Trends to consider in policy-making – What to avoid

The ongoing Digital Revolution reshapes our world and challenges policy makers in many ways. The emergence of the platform economy has created powerful non-state actors that have far-reaching influence on communities around the globe. In this new nexus of business, technology, and society, we need to rethink policy-making to blend innovation policy with foreign policy from the start. We need to think about the challenges and potential dangers ahead, about necessary course corrections and plausible alternatives, about the public discourse we should promote.

Over the next two posts, I’ll attempt to give at least some initial orientation, offer some guiding questions we could ask, and highlight a few promising ideas we could pursue further. While they all are related to digital technology one way or another, each comes from a different professional field. And I hope that these eight short stories collectively illustrate the breadth of developments we should take into consideration as we devise international innovation policy and innovative foreign policy.

In the next post, I’ll look at four forward-looking proposals that could help us shape our digital future for the greater good of society. But in this post today, I’ll start with casting some light on four potential downsides of the Digital Revolution, on the outcomes we should seek to avoid.

Advantage for totalitarian systems?

At the end of the Cold War, capitalism had won over communism, and liberal markets had won over centralised planning committees. Or so we think. Historian Yuval Harari holds a slightly more nuanced view and argues that neither the political nor the economic system made the difference. Instead, he sees the decisive advantage of the West in the distributed data processing system that underlies both, liberal markets and liberal democracies. And he goes on to say that this advantage might have been only temporary.

Historically, distributed data processing turned out to be reasonably effective for political decision making and the allocation of resources; it simply worked. At that time, centralised planning seemed a good idea only in theory, but it failed in practical everyday life. As Harari discusses in Why technology favors tyranny, recent technological progress changes that situation in potentially dramatic ways. Big Data analytics and Artificial Intelligence for the first time provide effective means to process vast amounts of data, while social media and the Internet of Things generate an endless stream of data to feed those analysis tools. When centralised data processing becomes more efficient than distributed data processing, the success story of liberal democracies could be undermined. What is more, centralised control over large volumes of data will be extremely valuable and tempting to exploit.

China’s social credit system represents the most ambitious centralised data processing system that is being implemented as we speak. But even without that very concrete prospect of Big Brother 4.0, we should think very carefully about the benefits and detriments of centralised processing of personal data. We have to answer a couple of tough questions: Who owns the data? Who holds control over large data volumes? Who gets access for what purpose? In the end, we need to make up our minds where we want to draw the line to ensure privacy, to uphold civil liberties, to protect our liberal democracies.

The flip side of globalisation?

The concept of globalisation isn’t new anymore. It’s been part of public discussion for several decades now, and we’ve gotten used to the reality of global supply chains, of global competition for the best brains, in general of global interactions and interdependencies in the economic realm. Still, it seems to me that we’ve focused on the business context alone, without paying attention to globalisation’s further-reaching implications, not just for national economies, but for our political systems writ large.

That is the topic of sociologist Saskia Sassen who turns globalisation around to look at its flip side. What she finds is the decreasing authority of national institutions, of the very idea of the nation state; what she finds is trend towards denationalization. Since the Peace of Westphalia in 1648, our political order and legal system are based upon the Westphalian state, i.e., a unity of people, territory, and culture. But this concept came under attack as recent advances in information technology have created entirely new types of communities that are not tied to any specific territory anymore. Social media deliver a particular case in point, as they exist outside territorial space, and even outside spatial dimensions. To enter, you just have to create an account; with that, you are a member and you have access; connected online, regardless of the physical distances between individual members’ locations. But how is order maintained in this virtual environment? Who holds that authority to govern the virtual space, and which rights and responsibilities do members have in legitimising the governing authorities? How do we amend the territory-based governance of nation states appropriately to deal with these new dimensions of community?

Nation states, though an abstract concept, exist in the real world. They are physically limited to their national territory, and their legitimacy is closely tied to their citizens. Here, governance is well defined, and so are rights and responsibilities (think about passports, voting rights, and taxes). On the other hand, communities in the virtual world know none of these constraints, which makes it easy to belong to any number of those communities. The sense of belonging can be very strong, while the level of governance remains fairly weak. And still, there is an expectation that some of the laws of the real world are upheld (e.g., against discrimination, but in favour of freedom of expression). The advent of these virtual communities created a novel type of governance challenge that traditional legal systems are ill-equipped to address. So we’ll have to learn how to deal with this blend of the real world and many virtual worlds, multilayered, partially nested, often overlapping, hardly delineated. We’ll have to think about the legitimacy of governance, appropriate limits of authority, and new challenges to accountability. We must find answers to these questions for application in the virtual world. And we must define those in clear relation to the real world in order to combine the best of both worlds.

