The article “Data Overtakes Oil as Leading (Geopolitical) Global Commodity” published three years ago became the subject of much debate and deliberation. At the time, many economists and political commentators decried the notion as nonsense – and some still do. “Data, the leading reason why tech exists in today’s world has overtaken oil as the number one traded global commodity and is now worth exactly double budgeted global defence spending. Like oil and military spending, data is the new geopolitical ammunition of the 21st century.” Whilst that statement is now recognised by just about everyone as common knowledge, Graham Vanbergen stresses the next big shift to take place will be just as rapid, game-changing and threatening. (1)
The reality is that data today is not just the main driver of everything from shipping to science, from shopping to share-dealing, it is about to change the way we live. It will change our understanding of economics, health, national security, politics, geopolitics and even the principles of democracy.
It is nothing new to say that the biggest corporations in the world by revenue manage everything from energy, retail, automotive, healthcare, commodities, financials, telecommunications and pharmaceuticals – and they so with one common factor – data. What happens next though will somehow surprise us all once again, like the 2008 financial crash and the Covid pandemic did.
The fine balance of international trade agreements that dominates agreed flows of goods and services are showing signs of stress and decay. For instance, the World Trade Organisation started life as GATT in 1948 and required overhauling in 1995. As the World Trade Organisation selects a new director-general this month, the Geneva-based group will be faced with one acute challenge: that there is no longer a great deal for support for it. Frank Lavin, CEO of Export Now says – “For its part, the WTO is faulted for its inability to complete a trade round… with no successful trade-rounds for 25 years. To put it politely, the WTO is not designed for success. Unlike the World Bank or the IMF, the WTO has no weighted voting based on a member’s economic role or financial contribution. (2)
The WTO is really designed for textiles, food, cars and commodities – but not artificial intelligence, software and big data – and unlike the former, the latter can be transported in seconds to anywhere in the world, with or without international or domestic governance. These new products are now challenging the institutions that support civil society and chips away at protective laws that govern such things as economic activity, workers terms and conditions, privacy, democracy and the making of geopolitical decisions. It will challenge the very basis of our understanding of not just how our economies are shaped but also how our democracies evolve in the years ahead.
For context, in the last two years alone, an astonishing 90 per cent of the world’s data has been created. Approximately 2.5 quintillion bytes of data are now produced by humans every day, 40 per cent of which, is now machine-generated. By the end of next year, the entire digital universe will be ten times the size of what it was this year at the beginning of this year as exponential growth continues. Systems have gone from storing gigabytes to petabytes and then on to zettabytes (one trillion gigabytes) and now yottabytes (1,200 zettabytes). (3)
Whilst the digital age was getting a firm and steady grip of every aspect of our lives, a market accelerator unexpectedly appeared. We have witnessed how economies are rapidly changing as a result of the Covid19 pandemic. It’s not just the obvious like traditional bricks and mortar shops being rapidly replaced with online retail, it’s telemedicine, fin-tech and home-working. Many businesses are rapidly digitising their operations. Those that don’t quickly evolve face extinction as their competitive edge is snatched from underneath them.
More regulated countries, face the dilemma of falling behind. One example is how the ubiquitous state surveillance system in China has not only shaped how the state delivers public services but also how to control, punish and administer its citizenry, and in so doing, cornered the global facial recognition systems market now being sold to countries all over the world.
