The COVID-19 pandemic triggered the deepest global recession since the Great Depression, and pushed millions of households and businesses into economic hardship. But not all parts of the global economy have been suffering.
Throughout the pandemic the ‘Big 5’ tech companies — Amazon, Apple, Alphabet, Facebook, and Microsoft — have seen their revenues and stock prices soar. At the end of 2019, the combined market value of these firms was $4.9 trillion. Since then it has nearly doubled to over $8 trillion, accounting for nearly a quarter of the total value of the companies in the S&P 500. This week Jeff Bezos stepped down as the CEO of Amazon after his net wealth rocketed to $211 billion, making him the richest person in history.
The Big 5 tech companies provide different products services, but they all have one thing in common: their vast power and wealth stems from their control over our data and digital infrastructure.
In the latest webinar in IIPP’s ‘Who owns what and why’ series, Shoshana Zuboff, author of ‘The Age of Surveillance Capitalism’, and Tim O’Reilly, Visiting Professor of Practice at IIPP and Chairman of O’Reilly Media, explored the rise of data capitalism — and discussed what policymakers can do to tame the tech giants.
In the long history of global capitalism, the digital age is still relatively new. As Zuboff highlighted, in the year 2000 only 25% of the world’s information was stored digitally, and Google was still a plucky start-up search engine. Although its founders had originally expressed concern about the potential for advertising to corrupt search engines, Google quickly realised that by mining the data amassed on its servers, it could accurately predict the behaviour of users and sell these insights to third party advertisers for a handsome profit.
Google’s early monetisation of behavioural data collected from its users was the first example of what Zuboff refers to as ‘surveillance capitalism’, and this would prove to be one of the most lucrative discoveries in modern history. As the amount of internet traffic rapidly expanded in the following years, the amount of data that Google could harvest from its users also skyrocketed. The financial rewards were enormous: between 2000 to 2004 Google’s revenues increased by 3,590%, and it wasn’t long before other companies wanted a piece of the action. By 2007, the proportion of the world’s information that was stored digitally had soared to 95%, and companies such as Facebook, Microsoft and Amazon had all embraced the surveillance capitalism profit model. Since then, these tech giants have grown to become among the most powerful economic actors in the global economy.
Whereas the corporate titans of the 20th century made profits from manufacturing goods under industrial capitalism, the business models of the 21st century equivalents couldn’t be more different. Profits are increasingly derived from the ever-expanding extraction and analysis of behavioural data from web users — who provide their data to tech platforms for free.
According to Zuboff, this business model is inherently extractive, as it relies om “unilaterally claiming private human experience as free raw material for production”. This had led some to draw parallels between the modern tech giants and the landowners of the feudal era. Both can be viewed as ‘gatekeepers’ that are able to extract economic rents by virtue of their exclusive control over an essential resource. As IIPP Director Professor Mariana Mazzucato recently wrote for Project Syndicate:
“Just as landowners in the seventeenth century extracted rents from land-price inflation, and just as robber barons profited from the scarcity of oil, today’s platform firms are extracting value through the monopolization of search and e-commerce services.”
As well as resulting in an enormous concentration of economic power, critics argue that the rise of surveillance capitalism is also at odds with the values of democracy and freedom. By gathering such large amounts of data and undermining human agency, these business models also impose a range of non-economic harms on society.
What can be done to tame the power of Big Tech? After years of turning a blind eye to the problem, in recent years policymakers on both sides of the Atlantic have started to pay more attention. In Europe, the EU has proposed a new Digital Markets Act which will introduce stricter rules for digital platforms that are deemed large enough to be “gatekeepers”. Meanwhile in the US, Joe Biden’s administration recently appointed Lina Khan, a vocal critic of Big Tech, as chair of the Federal Trade Commission.
For Zuboff, the goal of policy should be to change the way that data is collected and governed to ensure it serves democracy and the collective good. In practice, this means interrupting the tech giants’ data supplies by outlawing the extractive mechanisms and markets that fuel surveillance capitalism. Just as we have outlawed markets in human slavery and organs, Zuboff believes that the time has come to outlaw markets in the digital sphere that are immoral and anti-democratic. The effect of this would be to cut off surveillance capitalism’s revenue source at its root.
It also means introducing new laws and regulations designed to promote new competitors that genuinely serve the collective good. While this may include using antitrust and privacy powers, these tools were designed to serve the economic landscapes of the 20th century. As Tim O’Reilly highlighted in the webinar, if they are to be used effectively in the 21st century they must be redesigned for the digital age.
Fundamentally however, freeing our economies from ‘digital feudalism’ requires new tools and frameworks that enable us to more accurately analyse how value is created and extracted in modern economies. In a new project funded by the Omidyar Network, IIPP is currently working to define and quantify modern economic rents across a range of sectors including, including the digital sector.
Reining in the power of the tech giants won’t be easy. But collective action has transformed capitalism before––now it must do so again.