Frequently Asked Questions about NEMs

1) Impact of state backed e-Markets

Anything which is a naturally fragmented market with potential resources not currently in the economy: tourism, domestic transport, accommodation, financial services, temporary work, logistics, manufacturing facilities and so on. Also, any sector which feeds big organizations: advertising, merchant banking, stock markets and commercial property are examples.

Feeling the least impact would be industries in which players need a massive resource base to begin trading: oil, airlines, defense contractors, mining, highly specialized manufacturers and the like. These companies might however find advantages in hiring their staff through the public markets to allow greater flexibility for both sides and the security of an accumulating track record for each individual.

Impossible to say. There would be no coercion to use the system so penetration would depend on the rate at which companies and individuals decided the new system was a better way of trading than the alternatives.

All public infrastructure has its limitations. The postal service for instance is not sophisticated enough for legal and financial institutions who in most countries subscribe to high security document transfer services. At the other end of the scale it is too sophisticated for someone who just wants to push a note under a neighbor's door. Likewise, public markets would be poorly equipped for complex art-of-the-deal transactions in commercial property for instance. Nor do they have a place in the value chain for neighbor's needing to borrow a cup of sugar from each other. Like postage, their place is in the broad mid-market. If a sector clearly has no value for the public system no franchisee would come forward to invest in building it, the system is likely to come up against its own limitations as it expands organically. 

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2) How National e-Markets happen:

The GEMs (“Guaranteed e-Markets”) mechanism exploits the specific advantages of deep, well regulated markets. Because it allows immediate purchasing from ever changing sellers across interlocking markets it maximizes the flexibility, inclusivity and competitiveness such markets could offer. There are alternatives but countries that go down those routes could be overtaken in national productivity by others that offered the full advantages available from combining e-commerce technology with direct access to the highest authorities in the land.

Capitalism has always needed things it can't itself supply: a stable money supply, coherent road networks, and so on. No company, however large, can create a consistently dominant marketplace except by massive spending on marketing. Attempting to do so would fragment that marketplace by creating consumer awareness that operators with minimal marketing expenditure could harness at much lower rates. As with currency, only government can create one marketplace that everyone knows will stay ahead of the rest in terms of benefits, low costs and therefore liquidity (numbers of users).

The challenge for governments is to obtain maximum national advantage in bestowing those benefits. Particularly in ensuring universal access, transparency of operation/roll out and lowest commission rate.

 The same reason few countries allow politicians to run broadcasting. It would put too much power, and potential for inflicting a political agenda, in their hands. The principle that, once a concession has been awarded government stands completely apart from the country’s e-market system is an important one.

Then they go bust. These systems need to be private enterprises, if they misjudge the economics of their service they suffer the consequences. Individual governments might chose to help out in an emergency by extending the period of monopoly to attract further investors (as the UK government did for a financially troubled Channel Tunnel) but that is a political decision. The principle that no taxpayer funds are spent on these marketplaces (beyond setting administering the tender process) should be absolute. A concession can always be re-awarded if its first recipient fails beyond recovery and that principle, together with provision for optional transfer of individual's records, should be enshrined in the tender document.

The same could be said of electricity supply. Some countries opted for a 240v supply through 3 pin sockets, others for 110v through 2 pins and so on. No country offers a choice between them. This is highly constraining for people who are fascinated by different types of electricity supply and would like to hand pick which ever is appropriate for their needs of the moment. Such people are rare and best advised to purchase their own generator. Most of us simply couldn't care about the way power gets from some unconsidered turbine to our hair dryer / TV set / industrial stone crusher. It is the ubiquity and simplicity of mass supply that we value most.

It can be painful for e-commerce gurus to acknowledge but there are likewise large sections of the population who, when seeking a babysitter for instance, don't care about the relative merits of auctions, bid/ask systems, aggregated buying mechanisms and so on. Nor are they remotely interested in the subtle distinctions between charge-for-display, transactional percentages, seller access rates or other business models. They simply want someone who's safe to watch over the kids which means they need a market with deep liquidity: maximum numbers of buyers and sellers. The exact technical standards of these markets will be decided on a commercial basis by a winning consortium, but like the non-existent controversy over 240 versus 110 volts, don't expect many people to be worried about having to make an additional effort if they want to find alternatives to the dominant model.

True, but again it’s a pattern the world has seen before. An innovative Victorian water engineer would despair over our current arrangements for his sector. The technology that would allow us all to have whirlpool baths running straight off a high pressure public supply has long been available, we have the means to purify drinking water well above current standards. But the world doesn’t care. So long as we can turn on a tap and the stuff coming out is broadly drinkable and under pressure sufficient to fill a kettle that is all we want from water technology.

It may be the same with e-commerce. Yes the technology may one day be capable of all sorts of exciting functionality. But – apart from hard core enthusiasts – all the world wants from it is the ability to buy and sell more quickly and cheaply in a simple, consistently deep and highly reliable market.

3) Miscellaneous questions

Irrelevant question. It’s about national competitiveness and efficiency, not any particular ideology. Many on the right like the idea of freer competition and scaling back of regulation. (The system itself is regulated to ensure transparency and probity but what goes on in the markets needs far less oversight because the risks of cartels, market manipulation and fraud of customers is so reduced.) The left finds economic inclusiveness attractive. Historically, infrastructure development tends to be above political ideology.

In the current, dis-coordinated model of e-commerce, international trade is often what the technology does best. But most of the world’s trading needs are domestic. How global does the market for babysitters need to be? There is no authority that can bestow the kind of benefits on an e-market system that national governments have available.

In the short term there would be nothing to stop anyone importing goods to be sold in their country’s public market system (subject to existing laws of course): cigars from Havana for instance. Longer term, the consortia building these systems for different nations would be sensible to ensure they could be linked if politicians decided they would enforce each others laws in cross border sales.

It needn’t work like that. For relatively minor offences courts might opt for a hidden conviction: the seller gets email notification that they have a judgment against them on record but that it will be wiped from the record after another 200 hours of bookings. Only if they get a second judgment upheld before then do they get downgraded, even that might be “spent” after a certain number of hours. The balance needs to be found between ensuring only the most diligent traders make it into the upper grades while not over penalizing those on the way up.

In many markets the verification process could include an independent assessment of a seller’s past track record: their experience of working with children for babysitting for instance. They can then be cleared to go into the market at a higher level perhaps by the local education authority in the childminding example. As always, this assessment will be at their own expense but the system’s local Market Overview will show whether it is a worthwhile move.

What the system does is relatively simple, it’s the scale on which it might do it that would be unique: tens of millions of transactions a day could routinely be flowing through central servers. It should still not be impossible to ensure transparency of operation. Mandating that the source code and all programming is published openly and inviting a succession of international organizations to check that it matches what actually is running on the servers is one way. Providing an anonymous whistleblower page for system staff is another.

Critical to the system’s integrity is functionality that ensures any user wanting to resign their account can do so immediately with all records about them wiped irrevocably. If ever there was to be public loss of faith in the system there could then be a situation analogous to a run on a bank: thousands of customers withdrawing everything from the system leaving no details of how they might be re-contacted. This should focus management attention relentlessly on proving their trustworthiness.

Ultimately these systems would need a mature relationship with the populations they serve. Yes, there is the potential for corrupting the service and the whole system might one day experience technical failure: the same is true for the water supply, telephone networks and electricity companies. An ever vigilant population that includes a healthy number of skeptics offers the best protection for all concerned.

•  Frequently Raised Concerns about NEMs