Big government vs big business

You might notice you’re not mentioned in the headline. Which is the point of today’s Capital & Conflict.

Policymakers and business decision-makers care about your vote and your money, not your interests. And, for some reason, most people are more enamoured with political causes than their own interests too.

I find it incredibly odd that people believe the government can spend their money better than they can. “Tax me and then spend the money on me” seems like an incredibly stupid idea before you even get into the politics.

We’ve pretty much dropped the illusion that the government can organise food properly. Any country which tries that one suddenly experiences famines. We also don’t think the government would do a good job of things like fashion and manufacturing. But we still think politicians are good at choosing our education and healthcare for us.

You can argue about whether it’s true that the government does some things better than us. But my point today is that you don’t even feature in the calculation these days. The battle over these questions never seems to consider you as an individual and the right to choose for yourself. The actual effect on you is never mentioned.

The EU’s latest assault on the internet is a great example. It will have an effect on your life in ways that were never considered relevant to the political debate. Only political causes and big business featured.

Taxing the news

Last week, the EU passed a rather interesting directive about the internet. News aggregators may soon have to pay news creators for any content they display. If Facebook or Google display something from the Guardian or Telegraph, Facebook or Google will have to pay the Guardian or Telegraph.

It’s a bit like newspapers charging newsagents for displaying their front pages outside their shops. The irony being that the whole point of the display is to sell more of the papers in the first place.

That’s why I call the EU initiative “reverse advertising” – having to pay to display other people’s products… This is especially funny because Facebook and Google make their money advertising others’ websites and content in the first place. Making them pay their customers to do business is just bizarre.

As an aside, don’t forget that an American senator asked Facebook founder Mark Zuckerberg how he can possibly sustain a business that provides its service for free. Zuckerberg looked incredibly evil as he almost burst with incredulity at the cluelessness of the question. Eventually he managed to squeeze out the words “Senator, we run ads.”

The fact that politicians investigate and tax companies without having the slightest idea about the most basic aspects of those business explains the nature of the situation. But the EU’s cluelessness is slightly worse, because it is more nefarious in its effects on you. Effects that were never considered in the political debate.

But first, more about the EU directive. The potential law is being called a “link tax”, because the person providing the link has to pay the creator of the content a tax. Except it’s not a tax, it’s a fee.

MEP Axel Voss explains the purpose of the law:

I am convinced that once the dust has settled, the internet will be as free as it is today, creators and journalists will be earning a fairer share of the revenues generated by their works, and we will be wondering what all the fuss was about.

But there is plenty of fuss. And past attempts at very similar laws created all sorts of problems.

The trouble with any law is the cost of enforcement. Not just the financial cost. But also the time. Big companies have such resources. Small ones don’t.

Critics of the link tax law argue that small businesses and artists will not be able to enforce the law against troublemakers. If someone claims copyright over your work and starts collecting your revenue from it, what do you do next?

Another part of the law requires the news aggregation sites to monitor whether they have to pay the “tax” to someone. If a YouTube user uploads a video featuring someone else’s content, then YouTube has to pay the original creator. But figuring out when that applies is very difficult given the whole point of the internet is its openness.

Privacy campaigners point out that the law effectively creates the ability to monitor and censor all internet content. Should a new law in a few years’ time be made about censorship, the tools to implement it would then exist.

The EU is never deterred by failure

An earlier version of the EU directive I’m describing was rejected by the EU Parliament. But now it’s back. Which is just another example of how the EU works.

But it’s not just rejection in parliament that doesn’t stop the EU. Spain already implemented a link tax. And it was a complete shemozzle.

Analysis from publishers whom the tax was supposed to help eventually figured out it hurt them. The increase in news flow from the news aggregator websites is far more important than link tax revenue.

They also found out some other interesting facts. The efficiency which news aggregation websites create encourages people to consume more news. The spend less time searching and more time reading.

To make a point, the biggest news aggregator in Spain stopped providing snippets and links from one of the major media groups in Spain. Its website traffic tumbled.

Google News, one of the major news aggregators, simply shut down in Spain over the new law.

Without the aggregation sites, people stopped digging as deep into topics, so smaller publishers lost more than double the amount of traffic that large companies did. Precisely the niche website you’re looking for becomes impossible to find.

The smallest publishers, such as blogs, simply don’t have the means to comply with the requirement to remunerate the news sites for the content they use.

In 2014, Google stopped including snippets and images of news stories from German media after being sued for doing so. The funny part is that media organisations can decide for themselves what is shown on Google from their sites: “We regret this legal approach very much because every publisher was always able to decide whether and how its content is displayed in our services themselves,” said Philipp Justus, managing director of Google Germany. The market always had the solution, but the government stopped people choosing for themselves.

But I’ve fallen into the very trap I’m trying to criticise. All this discussion about the law, the businesses and the payments forgets what it’s all about.

Nobody thought about you

Regardless of the problems, you might think that the law at least sounds good. In the battle between government and business, you can take your side.

But what about you? You were never considered in all this. What will be the effect on your news flow? The effect on your job and own business? None of these things were actually thought through. Or they weren’t considered at all.

My point isn’t about what’s happening between Google, EU and national politicians, and publishing businesses. My point is that your news flow is being changed to your detriment.

Your ability to scan news efficiently, find news quickly, discover alternative takes and analysis easily, and understand what is going on in the world is under attack. Maybe not directly, but because the effect on you from laws isn’t being considered.

Focusing on inefficiencies

One way to think about yourself in all this is something I call policy profiteering. The idea is to think about how a government policy creates predictable opportunities to profit.

Consider the effect of having a single interest rate in Europe. Right now, that means the Germans have incredibly low rates given the state of their economy because the European Central Bank can’t raise rates on the struggling Italian economy. This is funding a very nice property boom in Germany you can profit from. I’m working on how for my readers at Zero Hour Alert.

But there may be an even better way. And far more convenient. The UK government has created a remarkable fortnightly opportunity. And my friend Eoin Treacy has figured out how to profit.

I’ve been informed that expressions of interest for Eoin Treacy’s Masterclass in Reflex Trading is ready for you now.

You can sign up here.

Until next time,

Nick Hubble
Capital & Conflict

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