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Economy

EU vs. Google: When Goliath Pretends to be David

Dr. Matthew Crosston

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The European Commission has opened a formal investigation into Google to ascertain whether or not the company’s operating system, applications, and services have breached EU anti-trust rules.

The Commission is seeking to figure out if Google has engaged in anti-competitive activities in its business philosophy and has tried to abuse what is a dominant commercial position in the European market. This formal inquiry actually goes back five years, when the EU was concerned primarily with Google’s dominance over the advertising search market (at the time it controlled 95% of the EU). The current incarnation of the inquiry now focuses on three main points:

  1. Whether Google has illegally hindered the development and access of rival mobile applications.
  2. Whether Google has prevented smartphone and tablet manufacturers from developing and marketing modified and potentially competing versions of Android.
  3. Whether Google has illegally hindered the development of rival applications and services by tying or bundling certain applications and services with other exclusively Google interfaces.

Google has always refuted such charges, its chief executive boldly declaring things like it is ‘not the gateway to the internet’ and that it was not true that Google would ‘promote its own products at the expense of its competitors.’ It is this last aspect which brings a bit of the surreal into the situation and should leave any sane thinkers of commercial activity in Europe shaking their collective heads. It is truly a farce majeure where two Goliaths desperately want the public to believe they both are in fact Davids.

Companies built upon the prevalence and popularity of the internet have always benefited from what I consider to be a bit of false praise. Whether you want to call them social media platforms, internet service providers, mobile application purveyors or any other semi-technical fancy phrase, the one simple reality of all such entities like Google is this: they are and always will be a BUSINESS first and foremost. The point of business is to be successful. The best success is one that is maximized and leveraged. This by default means earning a dominant position in which there may be rivals and competition, but such challenges must never amount to severe problems or damage to the company’s bottom line or market share. This is the great confusion of people in Western states: the conflation of capitalist rules with democratic principles. It is true the West has done an admirable job of instilling both systems into their societies. But it is not true that capitalism and democracy are two perfectly mirrored sides of the same coin. This is just the naïve mistake of those not bothering to understand how their relationship has always been a tethered and tense one, usually to the benefit of all, but not ever absent discord and disagreement.

Which brings us back to Google: ‘internet companies’ have helped themselves over the years by creating a brand image that emphasizes freedom, access, information, and connectivity. Indeed, in America we often call this process ‘drinking the company Kool-Aid,’ which means buying into your own propaganda. Companies like Google and Microsoft have always been quite enthusiastic about drinking their own Kool-Aid, believing they are somehow not just businesses, but something more: something more valuable and more productive for the overall growth and functioning of free societies all over the globe. It is indeed a wonderful brand image to develop. It also happens to be exaggerated. As long as Google or Microsoft dominate their respective markets, it is easy for them to focus on and proclaim how much ‘more than a business’ they are. Inquiries like the present EU investigation, however, call this mythology into question.

First instinct in the face of accusation is to of course always deny. But let’s examine the statements made by Google more objectively: Google, an ‘internet company’ that specializes in being the first portal for consumers to think of when it comes to net access, does not want to be ‘the gateway to the internet?’ Of course it does. It is almost ridiculous to consider the alternative. Second, as Google begins to grow and diversify its holdings, services, products, and applications, it doesn’t want to promote such products and services over other competitors? Again, of course it does. Why? Simply because it is a capitalist business operating in a global capitalist system. Because if what the Google chairman said was true it would mean Google is literally acting against the fundamental axiom of basic business, indeed of capitalism itself: we create not just to sell but to sell more than anyone else. Which subsequently means Google is acting against Google if it is not remaining faithful to this mission. Which version of reality seems more likely to any rational consumer: Google acting against itself or acting against rivals and competition? A more rhetorical question has never been asked.

The EU’s probe into this leads to a fascinating philosophical question that gets to the very heart of commercial activism and has different answers across the globe: WHO EXACTLY is responsible to guarantee greater competition and access to choice in the market? Should that competition be ‘facilitated’ by government watchdog agencies because businesses inherently cannot be trusted to engender honest competition and consumer choice? Or should it be a much more ‘organic’ process, Darwinian even, where only the best ideas, products, and organizations survive the competition, with the consumers’ actions themselves deciding everyone’s business fate? America has often prided itself on being in the latter school of thought (though anyone who looks closely at American economic policy and economic history knows this is not entirely true) while Europe more staunchly likes to position itself as the champion of the former (again, also not entirely true). These are the dual dilemmas secretly hidden under the layers of the EU inquiry into Google. On the one hand, Google is trying to maintain and secure its brand image as the benevolent and benign Goliath. Not a marauder inflicting damage to the market and consumers, but rather a friendly giant that should be appreciated and left alone. On the other hand, the EU is trying to stand on its own brand image as the Goliath that protects the people and guarantees true commercial freedom. Not an overly meddlesome bureaucracy whose good intentions only end up causing market regression, but rather the sole legitimate power able to stand up for the people against major multinational behemoths like Google.

