Bernie, Elizabeth And Big Tech

I’ve always seen Elizabeth Warren as a future U.S. president-- one term (or two terms) as Bernie’s VP, two terms as president after that… 12 or 16 years of the fundamental transformational change Status Quo Joe, Bloomberg, Mayo Pete, the Democratic Party establishment and the GOP are so desperate to prevent. Meanwhile, she’s been acting as Bernie’s loyal wing-man in debates and out on the campaign trail. Or haven’t you noticed? And she concentrates on issues that have helped broaden the joint platform. Last April, Ken Rogoff, writing for The Guardian, reported on how Elizabeth has been going after Big Tech, the way progressive reformers once went after, for example, railroad monopolies.

“Displaying a degree of courage and clarity that is difficult to overstate,” wrote Rogoff, a former chief economist for the IMF and now a professor of economics and public policy at Harvard, “U.S. Senator and presidential candidate Elizabeth Warren has taken on big tech, including Facebook, Google, Amazon and Apple. Warren’s proposals amount to a total rethink of the United States’ exceptionally permissive merger and acquisition policy over the past four decades. Indeed, big tech is only the poster child for a significant increase in monopoly and oligopoly power across a broad swath of the American economy. Although the best approach is still far from clear, I could not agree more that something needs to done, especially when it comes to big tech’s ability to buy out potential competitors and use their platform dominance to move into other lines of business.”

Warren is courageous because big tech is big money for most leading Democratic candidates, particularly progressives, for whom California is a veritable campaign-financing ATM.

…Although the causal relationships are difficult to untangle, there are solid grounds for believing that the rise in monopoly power has played a role in exacerbating income inequality, weakening workers’ bargaining power, and slowing the rate of innovation. And, perhaps outside of China, it is a global problem, because U.S. tech monopolies have often achieved market dominance before local regulators and politicians know what has happened. The EU, in particular, has been trying to steer its own course on technology regulation. Recently, the UK commissioned an expert group, chaired by Barack Obama’s former chief economist (and now my colleague) Jason Furman, that produced a very useful report on approaches to the tech sector.

The debate about how to regulate the sector is eerily reminiscent of the debate over financial regulation in the early 2000s. Proponents of a light regulatory touch argued that finance was too complicated for regulators to keep up with innovation, and that derivatives trading allows banks to make wholesale changes to their risk profile in the blink of an eye. And the financial industry put its money where its mouth was, paying salaries so much higher than those in the public sector that any research assistant the Federal Reserve System trained to work on financial issues would be enticed with offers exceeding what their boss’s boss was earning.

There will be similar problems staffing tech regulatory offices and antitrust legal divisions if the push for tighter regulation gains traction. To succeed, political leaders need to be focused and determined, and not easily bought. One only has to recall the 2008 financial crisis and its painful aftermath to comprehend what can happen when a sector becomes too politically influential. And the U.S. and world economy are, if anything, even more vulnerable to big tech than to the financial sector, owing both to cyber aggression and vulnerabilities in social media that can pervert political debate.

Another parallel with the financial sector is the outsize role of U.S. regulators. As with US foreign policy, when they sneeze, the entire world can catch a cold. The 2008 financial crisis was sparked by vulnerabilities in the U.S. and the UK, but quickly went global. A U.S.-based cyber-crisis could easily do the same. This creates an “externality,” or global commons problem, because U.S. regulators allow risks to build up in the system without adequately considering international implications.

It is a problem that cannot be overcome without addressing fundamental questions about the role of the state, privacy, and how U.S. firms can compete globally against China, where the government is using domestic tech companies to collect data on its citizens at an exponential pace. And yet many would prefer to avoid them.

That’s why there has been fierce pushback against Warren for daring to suggest that even if many services seem to be provided for free, there might still be something wrong. There was the same kind of pushback from the financial sector fifteen years ago, and from the railroads back in the late 1800s. Writing in the March 1881 issue of The Atlantic, the progressive activist Henry Demarest Lloyd warned that:

Our treatment of ‘the railroad problem’ will show the quality and caliber of our political sense. It will go far in foreshadowing the future lines of our social and political growth. It may indicate whether the American democracy, like all the democratic experiments which have preceded it, is to become extinct because the people had not wit enough or virtue enough to make the common good supreme.

Lloyd’s words still ring true today. At this point, ideas for regulating big tech are just sketches, and of course more serious analysis is warranted. An open, informed discussion that is not squelched by lobbying dollars is a national imperative. The debate that Warren has joined is not about whether to establish socialism. It is about making capitalist competition fairer and, ultimately, stronger.

I knew just who to turn to for a solid perspective on this-- Riverside County historian and congressional candidate, Liam O'Mara. O'Mara is running on a cutting edge progressive platform against one of the most insidiously corrupt Republicans in Congress, Ken Calvert. The idea of Calvert ever taking on the establishment is... just unthinkable. He is the embodiment of congressional and personal corruption. O'Mara is the polar opposite. He told us last night that "Years before I got into college to become a history professor, I worked in IT as a network administrator and consultant. I spent the '90s fixing and installing systems for health insurance providers and aerospace companies. During those years, the free-software/open-source movement was starting to gain ground against the old titans of the industry. I saw first-hand the desperate efforts of Sun, Novell, and IBM to keep their software competitive against a fast-changing rival that could run circles around them. I also watched in helpless horror as another titan, Microsoft, managed to beat back that challenge by getting away with monopolistic practices and bribing Congress to achieve lighter regulation. In the decades since, I have often wondered how much better things might have been if government had, for example, been more willing to enforce fair competition in the marketplace. Many more people may have joined us in using things like Linux and OpenOffice, making our computers faster, easier to maintain, and vastly cheaper. That the tech. industry is complex does not make it different from all other big industries-- it needs to be regulated in order to prevent corruption and abuse of power by virtual monopolies. The right-wing dogma that business regulates itself is wrong on all the evidence, but large corporations do one thing very well-- they bribe thought-leaders and policy-makers into accepting whatever reality they sees fit. Those in politics need to stop taking their money and pay better attention to the facts instead.