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How Google and Facebook Threaten Our Democracies – And the True Promise of an Open Intellectual Community

Direktør for den amerikanske tænketank, Open Markets Institute, Barry Lynn talte 25. september på Danske Mediers medlemsseminar. Her satte den profilerede amerikanske direktør fokus på tech-giganternes markedsposition. Her kan du læse Lynns tale.

Det talte ord gælder.


 

Copenhagen, September 25, 2019
By Barry C. Lynn

 

Let me start with a story, about journalism, the importance of journalism. And political writing, and the importance of ideas. It’s a story from my own experience.

In the late 1990s, I was running a magazine called Global Business. This was the period just after the approval of NAFTA, and the WTO.

Before that, I had worked for many years as a reporter, a correspondent in South America. I had worked in Caracas for Agence France Presse, and in Lima for the Associated Press. I had covered insurrections, riots, economic shocks, epidemics, the drug war – the narcos, and the Shining Path guerrilla war.

But at Global Business we had developed a journalism of a different sort. We wrote about how to globalize ones business, in this new environment of law that had been created by NAFTA and the WTO.

And we did so for a very sophisticated set of readers, the people who actually structure the operations of corporations, including thousands of top executives at Fortune 500 companies.

Then on September 21, 1999 there was a 7.5 magnitude earthquake in Taiwan. It was a true tragedy, that left 2,500 dead. But it was also a normal tragedy. Not to be glib, but earthquakes happen every day. You are supposed to plan for them happening.                                     

Yet within days, factories all across America had shut down, in California, in Texas. The reason, as it turned out, was that the supply of a certain kind of semiconductor had been disrupted. And the only factories in the world that made that chip were located in a city called Hsinchu, about an hour outside Taipei.

As it proved, none of the foundries themselves had been damaged, only the electricity to the airport was cut off, which meant they couldn’t fly the chips across the sea to America.

Within a week the just-in-time delivery of the chips was restored. But for me, and a few other people, that event, that cascading industrial crash, was a window opening to an alternative reality.

The world was not what we had been told it was. Globalization, we had been told, was supposed to result in more of everything everywhere. And yet here was proof that all of something really important was in one place. Here was proof, in other words, that we as human beings had put all of some very important eggs in one basket.

And this had created all sorts of economic dangers, one being a much worse crash – one that simply shut world industry down. But also all sorts of political dangers, such as attempts by one nation to coerce another using industrial dependencies as leverage.

I set out to understand how rational people could have accepted such huge risks, entirely unnecessary risks, simply to save a few pennies on a product. Over the next five years I used the one set of tools I had at hand, those I had developed as a journalist.

And so I conducted hundreds of interviews, and visited factories around the world. In addition to the executives and engineers I knew from my time at Global Business magazine, I spoke with economists and national security experts, international relations experts, experts in trade policy, and in competition policy.

And I came to understand that a generation ago a small group of intellectuals, from both parties had succeeded in overthrowing the traditional approach to competition policy, to antimonopoly, first in the United States, then around the world.

This was the intellectual revolution we sometimes call Chicago School. Or more often in Europe – Neoliberalism. One result of this revolution was radical concentration of power, and physical production capacity. This was true of expensive items like electronics and chemicals, but it was also true of items like piston rings and windshield wipers, that cost a few dollars at most.

A second result, I came to understand, was a blindness to the risks created by this concentration of capacity. So I then did the second thing I had learned as a journalist. Which was to sit down and write.

I wrote a book called End of the Line, which came out in 2005. I wrote about how concentration made complex systems, industrial systems, financial systems, subject to catastrophic failure.

Then in 2010 I published a second book – called Cornered – on how the economic and political effects of concentration harm our democracy and our personal liberty and personal well-being.

For years my reporting, my analysis, got no real traction. This was mainly because it made no sense to economists, trained as they were in this new neoliberal thinking, with its extreme fixation on “efficiency,” hence its celebration of monopoly.

In almost every meeting with an economist, he or she would tell me that what I was reporting could not be true. No manager, no business would ever accept the risks I was describing, the economists would inform me.