The irony of ironies is that in this battle between two Goliaths, one commercial and the other political, BOTH try so earnestly to portray themselves as David fighting against injustice. Be wary, Europeans, whenever actors with pockets deeper than the ocean depths both cry ‘woe is me’ and seek to earn your sympathy party. In such cases the only woe is usually your own and the only true sympathy needed is for the consumers of the EU itself. In the end, the decision-making of any Goliath tends to be suspect.

Dr. Matthew Crosston is Executive Vice Chairman of ModernDiplomacy.eu and chief analytical strategist of I3, a strategic intelligence consulting company. All inquiries regarding speaking engagements and consulting needs can be referred to his website: https://profmatthewcrosston.academia.edu/

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Economy

Dynamics of Current Global Economic Crisis

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Global economic architecture is fundamentally weak and fragile and having multiple internal contradictions which emanate in different economic and financial crisis in different time periods, H.P Minsky. Similarly, Marx asserted, sustainability of existing hegemonic economic structure depends on continues revolutionizing and modernizing of means of production and more exploitation of labor. However, because of this process the absolute and relative surplus value is generated which creates wealth. Additionally, because of the destructive patterns of the global structure the wealth shifts in the few hands, which makes and favors the global elite and sends rest of the society in the swamp of hunger and poverty.

Moreover, because of this mechanism, phenomenon of industrial reserve army emerged which creates problem of permanent unemployment and cause reduction in demand and later manifest in the form  of crisis i.e. economic or financial crisis. Nevertheless, credit crisis of 1772 which was originated from London and quickly spread to rest of Europe. The great depression of 1929-1939 which is considered the worst economic and financial disaster of the 20th century begin with the wall street crash. OPEC oil price shock of 1973. The Asian crisis of 1997 which is also known as Asian flu which  began from Thailand and quickly spread to east Asia and its trading partner and the most recent 2008 financial crisis can be considered as dominant examples. Howbeit, this is the basic contradiction of the existing hegemonic economic structure from where the crisis begins. In this context, Minsky highlighted that stability itself creates instability. Additionally, instability increases uncertainty and that uncertainty causes economic crisis. Though crisis hits different economies (developed and underdeveloped) differently, but it has also some universal impacts like reduction in growth, increase in unemployment, stock market crash, reduction in trade volume and currency crisis etc.

Withal, when economic crisis begins this sharpens contradictions among the capitalists. Consequently, these contradictions are converted into rivalry and manifested in different shapes  like price war etc. Furthermore, this scenario has much devastating effects where small, weak and newly established businesses cannot survive and the large businesses convert into monopolies and make strong cartels or syndicates for survival and cause more exploitation of both labor and consumers. Such process can also be analyzed through the different economic crunches; For instance, during the period of financial crisis of 2008 small business went under or were forced to lay off employees, slash spending, halt expansion plans and find new ways to survive which results in the closure of about 1.8 million small businesses during the period of December 2008 to December 2010. Moreover, every year 670,000 business were created before the decade of financial crisis and this figure reached at 715,000 in 2006. But during the period of financial crisis the number felt dramatically and reached 560,000,  highlighted by Barbara Weltman in his report.

It is of great importance to understand that due to the weak and fragile foundations, current economic structure cannot resist against any shock, these shocks might demand, supply or financial shock. Demand shock which can be seen after the tragedy of 9/11, supply shock which was caused by rising in oil prices in 1973 and financial shock which created the financial crisis of 2008. Besides, such shocks have more disastrous effects during the period of uncertainty and instability and result in the deep economic recession.

However, same situation can be observed due to the emergence of COVID-19 pandemic. Covid-19 has come up with triple shocks demand, supply and financial shock simultaneously. Ironically, the fragile structure was already suffering from economic instability and shrinking the world economy. under the prevailing uncertainty the various international institutions and think tanks have already been reporting about the effects of uncertainty on the global economy. in the form of conflicts among great powers, trade wars etc. For instance, before the Covid-19, world was facing growth uncertainty and there was tendency of reduction in the global output. This uncertainty created conflict among different powers where the Sino-US trade war is one of  the example of those conflicts. Further these conflicts negatively affected the world macro-economic indicators and shrank global growth and  trade volume. As warned by IMF “US-China trade war will cut the global growth slowest pace since 2008-2009 financial crisis”. Additionally, in November 2019 financial times highlighted that “because of trade tensions global trade balance shrank 1.2 percent”.

