mfioretti: monopoly*

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  1. Four companies dominate our daily lives unlike any other in human history: Amazon, Apple, Facebook, and Google. We love our nifty phones and just-a-click-away services, but these behemoths enjoy unfettered economic domination and hoard riches on a scale not seen since the monopolies of the gilded age. The only logical conclusion? We must bust up big tech.
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  2. I want to spend the bulk of my remaining time on another global problem: the rise and monopolistic behavior of the giant IT platform companies. These companies have often played an innovative and liberating role. But as Facebook and Google have grown into ever more powerful monopolies, they have become obstacles to innovation, and they have caused a variety of problems of which we are only now beginning to become aware.

    Companies earn their profits by exploiting their environment. Mining and oil companies exploit the physical environment; social media companies exploit the social environment. This is particularly nefarious because social media companies influence how people think and behave without them even being aware of it. This has far-reaching adverse consequences on the functioning of democracy, particularly on the integrity of elections.

    The distinguishing feature of internet platform companies is that they are networks and they enjoy rising marginal returns; that accounts for their phenomenal growth. The network effect is truly unprecedented and transformative, but it is also unsustainable. It took Facebook eight and a half years to reach a billion users and half that time to reach the second billion. At this rate, Facebook will run out of people to convert in less than 3 years.
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  3. If you were a delivery van driver searching for a new job any time between the years of 2010 and 2013, chances are, you wouldn’t have found many businesses competing for your services. In Selma, Alabama, there was, on average, just one company posting help wanted ads for those drivers on the nation’s biggest job board. In all of Orlando, Florida, there were about nine. Nationwide the average was about two.

    The situation for telemarketers wasn’t great either. In any given city or town, approximately three companies were trying to hire for their services. Accountants only had it a little better: Roughly four businesses were posting jobs for them.
    A lack of competition among employers gives businesses outsize power over workers, including the ability to tamp down on pay.

    Those numbers are based on the findings of a new research paper that may help unlock the mystery of why Americans can’t seem to get a decent raise. Economists have struggled over that question for years now, as wage growth has stagnated and more of the nation’s income has shifted from the pockets of workers into the bank accounts of business owners. Since 1979, inflation-adjusted hourly pay is up just 3.41 percent for the middle 20 percent of Americans while labor’s overall share of national income has declined sharply since the early 2000s. There are lots of possible explanations for why this is, from long-term factors like the rise of automation and decline of organized labor, to short-term ones, such as the lingering weakness in the job market left over from the great recession. But a recent study by a group of labor economists introduces an interesting theory into the mix: Workers’ pay may be lagging because the U.S. is suffering from a shortage of employers.
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  4. “The more data you have, the better the data products you can develop,” Professor Steven Weber said when discussing the link between data and development. “The better the data products you develop and sell, the more data you receive as those products get used more frequently and by larger populations.”

    But if all the world’s data flows back to a few tech powerhouses, without restrictions or taxes, this will further reinforce their monopolies, widen the privacy gap, and leave developing countries as passive consumers or data points, rather than participants in the digital economy.

    Those calling for liberalization use the rhetoric of creating opportunities for the poor — connecting the next billion — which sounds great, but only if we disconnect it from reality. Today, 60% world lacks even access to electricity. In the past, Spanish colonizers arrived in the Americas offering mirrors to the indigenous people in exchange for their gold. Is connectivity the “mirror” powerful actors are offering to the global poor today?

    Trade agreements eliminate the diversity of domestic policies and priorities, and impose costly restrictions on countries that want to address local inequalities and boost local industry. In the case of the digital economy, it will consolidate the position of few, to the detriment of the rest.
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  5. ‘It is good that authors should be remunerated, and at least exceptionable way of remunerating them is by a monopoly. Yet monopoly is evil. For the sake of the good we must submit to the evil: but the evil ought not to last a day longer than is necessary for the purpose of securing the good’


