Honestly - why should rando companies skim off the top of the entire country's economy? I'm surprised more countries aren't just nationalizing things that are a drain.
Why is something like PayPal not nationalized? Debit cards? The list goes on.
The goal here wouldn't be to form a successful business, but to serve needs directly. Creative, innovative people will continue to create and innovate as long as they are employed specifically to those ends.
There are probably business journals that put this better, but the issue may not be that these creative people will vanish if we directed them to serve a need. Rather, the issue may involve willingness to take risks to try crazy new ideas because the potential reward is great. Ownership in the results may be much more powerful than a static unchanging government salary. I'm not sure how this may translate to an organization level, but suspect similar dynamics at play, along with a good amount of competition to move things along (edit: that is, when there are multiple private entities vs a single state entity doing the directing).
I don't really see how an engineer at Blue Origin is more willing to take risks or has more ownership in the results than say an engineer at NASA JPL. If anything the engineer at NASA has more ownership since their work is in the public interest, rather than making some billionaire marginally richer.
> I don't really see how an engineer at Blue Origin is more willing to take risks or has more ownership in the results than say an engineer at NASA JPL
An engineer at SpaceX or Blue Origin is incentivized differently from one at JPL. SpaceX isn't designing rovers for a Titan mission or exploring novel theoretical propulsion systems. And NASA wasn't able to turn its decades of work on propulsive landing into a competitor to the Space Shuttle, Atlas or the SLS.
Note, too, that engineers at NASA are at the whim of Congress. I know several whose life work was cut in a budget negotiation thousands of miles away. I know several more who left aerospace for better pay in other industries.
>Note, too, that engineers at NASA are at the whim of Congress. I know several whose life work was cut in a budget negotiation thousands of miles away. I know several more who left aerospace for better pay in other industries.
Fair point, it does require the state to be willing to sufficiently and consistently invest in the effort for it to succeed.
The Japanese managed to grow their economy quickly because they did window guidance. People will complain about central planning yet there are countless of examples of governments that "macromanaged" their economy into success.
IIRC EU has tried for decades to facilitate launching a competitive international card system as alternative to US-run Visa & Mastercard, but failed. It definitely can lead to technological advancement, however, it often can not build an organization that's competitive enough that people would actually choose use it unless forced or motivated by subsidies.
Profit-driven enterprises automatically fail when the product is not desired by the market, or the firm is not operating sufficiently efficiently. Ideas are abundant and worthless - how would publicly funded research even figure out which idea is worth implementing into a running business? So many business ventures fail. Even a decade into Uber there is still great debate into whether or not it is viable. How would publicly funded research make an Uber?
The people who create those organizations do so with an expectation that they will earn a lot of money in the (not at all certain) case if they succeed and continue to own them until they sell their ownership to whomever they want at a time and a price they feel is right. It's not just a thing they would like to have, that expectation is the only reason for trying to launch such a company.
If there is a credible threat of nationalization (e.g. the government has nationalized similar organizations lately or even asserted that they are considering such things), then people who have the will, skill and capital to start financial services will rather do that elsewhere, where they have larger chances of a positive outcome for them. Safe and predictable legal environment - an expectation that your business won't be taken away from you - is a strong influence on the amount of investment and entrepreneurship a country gets; and more investment and entrepreneurship generally does result in more wealth for all of society even accounting for the share of the created wealth that's taken by the owners/investors.
You haven't really spelled out the issue, though. From your comment it sounds like nationalizing something is bad because the entrepreneurs won't make money?
If the business being nationalized is one that is a drain on the economy in some sense, then why wouldn't it be good for the country to nationalize it? I say "nationalize" broadly here, not necessarily in the way China implemented things. It could even be the creation quasi-public organization like Amtrak.
Obviously the key here is not to be as heavy-handed as China and to not nationalize everything, lest we be a communist state. However there are definitely things, like banks, that should have a public competitor.
I’m not following. My original comment called for the nationalization of things that drain the entire economy.
This implies said companies have already “won,” and that they’ve made (a lot of) money.
Your comment would make more sense if I was calling for the transitioning to communism.
Uber, for example wouldn’t be nationalized because its product type hasn’t become so pervasive that a majority of Americans use it. Debit cards and their ilk have.
I believe a lot of times in the US, those companies become public utilities [0], which are publicly owned through stock (or privately owned)[1] but are highly regulated by the government and also I think exempt from laws prohibiting monopolies[2]. I'm not sure what's the process of a company going from a regular public company to a public utility though.