I would then say, “but I confirmed this in hundreds of interviews, with actual business people, the vice presidents of manufacturing, the vice presidents of supply chain.”

And the economists – those neoliberal economists – would say, “well, the business people must be lying. They must be after something.”

And because journalists and policymakers had been trained to listen first and foremost to economists, these theoretical “experts,” the journalists and policymakers also were not able to see the plain facts of the matter.

Over the years I made incremental advances. But it was really not until 2016 that the dam broke. It was in June of that year that Senator Elizabeth Warren delivered a major speech based on our work.

And it was in November of that year that Donald Trump won the presidency – and promptly began to pick fantastically dangerous supply chain fights with China.  A recent example is his black listing of Huawei, which led Beijing to counter with threats to shut down Apple, or to impose embargoes that could lead to something much worse.

That’s one reason that last week – the OECD held a conference titled “Averting Systemic Collapse.” Suddenly people are able to see the systems, and see their fragility.

The lesson here? It can take a while. But the truth will out. Even when pitted against the most awesomely endowed of ideologies, and the richest and most politically connected of academies, the economics academy, you can change how people see the world in radical, revolutionary ways.

You just gotta get your facts right. You just gotta do good journalism.

What follows are the observations and analysis of a journalist, someone who has studied up close the structure of these platform monopolists, Google, Facebook, Amazon, others, for more than a decade.          

And who has studied the history of competition policy for more than 15 years, both alone, and as part of a fast growing team at our Open Markets Institute, a team that has provided many more hands for the gathering of facts, and the filling of intellectual gaps.

FOUR THREATS TO DEMOCRACY
And what does our reporting and analysis show?

It shows that today we face the gravest threat to democracy and liberty, in Europe since the Second World War, in America since the Civil War.

This threat is posed by the platform monopolists, the corporations we know as Google, Facebook, and Amazon.

That’s a big charge, you say, that these corporations pose such a huge threat to our democracy.

So let me put a little flesh on my contention by making four points.

The first reason I believe platform monopolists pose a threat to democracy is their role in spreading misinformation and propaganda. We have seen our societies hugely disrupted many times now by lies, and simple craziness.

There is nothing new about misinformation and propaganda. We can read about misinformation and propaganda in Thucydides’ history of the Peloponnesian War.

What is new is that Google and Facebook have built machines to use the secrets of the individual to manipulate the individual.

Their engineers have made these machines amazingly powerful. They are almost perfect mechanisms for amplifying propaganda and misinformation.

These two corporations make a lot of money by renting out these machines to just about anyone who comes along, be it Unilever or Coca Cola. Or white power idiots. Or Vladimir Putin.

Their business model, which is to sell advertising, depends on it.

What they sell to the advertiser is precisely their ability to manipulate you.

We cannot have democracy, if we routinely turn our most powerful communications platforms over to control by foreign agents, tribalists, nihilists.

The second reason I believe platform monopolists threaten democracy is the way they are starving our journalism.

We have seen our societies hugely disrupted by the collapse of journalism at the local level, and many other levels.

This is something I know well, from working for more than 30 years as a journalist.

Let me give you two figures – $116 billion, and $55 billion.

That’s how much Google made last year from advertising. And how much Facebook made.

That money did not come out of the ether. It came from competing media, media also supported by advertising.

In this case these corporations built a platform where people would be able to exchange news and information with one another. And then after people came to depend on that platform they began to exploit that dependence, to divert advertising away from publishers, and journalists, and editors, into their own pocket.

The result? Over the last 9 years – advertising revenue at U.S. newspapers fell from more than $50 billion to less than $20 billion. This was after Craig’s List, and the collapse of classified advertising.

And we have seen similar declines in news magazines, and television news, and in online native publications like Buzzfeed and Vox.

And, of course, Google and Facebook don’t operate only in the United States. Billions of those dollars also came from newspapers, magazines, television, and internet native publishers, in France, Britain, Germany; in South Africa, India, Brazil; in Malaysia, Myanmar, El Salvador, and Denmark.

This was especially true at the local level. But it was also true in trade journalism, and national journalism.

Those harmed by this theft are not only the publishers, and editors, and journalists.

