Capitalism favours private ownership as a means of production with the objective of generating profits. Politics concerns the taxation and distribution of the wealth that is created. Capitalism works at its most efficient when individuals have the freedom to maximise their use of capital.
The Coalition Government lost sight of this truth almost from the beginning with their torrent of change, regulation, fiscal backtracking, accusatory judgements and budgetary strangulation. Capital freedom has almost disappeared in the UK.
The current revolution in the world of publishing is therefore worth highlighting: it is capitalism at its most effective.
Everybody is aware of the fundamental shift from hardcopy to digital books. Many now have readers onto which they download their favourite books. The market leaders have been Amazon with its Kindle and Apple’s iPad.
Logo for the Barnes & Noble Nook (Photo credit: Wikipedia)
However Microsoft has stunned the sector by announcing that it is to acquire a stake costing $300 million in the digital operations of Barnes & Noble in the US. They are the world’s largest physical seller of books. They have invested huge sums in an e-reader called ‘the Nook’. When Microsoft launch Windows 8 the home screen will feature a Nook application. When the market statement was made the Barnes & Noble share price increased by nearly 60 per cent. The Nook e-reader market share is around 22% compared to Amazon’s Kindles at 52%. This deal will change all that.
Barnes & Noble anticipate that e-books will increase from 5% to 30% of the global book market within three years. Microsoft will own more screens in portable devices than their competitors.
In the United Kingdom the mantra is that growth can come from SMEs. However the small-cap markets are almost dead. AIM manages a few foreign mineral companies and little else. PLUS Markets is fighting for its survival and is up for sale. The Treasury is committed to providing finance for growth through funds. In doing so they are allowing the building of massive overheads (usually a minimum of 25% of a fund will go in costs) without any guarantee of success.
The Microsoft deal, which will pour capital into innovation and expansion to the ultimate benefit of the consumers, is capitalism at its best.
As the UK skirts with double dip it is time the Coalition, the Treasury and the financial regulators realised that the efficient operation of the capital markets is the best way to restore our fortunes.
Tony Drury
Follow Tony on Twitter @TonyDrury39
Related articles
- Microsoft and Barnes & Noble take on Amazon’s Kindle with $300m deal (telegraph.co.uk)
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[...] can be stimulated by a return to the importance of the capital markets system. In his blog ‘Capitalism lives on in the e-book wars’ he explains that free market activity in the publishing industry is improving choice for [...]
You’re right Tony that the ebook market is hugely exciting – though more so in the books themselves than in the e-reader/tablet market. Low pricing and convenient tech is allowing huge sales, titanic races between authors and large profits. It’s a pity a) VAT is still charged on ebooks and b) that hard copy books are still so over-priced despite the lessons of the online market.