Happy New Year

Jeff Bezos, with the world at his fingertips.

For Meta or Worse

Big Tech is becoming the government. Can anyone rein in Amazon, Google, Facebook, and Co.?


JANUARY 1, 2022

This comes from Graydon Carter’s Air Mail newsletter. While most of us know all this, we never quite think of big tech in this fashion.

After rioters stormed the US Capitol on January 6, some of the most powerful US institutions sprang into action to punish the leaders of the failed insurrection. But they weren’t the institutions you might expect. Facebook and Twitter suspended the accounts of President Trump for posts praising the rioters. Amazon, Apple, and Google effectively banished Parler, an alternative to Twitter that Trump’s supporters had used to encourage and co-ordinate the attack, by blocking its access to web-hosting services and app stores. Financial service apps, such as PayPal and Stripe, stopped processing payments for the Trump campaign and for accounts that had funded travel expenses to Washington DC for his supporters.

The speed of these technology companies’ reactions stands in stark contrast to the feeble response from the governing institutions. Congress’s efforts to establish a bipartisan, 9/11-style commission failed amid Republican opposition. Law enforcement agencies have been able to arrest some individual rioters but in many cases only by tracking clues they left on social media about their participation in the fiasco.

Nation states have been the primary actors in global affairs for nearly 400 years. That is starting to change, as a handful of large technology companies rival them for geopolitical influence. The aftermath of the January 6 riot serves as the latest proof that Amazon, Apple, Facebook, Google and Twitter are no longer merely large companies; they have taken control of aspects of society, the economy and national security that were long the exclusive preserve of the state.

The same goes for Chinese technology companies, such as Alibaba, ByteDance and Tencent. Non-state actors are increasingly shaping geopolitics, with technology companies in the lead. And although Europe wants to play, its companies do not have the size or geopolitical influence to compete with their American and Chinese counterparts.

Most of the analysis of US-Chinese technological competition, however, is stuck in a statist paradigm. It depicts technology companies as foot soldiers in a conflict between hostile countries. But technology companies are not mere tools in the hands of governments. These companies are increasingly shaping the global environment in which governments operate. They have huge influence over the technologies and services that will drive the next industrial revolution, determine how countries project economic and military power, shape the future of work, and redefine social contracts.

It is time to start thinking of the biggest technology companies as similar to states. These companies exercise a form of sovereignty over a rapidly expanding realm that extends beyond the reach of regulators: digital space. They bring resources to geopolitical competition but face constraints on their power to act. They maintain foreign relations and answer to constituencies, including shareholders, employees, users and advertisers.

They have taken control of aspects of society, the economy and national security that were long the exclusive preserve of the state.

These categories illuminate the choices facing the biggest technology firms as they work to shape global affairs. Will we live in a world where the internet is increasingly fragmented and technology companies serve the interests and goals of the states in which they reside, or will Big Tech decisively wrest control of digital space from governments, freeing itself from national boundaries and emerging as a truly global force? Or could the era of state dominance finally come to an end, supplanted by a techno-elite that assumes responsibility for offering the public goods once provided by governments?

To understand how the struggle for geopolitical influence between technology firms and governments will play out, it is important to grasp the nature of these companies’ power. The tools at their disposal are unique in global affairs, which is why governments are finding it so hard to rein them in.Amazon workers in Germany went on strike to protest low pay and poor working conditions as Prime Day began in 2019. 

Today’s biggest technology firms have two critical advantages that have allowed them to carve out independent geopolitical influence. First, they do not operate or wield power exclusively in physical space. They have created a new dimension in geopolitics — digital space — over which they exercise primary influence. People are increasingly living out their lives in this vast territory, which governments do not and cannot fully control.

The implications of this fact bear on virtually all aspects of civic, economic and private life. In many democracies today, politicians’ ability to gain followers on Facebook and Twitter unlocks the money and political support needed to win office. For a new generation of entrepreneurs, Amazon’s marketplace and web-hosting services, Apple’s app store, Facebook’s ad-targeting tools and Google’s search engine have become indispensable for launching a successful business.

