Frequently raised concerns

NEMs couldn't work because.....

But these are mature technologies. Both of them, and many others, started life with a phase of dis-coordinated haphazard development. Then governments set out a vision of what the technology could offer and created the incentive for companies to kick-start it. America’s 1921 Graham-Willis Act which gave AT&T a monopoly on the telephone service so long as they cabled up the entire country is a classic example.

Once a technology matures the environment that drove it to mass usefulness can become redundant: as with the break up of AT&T into “Baby Bells”. E-commerce technology is likely to mature fast, the original agreement between government and a consortium would only be for, say, 15 years. After that it is highly likely the state would have little need to be involved at all.

How often do we conduct purity tests on water before drinking or bathing in it? Government would have the same relationship with National e-Markets as they do with the water supply, but the effects of corrupting the later would be far more damaging to individuals concerned.

Not everyone will embrace their National e-Markets overnight. Some will use the system sparingly, many will chose not to use it at all. But like the early water companies, the consortium running the system would have every incentive to aggressively assert the freedom from government interference mandated in their franchise.

Some large corporates would undoubtedly oppose National e-Markets. But it is politicians who will make it happen and it could be a vote winner: a potential leap in national competitiveness, a more inclusive economy (leading to lower welfare bills) and a big attractor of inward investment. All without any public expenditure or restrictions on alternatives.

Only big companies have the resources to build the core operation for e-markets as public infrastructure but, once a tender is announced by a government, if there is little interest the eventual winner will be able to secure a high percentage commission for his next 15 years. If existing big companies aren’t coming forward to take part in the tender process a very attractive opportunity for ambitious start ups begins to emerge.

Would opposition from big players stop government offering a tender in the first place? Possibly but it’s difficult to keep up the pressure in all countries at once. Ultimately politicians compete for votes: something that corporates don’t have.  

Corporates unable or unwilling to change with the world around them are right to fear state backed e-markets. Others might see the opportunities inherent in more fluid marketplaces. Brands can be extended into value added software that sits on top of the basic service, shaping the user's experience. Government might chose to ensure large firms have a place in the new order, for instance by extending intellectual property protection so that a particular financial product can be owned by the company who introduced it and can not then be commoditized by any other sellers in the public markets. 

Railways killed off an entire way of life based on coaching. Telephones put thousands of messenger boys out of work. Nearly all working class women found employment as domestic servants at some point before mass electricity made labor saving devices the norm. All this infrastructure was inflicted on societies who were far less comfortable with job mobility than our own.

Countries have of course held back on new infrastructure for fear of job loses. Too often they have been overtaken by others who understand economies need to be constantly dynamic and infrastructure creates new opportunity that can be hard to foresee. Few commentators for example saw that the 1840’s Railway Acts in Britain would create the modern holiday industry or that a universal postal service would lead to mail order and mass publishing: both big sources of work.

Changes in employment patterns caused by national e-markets would probably happen over years, certainly not instantly. Few of us can be sure of our job on that timescale whatever happens. It is likely state backed e-markets would promote an increase in work but accelerate the decline in formal jobs.

Pets.com and others went bust trying to sell commoditized pet food over the Internet. The marketing costs of multiple dot.coms weren’t matched by returns in this sector.

National e-Markets have different dynamics. Once a consortium has the franchise from government they will need to find franchisees of their own. These individuals will be putting their own (or borrowed) money into their particular marketplace, they will only do so if they believe they can make it a financial success. The first markets are likely to be the “low hanging fruit”: tourism sectors, loans, work periods and similar. But as these sectors begin to interlock other opportunities emerge: it may be that a marketplace for cat and dog chow is only viable when it feeds directly from a forum for abattoir by-products at one end of the supply chain and into one for local deliveries at the other.

As part of the package offered to a consortium, a sensible government would reduce the tax take on the kind of low level trades where this is a strong factor: hairdressing, plumbing, catering jobs, tutoring, unskilled work and so on. Getting a small tax take from a much enlarged market could be preferable to keeping individuals in the black economy.

It’s also important to stress that the system is not an arm of the state. It doesn’t tell government how much anyone has earned or for what they have been using the markets unless forced by a public court to do so. This independence, akin to that given to broadcasters in mature democracies, is essential for the operating consortium’s profitability.

But the system holds the fee for each transaction in escrow. Unlike the current system there is every incentive to complain because it's an effortless online process and you should get your money back, possibly with additional compensation.

 The system could mandate a small bond for sellers that could be accessed in case of court judgment against them. That would ensure court costs were met. However, national e-Markets could decrease the cases coming to court because the economic disadvantages of being an unreliable seller, or a willfully complaining buyer, and therefore downgraded or excluded would outweigh the prospect of “trying it on” with a spurious case.