    ‘Dr Johnson died 56 years ago. If the law were what my honourable and learned friend wishes to make it, somebody would now have the monopoly of Dr Johnson’s works. Who that somebody would be, it is impossible to say: but we may venture to guess. I guess, then, that it would have been some bookseller, who was the assignee of antoher bookseller, who was the grandson son a third bookseller, who had bought the copyright from Black Frank, the Doctor’s servant and residuary legatee in 1785 and 1786. Now, would the knowledge that this copyright would exist in 1841 have been a source of grtification to Johnson? Would it have stimulated his exertions? Woudl it have once drawn him out of his bed before noon? Would it have cheered him in a fit of spleen? Would it have induced hime to give us one more allegory, one more life of a poet, one more imitation of Juvenal? I firmly believe not.’
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  6. I think most readers of Thomas Piketty’s book (Capital in the Twenty-First Century) get the impression that the accumulation of wealth — savings —is responsible for the rise in inequality and that there is, therefore, in a way,a link between the growth of the economy — the accumulation of capital— on the one hand and inequality and wealth. My paper begins with the observation that in fact, you cannot explain what has happened to the wealth/income ratio by that analysis. A closer look at what has gone on suggests that a large fraction of the increase in wealth is an increase in the value of land, not in the amount of capital goods.

    It’s not agricultural land, it’s the value of urban land. I would include in that, broadly, rents associated with natural resources (“rent” is an economic term for unearned revenue). It’s the value of existing assets. As a footnote, some of what has gone on, in addition to an increase in the wealth/income ratio, is a capitalization of the increase in other kinds of rents, like monopoly rents. If monopoly rents get increased, if the market power of firms relative to workers gets increased, as when you have the ability of a few, like the banks, to get government guarantees — the value of that is increased and gets capitalized. That increases wealth but it doesn’t increase capital. So it’s that distinction between wealth and capital that turns out to be critical. That’s the first idea.

    What has happened repeatedly in recent years is that we’ve had monetary authorities allowing — through deregulation and lax standards —banks to lend more. But this lending has not gone for creating new business, not for capital goods. Disproportionately it has gone to increase the value of land and other fixed resources (buildings, real estate, etc). And that’s what everybody was worried about. So in that sense, in that discussion that occurred with quantitative easing—nobody linked that with inequality or linked it with the overall macro growth. The links with inequality are twofold: one is that at a very, very macro level, if more of the savings of the economy leads to an increase in the value of land rather than the stock of capital goods, then worker productivity won’t go up. Wages won’t go up. So some of what is going on is that we haven’t been doing the kind of investment that we should be doing.

    But the other part that’s probably more important is that when you deregulate, you allow more lending against collateral. Then those who have the assets that can be used for collateral see those assets go up in price, like land. And so those who hold wealth become wealthier. The workers, who have no wealth, don’t benefit from that expansion. So the link is that credit affects land prices and fixed asset prices, and those go disproportionately to the rich. And that is a major part of the increase in the wealth. That’s one strand of my paper.

    The other strand of the paper was an attempt to lay out a general theory of the transmission, you might say, of wealth and other advantages across generations, and trying to identify, very broadly, forces that would lead to a more unequal distribution and forces that would lead to a more equal distribution. You could almost say it’s a taxonomy — it’s a framework for thinking through things. And when you start to think about it, you see that there are many more forces going on right now for increasing inequality. And that’s also a framework for policy prescriptions. So if we have more economic segregation in a world in which we have local schools, locally financed schools, we’re going to get inequality in education, and therefore the children of rich parents are going to get more human capital.

    This model actually provides a very robust general theory explaining inequality. There are many other wrinkles in the paper, but the final insight is that when you think of policies that are going to address inequality of wealth, you have to be very thoughtful about what economists call “incidence of taxes.” If most of the savings is being done by capitalists, and you tax the return on capital, then they will have less to invest. That would mean, over the long run, that the rate of interest would go up. That would therefore undo some of the intent to lower the income of capitalists.

    How can we prevent inequality from getting worse?

    I divide it into two parts: what can we do to reduce inequality of before-tax and transfers income, and what can we do to improve the after-tax and transfers income. The first part is things like higher minimum wages, stronger unions, better education, and stronger enforcement of anti-trust laws and corporate governance laws. Those are the kinds of things that are likely to improve the before-tax and transfers income. The second part is addressing things like capital gains taxes, the preferential treatment that mainly benefits people at the very top, and better redistributive policies. Those would help the after-tax and transfers income become more equal.
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  7. i Carlo si sono uniti e hanno detto: se Google raccoglie piu' pubblicita' di noi, noi moriremo. Come se non bastasse il Casaleggio si e' messo pure a suonare la marcia funebre per i giornali, col risultato che i giornali sono di pessimo umore.

    Particolarmente rumorosi sono i Charles, cioe' i Carlo francesi, che sono particolarmente arrabbiati con glo OTT americani perche' stanno raccogliendo pubblicita' a iosa: adesso che anche Twitter, stimolato dalle prime sane incazzature degli azionisti, sta per mettersi a vendere pubblicita' in maniera aggressiva, va da se' che si stiano letteralmente cacando sotto.

