Global power is shifting from a society of nation states towards a society of global online companies. Many of the traditional roles of government such as the redistribution of wealth, the creation of public infrastructure and competition regulation are being tested by a growing constellation of planetary-sized online businesses such as Apple, Facebook, Alibaba, Tencent, Google and Amazon. Sometimes one grouping of the US companies in this club is referred to by investors as FAANG (Facebook, Apple, Amazon, Netflix and Google) .

Even in that most rarefied role of the public sector – intelligence, government's potency and efficacy is now in question. In the latest 007 movie Spectre, James Bond's rival codenamed "C" says of their new impressive headquarters: "Her majesty's government wouldn't have the money to fund this – it's funded by a benefactor." And in the 2014 film Kingsman (which is intended to be a spy movie franchise) the central idea is one of a privately funded secret service, its founders having long given-up on the idea such an organisation could spring from and be run effectively in public hands.

In the spy game, government may not even have the best or most important secrets to guard anymore. Since 1960, industrial espionage involving theft of commercial technology and secrets has become the most written about aspect of spycraft in both fiction and non-fiction now receives five times the attention as military or political espionage.

Competition itself has to be understood differently in the online world because one enterprise can come to dominate a given sector very quickly. The merger of the number one and two US online real estate advertising companies Zillow and Trulia was approved in February after a six-month review by the United States competition regulator, the Federal Trade Commission, which concluded "the balance of evidence reviewed does not suggest that a hypothetical monopolist of real estate portals could profitably impose a price increase on agent advertising".

The decision was made in part because of a lot of the advertising budget for agents is still spent offline. And this is true – offline competition still does exist but this may miss an important point. Companies such as Airbnb face many rivals in traditional hotel business but very few, if any competitors in their space.

Competition policy redundant

And for many industries, competition policy is becoming increasingly redundant and difficult to enforce at a local or even national level. Consider the online transport giant Uber which offers to replace existing "regulated" city-wide taxi cab companies with one "user-led" global system based on the clever use of smartphone technology (effectively on the shoulders of another online giant, Apple) and global network economics.

This is effectively a new form of public infrastructure – thus replacing another role of government – which licences and regulates the service. And as a largely asset-free, networked marketplace its operators can undercut margins of municipal-scale operators, and give a better deal to drivers and customers in the process.

It's kind of like a global monopoly carve-up with the losers being the incumbent taxi-operators and taxi-plate investors who, not surprisingly are unhappy with this arrangement. Regulators are caught in the middle wanting to protect the interests of companies and drivers who have invested in (their) licences and at the same time listening to the interests of the public who want cheaper better transport options. And while in some jurisdictions, ride-sharing has been declared illegal; decisions of fragmented, individual regulators have little impact on the fortunes of these outsized global companies.

The massive scale of private sector online giants can be seen usurping another core function of government – wealth redistribution. The announcement by Facebook co-founder Mark Zuckerberg and his wife Priscilla Chan that they'll give away 99 per cent of their astounding wealth, $US46 billion ($62 billion), subject to certain conditions, will form the largest philanthropic organisation on earth.

This new pledge amounts to the equivalent of about 10 years worth of the total foreign aid budget of countries such as Australia, Canada or Sweden and is in effect replacing another traditional and central role of government – that of taxation and wealth redistribution.

New kind of democracy

A new kind of global-industrial democracy is at work here as we consumers elect a series of companies as the global "ruling parties" over different aspects of the online economy Facebook (social media); Google (search); Amazon (retail) and Apple (mobile).

As with elected officials, their "campaign statements" principles count as they run for office: Googlers started off with the mantra "Don't do evil" and Apple offers close-to-magic products.

Unlike elected officials however, due to the economics of online gravity (new set of economic forces), once they reach critical mass they are effectively unassailable and have the potential to stay in office unchallenged for a very long time.

Each of these companies, and a growing number of others like them operate in more than 100 countries around the world but typically have their employment, R&D and head office concentrated in a handful of locations.

And while revenue for online companies is increasingly global, taxation paid by jurisdiction is not so evenly distributed. As Tax Commissioner Chris Jordan commented in April "This means the majority of profits made in Australia end up in Bermuda where no tax is paid."

The answer for government, to my mind, on many of these issues is to do as the online private companies have done – use the amazing power of the web to go global. In the decades ahead, foreign policy and multilateral collaboration is going to be increasingly important not simply on issues of national security and trade but in many areas formerly in the realm of domestic policy – such as taxation, privacy, competition policy.

Anyone, including government, wanting to be part of this new global game should make two notes: Stand on the shoulder of giants and be global in ambition.

Paul X McCarthy is the author of Online Gravity, published by Simon and Schuster. He owns shares in Zillow Group (NASDAQ:Z).

Originally published in the Australian Financial Review https://t.co/0JA1LPSKaL