This is non-expert post on a topic about which many people have very deep knowledge and very strong opinions. So, please, feel free to tell me why I’ve got it wrong.
Google executive chairman Eric Schmidt may feel that the tough questioning he got yesterday on corporate tax was a price worth paying for promoting his company and book. But the news headlines focussed on tax, confirming Google’s reputation is now a great deal more mixed than a few years ago, when politicians of all varieties were queuing up to bask in its glow.
I wrote some time ago about the corporate tax issue and can only wish George Osborne luck as he seeks to agree an international approach to making multinational companies pay their fair share, something which will, one suspects, be made harder by the Coalition’s general antipathy to international co-operation in areas of tax and regulatory policy.
But tax is the least of my three concerns. The second is the potential for Google free riding, especially on non-profits. I recently saw the deeply impressive Salman Kahn, founder of the amazing Khan Academy, talk at the LSE. The Academy is currently running at six million students watching lectures every month and this is certain to rise rapidly in the years to come. Now, I have no idea what the information gleaned from these six million users is worth to Google in terms of revenue gained from advertising text books, on-line courses and other education related goods. Nevertheless, and notwithstanding Google’s good works such as its free ad words for non-profits, there is surely something problematic about a massive corporation making money from content generated entirely for charitable purposes. By the way, the same thing applies to the information gleaned from the ninety million on-line views of RSA Animate. Surely it is not beyond the wit of Google’s creative team to find a way of returning to non-profits the money which their content has made for Google and their commercial partners.
Third, Google is effectively a monopoly. We are so used to the idea that the internet opens up possibilities and disperses power we can fail to see another characteristic – the way single platforms tend to dominate core markets: Facebook and Twitter for social media, Amazon for retail, YouTube for free content, eBay for peer to peer sales, even Wikipedia for reference. Having had a tiny dip to 89%, Google is once again providing the engine for more than nine in ten on-line searches in the UK. The rise of the monopoly platform is partly due to network effects (platforms have more utility the more people use them) but also the use of big data to create algorithms which enable big players to continuously refine their product and maintain or expand the distance between them and any new entrant.
All these organisations will say that their market domination is deserved and that they use their power responsibly to the benefit of mankind (an argument I am willing to accept from Jimmy Wales), but these have always been the defences of monopoly and they don’t change the well attested theory that sooner or later monopolies lead to an abuse of position and dysfunctional outcomes.
Which brings me back to Eric Schmidt - his defence yesterday had two parts: the first was ‘everyone else does it’, which is basically an abdication of ethical responsibility; the second was, ‘we shouldn’t pay tax because we provide a service which helps the economy’. On this basis car manufacturers shouldn’t pay tax because people use their cars to drive to their jobs, nor should Greggs the baker because people need pasties and sausage rolls to give them energy to work and so on. Who in this world of collective irresponsibility pays for the social provision (education, infrastructure, policing, etc) which is integral to the reasonably peaceful social context in which companies can operate and prosper?
We have created an implicit pact with Google. Because we find its services so useful we accept not only that a massive global corporation knows more about us than we know about ourselves (imagine for a moment how you would react if a stranger came up to you in the street and said ‘I know more about you, what you like, what you do and what you are likely to do next than you know yourself’), but that it can use that information to gently manipulate us for its own enrichment. This is probably more power than the human race has ever given to any private organisation.
If this relationship is to endure and develop to our mutual benefit and if Google is to survive further challenges to its reputation, then the corporation needs to be seen to be taking its responsibilities incredibly seriously. The intellectually threadbare arguments mustered yesterday by Mr Schmidt do not augur well.
Fabian Wallace-Stephens Emma Morgante
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