Critics argue that Obama is turning the US into a corporative quasi-socialist state as he channels large sums into Google’s new venture capital fund. Some of the money may be used to buy French Exalead.

Yesterday Google (GOOG) announced its new venture capital fund called Google Ventures.

According to the The Official Google Blog Google will be focusing on early stage investments across a diverse range of industries, including consumer Internet, software, clean-tech, bio-tech, health care and and other areas:

“By borrowing the best practices of top-tier, financially focused venture capital firms and bringing to bear Google’s unique technical expertise and brand, we think we can find young companies with truly awesome potential and encourage their development into successful businesses.”

The New York Times reported yesterday that the VC fund will invest up to US$ 100 million over the next 12 months.

Obama and Google

However, that is only half the story.

Today a source close to the Obama administration revealed that the President is so disillusioned by the failure of US banks and other, more traditional, financial institutions, that he wants to add as much as 20 billion US$ in federal spending to the Google fund.

The White House will not comment , but Tim Geithner, the US treasure secretary, is reported to have mentioned Google’s venture fund at a charity dinner for impoverished home owners in Washington D.C. yesterday.

He argued that a fund like Google’s represents the way ahead, as Google has demonstrated its ability to think outside the box and generate innovation that will bring future growth.

Deep disillusionment in old institutions

Indeed, other government representatives have repeatedly expressed their deep disappointment in the current risk aversion displayed by traditional banks.

Newly appointed U.S. Commerce Secretary Gary Locke argues that it says a lot about the competences of banks and traditional funds that they prefer to invest in toxic assets rather than the innovative companies of the future.

Tim Geithner put it this way in his testimony to the House Financial Services Committee:

“The huge apparent returns to financial activity attracted fraud on a dramatic scale. Large amounts of leverage and risk were created both within and outside the regulated part of the financial system. These are not the visionary financial leaders this country needs.”

The recent scandal regarding AIG bonuses has made it increasingly difficult for politicians to spend more of the tax payer’s money on the failed businesses of the past. Politically it makes sense for Obama to invest some of the 1 trillion dollars set aside for rescuing the econmy in a fund that represents the future.

Angry Republicans

The proposal has met strong opposition in both liberal and conservative circles. American feminists argue that Google has become the world’s main distributor of indecent material and can therefore not be used as a vehicle for public spending.

On the other hand some conservatives argue that this is an example of how the “Bay Area liberal mafia” is taking over the country.

They point to the fact that Katie Jacobs Stanton from Google has become the nation’s first director of citizen participation, while Sonal Shah of google.org probably will become White House director of social innovation and civic engagement. Most important of all: Google CEO Eric Schmidt endorsed Obama’s campaign during the election.

Conservative radio host Rush Limbaugh claimed yesterday that Obama is using “the Google face of successful capitalism” to turn the US into a “Euro-socialist planning economy”:

“If the US government is to invest 20 billion dollars while Google contributes close to nothing, this proves that Obama’s intent is to nationalise the future industries of America using Google as a cover,” he said. “This is the time for all freedom-loving Americans to stand up against the frog-loving liberals in Washington!”

European fear of US capital

Interestingly enough, French commentators are of another opinion. French President Nicolas Sarkozy said yesterday that he was worried about the role of Google as a major global financial player:

“European culture is already under threat from the US monopoly on search. Google is scanning our books, taking control over our national heritage, and now they want to take over our innovative companies as well.”

Sarkozy plans to take up this issue at the G20 meeting. This will make it much harder for Obama to get the European leaders to inject more money into the global economy.

A Google Exalead take-over

William Maris of Google Investments denies that Google Venture will invest in non-US companies, but admits that the multinational nature of today’s industries makes it hard for him to guarantee that no French companies will be controlled by Google and the US government:

“Still, given our control over the French version of Google News we are confident that we will be able to communicate our version of the story to the French people,” he said to Le Monde.

That version of the story is that Google has contemplated buying Exalead, France’s leading enterprise search company, but that these plans have been made outside the framework of Google Venture.

“We are having discussions with Exalead right now,” Google founder Sergey Brin said to national French radio yesterday.

“We are looking for a European partner in the enterprise search field. Microsoft bought Fast. There are not many good alternatives left. Still, the French should not consider this a threat. We think of Google as a global company, not predominantly an American one. Google France is for instance as French as Champagne and Brie. You won’t believe how hard it is to work with our French unit. They think of themselves as philosophers and poets.”

Brin later said that he had been quoted out of context. What he really meant was that the French Google engineers were as creative as poets.

Asked whether the Google VC fund could be used for such an acquisition, he said that nothing has been decided.

The Corporative America

It will be interesting to see how Congress will react to the proposal. It seems that the financial crisis has made anything possible, even a Government/Google corporative model for industrial investment.

photo credit: surface to air