Capitalism without labour?

Capitalism assumes that an economy works best if market forces can act freely without governmental interference. The underlying idea is that everybody can bring their resources and assets to the market place (be it land, labour, money, skills or ideas) and exchange them at a price that is freely negotiated. In a fully transparent market, the fully rational market participants would always find the best price, driven by their individual self-interest, a.k.a. profit. Since the early days of the Industrial Revolution, we have departed from that unbridled theory, learning through painful societal struggles to implement safeguards against the brutal exploitation of the workforce. We have seen many significant improvements, including:

  • the advent of unions that increased the bargaining power of labour,
  • the abolition of serfdom, slavery, and child labour,
  • the creation of social insurance (unemployment and pension) as well as health insurance, and the introduction of health and safety standards,
  • the introduction of the six-day work-week, and later the 40-hour work-week,
  • public education for everybody, and
  • general suffrage.

That definitely is an impressive list of achievements; that’s evidence of societal progress. Still, the essential role of the worker remained largely unchanged: He/she trades skills (initially mainly physical, today increasingly knowledge-based) for income. Only that income enables the worker to pursue his/her second role in the economy: being a customer to and consuming the products and services offered in the market place. Even the emphasis shift to the consumer role that occurred since the 1950s didn’t change the foundation: First skills for income, then income for consumption. No consumption without skills: You have to earn your living.

The Digital Revolution is dismantling that foundation today as information technology transforms our societies and economies much deeper than we might recognise, and the result could be capitalism without labour. Sounds liberating, but could have serious downsides. The economist Shoshana Zuboff coined the term ‘surveillance capitalism‘ to illustrate how different, and potentially harmful, this novel guise of capitalism is. You’ll find the basics of her thinking in her 2014 speech on A Digital Declaration, and in her 2015 paper Big Other: Surveillance Capitalism and the Prospects of an Information Civilization. Surveillance capitalism’s clandestine success story began with a defining moment that virtually turned dirt into gold. Prior to that magic moment, the traces that internet surfers left online (where they clicked, how much time they spent) had already been captured, but for no particular reason. These traces were dubbed ‘data exhaust’, they were considered waste, they were useless, they had no value. But after that Eureka!-moment, the data exhaust was exploited to analyse user interest and predict user behavior. The insights generated through such analysis were highly valuable to the advertising industry. These insights became a product that sold very well, and the algorithms underlying the analyses became the platforms’ crown jewels. Google was the first to implement a business model that turn data exhaust into a source of revenue and profit, Facebook and many others followed soon.

Once this recipe for a secrete sauce was established, platforms focused on scaling up the number of users and the time each user spent online, tracking their behaviours in minutest detail in order to understand their desires and to predict their next moves. That way users generated ever more data that served to continuously improve the performance of those algorithms that delivered micro-targeted advertising to the users. For the platforms, that’s a virtuous circle; hence it’s only logical that they claim their business model to be sacrosanct, without alternative. While the users are toiling in the ‘data mines’ generating more data, they are expropriated from their original product, and the fruit of their efforts is used to surveil them even closer. What is more, data ownership has become a new source of power that grows exponentially with available data volume. Amassing gigantic volumes of user data, the platforms wield immense influence over their users, the communities, and societies writ large. The roles of masters and slaves are clearly distributed in surveillance capitalism. Society embarked on this fundamental change without conscious thought, without public discourse, neither guided nor constrained by politics. The collective of the individual users simply fell for the convenience of free-of-charge online services. And platforms were quick to declare this situation to be the natural state. 

Time to seriously consider the wider implications. When the platforms generate their profit from users’ online activities, that’s okay for the platforms of course, but what is the return for the users? Where does the users’ income come from when their skills don’t matter? Do the masters at all feel responsible for their slaves? And are the masters, with all their influence far beyond their respective company, accountable to anybody other than their shareholders? I’m looking forward to read Zuboff’s opus magnum The Age of Surveillance Capitalism: The Fight for the Future of the New Frontier of Power that is announced for January 2019.

Is ownership obsolete?

