Western government has followed a basic pattern for centuries. Enter a geographic area and settle it by managing its resources. The activities surrounding the extraction, processing, and distribution of resources are regulated and taxed by government with proceeds going toward the maintenance of government operations and institutions and the promotion of the social fabric. Government administers the control of resources via private hands by issuing “trading companies” a license to carry out the economic and financial activity necessary for resource management including the sale of finished products and services to consumers.
As a side note, you will find going forward that I will refer to private sector actors as “traders” or “trading companies.” Sometimes I will refer to private actors as merchants as well. The practice of trade and its importance in the activities of national government will be addressed more in future blogs but for now when I discuss the private sector I am describing the exchange of goods and services in markets where one asset, i.e. cash, is exchanged for another asset, i.e. goods, services, and the public administrator is regulating those exchanges on some level.
You will also find going forward that I will use public administrator and government interchangeably. Most Americans include the legislative and judicial in their perception of government. While the legislature and judicial branches set the legal parameters within which public administration occurs, government is about action hence the term executive when describing the branch that takes actual action in carrying out policy. Thus, arises another reason for using public administrator when describing action taken by government.
I can at a firm like US Steel and argue that they were chartered to create a taxable event in the mining of metals used to create steel. Archer Daniel Midland was likely chartered to create a taxable event in food production. Delta Airlines, chartered to create a taxable event in transportation. And Facebook? What resources has Facebook been chartered to manage and organize?
Given its mission to connect the world, Facebook’s charter appears to have been granted for the extraction and management of personal information in order to build an audience to which traders can advertise their goods and services. The taxable events public administrators are hoping for include the purchase of advertisement from Facebook which leads to taxable corporate income, and sales taxes generated from the sale of a trader’s goods and services with taxes going to state and local governments.
I am calling out Facebook because they are currently king of social media, but this analysis of public administration and social media could apply to any other social media firm including Twitter or LinkedIn. I guess a significant number of academics would not take to the argument that the government (and by government I am referring to the entire federal-state-local structure) issued a charter to mine the data of American consumers but that is the resource that Facebook and other social media sites extract, organize, and distribute for the purpose of making a profit, a taxable event.
Facebook’s business model for garnering consumer information and converting it into profit has been on Congress’ radar for months now especially given Facebook’s poor stewardship over personal data released to third parties. Implementing modifications to how it manages privacy may have a negative impact on net income, reducing the amount available for taxation. Last week, Facebook stock took a one-day hit falling 20% in value as concerns circulated about how its implementation of new privacy initiatives might impact its costs of doing business. I doubt if this price fall included any potential Trump administration action on privacy, but if not, any additional action on the part of the Trump administration or independent “Fourth Branch” agencies such as the Federal Trade Commission may contribute additional headache for the company and its shareholders.