However, this indicates  that fragile hegemonic structure unable to tolerate triple economic shock (demand, supply and financial shock) caused by covid-19 and that might lead to recession. According to the world bank global economic prospect 2020“The global economy will shrink 5.2% this year. That would represent deepest recession since second world war with the largest fraction of economies experiencing declines in per capita output since 1870.”in addition it has also been warned in the same report that  “Economic activity among advanced economies is anticipated to shrink 7% in 2020 as domestic demand and supply, trade, and finance have been severely disrupted. Emerging market and developing economies (EMDEs) are expected to shrink by 2.5% this year, their first contraction as a group in at least sixty years. Per capita incomes are expected to decline by 3.6%, which will tip millions of people into extreme poverty this year.”

Nonetheless, the existing hegemonic structure is not only fragile but also complex and standing on the foundation of exploitation of state and society at larger level. Therefore, any single factor cannot be considered as the main reason of the crisis. Rather multiple internal and external factors. However, the internal and hidden contradictions of global economic structure have been playing a significant role in global economic crunch. Additionally, these contradictions have made the recession destiny of the existing economic structure. Hence, whatever may be the situation, the recession is mandatory. This may start from any sector financial or real but it affects the whole economy and the external shocks fasten the  process which can be observed during covid-19. 

As Michel Robert explained while discussing the Marxist theory of  crisis that “Crises of capitalist production are due ‘under consumption’, a lack of spending by workers who do not have enough to spend or due to ‘disproportion’, the anarchy of capitalist production means that production in various sectors can get out of line with others and production can just outstrip demand; or it’s the lack of profitability in an economic system that depends on profit being made for private owners in order for investment and production to take place.” Similarly, H.P Minsky argued in his financial instability hypothesis “financial crisis are endemic in capitalism because periods of economic prosperity encouraged borrower or lenders to be progressively reckless this excess optimism creates financial bubbles than busts”

It can be concluded that covid-19 has severely affected the complex socio-economic structure. Nevertheless, it is not the sole reason of current economic recession as it is being appeared in the contemporary data and literature produced by the world institutions and think tanks. These publications are neglecting the role of fragile structure and its foundations which are not in position to absorb any shock. Thus comprehending the genuine causes and factors influencing the crisis is necessary to develop appropriate mechanism to contain and address the various dynamics of the existing hegemonic structure.

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Economy

Pandemic “Locked Down” People’s Life in the Developing and the Poor Countries

Ronny P. Sasmita

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Due to pandemic pressures, the countries around the world are preoccupied with matters of lack of human resources, medical equipment, and tamping capacity of the hospitals for coronavirus patients. For the community 40 percent of the lower middle class, especially in urban areas of developing and poor countries, large scale of social restriction in dealing with pandemic means losing daily, weekly, even monthly incomes.

Being asked to take two or three months off, that means two or three months of lost income. And their government are not ready to deal with that situation. But in developed and rich countries, with large and  strong economic fundamentals, turn out that not all of them are ready to provide guarantees to affected citizens, although they can provide any kind of  the provision of pocket money, the provision of food, and all forms of economic protection during lockdown.

In other side, entrepreneurs, for the most part, did not really feel the effects of tax incentives and relaxation, because it seems to be obligations that had to be paid if they were producing. Then if they do not produce and employees are asked to take a day off but still be paid, the story will be different. Entrepreneurs will also be paralyzed. The conditions are very different from the top richest conglomerates in developing countries, for example, whose reserves may be very strong.

What are about medium Enterprises, SMEs, especially micro? Countercrisis schemes have not clearly been seen at all. The countries may not be able to give it in maximum capacity because of zero fiscal support. Pushed a little to the new budget post, instead it became a fiscal deficit. The only option left is debt. And on one hand it will be politically bad for the government, but on other hand it will be new target to corrupt.

With this picture, COVID 19 attacks, economically, accept it or not, directly to the heart of the national economy of developing countries, which are largely supported by MSMEs. If these pillars fall, shake the countries economy. That’s when injections from various major countries and donor agencies are needed. So the conditions are indeed very difficult.

People who are able to buy any needs, the money in their accounts is still abundant, may be angry, even condemning, why there are still those who work or roam around looking for a living. But for them, (daily working class or micro business owner), stay  working  is also part of saving life, or actually starving to death. On the other hand, they have not yet been able to be certain about what guarantees they will get from the relevant authorities if they are not active.

If there is no more room to work, then asked to take a day off,  the choice to survive is to return home to countryside. In the villages, they can make a living in various ways, even if they stop working, for a few months at least. And it turns out that even then the mobility was banned, because it was considered to be expanding the pandemic to the villages. Then what else can they do? The situation is actually already locked down and stand off. The people economy is locked up. The more it moves, the more it twists.