> the nationalization of things that drain the entire economy.
Not sure how you would draw this line.
Do we nationalize the apple/google app stores because they are taking 30% cuts? Or Visa/Mastercard/Stripe because they take a cut on every transaction?
> Nationalizing something is bad because the next entrepreneurs in that field know they won't make money, so they won't build.
There is noting implicit that means they don't make money. The process of nationalization doesn't have to result in 0 compensation, it could be run like any other buyout. That being said being government run has its own issues.
Strange that you would twist my words that way. I don't advocate for getting rid of services that the government provides, nor do I have a problem with them offering a service in general.
I do think that if you take an existing market with competition, and you nationalise one or more actors in that market, competition becomes very difficult for any remaining private actors in that market or any future entrants. The reason is pretty simple: the rule-setting body is now playing the game against you. The end result of this is that new actors are less likely to enter the market at all, which limits innovation.
Because of this (and because of the historical record of failure almost every time this kind of thing is tried) the decision to nationalise should be taken very carefully. You list several things such as fire departments and roads which are arguably best provided by the government, but I don't think it's obvious that retail financial services should be added to that list.
Probably because raising money would be harder, would investors or venture firms weigh projects in industries likely to be nationalised lower? Probably.
Any industry likely to be nationalised would have an overall depressive effect on the number of risks taken on new products and services in that industry.
>then people who have the will, skill and capital to start financial services will rather do that elsewhere, where they have larger chances of a positive outcome for them.
Dan Wong, one the more competent China tech watchers surveying local entrepreneurs on current crackdown: "They would love to have the problems of Jack Ma" because it means they've made it really big.
China isn't a dinky market, the incentives are massive, founders will settle being 100s millionaires instead of billionaires if that's the size that keeps regulator scrutiny at bay. Also the fact that PRC is willing to break incumbents via regulatory crack down is creating opportunities not seen in markets effectively captured by huge players.
> rather do that elsewhere
Instead of "elsewhere", it's really about "do something else". PRC doesn't consider draining the best and brightest into a massive service blackhole like adtech or fintech worthwhile. It's crushing incentivization structure of soft tech to make hard tech more appealing. Beijing wants semiconductors and turbojets that can eventually be exported world wide, not a more profitable ANT pyramid scheme that will likely be a drain on domestic market.
> The fact that even Beijing isn't taking that path should show how extreme it is.
I think they absolutely are taking that path with their recent push towards the eYuan. If they want to replace Alipay with their nationalized, centralized system, I imagine the steps would look roughly like:
I am honestly a bit shocked how many folks are aware of China's digital currency push and nationalizing big fintech, and still don't see this is the endgame. Monetary policy and control of economies are power, why would you cede that control to civilians?
> I'm surprised more countries aren't just nationalizing things that are a drain.
Ask India, Pakistan, and Banglades how the era of mass nationalisations went for them in the seventies.
It went nowhere. In each respective country, the two decades of economic progress since the independence was undone.
It's a very remarkable test case for how nationalisation worked in three drastically different economies: relatively free market Pakistan, a socialism-lite India, going more hardcore, and a post-war blank sheet economy of Bangladesh.
In Europe most passenger railway companies are nationalised (or at least heavily controlled by state owned entities), and rail transport in Europe is arguably much better than in the US.
I think you would agree that there aren't very many nationalized industries other than weapon systems research/development ("weapons" as in cruise missiles, fighter jets, air craft carriers, etc.) I think you would also agree that the on-paper-private companies that do this work are effectively nationalized would perform much worse if they were selling to citizens rather than nations.
As far as services (rather than industries), those that I mentioned are perfect examples of nationalized (or at least "shared" as opposed to owned by a single company) services that perform well: Highways, USPS, TCP/IP, DNS, SMTP.
Though, I do admit that despite being built on publicly developed shared underlying technology, the actual deployment of DNS services or of devices that use TCP/IP or similar technologies is done by private companies.
This is also sort of adjacent to the debate of whether or not broadband access should be considered a utility and how utilities should be delivered.
With TCP I agree. On DNS I wish we actually used classes so we could have multiple separate hierarchies, ofc URL design might be needed to be changed slightly.
Take a look on the Riaz case, and his estate within a state.
Clearly, he violated almost every land ownership law possible. Fine him for that only, and fine him many billion, sure, but seizing BTK from him, and having Karachi govt nincompoops trying to run BTK... — painful to even imagine, and not helping the cause at all.
