Sanjay Gupta: Can We Protect Ourselves from Microplastics?
This is the latest episode of Chasing Life with Dr. Sanjay Gupta. Microplastics are everywhere — from the ocean to our bloodstream — raising urgent questions…
Thought Leader: Sanjay Gupta
By Laurence B. Mussio and Kevin Lynch
As Mark Twain famously observed, “History doesn’t repeat itself, but it often rhymes.” It also often contains lessons for the future. This may be one of those times, and the mass digitization of economies and societies may be one of those issues.
Consider that the New York Times and The Economist are now carrying articles lamenting the risks of monopoly power in the digital age, just as they did in a previous century marked by disruptive technological change. At the political level: In the United States, Senator Elizabeth Warren advocates the breaking up of info-tech monopolies; in the European Union, Competition Commissioner Margrethe Vestager is wielding regulatory policy and fines to modify infotech market behaviour; and in Britain, the Furman Report on “unlocking digital competition” proposes drastic reforms to competition rules for the digital sector. In these changing times, history may indeed offer present-day insights as public concerns regarding infotech behemoths gather steam—think of it as analogue signals for the digital age.
At the beginning of the 1900s, technological and economic advances spawned massive new “econo-technical” systems that transformed economic production, work and life and, in so doing, raised productivity, real wages and standards of living. They also facilitated the emergence of mammoth corporations that increasingly dominated economic life and exerted great influence over civic affairs.
Soon, a growing public backlash emerged, particularly in America. Local, regional and national monopolies had developed in many sectors: street railways, electric power, oil, and telephony to mention a few. Concerns about their striking corporate power combined with consternation over corporate practices—ranging from price gouging to restricting new competitors to unacceptable working conditions—rapidly grabbed and held the public’s interest. A coalition of consumers, workers, nascent competitors and public commentators succeeded in creating the political and policy context for a wave of American corporate regulations including anti-trust.
These “last century monopolists” in the U.S. were reined in by legislation (Sherman Antitrust Act of 1890), the trust-busting policies of President Theodore Roosevelt (1901-09) and precedent-setting legal judgements such as the break-up of Standard Oil in 1911 and the progressive policy context of the New Deal involving new regulatory instruments and new regulatory bodies. Specifics and timing varied, but other western countries such as Canada and the U.K. followed similar policy routes.
Fast forward a century, and we are deeply immersed in the Fourth Industrial Revolution, a time again of extraordinary technological change. Its capacity for creative disruption seems endless. And nowhere is that more evident than in the new digital world it has created. This digital world has dramatically changed how we communicate, work, socialize, study and relax. Consumers have gained enormously from new information-based services, often seemingly at little cost. Firms in many sectors are being transformed by digital technologies, tech start-ups are everywhere and the gig economy offers unique work flexibility. Financial markets have valued the info tech titans—Facebook, Amazon, Apple, Netflix and Google—among the world’s most valuable firms by market capitalization. Digital trade including e-commerce will soon be the fastest growing segment of international trade.
So, is this time really different? Not necessarily. These same tech titans, now sporting the Gothic acronym FAANGs, are being targeted as the “new monopolists” given the scale, reach and dominance of their technology platforms.
In the wake of the Facebook data-poaching revelations and the resulting widespread consumer outrage, U.S. politicians are exploring regulatory avenues to curb data abuse and establish consumers’ data rights, while the E.U. has already implemented the path-breaking General Data Protection Regulation (GDPR). Foreign interference in the U.S. election campaign and the Brexit referendum that leveraged social media has fueled fears about risks to democratic institutions in a digital world. Some commentators argue that digitally driven growth may exacerbate income wedges and job prospects between skilled workers and unskilled ones, increasing inequality. And, authors such as Harvard’s Shoshana Zuboff warn of “surveillance capitalism” in a digital era of big data, enormous computing power and AI.
So, if history is rhyming, what are the insights from hindsight for tackling the unappealing features of the new, tech-intensive digital world? Today’s major echo of the era of the early 1900’s is striking: a public mood that has swung from infatuation with the new technologies and the convenience and opportunity they convey to angst about some of their unwelcome side effects. And, present day angst ranges from fears about the privacy, security and usage of one’s data, to robots taking your job, to whether your children will have the skills for the jobs of the future, to what fake news and distrust may do to trust in the public commons.
Using a long-run lens requires correcting for optical illusions, and several exist today. First, the fuel of this digital economy is data—a factor of production as crucial as labour and capital but opaque in how it is sourced, priced, and utilized. Second, the capital assets of the new info techs are largely intangible capital (IP, creative ideas, code) rather than the bricks and mortar of yore. Third, highly educated and skilled talent is the essential labour driver of the info tech titans, not a workforce with a range of skill and educational levels. Fourth, the route to digital market dominance is building technological platforms of incredible scale, with numerous tech start-up acquisitions to maintain technical dominance, whereas in the past firms used multiple acquisitions of similar firms in the building of monopoly positions.
Finally, digital platforms are inherently virtual and global, not geographic in the manner in which traditional industrial sectors have been built and organized. A present-day policy lens must adjust for these changed economic circumstances.
Our past experience with disruptive technological change provides present guidance, although much of it is of a cautionary nature. Then, as now, policymakers and politicians have to work out where to draw the line between whether a firm is being innovative and efficient or whether it is engaging in anti-competitive behaviour. Then, as now, anti-trust policy emerged as an important tool, but by no means the only one. Then, as now, there was a broader question of balancing the encouragement of economic dynamism with the protection of consumers and the response to wage and income inequality. Then, as now, getting the calibration and timing of the policy response wrong can fuel populism and division.