    Cosi', a furia di lavorare di lobby, sono arrivati a stimolare Bruxelles ad approvare in seduta primaria questa cosa di spezzare in due la divisione di google che vende pubblicita' rispetto quella che fornisce i servizi ove la pubblicita' compare (motori di ricerca, gmail, etc etc).

    Siccome il mercato europeo e' abbastanza succoso, Google potrebbe essere costretto ad obbedire, a meno di non perdere un sacco di soldi in borsa. Ricordiamo che Google fatica in Russia, Cina e India, per cui perdere anche l' Europa non sarebbe una buona notizia.

    Perche' dico che sia una rosicata?

    Perche' "impedite al primo della classe di entrare in classe!" e' il mantra dei somari.

    Mettiamola nel senso inverso per spiegare meglio: domani google e gli altri motori di ricerca americani scelgono di lavorare solo in USA. I cinesi hanno baidoo, i russi useranno Yandex, e... in Europa?


    Potete andare in edicola e comprare La Repubblica. Le monde. Die Welt. El mundo.

    Potrete entrare in biblioteca e sfogliare tra tanti libri. Certo.

    Non e' Google che ha una posizione dominante in Europa.

    E' l'Europa che ha una posizione supina su Internet.

    Se solo domani una Monsanto cercasse di vendere OGM in Europa ci sarebbe la rivolta. Se apple vende prodotti fatti con gli schiavi cinesi, va tutto bene
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  8. it is demanded that search algorithms and results should be impartial to keep internet searches “nondiscrimatory” and to “secure competition and freedom of choice for users and consumers”. Consequently, indexing, weighting, display and ordering of search engines should be impartial and transparent.

    This wording is explosive. I am led to suspect that its aim is to prepare a European ancillary copyright for press publishers. The attempt to cross-finance big publishers through Google most recently spectacularly backfired in Germany. Is this resolution an attempt to create the puzzle piece that had been missing in Germany?

    In October, Günther Oettinger, the EU Commissioner for the Digital Economy and Society, provoked a debate on an EU-wide ancillary copyright law for press publishers before even taking office. Not a month later, the next move is made in that direction – this time in the parliament.

    Let’s look back at what happened in Germany: After a long lobbying campaign, an ancillary copyright for press publishers (“Leistungschutzrecht für Presseverleger”) was introduced in 2013. The goal: Publishers should be able to charge search engines and aggregators a licencing fee for serving up links to their articles if such links were accompanied by short snippets of the publishers’ content. The response of the search engine providers in Germany differed: GMX and Yahoo completely removed the websites of the publishers represented by collecting society VG Media from their results. The market leader Google, which had been the primary target of the law, announced that it would continue to display results from these sites, but without any text and image snippets, so as to not violate the new law.

    This step had publishers fuming: How dare Google NOT violate their rights und thus not be subject to licencing? Shortly after, VG Media gave in and granted Google a «revocable licence free of charge» – only Google, mind you. In effect, a law that had been put in place to force Google to pay now instead applies to everyone but Google – and thereby only serves to further secure Google’s dominant market position. I submitted an inquiry to the European Commission on the antitrust implications of what in the end amounts to preferential treatment of Google, but I have yet to receive a response.

    It is obviously in the interest of publishers to disallow Google and other search engines to “circumvent” the ancillary copyright law by delisting the content of anyone demanding licensing fees. They filed lawsuits and threatened an antitrust complaint, but the German antitrust office was unimpressed, responding that Google couldn’t be forced to pay for content it doesn’t want to use. The publisher’s best chance would be an actual law that forces Google to index their content.

    That’s precisely what may be the true intention behind the resolution’s wording on “neutrality” of search results. It is a highly absurd idea that search engines could be legally required to index sites which they are not even allowed to include in their results without having previously successfully negotiated a licence. Failure to accept a publisher’s demands in the negotation would leave just one remaining legal step: Completely suspending the search engine’s service.

    If we want the Commission to take a stand against powerful IT giants, let’s concentrate on measures that work: We need to take action following the LuxLeaks revelations and put an end to tax dumping in Europe. Transnational IT companies need to start paying regular taxes like everybody else. Those who truly care about equal opportunities and an innovation driven market will have to agree that tax evasion is the most urgent problem to address.
    What we don’t need are newly made-up taxes for single companies with dangerous side-effects that threaten the free exchange of information on the net.
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  9. l'Europa non ha campioni nazionali da difendere in questo settore, e quindi i suoi governi e le sue istituzioni federali sono più sensibili agli interessi del consumatore.

