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Western capitalism has limits (apparently)

17 July 2019

Everyone loves capitalism... or so we're told in the Western World.

The ability for an individual or business to earn money based solely on its competitiveness in a marketplace is one of the hallmarks of the captalist system. Work harder, work better, earn more.

No country iconifies a commitment to the capitalist mantra more than the USA... or so it used to be. However, there seems to be a limit and that limit has become increasingly apparent in recent days, especially where tech companies are involved.

The Europeans are far less ideological in respect to their treatment of capitalist principles. They are very quick to penalise any corporation deemed to have been operating unjustly or in a way that involves the use of market dominance to hike profits unreasonably. At least that's the justification often used when massive fines are thrown at huge multinationals.

Personally, I think it's just an excuse for squeezing substantial sums of money from those companies that are very profitable. Think of it as an ad-hoc tax that is applied whenever the EU feels like the trough in Brussels needs a bit of a top-up.

But back to the USA for a moment...

There is growing concern in the USA (and Europe) that Google has become omnipotent in the online marketspace.

In fact, Google and Facebook are now so big and powerful that they challenge even the might and power of governments around the world.

Predictably, those governments (including the US one) have responded by suggesting that it might be time to forcibly break up those companies into multiple smaller entities, so as to reduce their might and power; and the threat they pose to the rule of law imposed by those governments.

Facebook's announcement that it intends to become part of Libra and effectively launch its own crypto-currency has also prompted the US government to rattle its sabre and threaten huge fines if this happens without their approval.

The US government is concerned that such a popular crypto currency would be used as a trading tool by criminal gangs, organised crime, drug cartels, etc. Apparently this would be a bad thing and unacceptable. How odd it is that the international currency for crime is presently hard-cash in untraceable US dollars. Yep, Uncle Sam doesn't like competition in *any* arena!

So it is very clear that governments of the world are all for rampant capitalism, so long as they are able to benefit from it themselves. When capitalism produces entities that pose a threat to those governments however, suddenly it's no longer acceptable to allow market pressures to dictate who wins and who loses. Suddenly, those governments feel a desperate need to intervene and ankle-tap the biggest of players.

Hypocrites?

And speaking of hypocrisy...

Since the reforms of the 1980s, under a Labour government, New Zealand has proudly proclaimed its commitment to subsidy-free farming.

When the Lange government swept into power and axed farm subsidies way back then, we went to the world and touted for free trade on the basis that we were no longer propping up the farming sector by way of contributions from taxpayers' pockets. We proclaimed that by doing this, we should be allowed better access to the heavily subsidised farming markets of the USA, Europe and other countries.

To a degree, this worked and our farming sector has gone from strength to strength.

But it seems that the subsidies for NZ farmers are back.

Whereas other businesses in New Zealand will have to offset 100% their carbon emissions there is a proposal that would exempt farmers from 95% of their obligations under the Emissions Trading Scheme.

Once again, governments meddling so as to subvert the capitalist system and effectively using taxpayers' money to do so.

Perhaps it's time we admitted that "pure" captialism doesn't actually work very well once companies pass a certain "critical mass"(CM). Maybe it's time to formalise and codify the rules that ought to apply post-CM so that individuals, companies and corporations can be informed as to what lays ahead when they reach that point.

Right now, governments seem to be just screwing around without any real idea what they're doing -- once entities become too big to fit into the capitalist mold.

I again restate my claim that the entire world economy is in dire need of an overhaul. We can't continue to conduct business in the 21st century using principles, rules and methodologies that were devised centuries ago. The internet has erased borders and opened up huge new markets for even the smallest operators. It has also allowed unheard of growth and omnipotence for those (such as Google, Facebook, Amazon, etc) who hold the keys.

Without such reform, trading in the 3rd decade of the 21st century will become even more chaotic an subject to ad-hoc, bandaid measures such as digital sales taxes etc., which will become an intolerable burden on cross-border commerce.

What do readers think?

Time for a change -- or will the woodenheads just continue adding patch after patch after patch, until the entire framework of global commerce collapses before our very eyes?

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