Silicon Valley has been humbled. But its schemes are as dangerous as ever

Sex scandals, rows over terrorism, fears for its impact on social policy: the backlash against Big Tech has begun. Where will it end?


Evgeny Morozov in The Guardian


Just a decade ago, Silicon Valley pitched itself as a savvy ambassador of a newer, cooler, more humane kind of capitalism. It quickly became the darling of the elite, of the international media, and of that mythical, omniscient tribe: the “digital natives”. While an occasional critic – always easy to dismiss as a neo-Luddite – did voice concerns about their disregard for privacy or their geeky, almost autistic aloofness, public opinion was firmly on the side of technology firms.

Silicon Valley was the best that America had to offer; tech companies frequently occupied – and still do – top spots on lists of the world’s most admired brands. And there was much to admire: a highly dynamic, innovative industry, Silicon Valley has found a way to convert scrolls, likes and clicks into lofty political ideals, helping to export freedom, democracy and human rights to the Middle East and north Africa. Who knew that the only thing thwarting the global democratic revolution was capitalism’s inability to capture and monetise the eyeballs of strangers?

How things have changed. An industry once hailed for fuelling the Arab spring is today repeatedly accused of abetting Islamic State. An industry that prides itself on diversity and tolerance is now regularly in the news for cases of sexual harassment as well as the controversial views of its employees on matters such as gender equality. An industry that built its reputation on offering us free things and services is now regularly assailed for making other things – housing, above all– more expensive.

The Silicon Valley backlash is on. These days, one can hardly open a major newspaper – including such communist rags as the Financial Times and the Economist – without stumbling on passionate calls that demand curbs on the power of what is now frequently called “Big Tech”, from reclassifying digital platforms as utility companies to even nationalising them.

Meanwhile, Silicon Valley’s big secret – that the data produced by users of digital platforms often has economic value exceeding the value of the services rendered – is now also out in the open. Free social networking sounds like a good idea – but do you really want to surrender your privacy so that Mark Zuckerberg can run a foundation to rid the world of the problems that his company helps to perpetuate? Not everyone is so sure any longer. The Teflon industry is Teflon no more: the dirt thrown at it finally sticks – and this fact is lost on nobody.

Much of the brouhaha has caught Silicon Valley by surprise. Its ideas – disruption as a service, radical transparency as a way of being, an entire economy of gigs and shares – still dominate our culture. However, its global intellectual hegemony is built on shaky foundations: it stands on the post-political can-do allure of TED talks much more than in wonky thinktank reports and lobbying memorandums.

This is not to say that technology firms do not dabble in lobbying – here Alphabet is on a par with Goldman Sachs – nor to imply that they don’t steer academic research. In fact, on many tech policy issues it’s now difficult to find unbiased academics who have not received some Big Tech funding. Those who go against the grain find themselves in a rather precarious situation, as was recently shown by the fate of the Open Markets project at New America, an influential thinktank in Washington: its strong anti-monopoly stance appears to have angered New America’s chairman and major donor, Eric Schmidt, executive chairman of Alphabet. As a result, it was spun off from the thinktank.

Nonetheless, Big Tech’s political influence is not at the level of Wall Street or Big Oil. It’s hard to argue that Alphabet wields as much power over global technology policy as the likes of Goldman Sachs do over global financial and economic policy. For now, influential politicians – such as José Manuel Barroso, the former president of the European Commission – prefer to continue their careers at Goldman Sachs, not at Alphabet; it is also the former, not the latter, that fills vacant senior posts in Washington.

This will surely change. It’s obvious that the cheerful and utopian chatterboxes who make up TED talks no longer contribute much to boosting the legitimacy of the tech sector; fortunately, there’s a finite supply of bullshit on this planet. Big digital platforms will thus seek to acquire more policy leverage, following the playbook honed by the tobacco, oil and financial firms.

There are, however, two additional factors worth considering in order to understand where the current backlash against Big Tech might lead. First of all, short of a major privacy disaster, digital platforms will continue to be the world’s most admired and trusted brands – not least because they contrast so favourably with your average telecoms company or your average airline (say what you will of their rapaciousness, but tech firms don’t generally drag their customers off their flights).