This then leads on to concerns over democracy and national security and the inherent risk of geopolitical fallout. Technology can be as regulatory free and borderless as two parties desire. Take for instance Palantir Technologies. It is a private American software company that specialises in big data analytics. It was born in the intelligence community, initially funded by America’s huge Department of Defence, given additional seed-funding by the CIA and is used extensively by the National Security Agency. It helps to manage America’s warfare monitoring, counter-terrorism observation and was the architect of GhostNet, a cyber-espionage network that targeted the UN and various national embassies – alongside hacking operations of foreign defence systems. It played a starring role in the huge Facebook/SCL Elections scandal that dragged Brexit over the line in 2016, which required just 1.2 million votes to get a 48/52 per cent result. Brexit has already cost the UK economy £200bn in just four years. It divided the nation, fallen out with its European partners, driven its government to break international trade agreements and laws, threatens the Union and ultimately threatens the future prospects of what was once one of the worlds most stable democracies. Unashamedly, Palantir has just filed to become a listed company on the NY stock exchange to use all of that experience in areas such as data collection for democratic outcomes and managing crucial aspects of public health. (4)
Social media is another seemingly uncontrollable threat. These companies have the ability to undermine and frustrate governments’ ability to manage anything at all – as evidenced recently over the pandemic. It is a matter of documented fact that social media has eroded trust in democracy and the institutions that uphold it all over the world. All of these things are now happening all over the world, all of the time – to a greater or lesser degree.
Traditional trade agreements do not cover these new technologies and even if they did, they would be outsmarted in short shrift. Whilst it seems like common sense to have a common response for greater regulatory international coordination, enforcement will always lag behind. For instance, regulations can be undermined by companies operating from jurisdictions with laxer rules. Profit offshoring proves that point, now it is known that something like $32trillion sits in bank accounts located in tax havens. Another example is Britain’s Electoral Commission. The governing body, was not just unprepared for what happened in the 2016 EU referendum, but to this day it still has not worked out how to defend democracy against a new wave of technology that knows no borders.
The global reality is that there is a fight on for technical supremacy – and it is this that drives the lack of international regulatory frameworks in the first place.
Hyper-globalised economies were exposed for their weaknesses in a global pandemic. Programmes to move from service delivery to localised resilience are already underway in many countries. Sustainability is now a key factor for shareholders and investors with a new top investment priority that centres around the environment, society, and governance. (5)
The big problem with the coming technology spike is that basic principles should apply to every country – at least in Western democracies – but they don’t and won’t. That point is made by Dani Rodrik, Professor of International Political Economy at Harvard University’s John F. Kennedy School of Government, who says – “Countries may devise their own regulatory (technology) standards and define their own national security requirements. They may do what is required to defend these standards and their national security, including through trade and investment restrictions. But they have no right to internationalise their standards and try to impose their regulations on other countries.” Many high profile commentators echo this position.
There was a time when international trade was relatively simple. Products were shipped to mutually benefit both parties in the transaction. But hyper-globalisation ended up with trade imbalances that heavily favoured one against the other. The trade between America and China is worth around $650bn annually – well over $400bn is in China’s favour. Whilst Trump stokes his trade war, it was American corporations that off-shored its workforce to gain the upper hand against their own domestic competitors. It was unfettered competition that drove a wedge between corporations and an embittered workforce. The result then was financially distressed households supporting a populist whose wrecking tactics of the world order are cheered on. America is now heavily focused on fighting the tech supremacy war.
Take for instance Huawei. There is no real tangible evidence that it has (or has not) engaged in state-sponsored spying or surveillance and yet America is crushing its advances by legislating against the use of its products, against it acquiring US-based companies and anyone selling chips to its supply chain anywhere in the world. In so doing, America is creating very adverse side effects for national telecoms companies (170 countries already use Huawei’s products). Many countries are now facing the prospect of extracting installed systems and going to the expense of acquiring and installing new and more expensive ones. To all intents and purposes, America is using this as an economic weapon across the world to beat back just one company. It not only wants to stop Huawei from becoming a global force, it wants to stop China from gaining the upper hand. This alone is a warning that the global system of governance, of trade, of cooperation is coming to an end in a bid for technical supremacy.
What can we reasonably expect from this new world disorder? The regulatory framework we have known has already started fracturing. By its very nature, technology’s own advancement has a systems architecture designed to do one thing – beat the system.
About the Author
(1) The European Financial Review: Data Overtakes Oil as Leading (Geopolitical) Global Commodity
(2) Forbes: Can The WTO Be Saved?
(3) TechJury: How much data is created
(4) Wikipedia: Palantir Technologies
(5) Harvard Business Review: The Investor Revolution