A new policy area

This market failure issue belongs neither to the right or left. One commentators has said "NEMs could deliver the aims of Karl Marx by the means of Adam Smith"! However, “The Market” can have a negative perception, largely on the left, because markets can be so unequal or because they are seen as good for business but bad for communities.

NEMs addresses both points. It allows a sporadic micro-seller to trade with all the efficiencies of a global enterprise. That should make local community providers more competitive than remote corporates in many sectors.

Policymakers don’t yet take new trading technologies seriously enough. National governments responded to the Internet with a wave of initiatives. The Minitel listings service in France; a monopoly on high level encryption given to Verisign by the US Department of Commerce; Singapore’s TradeNet customs clearance scheme and Sweden’s drive to ensure universal e-mail are all examples. But we’re in a new era, there needs to be a mindshift from politicians.

At the moment, governments are following corporations in paying IT companies to build them systems on a department-by-department basis. Sometimes those systems work, but the underlying premise remains wrong. It’s analogous to government departments each shopping around for a power generator in the early days of electricity. They did at first, but policymakers then began taking an overview of the new technology and realising a little legislation could divert the private sector towards supply for everyone, including government departments.

Government should not be a passive consumer of IT infrastructure. It is sitting on benefits (listed in our A Framework for NEMs section) that could shape a new order of IT usefulness. Government’s task is to get every potential player in the economy access to a truly modern market. One outcome of that will be that anyone needing to interact with a government department has a state-of-the-art platform on which to do so, that platform having  cost taxpayers nothing.

Inevitably, policymakers will ask: Could NEMs be piloted?

 Policymakers are still in a “we buy what’s available” mindset rather than a “this is what our economy needs” mode when it comes to trading systems. That creates a danger that they unwittingly give away the benefits that could underpin a new facility, getting little in return. It’s happened before.

In 1985 Britain’s fledgling mobile phone operators approached Margaret Thatcher’s government asking for access to the then unused 900Mhz band of radio frequency spectrum. It was gifted to two companies, Vodafone and Cellnet. In 2007, it had to be painfully taken back and auctioned to other providers.

Radio spectrum is a national asset that can raise billions for the public purse. It is easy to see a comparable situation where policymakers give away the benefits that could be traded for investment in a fully fledged NEMs type system too cheaply.

A Modern Markets for All policy would cut across strategies for economic development, public service delivery, welfare reform and other strands. It could provide new potential in areas such as environmental policy. NEMs boosts local traders which should cut down on travel of goods and people. It can form instant supply chains to make local sourcing so effortless for any business.

A mature NEMs system would allow all sorts of initiatives to be piloted, analysed and rolled out with access to precise, immediate, data for decision makers. Assume boosting home tutoring in science for children in the run up to exam time becomes a priority. Tax on those bookings could be dropped, perhaps in one area initially.

In this scenario, anyone with tutoring qualifications would find NEMs telling them that it was in their interests to prioritise that sector. Putative tutors might be offered funding by private investors to train for the new market opportunity. If the pilot works, the tax code can be amended by government ensuring NEMs instantly changes its calculations on hundreds of thousands of bookings.

A developed NEMs system lets government get out of so many activities. In the example above, politicians need only change the tax code and set a standard for allowing individuals to work as home tutors that NEMs can demand proof of from potential sellers. Officials don’t need to recruit tutors or hire trainers to teach potential tutors. Once the opportunity is in place, Market Forces in NEMs should do the rest with entrants competing to get into the new opportunity ahead of the herd.

Our NEMs and government section explains this shift from political control to market opportunity further. Not initiating NEMs could be a sign of an activist government, determined to retain top-down command.

•  Opposition to NEMs