And it is technology firms – American companies but also Chinese – that create the false impression that the global economy has recovered and everything is back to normal. Since January, the valuations of just four firms – Alphabet, Amazon, Facebook and Microsoft – have grown by an amount greater than the entire GDP of oil-rich Norway. Who would want to see this bubble burst? Nobody; in fact, those in power would rather see it grow some more.

The culture power of Silicon Valley can be gleaned from the simple fact that no sensible politician dares to go to Wall Street for photo ops; everyone goes to Palo Alto to unveil their latest pro-innovation policy. Emmanuel Macron wants to turn France into a startup, not a hedge fund. There’s no other narrative in town that makes centrist, neoliberal policies look palatable and inevitable at the same time; politicians, however angry they might sound about Silicon Valley’s monopoly power, do not really have an alternative project. It’s not just Macron: from Italy’s Matteo Renzi to Canada’s Justin Trudeau, all mainstream politicians who have claimed to offer a clever break with the past also offer an implicit pact with Big Tech – or, at least, its ideas – in the future.

Second, Silicon Valley, being the home of venture capital, is good at spotting global trends early on. Its cleverest minds had sensed the backlash brewing before the rest of us. They also made the right call in deciding that wonky memos and thinktank reports won’t quell our discontent, and that many other problems – from growing inequality to the general unease about globalisation – will eventually be blamed on an industry that did little to cause them.

Silicon Valley’s brightest minds realised they needed bold proposals – a guaranteed basic income, a tax on robots, experiments with fully privatised cities to be run by technology companies outside of government jurisdiction – that will sow doubt in the minds of those who might have otherwise opted for conventional anti-monopoly legislation. If technology firms can play a constructive role in funding our basic income, if Alphabet or Amazon can run Detroit or New York with the same efficiency that they run their platforms, if Microsoft can infer signs of cancer from our search queries: should we really be putting obstacles in their way?

In the boldness and vagueness of its plans to save capitalism, Silicon Valley might out-TED the TED talks. There are many reasons why such attempts won’t succeed in their grand mission even if they would make these firms a lot of money in the short term and help delay public anger by another decade. The main reason is simple: how could one possibly expect a bunch of rent-extracting enterprises with business models that are reminiscent of feudalism to resuscitate global capitalism and to establish a new New Deal that would constrain the greed of capitalists, many of whom also happen to be the investors behind these firms?

Data might seem infinite but there’s no reason to believe that the enormous profits made from it would simply smooth over the many contradictions of the current economic system. A self-proclaimed caretaker of global capitalism, Silicon Valley is much more likely to end up as its undertaker.

The world can't afford another financial crash – it could destroy capitalism as we know it

A new economic crisis would trigger a political backlash in Britain, Europe and the United States which could drag us all down into poverty



Call this a protest? You ain't seen nothing yet Photo: PAWEL KOPCZYNSKI / REUTERS


By Allister Heath in The Telegraph


They bounce back after terrorist attacks, pick themselves up after earthquakes and cope with pandemics such as Zika. They can even handle years of economic uncertainty, stagnant wages and sky-high unemployment. But no developed nation today could possibly tolerate another wholesale banking crisis and proper, blood and guts recession.

We are too fragile, fiscally as well as psychologically. Our economies, cultures and polities are still paying a heavy price for the Great Recession; another collapse, especially were it to be accompanied by a fresh banking bailout by the taxpayer, would trigger a cataclysmic, uncontrollable backlash.

The public, whose faith in elites and the private sector was rattled after 2007-09, would simply not wear it. Its anger would be so explosive, so-all encompassing that it would threaten the very survival of free trade, of globalisation and of the market-based economy. There would be calls for wage and price controls, punitive, ultra-progressive taxes, a war on the City and arbitrary jail sentences.





Two men walk along the road to Los Angeles in 1937, during the Great Depression





For fear of allowing extremist or populist parties through the door, mainstream politicians would end up adopting much of this agenda, with devastating implications for our long-term prosperity. Central banks, in desperation, would embrace the purest form of money-printing: they would start giving consumers actual cash to spend, temporarily turbo-charging demand while destroying any remaining respect for the idea that money needs to be earned.