Having thousands – tens of thousands – fewer journalists on the beat watching over our politics, watching over our communities, watching over the wellbeing of our families, is also bad for us as individuals, and as a public.

We cannot have democracy without well funded, fully independent journalism.

The third reason I believe platform monopolists pose a threat to democracy is what we might call the automation of fear.

In February of last year my friend Nick Thompson, the editor of Wired published a feature article on Facebook. The article included this concise description of Nick’s fear as a journalist:

“Every publisher knows that, at best, they are sharecroppers on Facebook’s massive industrial farm… And journalists know that the man who owns the farm has the leverage. If Facebook wanted to, it could quietly turn any number of dials that would harm a publisher – by manipulating its traffic, its ad network, or its readers.”   

A few months ago, Nick updated that first article in a new article titled “15 Months of Fresh Hell Inside Facebook.” In this recent article, Nick tells us that just after that first article appeared last year – with that quote in it:

“Traffic from Facebook suddenly dropped by 90 percent, and for four weeks it stayed there.  After protestations, emails, and a raised eyebrow or two about the coincidence, Facebook finally got to the bottom of it. An ad run by a liquor advertiser… had been mistakenly categorized as engagement bait by the platform. In response, the algorithm had let all the air out of WIRED’s tires. The publication could post whatever it wanted, but few would read it. Once the error was identified, traffic soared back.”

Nick concluded by doubling down on what he wrote last year:

“It was a reminder that journalists are just sharecroppers on Facebook’s giant farm.”

Let me clarify the lessons of what Nick wrote, and what Wired experienced. In response to a very positive article overall, one that Nick structured to provide Facebook with ample room to prove its good intentions, Facebook responded by shutting Wired down, and keeping them shut down, for a month.

Today, in America, in Europe, around the world, our newspaper publishers understand something very well, our TV news producers understand something very well, our book publishers understand something very well, our online native publishers – like Buzzfeed and Vox – understand something very well, so too our reporters and editors and book authors.

They all understand that someone, somewhere, has the power to cut off their pathway to the reader.

And this is true not only of journalists. Google, Facebook, Amazon also exploit their positions as gatekeeper to many individual markets.

They extort just about every company and person that depends on them to sell on those markets, or to buy what they need on those markets.

They extort money, in the form of advertising dollars. And in the form of fees for service. And in the form of data, which is of course just another form of money.

They also extort political power, and voice.

This week the Wall Street Journal, for instance, reported that Facebook, to help choke off the threat posed by SnapChat, “discourage[ed] popular account holders, or influencers, from referencing Snap on their Instagram accounts.”

In other words, Facebook threatened these users of its platform with retaliation, if they worked with another platform.

But it’s not just little people – like online influencers – who are made afraid. Today even large corporations, Bertelsmann and Hatchett, Procter & Gamble and Unilever, Sony and Bosch, Citibank and HSBC, the BBC and PBS, depend on Google and Facebook and Amazon to get to some market or other.                          

And every one of them is very much afraid that as much money as the platforms may have already extorted from them, that they will extort more. Or perhaps simply cut them off, in ways that cost them big money. Maybe their whole business.

So they do not speak out in public about their fears. Instead they fold their hands and behave.

Almost 400 years ago, at the beginnings of our modern democracy, during the years of the English Revolution, and the English Republic, John Milton, the poet known for writing Paradise Lost, also wrote political treatises – for liberty of thought, and liberty of speech.

In one of those treatises Milton decried what he called “the perpetual bowings and cringings of an abject people.” By which he meant all subjects within a tyrannical monarchy.

And yet today, what we see, right in our own society, is a pyramiding of political power into the hands of the three great master manipulators, three private super-regulators, three immense and increasingly dictatorial powers – Google, Facebook, and Amazon.

Who – by controlling the path to the market – have captured direct economic and hence political power over many of the seemingly most important actors in our political economy. And who make those people bow and cring, every day.

We cannot have Democracy unless every one of us, every citizen, feels free to speak their mind, every moment of every day.

This is nowhere more true than with influential members of our society.

The fourth reason I believe platform monopolists pose a threat to democracy is their destruction of the public.

Increasingly the platform monopolists apply these same tools of manipulation and extortion to individual members of the public in their capacity as consumers.

