http://www.thehindu.com/opinion/columns/a-borderless-economy-that-will-be-controlled/article8581476.ece
A borderless economy that will be controlled
Parminder Jeet Singh
Jack Ma, the founder of Chinese e-commerce giant Alibaba, has proposed a new
business-led initiative for framing global e-commerce rules. Announcing it at
the Boao Forum for Asia, he said: “Let businesses drive it with governments and
NGOs and other organisations participating”. Mr. Ma’s proposed setting up what
he calls the World e-Trade Platform (WeTP). The WeTP is supposed to complement
the World Trade Organisation which can remain in charge of global rules for
offline trade. Alibaba will present this plan in the G-20 meet later this year
in Hangzhou, China, where it is headquartered. In short, this means that those
who run e-commerce businesses are proposing to draft the rules for e-commerce
too, because in their view, they know best.
Mr. Ma’s announcement is apparently a political shocker — corporate power is
making a direct political challenge to governmental actors. However, a former
vice minister of China, the Indonesian Trade Minister, and the President of the
Inter-American Development Bank — all of whom were present at the Boao Forum —
reacted positively to the announcement. To understand what is happening here,
let us step back a little.
Digital monopolies
In the digital realm, it is said that code is law and architecture is policy.
Those who control the software code, and the architecture of large ‘platforms’
around which key social systems are organised today, get to set the rules for
these sectors. ‘To organise the world’s information’ is Google’s stated noble
function. As Google developed monopoly over this sector, it increasingly
manipulated its algorithms for its own commercial gains. It judges what content
needs to be pulled down for violating intellectual property rights or on
grounds of defamation, normally a public function. Facebook similarly makes the
global social rules on its monopoly social media platform, as Apple does for
the mobile app ecology on its App Store, rivalled only by Google’s Android
market.
Things get more complex as we move to sectors that are not purely
informational/digital. But even in these cases, any first mover who can
organise the digital connections between the suppliers and consumers in any
sector, and the valuable data that arise from the ensuing digital interactions,
can expect to quickly develop a monopolistic position. The first mover comes to
own the ‘platform’ around which the digital avatar of the concerned sector
takes shape. It can become the Airbnb of accommodation booking, the Uber of
city transportation, or the Amazon/Alibaba of e-commerce.
Similar monopoly platforms are expected to develop in all areas, including key
sectors such as education, health, and agriculture. Monsanto has graduated from
a manufacturing company to being intellectual property-based and now to
becoming an agriculture data company. It plans to monopolise macro and micro
data about farming, right up to the soil type and micro-climate of each farm,
to be able to fully control all agricultural inputs, both hard and soft. With
privileged access to information about what is going to come out of the fields
and when, it can, in due course, also expect to dominate the agri-output
market. The automobile sector is similarly undergoing major digital
transformations, with Google and Apple moving in. Daimler’s CEO recently
expressed concern that traditional car-makers may get reduced to becoming the
Foxconn (the China-based i-Phone manufacturer) of the car industry, while
others own the all-important digital operating systems.
As all sectors go digital, some interesting reorganisation is happening. There
is a marked tendency towards greater monopolisation with the key positions held
by whoever can control the ‘platform’ that digitally connects different actors,
especially with consumers, and, even more importantly, control the data about
the sector. These two kinds of controls are related as data mostly gets
generated from digital interactions in the sector — among human actors, but
also increasingly with and among ‘things’, what is called the ‘Internet of
Things’.
Fixing regulation
Strong network effects implied in both these controls is the reason for
increased monopolisation. We see its extreme expression in pure digital
services such as search and social networking. In non-digital areas, there are
still the traditional manufacturing/intellectual property competencies and
brand loyalties to contend with, even as digital behemoths make audacious moves
to take on these sectors. There also exists a good amount of innovation outside
the current industry giants. However, starts-ups are fast being bought out, and
mergers and partnerships are taking place, overall tending towards a very few
actors dominating each sector — some competing wh
