The concept of Nordic Socialism became fashionable among supporters of Bernie Sanders, and we’ve pointed out that it is neither as benign nor as successful as it is made out to be. All forms of socialism depend on replacing the open, accessible, inclusive and pluralistic institutions of Western civilization with what F.A.Hayek called “extractive political institutions”. In extractive institutions, a political elite, incapable and incompetent at practicing the economic way of creating value, indulge in the political way of extracting value that’s been created by the productive members of society, and repurposing it for their own political goals.
The leading Nordic Socialist of the day is Margrethe Verstager, the European Union’s competition commissioner. She is not content with imposing Nordic Socialism on her fellow Danes in her own country. Rather, she uses her power as an EU commissioner to impose it on the citizens of the world, and most notably on those of the United States.
She does so through the extractive and punitive activities of her EU commission. Under her watch, the commission has:
- Fined Google 2.4 billion Euros for “abusing its dominance” in European markets for search and shopping.
- Ordered Apple to pay 13 billion Euros in alleged “unpaid” taxes.
- Fined Qualcomm nearly 1 billion Euros for payments it made to Apple that Ms Verstager said were “illegal”.
Her actions are purely political, with no grounding in economics, and precious little in law. Apple Chief Executive Tim Cook called the allegation that the company had paid an ultra low tax rate in Ireland and thereby evaded payment of taxes elsewhere in the EU “total political crap”. Even Ireland appealed the EU’s decision, alongside Apple’s own appeal. Google has appealed the EU’s ruling on the basis that its logic and conclusions are flawed. Qualcomm said that it will appeal its fine. The Information Technology And Innovation Foundation has stated that Ms Verstager is merely picking “big, juicy targets” as a “popular position for her to take in Europe”.
She is stretching competition law to cover issues and situations that her predecessors never intended, or at least never imagined. For example, she has created a doctrine that “dominant” companies “have a special responsibility not to abuse their power”. The abuse is, of course, perceivable only from a Nordic Socialist perspective.
Anti-capitalists like Margrethe Verstager fail to recognize- or even to understand – entrepreneurial order and its consumer-beneficial dynamism. First, companies like Google, Apple and Qualcomm began as innovative entrepreneurial start-ups. Their shared goal was a better experience for consumers. If they were able to deliver it, they would reap marketplace rewards. They grew bigger simply because consumers were, and continue to be, grateful for the innovation.
Do consumers believe that Google, Apple and Qualcomm have become too “dominant” and “abusive”? If they do, they’ll signal their permission for new innovations to take their place. New start-ups will emerge, present their case for a new and better experience and win consumer support. The consumer decides who wins in the marketplace.
We have clear evidence from our own history of extractive institutions here in the US. (Yes, we have them, too; it’s the natural and inevitable stance of politicians. Fortunately, US consumers have a little more economic freedom left than their European counterparts.) In 2001, the US Justice Department sued Microsoft for “anti-competitive practices” in the bundling of its Internet Explorer web browser with its Microsoft Windows operating system. What a massive threat! Today, the Internet Explorer brand has been abandoned by Microsoft, and the company has ended mainstream support for Windows and does not even have a corporate division devoted to personal computer operating systems. Consumer perceptions and preferences change and dynamic market innovation moves quickly, while the idiotic and sclerotic anti-trust mechanisms of the U.S. Government grind slowly on.
In the 1980’s IBM had its own 13-year antitrust battle with the U.S. Justice Department. The case was ultimately dismissed “without merit”, but burdened IBM with huge legal costs and a massive shift of its attention from competing in the marketplace to defending itself in the courtroom. IBM’s offense? It was too “dominant”, especially in mainframe computers. While the Justice Department’s case droned on, the marketplace shifted to PC’s. The government eventually abandoned its tainted effort entirely, but not until they had drained innovative energy out of IBM and initiated a decade-long financial slide.
The extractive institutions of government destroy commerce. They are driven by the politicians’ bitter, envious and vicious mindset. Margrethe Verstager is a lifetime professional politician. She has always followed the political way, never the economic way.
People like her, and the extractive political commissions like the one she heads, are a threat not just to innovation but also to the civilized open institutional framework that makes it possible.
