable and not unsurprising that they attempt to do so. The greater the grip and the larger the share of the market a corporation holds the greater the profitability and power of the corporation. The manipulation of consumer taste through advertising and aggressive marketing tactics is highly evident in the snack food industry. [...]
Online readingwith our online reader
Content validatedby our reading committee