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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. He is Senior Doctoral Faculty in the School of Security and Global Studies at the American Military University and was just named the future Co-Editor of the seminal International Journal of Intelligence and Counterintelligence. His work is catalogued at: https://brown.academia.edu/ProfMatthewCrosston/Analytics

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Economy

A bio-based, reuse economy can feed the world and save the planet

MD Staff

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Transforming pineapple skins into product packaging or using potato peels for fuel may sound far-fetched, but such innovations are gaining traction as it becomes clear that an economy based on cultivation and use of biomass can help tackle pollution and climate change, the United Nations agriculture agency said on Friday.

A sustainable bioeconomy, which uses biomass – organic materials, such as plants and animals and fish – as opposed to fossil resources to produce food and non-food goods “is foremost about nature and the people who take care of and produce biomass,” a senior UN Food and Agriculture Organization (FAO)  official said at the 2018 Global Bioeconomy Summit in Berlin, Germany.

This means family farmers, forest people and fishers, who are also “holders of important knowledge on how to manage natural resources in a sustainable way,” she explained.

Maria Helena Semedo, FAO Deputy Director-General for Climate and Natural Resources, stressed how the agency not only works with member States and other partners across the conventional bioeconomy sectors – agriculture, forestry and fisheries – but also relevant technologies, such as biotechnology and information technology to serve agricultural sectors.

“We must foster internationally-coordinated efforts and ensure multi-stakeholder engagement at local, national and global levels,” she said, noting that this requires measurable targets, means to fulfil them and cost-effective ways to measure progress.

With innovation playing a key role in the bio sector, she said,  all the knowledge – traditional and new – should be equally shared and supported.

Feeding the world, saving the planet

Although there is enough food being produced to feed the planet, often due to a lack of access, estimates show that some 815 million people are chronically undernourished.

“Bioeconomy can improve access to food, such as through additional income from the sale of bio-products,” said Ms. Semedo.

She also noted its potential contribution to addressing climate change, albeit with a warning against oversimplification.

“Just because a product is bio does not mean it is good for climate change, it depends on how it is produced, and in particular on much and what type of energy is used in the process,” she explained.

FAO has a longstanding and wide experience in supporting family farmers and other small-scale biomass producers and businesses.

Ms. Semedo, told the summit that with the support of Germany, FAO, together with an international working group, is currently developing sustainable bioeconomy guidelines.

Some 25 cases from around the world have already been identified to serve as successful bioeconomy examples to develop good practices.

A group of women fishers in Zanzibar are producing cosmetics from algae – opening up a whole new market with sought-after niche products; in Malaysia, a Government programme supports community-based bioeconomy; and in Colombia, a community is transforming pineapple skins into biodegradable packaging and honey into royal jelly – and these are just a few examples of a bioeconomy in action.

“Together, let’s harness the development for sustainable bioeconomy for all and leave no one behind,” concluded Ms. Semedo.

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Belarus: Strengthening Foundations for Sustainable Recovery

MD Staff

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The speed of economic recovery has accelerated in early 2018, but the foundations for solid growth need to be strengthened, says the latest World Bank Economic Update on Belarus.

The economic outlook remains challenging due to external financing needs and unaddressed domestic structural bottlenecks. Improved household consumption and investment activity, along with a gradual increase in exports, will help the economy to grow, but unlikely above three percent per annum over the medium term.

“The only way for ordinary Belarusians to have better incomes in the long run is to increase productivity, which requires structural change. While macroeconomic adjustment has brought stability, only structural change will bring solid growth to the country,” said Alex Kremer, World Bank Country Manager for Belarus. “Inflation has hit a record low in Belarus, driving the costs of domestic borrowing down. However, real wages are now again outpacing productivity, with the risks of worsening cost competitiveness and generating cost-push inflation.”

A Special Topic Note of the World Bank Economic Update follows the findings of the latest World Bank report, The Changing Wealth of Nations 2018, which measures national wealth, composed of produced, natural, and human capital, and net foreign assets. Economic development comes from a country’s wealth, especially from human capital – skills and knowledge.

“Belarus has a good composition of wealth for an upper middle-income country. The per capita level of human capital exceeds both Moldova and Ukraine. However, the accumulation of physical capital has coincided with a deterioration in the country’s net foreign asset position,” noted Kiryl Haiduk, World Bank Economist. “Belarus needs to rely less on foreign borrowing and strengthen the domestic financial system, export more, and strengthen economic institutions that improve the efficiency of available physical and human capital.”

Since the Republic of Belarus joined the World Bank in 1992, lending commitments to the country have totaled US$1.7 billion. In addition, grant financing totaling US$31 million has been provided, including to programs involving civil society partners. The active investment lending portfolio financed by the World Bank in Belarus includes eight operations totaling US$790 million.

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Economy

Economic Growth in Africa Rebounds, But Not Fast Enough

MD Staff

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Sub-Saharan Africa’s growth is projected to reach 3.1 percent in 2018, and to average 3.6 percent in 2019–20, says Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank, released today.

The growth forecasts are premised on expectations that oil and metals prices will remain stable, and that governments in the region will implement reforms to address macroeconomic imbalances and boost investment.

“Growth has rebounded in Sub-Saharan Africa, but not fast enough. We are still far from pre-crisis growth levels,” said Albert G. Zeufack, World Bank Chief Economist for the Africa Region. “African Governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth.”

The moderate pace of economic expansion reflects the gradual pick-up in growth in the region’s three largest economies, Nigeria, Angola and South Africa. Elsewhere, economic activity will pick up in some metals exporters, as mining production and investment rise. Among non-resource intensive countries, solid growth, supported by infrastructure investment, will continue in the West African Economic and Monetary Union (WAEMU), led by Côte d’Ivoire and Senegal. Growth prospects have strengthened in most of East Africa, owing to improving agriculture sector growth following droughts and a rebound in private sector credit growth; in Ethiopia, growth will remain high, as government-led infrastructure investment continues.

For many African countries, the economic recovery is vulnerable to fluctuations in commodity prices and production,” said Punam Chuhan-Pole, World Bank Lead Economist and the author of the report.  “This underscores the need for countries to build resilience by pushing diversification strategies to the top of the policy agenda.”

Public debt relative to GDP is rising in the region, and the composition of debt has changed, as countries have shifted away from traditional concessional sources of financing toward more market-based ones. Higher debt burdens and the increasing exposure to market risks raise concerns about debt sustainability: 18 countries were classified at high-risk of debt distress in March 2018, compared with eight in 2013.

“By fully embracing technology and leveraging innovation, Africa can boost productivity across and within sectors, and accelerate growth,” said Zeufack.

This issue of Africa’s Pulse has a special focus on the role of innovation in accelerating electrification in Sub-Saharan Africa, and its implications of achieving inclusive economic growth and poverty reduction. The report finds that achieving universal electrification in Sub-Saharan Africa will require a combination of solutions involving the national grid, as well as “mini-grids” and “micro-grids” serving small concentrations of electricity users, and off-grid home-scale systems. Improving regulation of the electricity sector and better management of utilities remain key to success.

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