The public and political context is clearly volatile in a number of countries. Populism has surged in the U.S. as a critical mass of the population fears that their jobs will be stolen by foreigners, either because of bad trade agreements or illegal immigrants, that they have lost control of their lives in a disruptive world, and that their future prospects have soured—the American dream no longer applies to them. This has created a distilled brew of discontent and distrust.
Getting the response right in this challenging context represents a high-stakes policy challenge. It starts with getting the questions clear. How do we balance a stated public interest in innovation-driven growth and innovative firms that create new goods and services with a public concern with negative externalities of technological disruption? How broadly or narrowly should we define the policy toolkit to address these externalities in a rapidly changing digital economy? How applicable is current competition policy, which focuses largely on narrowly defined consumer surplus, to economic dominance in the digital economy? And, given the global nature of the digital economy, how much sovereignty do national jurisdictions, particularly smaller ones, really have?
Major jurisdictions who are global players in digital commerce appear to be taking quite different paths to the future. The EU applies an individual rights lens to data, China at the other end of the spectrum applies a statist lens, and the United States has a largely corporate rights lens, at least at present. Regulatory blocs appear to be forming, and other jurisdictions such as Canada may be squeezed in the absence of a common international approach. It is worth noting that the vast majority of the world’s info tech titans are either American (FAANGs) or Chinese (Alibaba, Tencent, Baidu). Japan is trying to internationalize data standards, putting digital trade on the table as a World Trade Organization priority and attempting to rally support at the next G20 meeting, which it will host. Without international coordination, digital trade—the most rapidly growing part of trade in services—will be hampered by non-tariff barriers of conflicting data regulations.
The emerging splits in anti-trust thinking are equally revealing. The consumer welfare standard for competition—the view championed by the Chicago School that only consumer prices and consumer welfare should be considered in anti-trust cases—is under sustained intellectual and political attack in the U.S. Opponents argue it is inadequate in a world where the business model of Facebook and others offers services nominally without charge to consumers but monetizes their data. The EU, which has already launched and won anti-trust cases against Google and other info tech firms, clearly believes in a broader standard. In the U.S., influential anti-trust experts such as Judge Richard Posner, accept the interpretative challenges of applying conventional anti-trust measures in the digital economy, citing the growing complexity of new digital products and services, produced in digital economy firms with new business models, and changing at an unparalleled pace.
Given that public concerns range from market dominance and abuse to data privacy and misuse to wage suppression and inequality to job insecurity in a world of impending automation, a more innovative and expansive toolkit than current policies is likely needed, not unlike the innovative policy thinking a century ago in response to technology-driven developments. For countries like Japan, Australia, Britain (post-Brexit), Singapore, India and Canada, which are outside the emerging U.S., EU and China “regulatory blocs”, there should be both cause for concern and impetus for common cause as digitization and data redefine the global economy.
So, what does all this mean, particularly for Canada? First, Canada should be at the leading edge of global policy analysis and thinking on the digital economy, shaped by our aspirations and experience. We should not rely solely on the policy paths of others. American policy thinking will be influenced by their dual reality: maintaining global pre-eminence in digital economy firms while responding to public concerns about unacceptable side- effects of digitization. Similarly, the EU policy approach will be shaped importantly by European attitudes.
Designing regulatory policies that target unacceptable market and societal outcomes but do not impede innovation and entrepreneurship isn’t easy. Overly prescriptive regulation in a dynamic and fast-changing world may not achieve the desired balance, whereas principle-based regulation and collective codes of conduct, accompanied by effective monitoring mechanisms may be able to provide the public with reasonable assurance of expected behaviours by participating firms. Similarly, programs of job retraining and reskilling in response to automation may do more for job security concerns than searching for regulatory fixes. Indeed, protection against cyberattacks may be better tackled as a collective public good rather than purely a private one. In short, we should be asking these questions, and many more.
Second, Canada should be building digital alliances with countries with similar interests and concerns, and pushing for global data and digital standards. Japan, Australia and Britain would be potential partners in such an alliance.
Third, Canada should consider being a digital “policy sandbox.” It could build on work by the World Economic Forum (WEF), the Organisation for Economic Cooperation and Development (OECD) and others on global data principles, and become an early adopter, helping to shape international conventions.
Fourth, Canada should strive to be a significant player in the digital economy notwithstanding the hegemony that the U.S. and China enjoy with their info tech titans. This means leveraging our advantage in being able to attract world class talent, aiming to own the podium in building world class innovation ecosystems, and rethinking regulation to encourage Canadian tech entrepreneurship, all the while building trust in Canadian digital tech firms. The government’s initiatives on innovation superclusters and global talent visas are good steps that need broadening and reinforcing by the public and private sectors.
Fifth, Canada could be a leader in applying the digital economy and data to government and quasi-government sectors. The health sector can be transformed by digitization, big data and AI, provided there is public trust in how data are respected and handled. Similarly, with government operations, the opportunities to be a world leader certainly exist provided public confidence goes hand-in-hand with technology competence.
In all this, Canada must avoid complacency regarding the threats of anxiety-fueled populism in today’s world of change and disruption. We are well into the digital era, with its transformative potential and its new risks. The “new digital monopolists”, with their size, power and economic impact, are the public face of these generational policy challenges, much as was the case a century ago, but both the challenges and opportunities run deeper. Responses will differ across jurisdictions and traditions, but past experiences provide useful signals for contemporary policy makers, and Canada should have a global digital voice.
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