Examples of intermediary relationships include the following: Priests between Gods and believers. Farmers between growers and eaters. Entertainers between stimulators and those stimulated. Lawyers between legislators and legislated. Physicians between pharmaceutical companies and patients. Banks and brokers between wealth owners and wealth users. Real estate agents between property owners and buyers or tenants. Distributors between manufacturers and product users. Educators and information providers requiring electronic and other means of communication between those seeking to communicate and learners. Agents between insurers and insured.

In each of the foregoing relationships, it is also possible for there to be a direct relationship which does not make use of an intermediary. However, in most of those cases the role of intermediaries enhances the relationship between the producer or service provider and the customer, and if there is competition it creates a demand for improving quality and/or reduces the price.

In the case that there is only a single intermediary, especially if producer-affiliated, openly, or otherwise, the intermediary will naturally favor the producer. This is observed in restrictions relating to postal services, frequency allocations, government services, and transportation services, etc. When access to the producer of anything is restricted, the end-product user has fewer options and therefore suffers from the lack of competitive pressures.

Of course, to attract investor capital, governments can offer licensees the benefit of monopolistic pricing and control. This proposition is effectively “build whatever is needed and we will prevent future competition”. This policy is often effective in getting projects completed, but there is a cost of delaying or denying future technological or other developments which may lead to offering better or less expensive products and services.

Independent intermediaries are desirable for the benefits which result from competition and their impact on public product or service pricing and availability. Monopolies benefit the providers, not the customers.

 

Arthur Lipper, Chairman                          arthurlipper@gmial.com
British Far East Holdings Ltd.