There is no monolithic operator. The system is built and run by a federation of businesses small and large, united only by the need to recoup their upfront investment. Certainly the system has advantages over others, bestowed by the state, but it has obtained them by a 15 year commitment to enforced transparency and committing to the lowest percentage cut of each transaction for that period. Selling data or trying to build a personalized relationship with users is expressly forbidden, like the postal service the system is a public utility that makes its money only through increasing usage.

Tools like CRM (Customer Relationship Management) that give so much power to large marketplaces now have no place in the national e-markets model and would in any case be made redundant by the brutal efficiencies of so many interlocking markets. Buy a car online at the moment for instance and you are an attractive target to be sold vehicle insurance by a partner company of that marketplace. Because of the effort involved in looking elsewhere you may accept the deal emailed to you shortly after the purchase. But in public e-markets the entire insurance market - open to any seller - is one click away and already knows everything about the car you've bought. (Value added operators can of course do what they like with add-on services that might include CRM but that is between them and their customers and has nothing to do with the main system.)

A National e-Markets consortium would not have anything like a monopoly in their sector: buyer/seller matching online. They have a package of benefits awarded by the state that can not be realistically given out any other way. In return for unique access to these benefits for, say, 15 years they would have:

-         Given up any rights to “owning the customer”, cross-selling, packaging their own value added services, identifying users for preferential treatment or any of the other business models that can put so much power in the hands of market operators at present.

-         The mandate should not even allow the consortium to run the system’s marketplaces which should be developed by franchisees. The consortium itself is running an unexciting (but potentially highly profitable) public utility.

-         Committed to a fixed percentage take of transactions across the system for the entire period. They will have set this figure in open competition with rivals.

Fear of monopolies is potentially an argument in favor of national e-markets. Online marketplaces are natural monopolies: buyers want to be where there are most sellers and vice-versa so users naturally gravitate towards one dominant player. E-bay have discovered this effect in auctioning collectibles. Microsoft are attempting to leverage their near monopoly in PC operating systems and office applications into services like Passport that could give them a role as toll-gates into online trading into eternity.  

Initiating e-markets as public infrastructure would create fragmented networks of companies that had a monopoly on certain facilities at national level for a fixed term in return for a very low price service and restricted powers. For those who wish to use them, they would provide an alternative to emerging worldwide would-be monopolists.  

Some worry about the cultural impact of such a system, concerned it would become an unassailable mega-brand. Far more likely is that the national e-markets become a taken-for-granted utility that barely registers in the nation's consciousness once a first novelty phase is passed. How you buy becomes uninteresting, it is what you buy that commands mind share. Electricity supply brands are similarly dull, but the appliances they enable excite continuous attention.

National e-markets would be one channel to be used by individuals and companies as they see fit. It is predicated on markets in which bad traders are passed into the court system for judgment in a publicly accountable process then downgraded or even evicted if found guilty.

Forcing babysitters, for instance, to get vetted before being able to trade is no more intrusive than the relationship already forced on users of the road network by governments. Unlike the roads however, if you don’t like the rules there are plenty of alternatives to the state backed system.

And the new markets would not stand in their way. If you simply want an undemanding job-for-life the system would have little to offer you (as a seller of your time). But few are lucky enough to get such job security today. If you would rather opt for working for a much wider range of employers and aggregating a desirable track record national e-markets would be a very easy way to do it: possibly opting for long term contracts through the system with the daily hours that are right for you. No-one has to sell in the short term, short notice market although that is where rates are likely to be highest.

The system’s charter needs to ensure the only person or company not allowed to sell in a particular market is whoever runs it. Markets have to be neutral, if one big player dominates it's because they have resources, skills or patents that others can not match, not through any preferential treatment by the system.

Just the opposite. Money-laundering, fencing of stolen goods and fraudulent transactions usually rely on large sums of money moving anonymously. National e-Markets will tend to break down big transactions among smaller sellers (because it’s more cost effective for the buyer). They also create an audit trail of contracts that – with a court order – can be accessed.

But they are based on different mechanisms, different business models, different pricing regimes and have no agreed standards either technical or in market management. Better to let a winning consortium start afresh and manage things their way. E-commerce technology is so cheap, relative to its potential,  there seems little point in hampering it by trying to plumb together a bunch of first generation systems as the foundation for something much bigger. Existing companies would of course be free to interface with the public system and add value in whatever way they wish.

If that happens it will be because the alternative marketplaces have failed to find a convincing advantage over the public utility and nobody wants to use them. But there will be all sorts of ways operators can build value added services on top of the state sanctioned marketplace. These companies will have no relationship with the main system: they can innovate as they please. Think of the relationship between bath salts manufacturers and the public water supply: non-existent, but the hundreds of competing unregulated companies are dependant on the public utility for their existence. State backed markets could be a huge spur to innovation.

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