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Why the Internet Is Industrial Policy Not Free Market

May 25, 2021

Big Tech’s defense against any potential governmental accountability is wielding the myth that their success is a result of their free market merit, innovation, and competitiveness.

Myth busted.

Common sense scrutiny proves the Internet and Big Tech are not the mythic result of laissez faire free market capitalism, but the real product of massive U.S. Government (USG) intervention via U.S. Internet industrial policy in Section 230 of the 1996 Communications Decency Act.

Only the “interactive computer service” (ICS) industry created and defined by the USG in Section 230, are endowed with elite, supra-national status, and lawless impunity of  being “unfettered by Federal and State regulation.” 

Big Tech’s defense against any potential governmental accountability is wielding the myth that their success is a result of their free market merit, innovation, and competitiveness.

It is not merit when the game allows one side to not play by the rules when the other side must. It is not innovation when government policy mass-enables ICS-only regulatory arbitrage of existing industries in ways that are illegal for existing industries. It is not competitiveness when government industrial policy bestows only ICSs with unbeatable, government advantages.

The Internet industry has branded its regulatory arbitrage impunity as “disruptive innovation.” They get the joke. It is a cheaters charter akin to racing against a runner whose shoelaces are tied together.

Government-incented regulatory arbitrage is the opposite of laissez faire free market capitalism.

In hindsight, Section 230’s most disruptive industrial policy impact was dividing the U.S. economy into predetermined winners (ICS) and designated losers (non-ICS, i.e., everybody else) -- via the most unlevel playing field the USG could possibly create.

Section 230’s massive intervention of removing most rule-of-law risks online, predictably fueled widespread fraud and wild speculation that ultimately cost investors and pensioners $4 trillion in the 2000 Dotcom Bubble market crash. Again, widespread fraud and wild speculation fueled the 2019 ~$1 trillion cryptocurrency-crash, and it is at it yet again in 2021’s ~$2 trillion ‘Cryptocurrency Bubble II.’  

The Internet industry’s regulatory arbitrage has disrupted the constructive and productive rest of the economy, by adopting business practices, models, strategies, products, and services, that the rest of the economy companies cannot do legally or ethically because they are subject to Federal and State enforcement of intellectual property rights, a duty of care, and government fiduciary, safety, security, privacy, and antitrust, rules.

U.S. Internet industrial policy has transmogrified our economy into a franken-system of out-of-control crony capitalism and crony socialism online. Its classic regulatory capture and Big Tech’s Big Advocacy enable ICSs to capitalize winner-take-all economic benefits, while socializing their many costs to the designated losers and the public.

It is no coincidence USGDP has lagged its historical averages for twenty years. See a big reason why.

From 2012-2019, 497 Fortune 500 companies (i.e., the 500 minus Amazon, Google & Facebook,) grew revenues 14.6%; current USGDP grew output 32.3%; and Amazon, Google, and Facebook together grew revenues 341%.

This evidence reveals the macro-outcome of Big Tech’s unfettered regulatory arbitrage. From 2012-2019, Amazon, Google, and Facebook together outgrew the other 497 Fortune 500 companies by a winner-take-all 2,235% -- the antithesis of broad free market prosperity.

Coercive U.S. Internet industrial policy is the opposite of a voluntary free market.  

1996 U.S. Internet policy arbitrarily dictated unequal protection under the law in creating two rival classes in America --the unfettered ICS aristechcracy and the fettered everyone else.

Fast forward to 2021, the unfettered Big Tech aristechcrats’ algorithms, terms-of-service, and end-user-licensing-agreements lord over the fettered masses because USG Internet policy has subjugated them to private regulation without limited-government, constitutional rights, rule of law, due process, or redress.

1996 U.S. Internet policy in practice coercively inverts many of America’s values and priorities today by imposing top-down, tech-first tyranny, where Internet technology’s best interests reign above all others. Technology comes before people and tech determinism before rule-of-law. It is globalism first, America last, and unfettered Big Tech above limited government for all.  

This Internet industrial policy also imposes all-purpose, global, peer-to-peer (P2P) technologies that are enabled by a USG-invented essential TCP/IP protocol, that by an original design mistake, disturbingly cannot be authenticated, secure, or made private at scale, but it is still promoted by U.S. policy for use for everything everyone, conducts everywhere for work, life, and play.  

This USG Internet policy is massively coercive because it is a take-it-or-leave-it proposition. To get any of the Internet’s many good things one must accept all the major unfixable, vulnerabilities and risks that come with it, with insufficient means to protect oneself or one’s family from them.

In sum, only top-down, coercive Government industrial policy, not a bottom-up, voluntary free market, could impose on everyone, one universal, all purpose, global network on which no one and nothing can be safe and secure.

Myth busted.

Author
Scott Cleland is a precursor: a proven thought leader with a long track record of industry firsts.
scleland@precursor.com @scleland
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