And this first-degree discrimination in pricing and in terms of service, by monopolists that provide vital goods and services, is leading to the atomization of the citizenry.

The issue is not that the price for the services of Google, Facebook, Amazon is free. It’s that the price for individual goods and services is imposed – from outside the market. And that the real price is different for each seller and buyer.

In the world regulated by Google, Facebook, and Amazon, price is no longer a function of competition but a tool of power.

The tailored price is both the purpose of the system of manipulation that these corporations have built. And it is a means of manipulation.    

The public, to understand a problem, needs information. One of the most important forms of information is the price of a good or service. In a world in which every price is unique, it is impossible for the public to concentrate knowledge about a particular human commercial activity.

Hence it becomes impossible for the public to concentrate political power to affect that human activity.

Without public prices you don’t really have a public. And obviously, without a public, you can’t protect democracy.

THE LARGER IMPLICATIONS OF THE MONOPOLY SYSTEM
It gets worse. What I am about to say against the platforms, I have not said before.

But this argument became clear to me last week, at a conference on how to address the effects, and causes of climate change. It became clearer yet watching millions of children march, to save their world, and ours.

Thinking of my own children, and of all our children, of their future, what I realized was that the way that Google, Facebook, Amazon fight to defend their power every day makes it far harder to master this threat too, of climate change.

The problem here is not the business model that Google and Facebook built in simpler, more innocent days. That advertising-based business model that – arguably – ties the hands of their executives today.

The problem lies with the philosophy they preach, as they seek to perpetuate their power. As they seek to perpetuate the Chicago School, Neoliberal philosophy that helped to unleash monopoly a generation ago. And has buttressed monopoly power ever since.

Until a few years ago, the two groups that spent the most money lobbying and advocating against regulation of business and in favor of libertarian philosophies, were the Wall Street banks and the hydrocarbon vendors.

This later group includes our friends Exxon and BP, of course. Most importantly, it includes the Koch brothers, who built perhaps the single most powerful lobbying operation in human history, one that has for all intents captured control over the entire Republican Party in the United States and turned that Party into the single most powerful voice in favor of hydrocarbons, in all the world.

In the last few years, however, the bankers and financiers have to some degree backed off from this assault on regulation and this defense of extreme libertarian philosophy. In part this is because they are now so powerful they hardly need to lobby.

Do you know what group took their place? Yes – the platform monopolists. In their efforts to perpetuate their power they have devoted huge resources to protecting the bogus philosophy that was used to overthrow modern antitrust a generation ago and that has been so useful to them, and that continues to befuddle powerful men, like many members of the U.S. Senate.

It is Google especially, but also Facebook, and Amazon, and Microsoft that have stepped into the breach left by the bankers. It is they who fund the pro-monopoly academics. They who fund the pro-monopoly think tanks. They who fund the pro-monopoly armies of lawyers. They who fund the oppo teams who attack us and our allies. They who engage in intellectual thuggery.

It is they who – in tandem with the Koch operation – prop up the entire institutional system of monopoly in America, and the world as a whole. The system of monopoly that also protects the power and business models of the most powerful sellers of hydrocarbons.

Google and Facebook and Amazon don’t – of course – sell hydrocarbons themselves. But their fight against antimonopoly law has brought them into an intellectual alliance, a political alliance, with the hydrocarbon vendors.

Let me be absolutely fair. I will venture that almost every person who works at Google, Facebook, and Amazon believes the dangers of climate change are real. I will venture that given the choice, every executive and employee at these corporations would vote in favor of even quite radical efforts to address this existential crisis.

And yet to the extent that the executives and employees of Google, Facebook, and Amazon abide the conscious, voluntary, intentional attacks by these corporations upon normal and necessary government regulation of business.

And abide the conscious, voluntary, intentional attacks by these corporations on Democracy, and on those who stand for Democracy.

And abide the conscious, voluntary, intentional attacks these corporations make on antimonopoly law, which is the foundation of all Democracy, and all innovation.

They stand fully in direct alliance with the worst of the worst actors when it comes to climate change.

Monopoly is the product of an interlocking system of law.

