The return of the state is a phrase seemingly on almost everyone’s lips nowadays. Given the global challenges posed by the Covid-19 pandemic and climate change, the argument goes, it is governments, not markets, that should be responsible for allocating resources. The neoliberal revolution started by Ronald Reagan and Margaret Thatcher has apparently run its course. New Deal-style state intervention is back.
But this opposition of state and market is misleading, and it poses a major obstacle to understanding and addressing today’s policy challenges.
The dichotomy emerged in the nineteenth century, when arcane government rules, rooted in a feudal past, were the main obstacle to the creation of competitive markets.
The battle cry of this quite legitimate struggle was later raised to the principle of laissez-faire, ignoring the fact that markets are themselves institutions whose efficient functioning depends on rules.
The question is not whether there should be rules, but rather who should set them, and in whose interest.
In the twenty-first century, this state-market contrast is obsolete. State intervention can promote markets. The portability of mobile-phone numbers that most developed countries have introduced has spurred competition among cellular providers.
US Federal Aviation Administration safety regulations persuade passengers to trust new airlines, thereby encouraging new entrants and competition in the sector.
Not only did Operation Warp Speed accelerate the development of a Covid-19 vaccine, but it also promoted more competition among vaccine producers.
But while some rules foster competitive markets, many others interfere with them.
In some cases, like the restrictions on the resale of N95 face masks at the start of the pandemic, the interference is justified on the basis of higher principles. In many others, such as limits on the number of places in medical schools, interference simply reflects the influence of vested interests trying to distort the market.
The main divide, therefore, is not between the state and markets, but between procompetitive and anticompetitive rules.
And within the universe of anticompetitive rules, the key distinction is between those that are justified by a higher principle and those that are not.
Today, however, this association no longer necessarily holds. In a world of digital monopolies, laissez-faire enables disproportionate power to be concentrated in a few hands. This fuels oppression, not individual liberty.
Is one company’s ability to edit the news for three billion people an indicator of freedom?
Conversely, is state regulation that protects our privacy from constant surveillance a tool of repression?
Another crucial trade-off, therefore, is not between state oppression and market freedom, but between the oppression resulting from the existence of monopolies (whether private or state-controlled) and the freedom to choose offered by competitive markets.
In sum, we should strive to achieve a better state and better markets, and to contain each within its respective spheres. And yet the facile state-versus-market narrative lives on, because it greatly benefits vested interests
© Project Syndicate 2021
Although the digital revolution is now decades old, there still is no global digital economic order. Instead, there are competing visions of digital capitalism, predominantly articulated by the United States, China, and the European Union, which have been developing their models for many years and are increasingly exporting them to developing and emerging economies.
Absent more global alignment, the world could miss out on promising technological solutions to shared problems.
The question, of course, is what kind of alternative digital order is possible in today’s world. How can the Internet be reclaimed to serve citizens, rather than dominant political and economic interests? Realigning the incentives that drive the digital economy will not be easy.
Still, recent policymaking efforts reflect demand for new forms of governance.
The OECD, for example, is leading an effort to tackle international tax arbitrage — a favoured practice among US Big Tech firms. At the same time, US President Joe Biden has appointed industry critics to lead key institutions such as the Federal Trade Commission, and he has directed regulators to investigate the problem of undue platform power in digital markets.
And the European Union, building on its landmark General Data Protection Regulation, has advanced a more expansive ethics-led vision for governing data, digital markets, and artificial intelligence.
Moreover, countries such as Spain and Germany are now targeting the data-extraction business model directly.
Regulators and governing authorities around the world are considering how to redefine their AI and data agendas, foster the next generation of digital players, and shape global standards to fit their own respective visions. But if each of these jurisdictions’ main goal is to rein in overpowered digital platforms, there may be common ground upon which to build a more effective global digital order.
EU and US digital authorities certainly don’t agree on everything. But they do share a vision of a more open and collaborative digital order. If they are going to align effectively behind this overarching goal, they need to understand what they are up against. Divergent visions for the foundational structure of the global Internet have already put down deep roots.
In the emerging “splinternet,” informational isolation is on the rise. People within different silos have fundamentally different views about facts and thus what constitutes truth. There is not even agreement on how to secure and coordinate key features of the digital architecture, such as GPS.
The digital order that has emerged in the absence of global coordination raises two critical concerns. The first is the digital side of major global challenges like climate change and pandemics, which exist independently of liberal or illiberal governments. Just as the effects of climate change will be experienced unevenly, the technologies needed for climate adaptation and mitigation – or for epidemic surveillance – will be unequally distributed.
The second issue is the incompatibility of competing visions for future digital economies. Many developing and emerging economies are still deciding how to expand and govern their digital capabilities so that new technologies serve their broader strategies to achieve sustained economic growth.
These two concerns need to be addressed together. If measures to improve access to technology do not account for different local and national growth strategies, they may entrench an undesirable digital economic future, even if they promise progress against other issues such a climate change.
Addressing these concerns together bears directly on the pursuit of the 2030 Sustainable Development Goals. Whether it comes to public health, education, or climate change, seeking global alignment ought to rank higher on any country’s agenda than securing narrow geopolitical gains.
But, of course, realists must acknowledge that the current competition between models for data control, hardware design, and platform governance will loom large in any multilateral negotiation on these issues.
© Project Syndicate 2021
The writer is a PhD student in innovation and public policy at the UCL Institute for Innovation and Public Purpose