You know exactly what is means to own a house, a car, a book. Don’t you? Once you bought it, you can use it, sell it, lend or donate it to somebody else, dispose of it, or even destroy it; just as you please. You can even hand it down to your heirs, i.e., you can pass on ownership. That’s our traditional sense of ownership: you are in full control. That’s the way things have been for millennia, protected by the common law, and maintained through everyday purchase contracts. However, this traditional certainty of assured control is eroding quickly as electronic books, online music stores and video-streaming offer new distribution channels for classical media, which give rise to new business models that in turn impose news modes of ownership that have little in common with our conventional ideas about that concept. It happens below the surface, we are just puzzled every now and then, when we must realise that our expectations are not met. Just think about the particular version of your favourite song on iTunes: you might suddenly find out that it is replaced with a different version (you didn’t ask for that, you don’t even like the new version, but you cannot change it). Or you get a new device that you want to play your music from: too bad that for many of your long-term favourites you cannot create an additional copy (you’ve done that for every new device so far, and now you realise that there is a number of copies allowed that you cannot exceed – deleting copies on old devices won’t help, you have to buy those songs again). Or an eBook has been removed from your reader (you payed for it, but sorry, you cannot read it). 

All of these instances raise a fundamental legal question: What do I actually get in return for the money that I pay? For sure it’s not ownership and full control in the traditional sense anymore. The lawyers Aaron Perzanowski and Jason Schultz tackle this question in the end of ownership, focusing on the impact and implications to the End User Licence Agreement. Certainly a legal term, this licence technically replaces the purchase contract that you would have expected. The big difference: You didn’t buy the song or eBook to own it, you obtained a licence to get access to it. Hence you have far less control and less rights. Is that legal? Well, some time ago you clicked on “Accept” after installing the app, and the tons of small print that you agreed to without reading most certainly included the terms of use for the app and all the services it offers. The hideous truth was hidden in plain sight.

And the story doesn’t end there; this erosion of our traditional ownership concept is not limited to data and software products alone, as Tesla’s response to hurricane Irma illustrates. In September 2017, when Irma was about to hit Florida, Tesla provided its customers in the area with a temporary upgrade (via remote software update) that allowed them the use the maximum battery capacity, hence benefit from extended range of their vehicles and escape safely. While this action was certainly well intended, it unambiguously demonstrated that the product they bought –and thought to own– was not anything like a conventional car (with set and unchangeable characteristics). Rather, customers had purchased a mobility service in the form of a car, with essential specifications under the continued control of the manufacturer, and subject to change after purchase. The same is possible with any software-heavy product with online connectivity: it remains subject to the manufacturer’s will, with no legal or technical requirement to obtain user/owner/licence holder consent in advance, and potentially even against her will. Note that ‘software-heavy products with online connectivity‘ are the tenets of the coming Internet of Things. Hence we can safely assume that this challenge is not going to disappear; instead the need for a solution will continue to grow.

Where does this get us? To lots of question, I’m afraid. Is ownership obsolete? Is it already gone without us realising? Or are there concrete aspects of ownership that we want to maintain in the digital future? I’d offer two essential elements that are worth fighting for: guaranteed access and ensured bequest. First, if the licence agreement grants access to a service, then how does the provider guarantee access at any time? What standards should apply to protect users against loss of access (through unintended bugs in a database, or intentional hacks)? What would be the provider’s liabilities? Second, if the licence agreement gives rights to me, how are those rights transferred to my heirs? In the past, libraries and record collections were handed down to the next generation. Why should that be impossible in the future? This particular question is bigger than just books or music, it includes the general concern over user data as well: What happens to all the my online accounts (e-mail, social media, banks, online shopping, you name it)? Shouldn’t they all automatically fall to my heirs? Bottom line: How could we establish the legal framework to ensure that our individual rights in the digital world are clearly defined and properly protected?

Downsides. Upsides?

These four ideas represent the trends I believe we should consider in policy-making, with the clear goal of avoiding their likely negative outcomes. At the very least we should follow their evolution in order to see the path they’ll take. Will they meet resistance and stall, or will they gain further momentum? Or would they blend and merge to take off in yet unforeseen directions?

Either way, I don’t want to leave you with a gloom and doom scenario. Therefore, in the following post, I’ll present a set of ideas worth pursuing to pave the way for a more positive digital future.

But before I do that, spare a thought on the following question:

Which important idea deserves more attention in policy-making?  What’s the essential thought, and why does it matter? But also: Who’s the originator? And is there a source for us to read more?

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