Economic growth: inclusive, green, no-cost.

The policy/politics frame

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“Modern Markets For All” won’t be easy. But it does seem obvious.

 

 

 

 

Market failure; so many markets

Our aim is ensuring the best possible marketplaces for what individuals and organizations at the base of the economic pyramid have to sell. Covering micro-economics, it is a constituent policy, establishing a new organization that funds, creates and operates the proposed marketplaces.

How do we know our target populations don’t already have the best possible marketplaces? We can take a standard like five-factor markets. Then we survey individuals plus small firms, charities and public bodies. Are they exposed to their full range of putative buyers? Do they have all data needed to inform trading decisions? How heavy are their overheads? Are their markets stable? Can legitimate supportive interventions be made easily? Is there accountability?

Compared to what’s now possible, the answers are No. Operators have to outspend competing marketplaces to attract buyers and sellers. That is only viable if they focus on “owning” one sector, not sprawling across the economy to open up opportunity for sellers. Costs then have to be recouped; skewing benefits to the most profitable users helps. Even if a global corporation could advertise a “horizontal” marketplace to dominance, their best sectors would be cherry-picked by undercutting rivals. And such unregulated economic power would force official clampdowns.

We suggest rectifying this market failure should:

  • Avoid cost or risk for taxpayers: The entity that develops the intended markets should be self-financing and bear the costs of any failure.

 

  • Extend choice: There must be no constraints on alternative marketplaces.

 

  • Deliver all possible benefits: We propose a principle of Maximum Usefulness; users are to get every possible tool in every possible sector to deploy as they wish.

 

  • Avoid concentration of power: A consortium operating the public markets could be limited to core functions with independent franchisees running each sector. Their combined revenue comes from the flat percentage mark-up within each transaction.

 

 

Could the policy aims be achieved in other ways?

There are some obvious possibilities:

  • Regulate existing markets: Could Uber, Lyft, TaskRabbit and their thousands of competitors be compelled to share data, become interoperable with each other,  slash their charges and institute full functionality for sellers perhaps through “platform governance“? Could regulators keep up? The intensity of battle being waged against even basic protections for workers doesn’t encourage hope.

 

  • Tax and redress: A levy could be charged on transactions in commercial marketplaces, then used to fund social support for users. But it’s bureaucratic and increases costs which will keep activity in the shadow economy.

 

  • Foster unionization: Collective bargaining could be a bit 20th Century for today’s fluid, high-churn, globalized, labor platforms? It could certainly help stop blatant abuses. But policy aims should be wider than that?

 

  • Offer official benefits to all e-markets: That could invite chaos with cowboy operators roaming official databases and dumping user disputes in the courts; plus public sector spending forced across countless here-today-gone-tomorrow forums.

 

  • Direct provision: Government could fund, design and run the intended marketplaces rather than establishing a concession for independent operators. Like state-run broadcasting, this closeness to authority is inherently unhealthy. A rugged stand-alone entity, surrounded by for-profit competitors, would have every reason to assert users’ rights.

 

Global reach by companies like Uber complicates attempts to change their practices. When business models are restrained, these services typically exit an area. That fosters a surge in localized alternative markets, but each has smaller revenues and userbases, so its vulnerable. Rather than fighting incumbents, why not sidestep them with another option for citizens?

Modern Markets for All isn’t an alternative to other policies to tackle economic inefficiency. It can supplement them. POEMs (Public Official E-Markets) would be a slick way of administering; hybrid legal statuses for work-seekers, Universal Basic Income or green incentives for instance. There should be no social engineering attached to the policy. It just creates the best possible markets, then allows users’ self-interest and general economic regulation to play out.

For simplicity we are focusing here on policy for a stable, liberal, democracy. We have a separate page for other governments.

 

 

Downsides

No meaningful policy is utopian. This one shares unintended consequences with past legal frameworks for new technologies. They have proved manageable:

  • Centralized point of failure: Water supply in your area likely comes from a central ring-main. Imagine that were disabled. Urbanites live with this risk constantly. Existing without Modern Markets for a few days is less frightening. And too-big-too-fail online services have security protocols, access controls and failover capacity impossible to replicate in physical infrastructure.