Every Chinese would extol their low broadband prices, like 100 RMB for 300 to 500 mbps, but what they didn't care is that the prices for businesses are startlingly high, so you have to pay to get blocky 1080p or even 720p online videos, the 300 to 500 mbps you got is merely a number when you aren't torrenting.
That's what nationalization looks like, beautiful from the outside, good luck inside of it.
Don't be too harsh to your local Chinese deliverymen, they make 1 RMB per package dreaming of buying those multimillion RMB a piece socialist condos.
I agree that companies shouldn't be allowed to monopolize and rent seek, but I'm not sure nationalization is the answer. It isn't done because of the same reasons communism fails. Innovation halts, corruption creeps in, and it becomes bloated and worse for the end user than when it started.
People always say this but it's simply not true. My local water authority has been operating for decades and I've never heard a single person complain. Ditto for the municipal gas company. I can't say the same for the local electric company (owned by Exelon) or the local cable company (Comcast) or the local garbage collection service (owned by WM).
If anyone is guilty of "bloat" that harms the end user it seems to me it's the private companies.
Capitalism and free enterprise succeed due to competition. Your local electric company and the local cable company probably are state sanctioned monopolies.
> People always say this but it's simply not true.
There are also cases where it does not go well, e.g. flint. Those companies you list suck because they have monopolies which I think is a separate issue. Also, a local municipal organization has a ton less bureaucracy, there is not much incentive for corruption, and the result of corruption won't tank the economy. A national bank would be a whole different ball game. If a guy gives his friend's company free water, so what. if a guy who works at a national bank gives his friend's shitty company a sweetheart loan that he knows they won't be able to pay back, that will have a lot more dire consequences if repeated over and over.
Oh don't worry about that, Chinese banks have been making risk-free money for decades, propped up its stratospheric property bubble and almost exclusively lend to SOEs (these SOEs then mark up it and re-lend or bulk-buy condo towers, shadowbanking at its finest) and avoid the private sector, probably no banks elsewhere are more of a leech than them.
Yeah, nationalize all the innovative companies and let the bureaucrats run them. You then end up with a system designed in the 1970s and rarely updated - https://en.wikipedia.org/wiki/ACH_Network. In the US, it takes 4-10 days to send an ACH.
I am all for competition. But only till companies reach a certain size. It is ridiculous to let private companies like Mastercard and Visa collect a percentage of every single electronic transaction.
We have had a government-run payments network[1] in India for a long time that all banks hook into and it works very well.
Umm... ACH is apparently private, even if it took serious inspiration from initiatives used by federal government.
I think a better question is why, for all supposed innovation that is brought by private enterprise, the country with seemingly most privatised financial sector has some of the most backwards, arse-end-of-nowhere, the devil has said goodnight few stations before payments situation?
One hypothesis is that in such situation, the vendors are not interested in cooperation if they can operate nationwide, and instead try to get as much lock-in in spite of what's better for customer, and thus aren't interested in faster general payments system.
I mean, seriously, Poland despite all the crap we had to sort out in 1990s managed to build a faster and more reliable system by using file transfer (mostly by FTPS, but used to be X.25 and optionally floppies!), scheduled jobs (essentially cron) and these days basic PKI file signing.
It worked well enough that cheques were phased out by I think 2002 (as in "no, there are no cheques supported anywhere").
And the capability floor it set means that any private alternative has to figure something that adds value - for example, instant online settlement (ever paid for pizza by wire? I do, often), shortcode-plus-phone quick transfers (essentially a common enough variant of the previous that even works at POS).
Nationalization is expensive and inefficient though.
With nationalization, PayPal won't even be created in the first place. Because why? The purpose of nationalized institutions is not chasing profits, and let me tell you, they hate changes unless they absolutely have to.
So for Alipay, even China is not going to nationalize it to the point that it becomes a state apparatus, the Chinese government would like to enforce control when they want to, and makes it obvious to Ant's factual owners.
68 comments
[ 4.8 ms ] story [ 142 ms ] threadWhy is something like PayPal not nationalized? Debit cards? The list goes on.
This is a good way to not get future PayPals or debit cards. The fact that even Beijing isn't taking that path should show how extreme it is.
Are you trying to say that publicly-funded research cannot lead to any technological advancement?
In other words, society needs more than just basic research and bureaucratic administration of basic government services.
An engineer at SpaceX or Blue Origin is incentivized differently from one at JPL. SpaceX isn't designing rovers for a Titan mission or exploring novel theoretical propulsion systems. And NASA wasn't able to turn its decades of work on propulsive landing into a competitor to the Space Shuttle, Atlas or the SLS.