Second, these companies are increasingly providing a full spectrum of both the digital and the real-world products that are required to run a modern society. Currently, just four companies — Alibaba, Amazon, Google and Microsoft — meet the bulk of the world’s demand for cloud services, the essential computing infrastructure that has kept people working and children learning during the Covid-19 pandemic. The future competitiveness of traditional industries will depend on how effectively they seize new opportunities created by 5G networks, AI and massive internet-of-things deployments.

Along with owning the world’s leading search engine and its most popular smartphone operating system, Google’s parent company, Alphabet, dabbles in healthcare, drug development and autonomous vehicles. Amazon’s sprawling ecommerce and logistics network furnishes millions of people with basic consumer goods. In China, Alibaba and Tencent dominate payment systems, social media, video streaming, ecommerce and logistics.

Big Tech’s eclipse of the nation state is not inevitable. Governments are taking steps to tame an unruly digital sphere: whether it is China’s recent moves targeting Alibaba and Ant Group, which derailed what would have been one of the world’s biggest ever initial public offerings; the EU’s attempts to regulate personal data, AI and the large technology firms that it defines as digital “gatekeepers”; the numerous antitrust bills introduced in the US House of Representatives; or India’s continuing pressure on foreign social media companies — the technology industry is facing a political and regulatory backlash on multiple fronts.

Moreover, technology firms cannot decouple themselves from physical space, where they remain at the mercy of states. The code for the virtual worlds that these companies have created sits in data centres that are located on territory controlled by governments. Companies are subject to national laws. They can be fined or subjected to other sanctions, their websites can be blocked and executives can be arrested if they break the rules.

Politicians’ ability to gain followers on Facebook and Twitter unlocks the money and political support needed to win office.

But as technology grows more sophisticated, states and regulators are increasingly constrained by outdated laws and limited capacity. Digital space is ever growing. Over 64 billion terabytes of digital information was created and stored in 2020, enough to fill some 500 billion smartphones. In its next phase, this “datasphere” will see cars, factories, and entire cities wired with internet-connected sensors trading data. As this realm grows, the ability to control it will slip further beyond the reach of states.

In the United States, a combination of congressional dysfunction and Silicon Valley’s potent lobbying power will probably continue to preclude expansive new regulations that could pose a serious threat to the digital giants. It is different in Europe, where the lack of homegrown cloud, search and social media conglomerates makes passing ambitious legislation easier. And it is certainly different in China, where a recent round of regulatory crackdowns has sent shares of the country’s own technology heavyweights reeling.

Technology companies’ orientations are no less diverse than the states with which they compete. Strands of globalism, nationalism and techno-utopianism often coexist within the same company. Which outlook predominates will have important consequences for global politics and society.

First there are the globalists — firms that built their empires by operating on a truly international scale. These companies, including Apple, Facebook and Google, create and populate digital space, allowing their business presence and revenue streams to become untethered from physical territory. Each grew powerful by hitting on an idea that allowed it to dominate an economically valuable niche and then taking its business worldwide.

The likes of Alibaba, ByteDance and Tencent emerged at the top of China’s massive domestic market before setting their sights on global growth. But the idea was the same: set up shop in as many countries as possible, respect local rules and regulations as necessary, and compete fiercely.

The forces of globalism and nationalism sometimes clash with a third camp: the techno-utopians. Some of the world’s most powerful technology firms are headed by charismatic visionaries who see technology not just as a global business opportunity but also as a potentially revolutionary force in human affairs. In contrast to the other two groups, this camp centers more on the personalities and ambitions of technology CEOs rather than the operations of the companies themselves.

Whereas globalists want the state to leave them alone and maintain favorable conditions for global commerce, and national champions see an opportunity to get rich off the state, techno-utopians look to a future in which the nation state paradigm that has dominated geopolitics since the 17th century has been replaced by something different altogether.

Over 64 billion terabytes of digital information was created and stored in 2020, enough to fill some 500 billion smartphones.