What people requests from the government are to anticipate the spread of the corona virus on the one hand while anticipating an economic downturn that will stop many people from earning income, the business stop moving, then there will be an explosion of unemployment, poverty, living improperly, lack of food, including the needs of any installment, the educational needs, risk of education lost of the children, ect, on other hand

In what ways can the already collapsed economy be brought back, which plunges many people under such poverty, unemployment and hopeless lines? Especially if unemployment and famine spread? No body wanna answer. For example, in Indonesia, the 1997-1998 crisis plunged no less than 10 million people into the abyss of unemployment, which to this day is still unemployed, displaced after being laid off, competing for work with a new workforce, which makes them unsold in the eyes of job providers. Fortunately, there are online motorcycle taxis or online taxis, so now some of them can join in making a living. But in pandemic stand off, all of that little hope is gone.

The crucial note for this pandemic case is that the humanitarian affairs are not just a matter of health, but a matter of the survival of millions of people in decent conditions, not in tragically frightening conditions, without hope and certainty. To be healthy, there are costs. The problem,  it is not borne by their state. And for independent isolation, there are also costs, and it is not borne by their government. The best way, it’s best not to judge or blame each other about people who insist on their hearts to keep struggling for a living. The developing countries government should take action to protect them with any health equipment needed.

The second, the majority of people, everywhere in the world, work hard, go home early at night, the reason is the economy, to become more prosperous, so that the need to be able to live healthier and more worthy can be fulfilled, so that the future of children born is more secure because there are costs for education and health, so that their lives in the future are better.

But there are many government of the developing and the poor countries  clearly have no “more ability” to deal with poverty and unemployment well amid pandemic. More over if the 60 percent of the countries workers are informal workers, live in vulnerability, just above the poverty line. Let’s assume that their government wish to do all of that, but they have no capacity. So what if they have the authoritarian and non democratic governments?

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Economy

Conversion of Local Business into E-Business by Effective Use of Social Media

Ahsan Siraj

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The spread of coronavirus (Covid-19) has affected almost all areas of life. The whole world is facing a crisis because of this pandemic issue. A lot of people have lost their jobs and many are struggling to survive in this situation. All businesses whether working at a large scale or a small scale are facing problems due to the unavailability to resources to operate businesses successfully. The developed countries are somehow managing this situation because of the successful implementation of online businesses from a long-time period. So, for those countries both customers and businesses are relatively ok with the situation by not going in the markets to buy things and place orders online and get it delivered at the doorsteps easily.

Whereas many developing countries like Pakistan have certain barriers in the full acceptance of e-business offered by the local and international companies. As per many studies on this topic, there are a lot of factors that pose hindrances in full acceptance of e-commerce in Pakistan. However, there is one thing worth mentioning that these hindering factors are related to all stakeholders. A few of those factors include insufficient technological resources, Government Policies, legal issues, social acceptability of the online shopping trend because of trust issue between companies and customers whether in terms of provided customer information at online shopping platforms, payment security, or the difference in shown and finally delivered product at customers doorstep, etc. But there has been seen a change in this trend in a couple of years with the development of the telecommunication industry. As most of the people now days have internet access at their places and are following social trends all around the world. So, the trend on online shopping from official brand stores’ websites has developed rapidly due to the trust of customers in brands’ shown and delivered products on their official online websites. But as far as local businesses and third party online shopping websites are concerned they are still a certain group of people consider taking a chance to shop online.

    In the pandemic situation, as all the markets were closed due to the lockdown in the country, everyone was worried about the situation whether a businessman or a customer. In this crucial time of survival, there has developed a new trend of conversion of local businesses into e-businesses by using social media effectively. Here are those businesses are under discussion who are owned by the people who are not mostly educated enough to know the value of effective use of social media or those people who even being educated at a certain level didn’t think before that they can utilize social media for their businesses to operate when everything was closed. Talking about the customers who were conscious about all the factors of trust and all before were just considering one thing and that was the availability of their desired products at their doorstep in their required time frame. Somehow, like big brands and businesses, many small businesses managed it quite well and provided online shopping facilities to the customers.

In the period of locked down, these small local businesses used social media i.e. Facebook, Instagram, what’s app, LinkedIn, etc. to display their products online offering discounted prices and free home delivery. This step not only provided them the opportunity to earn money in the time of crisis but also put the foundation of new trends in online shopping i.e. the acceptability of online shopping in the society even in the smaller and backward areas of Pakistan. We hope that this conversion of local businesses into e-businesses will continue to flourish successfully in the future and the acceptability of online shopping in Pakistan will grow over time. Here, in the end, one thing that matters is that all the stakeholders should play their effective role in this growth especially the Government should make policies to support the effective implementation of online business trends in Pakistan.    

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