Note, too, that engineers at NASA are at the whim of Congress. I know several whose life work was cut in a budget negotiation thousands of miles away. I know several more who left aerospace for better pay in other industries.
Fair point, it does require the state to be willing to sufficiently and consistently invest in the effort for it to succeed.
That is not to say that then companies don't need to form around it, but not as black and white.
If there is a credible threat of nationalization (e.g. the government has nationalized similar organizations lately or even asserted that they are considering such things), then people who have the will, skill and capital to start financial services will rather do that elsewhere, where they have larger chances of a positive outcome for them. Safe and predictable legal environment - an expectation that your business won't be taken away from you - is a strong influence on the amount of investment and entrepreneurship a country gets; and more investment and entrepreneurship generally does result in more wealth for all of society even accounting for the share of the created wealth that's taken by the owners/investors.
If the business being nationalized is one that is a drain on the economy in some sense, then why wouldn't it be good for the country to nationalize it? I say "nationalize" broadly here, not necessarily in the way China implemented things. It could even be the creation quasi-public organization like Amtrak.
Obviously the key here is not to be as heavy-handed as China and to not nationalize everything, lest we be a communist state. However there are definitely things, like banks, that should have a public competitor.
Nationalizing something is bad because the next entrepreneurs in that field know they won't make money, so they won't build.
This implies said companies have already “won,” and that they’ve made (a lot of) money.
Your comment would make more sense if I was calling for the transitioning to communism.
Uber, for example wouldn’t be nationalized because its product type hasn’t become so pervasive that a majority of Americans use it. Debit cards and their ilk have.
[0]: https://en.wikipedia.org/wiki/Public_utility [1]: https://marketrealist.com/p/are-utility-companies-public-or-... [2]: https://www.law.cornell.edu/wex/public_utility
Not sure how you would draw this line.
Do we nationalize the apple/google app stores because they are taking 30% cuts? Or Visa/Mastercard/Stripe because they take a cut on every transaction?
There is noting implicit that means they don't make money. The process of nationalization doesn't have to result in 0 compensation, it could be run like any other buyout. That being said being government run has its own issues.
So your real problem is that the government offers a service? So we should get rid of public fire departments, police, schools, and roads?
I do think that if you take an existing market with competition, and you nationalise one or more actors in that market, competition becomes very difficult for any remaining private actors in that market or any future entrants. The reason is pretty simple: the rule-setting body is now playing the game against you. The end result of this is that new actors are less likely to enter the market at all, which limits innovation.
Because of this (and because of the historical record of failure almost every time this kind of thing is tried) the decision to nationalise should be taken very carefully. You list several things such as fire departments and roads which are arguably best provided by the government, but I don't think it's obvious that retail financial services should be added to that list.
Neither do I especially, I was only questioning your reasoning for opposing it.
Not to mention the purpose of the government is to serve its citizens, not just entrepreneurs.
Any industry likely to be nationalised would have an overall depressive effect on the number of risks taken on new products and services in that industry.
Dan Wong, one the more competent China tech watchers surveying local entrepreneurs on current crackdown: "They would love to have the problems of Jack Ma" because it means they've made it really big.
China isn't a dinky market, the incentives are massive, founders will settle being 100s millionaires instead of billionaires if that's the size that keeps regulator scrutiny at bay. Also the fact that PRC is willing to break incumbents via regulatory crack down is creating opportunities not seen in markets effectively captured by huge players.
> rather do that elsewhere
Instead of "elsewhere", it's really about "do something else". PRC doesn't consider draining the best and brightest into a massive service blackhole like adtech or fintech worthwhile. It's crushing incentivization structure of soft tech to make hard tech more appealing. Beijing wants semiconductors and turbojets that can eventually be exported world wide, not a more profitable ANT pyramid scheme that will likely be a drain on domestic market.
I think they absolutely are taking that path with their recent push towards the eYuan. If they want to replace Alipay with their nationalized, centralized system, I imagine the steps would look roughly like:
1. Create eYuan (Done)
2. Disrupt other solutions (We are here)
3. Disallow other solutions
4. Done
Ask India, Pakistan, and Banglades how the era of mass nationalisations went for them in the seventies.
It went nowhere. In each respective country, the two decades of economic progress since the independence was undone.