Every day, Google and Facebook strive to place the dead hand of monopoly on our public debates, and on our democracies, and on our liberties.

They also – through their support for this system of law – help to place the dead hand of monopoly upon our world and on the future of our children.                 

TOWARD A NEW DEMOCRACY OF HUMAN INGENUITY.
First, we must understand the nature of the problem.

Platforms are many things. But a simple useful analogy is that they are the railroads of the 21st Century. They connect sellers to buyers.

Some are nation spanning, world spanning. Others are highly localized.

All provide services that are essential, that increasingly are not replicable. Like the railroads of the 19th century, and like the telephone companies of the middle of the last century.

Second, we must ensure that these providers of essential services are subject to common-carrier-style regulation. They must never discriminate in the prices or terms they give to different sellers, or different buyers.

This is what we have done in the past with every single essential service, every network monopolist.

Tax these corporations? Well we should of course make sure that the platforms pay their fair share of taxes, like everyone else. But tax is not the way to deal with their power. We must avoid any risk of putting the state into bed with these corporations; and this must include never coming to depend on them for tax revenue.

Break up these corporations? That is a necessary action, and will bring many benefits. But it is a second level action, that will improve matters around the margins.

Most immediately important is that we use common carrier style regulation to break their business model, which is based on selling their ability to manipulate behavior in exchange for advertising dollars.

To impose such common carriage rules we don’t need any new law or any new institution. We have every tool we need already at hand. We lack only political courage.

Third, we must accept the fact that we the people will prevail. We will fix this problem. And we will do so soon. Indeed we are already at it. The sooner we accept that fact, the sooner we will finish the job.

Consider, just two weeks ago in the United States 50 state attorneys general announced a wide-ranging investigation into Google’s business model, it’s advertising based business model. That included 23 Republicans.

Consider, the Antitrust Subcommittee of the Justice Committee in Congress that same week subpoenaed a vast amount of commercial information from the platforms, including the personal emails of their executives, so they can detail exactly how these corporations harm their customers, so they can do so, in the best journalistic tradition, with real facts.

Every member of the subcommittee, including every Republican, voted in favor.

Consider, more than half of candidates for the Democratic Party nomination for president have named the power of the platforms as one of the top challenges for the future.

A new center, a new popular democratic center, is beginning to form, based on the desire to protect our democracies from autocracy.

For the last 400 years, democracy has been built upon the foundation of antimonopoly law. Antimonopoly law is one of the fundamental bases for the rule of law itself.

So it will be again in the 21st Century.

Don’t let Europe fall behind.

Commissioner Vestager has done very good work. President Macron has done very good work. But they are moving too slow.

They appear to be still too afraid of retaliation, too subject still to the neoliberal myths, about the rights of private corporations.

So tell Commissioner Vestager, and tell all your politicians that we the people have an absolute right, and an absolute duty, and all the power we need today, to break and neutralize these corporations.

And we must act now. Before they break and scatter us. And shatter all that is good in the world.

Sharpen our sword of antimonopoly, on Google, Facebook, and Amazon, and we will not merely protect democracy, not merely perfect democracy. We will also have made our sword sharp enough to use against every other power that intends to block our efforts to think and innovate our way to a dignified human future on this earth.

Almost four centuries ago, John Milton, in Areopagitica, warned against the choking off of debate in society.

The people, he said, all the people: “should be disputing, reasoning, reading, inventing, discoursing, ev’n to a rarity, and admiration, things not before discourst or writt’n of”

The true danger came from those who would monopolize control over information and knowledge, Milton wrote. It was they who threatened

“to bring a famin upon our minds again, when we shall know nothing but what is measur’d to us by their bushel.”

Milton ended by quoting Moses, who, looking over Canaan 3,500 years ago, facing innumerable immediate existential threats, wished only that the light might shine in every one of us.

Would God that All the LORD’S people were prophets, and that the LORD would put his spirit upon them!,” Moses said. (Numbers 11:29).

Now is that not an awesome democratic vision? It may well be the world’s first true antimonopoly vision. A vision of a true community of human mind and human ingenuity.

It is a vision we must embrace once again today.

Thank you.

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