In April 2019, analysts UpGuard said that the cloud services of Amazon I found out more than 500 million users of Facebook. Not to be confused with the case when on the internal servers of the social network were found hundreds of millions of user passwords without encryption. And it’s not the same data, which too freely ordered Cambridge Analytica three years earlier and for which, a year ago, mark Zuckerberg was reported to Congress.
Why the company is still not punished? Because she and other it companies have become part of the political system of the United States. Silicon valley originated as a community of geeks who believe in progress and don’t want to pay attention to policy. But now it companies become Imperial power. How did this happen?
The origins of the power
The emergence of technological corporations contributed to the concept of the free market bill Clinton, who created a digital free trade zone by weakening the tax law for Internet businesses. With the government’s interference was born a new form of digital capitalism, which has opened the companies-winners of road to domination of whole continents for the digital economy: Google in search, Facebook in social networks, Amazon in online retail. Earning more money, they invested in creating a proprietary infrastructure such as data centers in order to gather more data on clients to hone their algorithms to buy or to clone competitors. This, in turn, gave them an even greater advantage and allowed us to become the largest companies in the world by market capitalization.
Google and other it corporations have achieved their success with help from the state. Since 1960-ies the Agency advanced research projects Agency (ARPA, now known as DARPA) has allocated funds for long term research and development of breakthrough technologies that have underpinned future giants. This included funding for the Stanford research Institute as a center of innovation and economic development in the region, who is credited with many inventions, including the first fully digital computer, mouse, and even an early version of the Internet. Suffice it to recall that the prototype of the global network called the ARPAnet.
Each of the main technologies that you know about the iPhone including GPS, cellular, data network, microchips, Siri and touch screens — were obtained through the research and financial efforts of the government and the armed forces of the United States. Development of algorithm of search engine Google has also been supported by the National science Foundation. According to Professor University of Illinois Robert McChesney, a myth about the Internet always meant him creating a brilliant entrepreneurs, while for decades it was the development of the Federal government.
The government also played a key role in the destruction of monopolies in the technology sector in the United States. When IBM dominated the mainframe computing in the 1970-ies, the state sued to separate hardware and software parts of their business. Ultimately, IBM agreed to allow other companies to create software running on their computers. This allowed to ascend the star of Microsoft, which eventually faced its own antitrust case in the 90s. the Presiding judge, Thomas Penfield Jackson, U.S. District court for the district of Columbia then proposed to divide Microsoft into two companies — one for Windows and another for other products, but in the end, Microsoft remained intact. On Microsoft had imposed some restrictions such as the requirement to share certain programming information with third parties and ban the sale of products containing incompatible version of Java. And while the company fought for its integrity, in the field of search and social networks overtook her free products Google and Facebook
More than monopoly
The impact that today have the largest it corporations on the economy, innovation and stability in society force the politicians to think again about deterrence and even the division of giants. The Senator from Democrats Elizabeth Warren has proposed a ban on large monopolies, such as Facebook (and with it Instagram and WhatsApp), Google, Apple and Amazon, to host the application on their own platforms. Warren offers to share the big digital giants to dozens of small companies and to forbid them to promote their products on platforms that they own, as under the current scenario, they will default to create a preference for their solutions.
Weak antitrust enforcement has led to a sharp decrease in competition and innovation in the technology sector. Venture capitalists today are hesitant to Finance innovative start-UPS out of fear to be in the same market with the giants, because large companies is not difficult either to absorb the younger competitors or to drive them out of business. Using merge and controlling admission to their own trading platforms, it-Corporation has formed a certain “exclusion zone” around itself in which no risk to join any entrepreneurs or investors. In the end, reduced the number of technology start-UPS, young companies with high growth and 22% decline in the number of first rounds of financing in comparison with 2012.
Victims are not only startups but also large companies. Android Open Source Project (AOSP) and community Open Handset Alliance (OHA) Google is actually allowed to create a ban device running an alternative OS in 2012 under the threat of rupture of partner relations with Android Acer was not able to start the phone using the operating system from Alibaba. Similar situation with one of the only delivery channel applications from developers to users the App Store is dominated by Apple, allows the latter to deprive of competitive services, opportunities to distribute their products through their own platform. The list of victims includes such major companies as Spotify and Kaspersky Lab, who claims to regulators of the EU and Russia against Apple. Google and Facebook to Apple in February of this year temporarily withdrew the corporate certificates and digital signatures, stating that they broke the rules for the software placed on the App Store. Under the ban came and apps that Google and Facebook were used just for communicating with colleagues and testing new features.