    Il Wall Street Journal dà voce alle preoccupazioni della Silicon Valley, con un titolo in prima pagina: "L'Europa prende di mira le aziende digitali americane". I terreni di questa offensiva sono molteplici, si va dalle accuse di elusione fiscale alle iniziative per la tutela della privacy ("diritto all'oblìo") per finire con le procedure antitrust. Su quest'ultimo terreno l'Europa ha dei precedenti illustri. Fu la Commissione Ue ad assestare un colpo al semi-monopolio di Microsoft quando il responsabile della concorrenza era Mario Monti. Anche a quell'epoca, gli americani videro in quell'offensiva una sorta di complotto anti-Usa: sta di fatto che l'Antitrust di Washington era stato fin troppo timido nei confronti del colosso di Bill Gates.

    Oggi una procedura analoga dell'Antitrust europea potrebbe colpire il potere semi-monopolistico di Google e forse smantellarlo: se passasse il principio della "neutralità delle piattaforme", caro soprattutto alla Francia, Google sarebbe costretta a facilitare l'uso di motori di ricerca diversi dal suo. In generale quello che il Wall Street Journal mette in risalto è una convergenza di iniziative tra i due maggiori Stati membri dell'Unione, Germania e Francia, insieme con le azioni promosse dall'Europarlamento: quest'ultimo ha preso in esame una risoluzione che "scioglierebbe" i motori di ricerca dagli altri servizi offerti dai padroni della Rete (o come vengono chiamati a Parigi "les Gafas", plurale dell'acronimo che sta per Google Apple Facebook Amazon).

    La questione dell'elusione fiscale è emblematica delle differenze tra Usa e Ue. In realtà fu il Congresso di Washington ad aprire per primo una indagine sul comportamento fiscale di questi colossi. Memorabile fu l'audizione di Tim Cook, chief executive di Apple, nel corso della quale i parlamentari divulgarono dati scandalosi: l'azienda fondata da Steve Jobs sfrutta ogni possibile cavillo delle legislazioni fiscali per spostare i suoi profitti da un paese all'altro. Alla fine la massima parte dei profitti viene fatta "figurare", in modo del tutto artificioso, a capo delle filiali irlandesi, con fisco più generoso. La pressione fiscale effettiva che Apple subisce sui propri profitti è dello 0,2% secondo le conclusioni di quell'indagine parlamentare.

    Le sedute del Congresso Usa ebbero grande pubblicità e risonanza. Poi però non se ne fece nulla. Perché? I Padroni della Rete qui a casa loro sono quasi inattaccabili. La destra, che ha la maggioranza al Congresso, è per principio contraria ad ogni aumento di pressione fiscale sulle imprese. I democratici a loro volta sono i beneficiari delle generose donazioni elettorali della Silicon Valley, da sempre "liberal" e progressista su temi come l'ambiente e i matrimoni gay. Ecco perché alla fine è più probabile che la lotta all'elusione fiscale dei monopolisti digitali faccia qualche passo avanti nella Ue, dove il loro potere di condizionamento è meno forte. Se ne sono resi conto i vertici di Google: il presidente Eric Schmidt e il chief executive Larry Page di recente hanno moltiplicato i loro viaggi "diplomatici" a Bruxelles, Berlino e Parigi, per intensificare un attività di lobbying fin qui non abbastanza efficace.
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  10. The latest skirmish in the long-running battle between Google and the German media establishment — over the search giant’s right to display short excerpts from news stories in Google News — appears to have been won by Google. Media giant Axel Springer admitted on Wednesday that removing its news content from the search engine caused traffic to plummet, and so it is allowing Google News to display short excerpts of its news stories again.

    As my colleague David Meyer has explained in a number of previous updates, Springer and several other German companies have been fighting with Google for years over what they claim is the company’s theft of their content.

    After much lobbying of the government, Germany finally passed a law that requires anyone who publishes more than a short “snippet” of text from a newspaper to pay royalties, a law that was clearly aimed directly at Google News. The definition of a “snippet” hasn’t been determined, however, and Google hasn’t paid any royalties. Instead, it just removed any excerpted content from those German publishers.
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