Updated: Mar 14, 2021
Government officials in Washington, Brussels and Beijing are probably more divided than ever on international trade, investment, human and property rights, efficacy of their economic and social policies. But they seem to agree on one theme – Big Tech has become too powerful and should be subjugated.
The narrative around the overarching technological giants – mainly Amazon, Facebook and Google in the US and Alibaba and Tencent in China, has changed dramatically in the past five years. The
heroes of yesteryear, credited for driving economic growth, social and financial inclusion and global connectivity, have now become the target of constant criticism from politicians, regulators, media, consumer and business groups. Indeed, grievances against the tech giants abound, including anti-competitive practices, use of customers’ private data for generating advertisement revenues, undermining democracy and social cohesion by hosting fake news on social media platforms, to name a few.
Chinese regulators’ latest crackdown on Jack Ma’s Ant Group is from the same playbook popular in western capitals. After suspending of Ant’s record-breaking $35 billion initial public offering last November, People’s Bank of China, the country’s central bank, announced in late December that it had requested Ant to overhaul the group’s financial services business.
The regulatory pressure may end up with tighter oversight of Ant’s financial services business and possibly splitting its non-financial operations. To be clear, Ma’s Ant is very big, it is the biggest fintech company in the world with well over a billion active customers, together with its partners for digital payments. But it is not only a fintech company with its Alipay payment platform; it is a gateway to almost every digital encounter for most Chinese citizens. As the company itself puts it, “Alipay has developed from a payment tool to a one-stop digital daily life platform”. Jack Ma’s lambasting of large Chinese state-owned banks and banking regulations several months ago accelerated, rather than caused the regulatory measures against both Ant Group and Alibaba – Ma’s larger business venture and one of the biggest technology companies in the world. Ma’s competitors certainly are not immune. In fact, the other Chinese tech giants Tencent, JD Digits and Baidu are making changes in their businesses based on the regulators’ commentary of Ant Group’s operations and practices.
The world’s leading central banks’ reinvigorated efforts to introduce their own digital currencies were prompted in part by the announcement of Facebook’s Libra digital payments project and growing acceptance of stablecoins – cryptocurrencies without the volatility of Bitcoin. Central banks digital currencies can be very attractive for both households and businesses and thus could help fend off private companies’ attacks on governments/central banks’ monetary sovereignty.
Big Tech, their investors and customers - that is all of us - had better take note of the world governments’ shared stance on this industry and its possible consequences described below:
Radical assault – Big Tech are more tightly regulated and/or broken-down to quell their monopoly positions. More competition will reverse the network effect of big platforms, such as Google search and Facebook, resulting in lower earnings and deflating lofty valuations. This approach, however, could be highly contentious, and disruptive if not well thought-through. It would lead to a lose-lose situation for both the tech firms and their customers. The governments will not benefit in this eventuality either.
“Sticking plaster” – Following long debates and heavy lobbying, governments take shares in some of the large technology firms and have a greater say in their policies, mainly concerning the use of customers data. Tax burden will likely increase too. This is a good outcome for supporters of a big government but it would stifle innovation and ultimately hurt technology companies’ profitability.
Unholy alliance - Big Tech are willing to give in a greater share of their autonomy to the government in return of maintaining their business models more or less intact, thus preserving these firms’ strong profitability. In such a scenario, governments gain broader access to tech firms’ software, and hence to their customer data, for multiple good or bad reasons - from fighting terrorists and crushing cyber criminals to identifying potential political dissidents and manipulating public opinion. Democratic institutions will likely spare Europe and the US an Orwellian scenario of total government surveillance. However, we may have to live with a somewhat Bigger Brother.