Because in the market there is less competition, large technology companies do not have to so aggressive to compete in such key areas as the protection of privacy. The concentration of user data in one system and the vulnerability of platform solutions opened the way for the large-scale leak of personal data, ever happened in the world. So, only for last year the share of Facebook and Google accounted for about 168 million victims. Do not stand on ceremony social network with user passwords — hundreds of millions of them were available to employees of the Corporation without any encryption. According to the results of a survey conducted by SurveyMonkey and Recode from corporations less Americans trust Facebook and Google: these companies took the last position in the ranking. No wonder: after all, the responsibility for data breaches, for example, mark Zuckerberg laid on the victims themselves, accepted the user agreement.
The actions of major corporations are not subject to regulation based on the principle of consumer welfare: when Facebook and Google are free, we can’t talk about price gouging — the main characteristic of monopolies. In fact, the standard consumer welfare says that the government must show that the merger would lead to higher prices for consumers, before it will be able to stop him. As a result, attempts by regulators in the United States to curb the current generation of tech giants mostly look toothless. Similarly, things in the EU, where even the landmark antitrust case against Google, the EU, the culmination of which was the acquisition last June a record penalty of $2.7 billion for illegal promotion of its own services in search results, in the end did not change the dominant position of Google.
Does Senator Warren that today the direct beneficiaries of the antitrust case of Microsoft, namely Google, Facebook and Amazon, are something more than monopoly? They represent a political force that allows the head of Facebook not to be afraid and not to respond to the charges, but simply to temporarily remove the ads placed by the presidential campaign of the Senator in response to his aggressive stance toward the largest Silicon valley companies. Some of these companies have become so powerful that it can intimidate cities and States, receiving tax breaks under the threat of cutting jobs and moving to other places. It corporations can act, according to Mark Zuckerberg, “more like a government than a traditional company.”
Over the past 10 years, the five largest technological corporations of America increased spending on lobbyists in 5 times and flooded Washington with money to such an extent that they now surpass wall street’s four to one. For example, in 2018, Internet companies spent $77 million to support politicians (versus $16.4 million in 2008), while the five largest U.S. banks is only $16.6 million (versus $17.9 million in 2008). To protect their monopoly, they avoid all that may lead to higher taxation and to tighten governmental control over the content and privacy of user data.
Google has significantly increased their investment in lobbying during the leadership of Eric Schmidt, in the early 2010’s. When Schmidt was CEO of Novell, his company together with Sun Microsystems and IBM actively resisted the influence of Microsoft. Novell lost the battle for the market, which, apparently, became head of the company a lesson — he realized a vital need for warm relations with Washington for the it giants. In the first years of the work of Schmidt on as Chairman of the Board of Directors, Google was spending on the promotion of their interests are relatively few in 2013 this amounted to $80 000. In the past year, its parent company Google spent more on lobbying than any other technology Corporation: $21.7 million and slightly less — $18.4 million in 2017. It is significant that in 2013, Google leased an office area of over 15,000 square meters, about the same size as the White house, a couple miles from the Capitol building.
In addition to the direct costs of lobbying, which is subject to disclosure, the Silicon valley effect on politicians and citizens using non-transparent methods of “soft power”. These include the funding of think tanks, research bodies and trade associations that have an impact on civil society. Other ways to gain favor and influence include multimillion-dollar cost of the event, such as a secret three-day conference, Google Camp, which in 2018 was held for the third time. The Verdura resort in South-Western Sicily business leaders flew in on private helicopters and sailed super yachts, to socialize among themselves. The company was Emma Watson, Sean Penn, Prince Harry and sir Elton John. Formally the event was dedicated to the discussion of major global issues, politics and the future of the Internet.
