Wednesday13 November 2019 ★ FINANCIAL TIMES 9

Opinion

Martin Wolf Economics

Surely, companies can do the right

thing even if regulations do not mandate

it? David Kaye, UN special rapporteur

on the promotion and protection of the

right to freedom of opinion and expres-

sion, has urged tech companies to align

their terms of use with human rights

frameworks.But we cannot depend on

the willingness of companies to act,

without ensuring a level playing field.

The decisions social media executives

do, and do not take, change the space for

online speech for hundreds of millions

of people. Governance of fundamental

rights is thus privatised. The outcomes

of the court cases, policies and business

decisions will play out over time.

But they are clearly disconnected

from the rule of law and legal frame-

works within which speech is protected,

or exceptions to that freedom are

Without knowledge of how tech compa-

nies work, it is impossible to scrutinise

their activities properly. We cannot rely

on the bravery of whistleblowers ot

bring abuse to light.

In the absence of clear rules, and with

stakes rising, we have seen a number of

high-profile court cases brought for-

ward.In October,WhatsApp owned by(

Facebook)sued the Israeli surveillance

companyNSO Group or allegedlyf

injecting spyware on the phones of

human rights defenders and govern-

ment officials. A month earlier Face-

bookitself faced alawsuit n which thei

plaintiffs alleged the social network

illegally allows employers to show job

ads only to men. It is important that

executives answer to lawmakers’ ques-

tions, but hearings in parliament risk

distracting from the need for regulation.

Mr Zuckerberg before Congress left a

sense that tech companies have bitten

off more than they can chew, and law-

makers have lost their grip.

Part of the challenge lies in the asym-

metry in access to data between the tech

giants and democratically elected rep-

resentatives or regulators. Companies

know everydetail of people’s lives, while

citizens and lawmakers know very little

about the inner workings of data collec-

tion or microtargeting algorithms.

the company’s founder, romised that p

disinformation would be fought. Soon

afterwards, however, Facebook listed

the rightwing Breitbart News website

among its “trusted” news sources nda

vowed to keep lies by politicians online.

A radically different approach was

announced by Twitter’s Jack Dorsey,

who tweeted that the company would

stop runningpolitical advertisements

all together. Now both Google and Face-

book say they are considering a ban on

micro-targeted political ads. But no

matter how many individual decisions

tech executives make, they should not

distract from the bigger challenge of

upholding the rule of law online.Corpo-

rateinitiatives are no substitute for

democratic lawmaking.A US Congres-

sional hearing, however tough, is no

alternative either. The appearance of

F

or a long time, regulators and

lawmakers took a hands-off

approach towards technology

companies. Initiatives to regu-

late the industry tended to be

criticised as “stifling innovation” by lob-

byists. Over the past few weeks, how-

ever, we have seen a rash of interven-

tions on technology policy by social

media leaders themselves, all of them

having an impact on speech online.

After beinggrilled on Capitol Hill

aboutFacebook’s plans to launch a glo-

bal digital currency,Mark Zuckerberg,

Executives should not be giving rulings on political truth

There is an asymmetry

in access to data between

corporations and

lected representativese

exceed those to America alone. Many of

those allies also share US concerns over

market access, poor protection of intel-

lectual property and China’s demand to

be treated as a developing country. Yet

the US has thrown away the leverage its

allies could have given it. If it had pro-

moted a negotiation with China inside

the World Trade Organization on these

issues, in concert with its allies, it would

have enjoyed both more leverage and

the moral high ground. (See charts.)

It is, of course, not enough for the

US to appreciate its resources. It also

has to know what to do with them. It is

not to make itself an enemy of the

Chinese people’s legitimate desire for a

better life. Still less is it to dream of over-

throwing China’s political system. Such

aims are neither reasonable nor achiev-

able. It is to stand up for an open and

economy over the decades ahead, it

should retain three significant assets: a

law-governed democracy; a free-mar-

ket economy; and economically power-

ful allies. These are sources, respec-

tively, of admiration, dynamism and

strength. Unfortunately, the US is trash-

ing them all. President Donald Trump

seems ignorant of what a liberal dem-

ocracy is. The US economy is slowly

morphing intorentier capitalism. It has

also become an unreliable and even out-

right hostile ally — ask the Germans.

The last might be the biggest blunder

of all. For military strength, the US has

in truth to rely mainly upon itself. But in

economic policy or human rights, it

does not.The US’s allies bring enormous

extra weight to the table (unlike Russia,

China’s only potent ally). Take trade:

China’s exports to close US allies far

stop it? The answer is: not much. Yes, it

could halt its imports from China and

try to halt all transfers of technology,

too. Such actions would hit China’s

development, but they are unlikely to

halt it. Only Chinese blunders, always

possible, are likely to do that.