Elon Musk, the CEO of Tesla and SpaceX, is the most recognizable example, with his open ambition to reinvent transportation, link computers to human brains and make humanity a “multiplanetary species” by colonising Mars. Yes, he is also providing space lift capacity to the US government, but he is chiefly focused on dominating near-space orbit and creating a future in which technology companies help societies evolve beyond the concept of nation-states.

Mark Zuckerberg, the CEO of Facebook, has similar tendencies, even if he has become more open to government regulation of online content. Diem, a Facebook-backed digital currency, had to be scaled back dramatically after financial regulators almost universally raised concerns.

As technology companies and governments negotiate for control over digital space, US and Chinese technology giants will operate in one of three geopolitical environments: one in which the state reigns supreme, rewarding the national champions; one in which corporations wrest control from the state over digital space, empowering the globalists; or one in which the state fades away, elevating the techno-utopians.

In the first scenario, the national champions win and the state remains the dominant provider of security, regulation and public goods. Systemic shocks, such as the Covid-19 pandemic, and long-term threats, such as climate change, coupled with a public backlash against the power of technology companies, entrench government authority as the only force that can resolve global challenges. A bipartisan push for regulation in the United States rewards “patriotic” companies that deploy their resources in support of national goals. Beijing and other authoritarian governments double down on cultivating their own national champions, pushing hard for self-sufficiency while competing for influence in important global markets.

In the second scenario, the state holds on but in a weakened condition, paving the way for the ascendancy of the globalists. Unable to keep pace with technological innovation, regulators accept that governments will share sovereignty over digital space with technology firms. Big Tech beats back restrictions that could curtail its overseas operations, arguing that the loss of market opportunities will harm innovation and, ultimately, governments’ ability to create jobs and meet global challenges. Rather than accept a technological cold war, companies press governments to agree on a set of common rules that preserve a global market for hardware, software and data.

The globalists need stability to succeed over the coming decade. Their worst fear is that the US and China will continue to decouple, forcing them to choose sides in an economic war that will raise barriers to their attempts to globalize their businesses. Their fortunes would improve if Washington and Beijing decided that over-regulation risks undercutting the innovation that drives their economies.

In the final scenario, the oft-predicted erosion of the state comes to pass. The techno-utopians capitalize on widespread disillusionment with governments that have failed to create prosperity and stability, drawing citizens into a digital economy that reduces the role of the state. Confidence in the dollar as a global reserve currency erodes or collapses. Cryptocurrencies prove too much for regulators to control and they gain wide acceptance, undermining governments’ sway over the financial world. The disintegration of centralized authority renders the world substantially less capable of addressing transnational challenges.

The implications of a world in which techno-utopians call the shots are the hardest to tease out, in part because people are so accustomed to thinking of the state as the principal problem-solving actor. Governments would not go down without a fight. And the erosion of the US government’s authority would not give techno-utopians free rein; the Chinese state would also need to suffer a collapse in domestic credibility.

As US-Chinese competition grows more entrenched, these firms will wield their leverage more proactively. If they manage to establish themselves as “the indispensable companies”— much like the US considers itself “the indispensable nation”— the national champions will push for greater government subsidies and preferential treatment over their rivals. The globalists will argue that governments will be unable to sustain economic and technological competitiveness over the long haul if they turn inward and adopt a bunker mentality.

And the techno-utopians? They will be happy to work quietly, biding their time. While the national champions and the globalists duke it out over who will shape government policy, the techno-utopians will use traditional companies and decentralised projects such as ethereum, the world’s second-most popular blockchain after bitcoin, to explore new frontiers in digital space, such as the metaverse, or new approaches to providing essential services. They will strike an understanding tone when the US Congress hauls them in every now and then to denounce their egos and power, taking minimal steps to appease policymakers but deploying aggressive lobbying efforts to undermine any efforts by Washington to bring them to heel.

This does not mean that societies are heading towards a future that witnesses the demise of the nation state, the end of governments and the dissolution of borders. But it is simply no longer tenable to talk about big technology companies as pawns their government masters can move around on a geopolitical chessboard. They are increasingly geopolitical actors themselves.

Ian Bremmer is a political scientist and the author of several books, including the best-seller Us vs. Them: The Failure of GlobalismFOREIGN

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