The brinkmanship between the Morrison government and two tech giants was unmissable viewing for Australians and many across the world.
That the News Media and Digital Platforms Mandatory Bargaining Code was passed by the parliament on the last sitting day last month speaks to the mettle of Josh Frydenberg and the willingness of politicians from all sides to serve the national interest.
But these are still early days in terms of Australia and other liberal democratic governments redefining their relationship with big tech. There is no appetite to allow giant firms to write their own rules.
At the same time, governments are growing ever more dependent on big tech to execute policy and achieve core objectives, meaning the need to collaborate with firms they cannot completely control. Done well or poorly, the implications for sovereignty, national security and geopolitics will be immense.
The top five big tech American firms — Apple, Microsoft, Amazon, Alphabet (Google) and Facebook — have a market value of about $9.5 trillion and earned revenues of just under $1.2 trillion last year. The combined market capitalisation is more than five times the size of Australia’s gross domestic product and their revenues more than twice what Canberra received in fiscal revenue in the same year.
For most of this century the emergence and dominance of these innovative and profitable behemoths represented the triumph of liberal democracy and the American way of capitalism.
Chinese blueprints such as Made in China 2025, which aims to guide the upgrading of national industry, production and innovation during the next few years, began with the realisation a decade ago that American and other advanced economy companies were pulling away from the rest of the world in the sectors that would create value and underpin national power into the future.
Chinese successes such as Alibaba, Tencent and Huawei took their inspiration — and in many instances acquired or stole intellectual property and know-how — from mainly American firms.
We all know the Oscar Wilde quote about imitation and flattery. The second part of the quote is often left out: imitation is the sincerest form of flattery that mediocrity can pay to greatness. This was how many democrats viewed the rise of big tech earlier this century. Authoritarian China could never match the spontaneous genius of open societies. As the argument went, authoritarian capitalists might do well to benefit from the fruits of innovation and creativity produced in liberal democracies but would always be a step behind.
That complacency is ending given the market share of Huawei in the 5G sector and the global popularity of platforms such as WeChat and TikTok. Also fading is faith that big tech’s successes automatically serve the interests of free societies and democratically elected governments or that these giants will give us a decisive advantage in the intensifying geopolitical competition with authoritarian rivals such as China and Russia.
This is a crucial time for the liberal democracies, and not only because China is quickly catching up. These giants are at the forefront of the so-called fourth industrial revolution, which describes the blurring of boundaries between the physical, digital and biological worlds. That blurring is based on ever advancing improvements in areas such as artificial intelligence, robotics, quantum computing, accumulation of and use of big data, 3D printing and the internet of things, where everything is connected to everything else.
For most, the advances will be apparent in transforming the way we live, work and interact. For those in the national security and military communities, it will revolutionise the way threats are identified and neutralised, how countries and governments acquire power to coerce or influence each other, and how wars are fought and won. In short, these capabilities will go to the heart of sovereign capability, national resilience and national power, which are all buzzwords that will remain long after COVID-19 passes. Importantly, there is the blurring of not only the physical, digital, and biological worlds but also between the civilian, governance and military realms.
Here, then, is the cause of anxiety for liberal democracies. There is a vast and expanding talent, resources, innovation and capability gap between government and big tech on the other. As US Joint Chiefs of Staff chairman Joseph Dunford admitted in 2019, the American and allied ability to conduct core national security missions and maintain its edge over adversaries (read China and Russia) depends on collaborations with these giant firms. This means that while certain assets and capabilities become ever more important to the state to meet national resilience, strategic and war-fighting requirements, private firms will own and control most of these advanced assets and capabilities.
This is deeply uncomfortable for democratic governments, and even more so the national security community, because they are becoming ever more reliant on big tech that is too big to own and too powerful to control. And these firms will not always serve the interests of US and allied governments even if they are headquartered in a liberal democracy. One might want Google to dominate rather than China’s Tencent or Baidu. Even so, Google ended its partnership in the Pentagon’s Project Maven AI program in 2019 because thousands of its employees rebelled against assisting the US military even as the company established a joint AI research centre in a Chinese nation that uses AI to suppress millions of cultural and religious minorities.
Democracies cannot and should not replicate the Chinese model of military-civil fusion and giving the state the right to use any public or private company in the country to advance Communist Party objectives. Neither is it a fix-all to break tech giants into smaller and more manageable parts because we need these firms to have the scale and reach to out-innovate and outpace state-owned competitors and national champions in authoritarian states.
There needs to be a mix of collaboration and confrontation but not overreach. The purpose of legislation and regulation should not be to seize control or overburden firms with endless compliance obligations that will only suffocate innovation and creativity. That would be to our collective detriment. It is to ensure these firms become decent corporate citizens.
In this context, democratic governments should not back down from exercising the right to define what is legal or illegitimate, ensure legitimate taxes are paid rather than evaded, place limits on how personal data collected is used, and of course force firms to pay for content derived from news publishers. The Australian Treasurer was right to stand his ground and other democracies should be encouraged to do the same. The better the co-ordination between democratic governments in advanced economies, the more effective the ability of sovereign governments to shape the actions of big tech. In this context, co-operation between the US and Europe is most important.
Democratic governments need to persuade and publicly pressure big tech into accepting their broader responsibilities; perhaps even legislate or issue prohibitions against certain collaborations.
Google’s assertion that “science has no borders” in justifying its AI centre in China is patently irresponsible and absurd. If Google and others seek to define the future by being agents of change as they claim, then they are central players in an undeniable geopolitical and moral contest.
Finally, governments must do more than admonish or prescribe. They need big tech as partners. Successful public-private collaboration will go a long way towards determining whether liberal democracies enjoy the position of pre-eminence in the future. The US does this best and examples include the approximately $13bn cloud services contract with the Pentagon. Washington will allocate billions more to partner in areas such as AI and big data. Australia and other advanced democracies must do the same. The more government resources for collaborations, the better.
Globalisation needs to be reimagined because the world is breaking up into different ecosystems, with each having its own political, moral and social norms and values. Big tech is a core enabler and stakeholder in our preferred system and ought to be a champion and defender of liberal democratic communities. In this brave new world, we need these giants to become part of the solution and a major problem for authoritarian rivals.