Silicon States: How Tech Titans are Acquiring State-like Powers

Silicon States: How Tech Titans are Acquiring State-like Powers

. 6 min read

When Mark Zuckerberg created The Facebook to rank the attractiveness of his female peers at Harvard, he could not have imagined that his platform would come to connect 2.7 billion people across the globe. Nor could he have imagined to unveil Libra, hailed by many as the first viable mainstream cryptocurrency in the world. Nor could he have imagined to launch a charm offensive in China, pleading for it to open up to Facebook. Nor could he have imagined that in 2017 he would be questioned by US Senators over alleged complicity with Russian interference in the 2016 elections.

Zuckerberg and Facebook’s meteoric rise is emblematic of a larger theme: tech companies have gained unparalleled influence and the accompanying responsibilities. In many ways, they are acquiring powers typically associated with nation states: conducting independent foreign policies, introducing currencies, and having cyber military capabilities stronger than most governments. This rapid rise in influence regarding international relations, until recently, had gone largely unnoticed. Yet this phenomenon merits serious attention: it could constitute a tectonic geopolitical shift in which nation-states must devise ways to share influence or fight back against a growing rival center of power.

Independent Foreign Policies

Through conducting foreign policies independent of their home nations, tech giants are beginning to act like nations of their own. A prime example of this trend is Google’s relationship with China: despite widespread condemnation from US policymakers across the political spectrum, Google forged ahead into China with a new search engine dubbed Dragonfly, which would censor out words, phrases, and viewpoints the Chinese government found problematic. Entering into the Chinese market in 2006, pulling out in 2010, and secretly continuing the project today according to Fox Business News, Google’s relationship with China symbolizes an independent foreign policy agenda and a strong disconnect with American policy aims.

Google is not the only tech giant to directly undermine its home nation’s foreign policy goals: according to the New York Times, some companies like Intel and Micron are “sidestepping” the blacklisting of Huawei that has come amidst economic tensions between the US and China by continuing to sell their technologies to Huawei. Driven by the goal of maximizing shareholder earnings, US tech companies engage with actors around the world oftentimes hoping for the opposite outcomes as their political leaders in Washington.

Recent controversies over the Chinese telecommunications company Huawei further demonstrate the separate foreign policies of firms and nation states. The Trump administration has accused Huawei of being beholden to the Chinese government: in the Trump administration’s view, Huawei and its infrastructure could be used to spy on citizens around the world on behalf of the Chinese surveillance state. In other words, Huawei is accused of having a lack of separation of its foreign policy and the state. Through levelling such an accusation, the US is implying that the separation of nation state and firm is the norm. Just as Google is not supposed to force democracy upon China, Huawei is expected not to use American data for the aims of China’s Politburo.

Even in the theoretical case, most of the Big Tech companies in the US do not see themselves as American, even if they are headquartered in the US. For example, Google’s philosophy states that “Our company was founded in California, but our mission is to facilitate access to information for the entire world.” To Google, and many other tech firms, their aim is not national but universal; they serve not their home nation but humanity itself. The natural consequence of this is that they conduct their own independent foreign policies.

Large businesses dealing with foreign governments is hardly unprecedented: Rockefeller’s Standard Oil cultivated a deep relationship with the Saudis in 1933; European energy suppliers struck deals with Russian state-owned Gazprom for natural gas during the height of the Cold War; and McKinsey has played a role in advising the Chinese government on building islands in the South China Sea today. These actions are unsurprising given that as profit-maximizing entities, businesses are owned not by the citizens of the nation they are based in, but by their shareholders.

What differentiates Big Tech from its historical counterparts is the impact that it has on our lives. We spend so much of our waking hours on the internet, on social media, and on our emails. When these companies so critical to people’s lives conduct their own foreign policies, the shift in power from government to business becomes more pronounced than ever before.

Military Might?

Aside from foreign policy, Big Tech is gaining military capabilities unprecedented for private firms. In the abstract, each tech giant has deep knowledge of cyber-defense and cyber-security measures. Deep knowledge of cybersecurity requires deep knowledge of hacking and cyber-offensive capabilities. It is not unreasonable that the world’s experts in cyber-defense could have the capability to change their defensive posture to an offensive one able to cripple the systems of other nations. A 2018 Cybersecurity Accord practically admits this capability: 30 tech companies, including tech giants like Microsoft, agreed not to come to the aid of any country in the event of a cyber war. The implication is that these companies could meaningfully involve themselves in a conflict.