Also there is a well-trodden trail of the leaders of Silicon valley on top government posts and back again. Only one Google employs 183 people who have previously worked in the Federal government under Barack Obama, while 58 employees it-Corporation found the subsequent work in Washington. For example, former attorney General Eric holder in 2016 got a job in Airbnb, and former Advisor to Obama and the campaign headquarters of the democratic party David Pluff started in 2014 Uber, and then in 2017 joined the project Initiative Vats Zuckerberg (CZI), a philanthropic group headed by the founder of Facebook. CZI was created in 2015, she aims to “open up human potential and achievement of equal opportunities”. Along with donations, the group engaged in political lobbying and investments in startups. Among the participants, Ken Melman, former head of election campaign of George W. Bush.
Policy as a service
Platform for corporations in Silicon valley have become tools of influence on the electoral processes. Often participants in the process do not shun any means to achieve the result. During the presidential elections in 2016 in the United States more than 35 million times was reported about the news, and a significant role in their distribution played Facebook, Google and Twitter. Shortly thereafter, a scandal involving Cambridge Analytica showed that the data of more than 50 million users of the largest social networks were collected without their consent and used for the targeting of political advertising and dissemination of false news during elections. Earlier something similar happened during the referendum on Brexit in the UK in 2016.
Despite the constant scandals with user data, it giants get away with it, taking responsibility for the placed on their platforms of the content. We hear a number of loud statements, including the willingness to transfer control of troubled assets, but so far no example of transmission control levers were not. Regulators, and entire Nations are forced to reckon with the consequences, making the solution of different severity, while generally not affecting the fundamentals of business technology companies.
Who spends money on political advertising? In late October, Facebook released a tool that allows to determine the figure for the United States. Judging by the first report, the leader turned Senate candidate from Texas, Beto O’rourke, who invested more than $5 million in advertising in a social network. But the fine print shows a more surprising discovery: the advertiser who spends the most on political ads on Facebook is the social network itself. However, buying advertising campaign on their own platform, the company is Mark Zuckerberg does not solve the problem. Political advertising in Facebook is still open for manipulation, although its head promised to solve the problem of disinformation: in 2018, the journalists of Business Insider has successfully placed fake ads on behalf of the now defunct and banned in the social network Cambridge Analytica.
A Hobson’s Choice
Facebook, YouTube and Twitter have become not only the uncontrolled tools a fierce political battle, but they began to exert their influence on democratic processes. In addition to the above history with Elizabeth Warren, the social network was removed page-right party in Brazil just before the elections. The formal cause is the fight against misinformation. The influence of the technology companies concerned about even the President of the United States. In August 2018 Donald trump criticized Google, accusing the search engine in that it excludes positive news related to its work, from news collections.
Silicon valley, which grew on the spirit of freedom and independence from the state, has long been taking part in the games of the government. When trump came to power, he created the Council of heads of technological companies, and if the majority of it leaders ignored the invitation, Elon Musk agreed. Already is it because the business of SpaceX and Tesla depend on the state orders and tax policy? Travis Kalanick, who is the election trump was led by Uber, also joined the Board and left it only after users EN masse protested against the cooperation with the new President. The head of the Board of Directors of Google, Eric Schmidt, who was actively involved in the election campaign of Obama and has publicly spoken about the “evil deeds” of Donald trump, reversed its position in 2017, attributing the administration trump “a huge explosion of new opportunities.”
According to legend, in the XVII century British stable owner Thomas Hobson offered customers the choice: take the horse nearest to the entrance of the stall or not to take the horse at all. Since then, the “Hobson’s choice” is called free choice, in which proposed to take “what is given”, or even refuse services. It seems that technology corporations lead us to the Hobson’s choice between “independent Internet” under the absolute control of private monopolies and direct government control over the Internet, as is happening in China and is viewed in Europe and Russia. And while the media appreciate the ways the division of another monopoly in the USA (what can traditionally open the road to new), the rest of the world seems to have finally decided on this choice: in Germany are demanding that the hosted content in France require transparency of the algorithms used in AI, in Canada, impose strict control of political advertising, and the EU requires compliance with people’s right to control personal data. If administrative controls to stop the flow of misinformation and manipulation? The bets are placed, waiting for result.
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