It's a very remarkable test case for how nationalisation worked in three drastically different economies: relatively free market Pakistan, a socialism-lite India, going more hardcore, and a post-war blank sheet economy of Bangladesh.
- Why don't big american cities have trolleybus?
- Because density , imagine putting those buses in the desert, would be stupid
- But why not put the infrastracuture starting from high density areas ?
- You are making sense now, let me find other excuse ... it is because culture/freedom/short history/ the constitution , the yellow party
- I don't have time to logicaly analize all those excuses, next time maybe
As far as services (rather than industries), those that I mentioned are perfect examples of nationalized (or at least "shared" as opposed to owned by a single company) services that perform well: Highways, USPS, TCP/IP, DNS, SMTP. Though, I do admit that despite being built on publicly developed shared underlying technology, the actual deployment of DNS services or of devices that use TCP/IP or similar technologies is done by private companies.
This is also sort of adjacent to the debate of whether or not broadband access should be considered a utility and how utilities should be delivered.
2) The government cant play the enterpreneurship game, except extremely fringe cases,
Take a look on the Riaz case, and his estate within a state.
Clearly, he violated almost every land ownership law possible. Fine him for that only, and fine him many billion, sure, but seizing BTK from him, and having Karachi govt nincompoops trying to run BTK... — painful to even imagine, and not helping the cause at all.
That's what nationalization looks like, beautiful from the outside, good luck inside of it.
Don't be too harsh to your local Chinese deliverymen, they make 1 RMB per package dreaming of buying those multimillion RMB a piece socialist condos.
If anyone is guilty of "bloat" that harms the end user it seems to me it's the private companies.
There are also cases where it does not go well, e.g. flint. Those companies you list suck because they have monopolies which I think is a separate issue. Also, a local municipal organization has a ton less bureaucracy, there is not much incentive for corruption, and the result of corruption won't tank the economy. A national bank would be a whole different ball game. If a guy gives his friend's company free water, so what. if a guy who works at a national bank gives his friend's shitty company a sweetheart loan that he knows they won't be able to pay back, that will have a lot more dire consequences if repeated over and over.
Oh don't worry about that, Chinese banks have been making risk-free money for decades, propped up its stratospheric property bubble and almost exclusively lend to SOEs (these SOEs then mark up it and re-lend or bulk-buy condo towers, shadowbanking at its finest) and avoid the private sector, probably no banks elsewhere are more of a leech than them.
SOEs themselves are ruthless leeches.
It's a tragedy instant payments haven't been a utility for this long.
https://corpgov.law.harvard.edu/2020/08/31/fednow-the-federa...
https://www.pymnts.com/news/faster-payments/2021/five-banks-...
https://www.frbservices.org/financial-services/fednow/blog/u...
https://www.frbservices.org/financial-services/fednow/instan...
We have had a government-run payments network[1] in India for a long time that all banks hook into and it works very well.
[1] https://en.wikipedia.org/wiki/National_Payments_Corporation_...
I think a better question is why, for all supposed innovation that is brought by private enterprise, the country with seemingly most privatised financial sector has some of the most backwards, arse-end-of-nowhere, the devil has said goodnight few stations before payments situation?
One hypothesis is that in such situation, the vendors are not interested in cooperation if they can operate nationwide, and instead try to get as much lock-in in spite of what's better for customer, and thus aren't interested in faster general payments system.
I mean, seriously, Poland despite all the crap we had to sort out in 1990s managed to build a faster and more reliable system by using file transfer (mostly by FTPS, but used to be X.25 and optionally floppies!), scheduled jobs (essentially cron) and these days basic PKI file signing.
It worked well enough that cheques were phased out by I think 2002 (as in "no, there are no cheques supported anywhere").
And the capability floor it set means that any private alternative has to figure something that adds value - for example, instant online settlement (ever paid for pizza by wire? I do, often), shortcode-plus-phone quick transfers (essentially a common enough variant of the previous that even works at POS).
With nationalization, PayPal won't even be created in the first place. Because why? The purpose of nationalized institutions is not chasing profits, and let me tell you, they hate changes unless they absolutely have to.
So for Alipay, even China is not going to nationalize it to the point that it becomes a state apparatus, the Chinese government would like to enforce control when they want to, and makes it obvious to Ant's factual owners.
This company is completely doomed because the founder is basically treated as an enemy of the state.
"China plans to break up Ant" could have been a headline nearly every week/month since Jack Ma dropped out of the public sphere.
Has Ma reappeared yet to publicly thank the Chinese state for breaking up his company?