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A coercive monopoly is a monopoly that arises and whose existence is maintained as the result of any sort of activity that violates the principle of a free market and is therefore insulated from competitive forces that would otherwise be a potential threat to its superior status.
A corporation which successfully engages in coercion to prevent competitors entering the market operates a coercive monopoly. A firm may use illegal or non-economic methods, such as extortion, to achieve and retain monopoly status. A company which has achieved monopoly status by simply outcompeting all other firms, may exploit its position to retain its monopoly; typically, engaging in activities that result in what are commonly referred to as "barriers to entry", although it is is a matter of debate whether particular barriers to entry are coercive in nature. For example, some say high costs required to compete are a barrier to entry, but free market advocates would say that the market is still free since competition is allowed to anyone that can raise the funds to compete, and that hence it cannot rightfully by called a "coercive monopoly."
In a state monopoly or a government-granted monopoly, monopoly status is sustained by preventing free competition through legal enforcement. An example of a coercive state monopoly would be the United States Postal Service. If any firm competes with the particular kind of service that the Post Office provides (delivering letters to mailboxes), legal, and ultimately physical, force will be initiated against the competitor, thereby thwarting the operation of the free market.1 (It is a matter of debate whether such initiation of force can be considered unethical to apply. Some say that if a government is engaging in the initiatory force then it is necessarily ethical, while others say that the moral legitimacy of an action is not contingent upon its legality). Advocates of economic intervention by government say that in cases where there exists a private natural monopoly, government-granted or state monopolies, may be the only possible way to protect consumers from the absence of competition. Free market advocates say, on the other hand, that it is a practical impossibility for a natural monopoly to occur when there is no government intervention, citing what they deem to be a almost certain probability of an emergence of competitive forces that would begin diminishing market share. They claim that in the case of nationalization (or deprivatization) of an alledged natural monopoly that it is the government intervention itself that creates a coercive monopoly where one actually did not exist. Those who oppose government intervention, such as mandatory price ceilings on what businesses may charge for their produce, assert that a natural monopoly has no historical precedent (given that a monopoly, to be a monopoly, must be a persistent rather than a transient situation), and that the concept is merely a theoritcal abstraction used to justify an irrational intrusion into the free market and, in the case of nationalization, ensuring "competition-free" revenue to the same.
Claiming that monopolies occur as a result of government intervention thwarting free market principles is typical of those who advocate laissez-faire capitalism. Some such advocates will often claim that a coercive monopoly cannot develop without government intervetion. Claiming that monopolies occur as a result of free market principles and that, without government intervention such as anti-trust legislation, big business is able to dominate economic activity, is typical of those who advocate economic intervention. Some such advocates will often claim that intervention by a government that is democratically accountable cannot be considered coercive.
Some say that government, by nature, is a coercive monopoly, claiming that it maintains its existence by coercion. Others say that free market capitalism as a whole is a form of coercive monopoly, claiming that it operates to preserve wealth inequalities and against the interests of workers and consumers, but whatever.
Footnotes
1. Lysander Spooner started the commercially successful American Letter Service in order to compete with the United States Post Office by providing lower rates. He was successfully challenged by the U.S. government and exhausted his resources trying to defend what he believed to be his right to compete.
See also
Free market, Government-granted monopoly, Government monopoly, Natural monopoly
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