Other tech titans like Google, Apple, and Amazon, in contrast, have declined joining the accord. In fact, Google has worked hand-in-hand with the US government to develop AI to assist in drone strikes and other cyber-related military operations. Regardless of whether they have signed onto the accord, Big Tech clearly has sizeable military capabilities.

Quantum computers provide another concrete example of this shift in power. The National Academy of Sciences writes in a report Quantum Computing: Progress and Prospects that quantum computers could defeat today’s encryption methods and hack everything from bank data to state secrets. However, the pioneers of these computers are not governments but instead companies such as IBM, Intel, and Google. As a result, it is likely that a company will own a quantum computer before a government does. While companies certainly would not use these quantum computers to wage war, they will possess one of the most powerful cyber-weapons in the world while the nation state governments do not.

Coining Currencies

Finally, Big Tech’s state-like powers extend to the international economy. In June 2019, Facebook unveiled the Libra, a digital currency backed by blockchain technology. Developed in concert with Visa and Paypal, Libra could be the first mainstream cryptocurrency. Previous cryptocurrencies have suffered from a lack of legitimacy. Through the momentous influence of it and its partners’ reputations, Facebook is flirting with creating the first widespread currency not issued by a country.

The implications for Libra are profound: if it, or some cryptocurrency backed by a tech giant, were to take hold in the economy, the US Federal Reserve could lose control over the money supply and thereby interest rates. Though such an outcome is near impossible in the short and medium term, Federal Reserve Chairman Jerome Powell nonetheless said that the Fed is “carefully considering” the impact of Libra on monetary policy.

Libra’s effects could be the greatest for the smallest nations: people in some smaller nations might elect to do away with their local currency completely in favor of a well-established cryptocurrency. Libra could also gain relevance in a country with high inflation where faith in the paper currency is low: for example, in Venezuela, which is experiencing hyperinflation, many citizens are resorting to bitcoin for payments.

Governments Strike Back

Through foreign policy, cyber-attack capabilities, and new currencies, tech titans have established influence over international policies like never before. Up until the end of the Obama Administration, the US government had adopted a largely laissez-faire approach to regulating these giants. Recently, however, politicians of disparate political viewpoints have toughened their stances dramatically. For example, Senator Elizabeth Warren (D, MA) and Presidential Candidate wrote in an op-ed that “Today’s big tech companies have too much power — too much power over our economy, our society, our democracy” and has called for companies like Apple and Amazon to be broken up. Meanwhile, conservative-leaning politicians have decried tech giants’ alleged ideological discriminaton and have called for anti-trust legislation to be enacted. Moreover, the Trump Administration has launched a Federal Trade Commission probe into whether Google has killed off competition.

Meanwhile, the EU has beat the United States in regulating Big Tech. In 2014, it established “the right to be forgotten” or to have one’s data removed. It has also levied fines against Big Tech companies, reaching as high as US$1.7 billion. Finally, according to The Economist, Europe is on the verge of approving “new digital copyright laws.”

The future for Big Tech is anything but clear. Increased regulation on both sides of the Atlantic seems likely. In fact, Facebook’s Chief Operating Officer, Sheryl Sandberg, has called for more regulation of tech giants like Facebook. In Sandberg’s eyes, the ideal scenario is that technology companies work in tandem with governments to create effective mechanisms to soften technology firms’ rougher edges. Yet, many distrustful of Big Tech—like Warren—would be appalled by Big Tech writing its own rules.

The regulatory controversies over large technology companies go to show how much power they have garnered over the last few years. With nation-state like powers, these firms will undoubtedly continue to bring about technological progress. Regardless of whatever regulatory challenges they face—whether in the US, the EU, or elsewhere—they will continue to reshape the international relations of the 21st century.

Originally published in 2018.

Paul Apostolicas

Paul Apostolicas is Editor-in-Chief of the HIR. He is particularly interested in political economy, national security, and human rights.