History never repeats itself exactly, but the last time a recession was met by pure, unadulterated populism was in the Thirties, when the Americans turned a stock market crash and a series of monetary policy blunders into a depression. President Herbert Hoover signed into law the Smoot-Hawley Tariff Act, dreamt up by two economically illiterate Republican senators, slapping massive taxes on the imports of 20,000 goods and triggering a global trade war. It was perhaps the most economically destructive piece of legislation ever devised, and it took until the Nineties before the damage was finally erased.

That is why we must all hope that the turmoil of recent days in the financial markets, and the increasingly worrying economic news, will turn out to be a false alarm. It would certainly be ridiculously premature, at this stage, to call a recession, let alone a financial crisis. But at the very least we are seeing a major dose of the “dangerous cocktail of new threats” rightly identified at the turn of the year by George Osborne, a development which will have political repercussions even if the economy eventually muddles through.

Investors in equities, including millions of people with private pensions and Isas, have already lost a fortune; they won’t be too happy when they begin to realise the extent of the damage. Growth is slowing everywhere, and the monetary pump-priming of the past few years is looking increasingly ineffective. Traders believe that interest rates won’t go up in Britain until 2019, and there is increasing talk that negative interest rates could become necessary across the developed world, further crippling savers.

No positive spin can be put on any of the latest developments. Banking shares have taken a beating; China’s slowdown continues; Maersk, the shipping giant, believes that conditions for world trade are worse than in 2008-09; industrial production slumped in December, not just in Britain but more so in France and Germany; energy prices are devastating Middle Eastern and Russian economies; and sterling has tumbled.

It is always a sure sign that panic has broken out when financial markets respond badly to all possible scenarios. The prospect of higher interest rates? Sell, sell, sell. A chance of lower rates? Sell, sell and sell again. A rise in the price of oil is met with as much angst as a decline. The financial markets remain addicted to help from central banks: they are desperate for yet more interventions, regardless of the consequences on the pricing of risk, the allocation of resources or the creation of unsustainable bubbles that only enrich the owners of assets.

This is exactly the tonic that the populists have been waiting for. Despite their dramatic emergence, they have so far failed to make a real breakthrough. The SNP was unable to win the Scottish referendum and the National Front didn’t gain a single region in France. Mariano Rajoy remains Spain’s prime minister, and anti-establishment parties have been thwarted in Germany. Even lighter forms of populism, such as Ed Miliband’s, were rejected. Syriza’s victory in Greece was one of the few genuine populist triumphs; but it was soon crushed by the combined might of Brussels and Frankfurt.






The Republican presidential nominee often proclaims that his presidency will make America a "great" country again

This could be about to change. The fact that Donald Trump and Bernie Sanders both won their respective New Hampshire primaries is certainly one remarkable indication of the state of mind of many US political activists. Any economic relapse would help Marine Le Pen’s chances in next year’s French presidential election, and further undermine Angela Merkel’s sinking popularity in Germany.

But it is in Britain that the immediate impact could be the greatest. The Brexit debate is already being overshadowed by the migration crisis, undermining the Government’s attempts at portraying a Remain vote as a safe, low-risk option; a sustained bout of economic volatility would further ruin the pro-EU case, especially given that the eurozone, rather than the City, is likely to emerge as one of the epicentres of any fresh crisis. It would be hard for bosses of large financial giants to credibly tell the electorate to vote Remain when their own businesses are in crisis.

Britain will noticeably outperform the EU this year: our labour market remains strong and our banks far better capitalised than many of their eurozone competitors, too many of which are still sitting on massive amounts of bad debt. The Chinese slowdown is worse for Germany than for us. But while the Eurosceptic cause to which some of us are partial is likely to benefit from the turmoil, it would be madness for anybody who cares about this country’s future to feel anything but dread towards the economic threats facing the world. The sorry truth is that there is very little that governments can do at this stage, apart from battening down the hatches and hoping that central banks succeed in kicking our problems even further down the road.