 

  • Low value businesses suffer: Many people are employed in temporary work agencies, brokers and other buyer-seller matching businesses. Those operations will gain multiple ways to offer value added services incorporating POEMs. But not all will do so. If gig work marketplaces decide not to work with POEMs they – and their investors – could suffer. Likewise, long-haul stagecoaches declined after railway acts created faster travel. But local journeys, tourism and other new sectors boomed.

 

  • Disadvantaging of non-users; Anyone uncomfortable around computers or with a disability that makes usage hard could be sidelined. Again, it’s a common thread in new infrastructure. Telephones disadvantaged deaf citizens until accessible technologies were developed. Incentivizing comparable tools (or human assistance) for those who struggle with computers could be enshrined in a concession to operate POEMs.

 

  • Flushing out blurred issues: Current fuzziness in labor markets is a lifeline for groups such as unauthorized workers. With so much work off-the-books, they have opportunities and reduced risk of detection. If better options in public markets attract activity out of shadow economies, the gray market will shrink; possibly becoming only those who are not legally permitted to earn. If policymakers wish, this can be mitigated by allowing anonymous users in POEMs.

 

As a counterweight to downsides: it’s worth examining the costs of inactivity. Cellphones could have arrived decades earlier but for governments’ inability to see potential in the technology. Every month that regular people are denied access to state-of the-art trading is likewise a month of lost growth and personal opportunity.

A common fear about better markets for hourly labor is that they will erode jobs. We address it in a separate page.

 

 

Politics: Make Economics Exciting Again!

There’s nothing ideological about “Modern Markets for All”. Money and Markets are the cornerstones of capitalism. Every country provides an official currency to facilitate trade. What’s the justification for not doing the same for marketplaces?

But nor is this just an economic development issue. If hardworking people are not getting opportunities to progress because markets they have to use are skewed against them, that should be a fundamental bipartisan injustice. It can be framed in many ways.

Historically, economic infrastructure has been a galvanizing issue. In 1832 the youthful American government decided to stop issuing banknotes backed by the state. “Free banking” spawned thousands of incompatible money systems. Some were good for limited purposes. Many were valueless.

The one choice Americans didn’t have for the next three decades is the option we take for granted today; a stable, too-big-too-fail, official money system. None of the 15,000 free banking note issuers could come up with any enduring advantage over the others across the whole economy. So, many citizens turned to barter. Campaigns for government- issued currency became a fiery political cause. The 1863 National Currency Act stabilized trade and government services; it enabled financial innovations impossible with dissipated money systems.

 

For banknotes in 1840’s America, read electronic markets today. The shifting, time consuming, nature of online trade for the 99% ensures most transactions occur without it. Addressing this waste of economic potential offers a new pocketbook issue, to be developed by right or left. Opponents could be pushed to justify denying a public markets option as a choice,. This option is funded, entirely, by people who opt to use it.

 

 

Disrupting the disrupters

Digital policy is typically reactive; plugging gaps or reigning in excesses. Modern Markets for All puts digital policy ahead of the curve. Current policy often boosts big players. Ubiquitous broadband for example will help citizens find work and meet their needs, driving new users to Amazon, Uber, and others. A Modern Markets policy gives citizens a destination, not just a faster journey.

Who will the opposition be? Low value-add companies (online or offline) who fear POEMs as a choice for their customers and lack vision to build a value added business on top of the public platform. Shadow economies would also take a hit, but they don’t have lobbyists.

Unfortunately, it’s easy to see how even small opposition could be fomented into a wave. Opponents will likely tap visceral feelings about the “M” word, and the “G” word:

 

  • Markets: Yes, this is about expanding market access just as many on the left have had their fill of market-driven solutions. But their revulsion could be because this generation is so used to markets skewed against them. It doesn’t have to be that way.

 

 

  • Government: It needs repetition: governments shouldn’t fund, design or run these new markets. Policymakers unlock official facilities for a new generation of markets, ensure they pass to commercial operators in a transparent process, then get out of the way.

 

If this policy gets traction it could create new fault lines; particularly between those who take an all-in approach to new possibilities and others who favor cautious protection for existing interests. Predictably, momentum would be accelerated by external events; recession, corruption or need to temper climate clampdowns by ensuring routes to new income opportunities.

 

→ SOLUTION: Modern Markets for All