This is a cry not for defeatism, but for

the realism Mr Pillsbury himself calls

for. China is likely to become the world’s

greatest economic power because it is

both big and competent. Yet even if the

US does not remain the world’s largest

question. US output per head will

remain far higher than China’s, perm-

anently. At market prices, China’s gross

domestic product per head in 2018 was

just 15 per cent of US levels. That is very

close to Turkey’s (and ranks 72nd in the

world). Imagine, however, that China

achieves Spain’s output per head, rela-

tive to the US. Its economy would then

be twice the size of that of the US, at

market prices (and close to three times

as big in terms of purchasing power).

Is it plausible that China will, over the

next three decades, achieve a GDP per

head relative to the US comparable to

that of Spain today? Of course it is. Does

anybody doubt that the Chinese people

are capable of this? But what is plausible

is not inevitable. It is possible, instead,

that Xi Jinping will be remembered as

China’sLeonid Brezhnev.

Brezhnev closed down all thoughts of

economic and political reform in the

Soviet Union from 1964 to his death in

1982. He emphasised communist ortho-
      doxy and party discipline. The result
      proved a disaster for the USSR. His con-
      servatism bore direct responsibility for
      the subsequent collapse. It is conceiva-
      ble that Mr Xi’s re-establishment of
      party discipline and the role of the state
      in economic life will have similar conse-
      quences for China. But what is conceiva-
      ble is not inevitable. China also has a vig-
      orous market economy and a studious
      bureaucracy. It may avoid this trap.
      In sum, what Mr Pillsbury views with
      horror is not just plausible, but natural.
      What, short of war, could the US do to

I

t’s easy to win a race when you’re

the only one who knows it has

begun. China is thus on the way to

supplanting the US as the global

hegemon, creating a different

world as a result. Yet it doesn’t have to

end this way.” This anxious view comes

fromThe Hundred-Year Marathon y theb

Hudson Institute’s Michael Pillsbury.

Mr Pillsbury is one of the most influ-

ential American thinkers on US-China

relations. The book is more than a call to

recognise reality: it is a call to arms. On

one central point Mr Pillsbury is cer-

tainly right: China’s rise is the great

political event of our times. Getting the

response right is crucial. It is so easy to

get it wrong. Today, I fear, the US is get-

ting it frighteningly wrong.

The starting point must be that,

whether or not China has a plan for

world economic domination by 2049

(the 100-year anniversary of thecrea-

tion of the People’s Republic), that is a

plausible, though not inevitable, out-

come. Other things being equal, popula-

tion is decisive in determining the size of

an economy. The US is the most power-

ful high-income country because it has

the biggest population, by far. But the

population of China is tothe US’s,

roughly whatAmerica’s is to Germany’s.

Nobody could now imagine a world in

which Germany’s economy is compara-

ble in size to that of the US. Similarly,

why should we imagine that the US

economy will remain indefinitely com-

parable in size to that of China?

There can only be one answer to this

How the US

should deal

with China

America’s economy is

morphing into rentier

capitalism and it has

become an unreliable ally

Exports as  of GDP

*European Union, South Korea, Japan, Canada, Australia and New Zealand

Sources: Refinitiv: FT calculations

China exports far more to US allies

than to the US

China is a very important market for

some US allies

Export of goods, by destination (as a  of GDP)

    

South Korea

Australia

New Zealand

Japan

Germany

Canada

UK

France

Italy

EU (excl. Germany)

India

US China

*European Union, South Korea, Japan, Canada, Australia and New Zealand

The US and its allies still do much more

trade than China

Exports and imports of goods as a  of world total

US Allies* China Russia

Source: IMF













 

Sources: Refinitiv; FT research









































US exports to

its allies*

US exports to China

China exports

to US allies*

China exports

to the US

mandated. If we do not want tech execu-

tives to be the ones deciding which polit-

ical ads or news sources are truthful or

deceitful, whether whistleblowers are

protected, or whether hacking technol-

ogy is legal, we must take action. If we do

not want Facebook to run financial mar-

kets, it should not be allowed to create a

global digital currency.

It is time for clarity and accountabil-

ity anchored in democratic foundations.

Instead of depending on tech executives

or going through more frustrating hear-

ings that generate few structural solu-

tions, lawmakers themselves should

urgently start answering the difficult

questions on how to ensure the rule of

law applies online as it does offline.

The writer is international policy director

at the Cyber Policy Center at Stanford

dynamic world economy, based on

market principles, to defend freedom of

speech and to challenge abuses of

human rights in China itself. But it

is also to recognise that, if humanity

is to achieve economic progress,

maintain peace and preserve the

global commons, a high degree of

co-operation must also exist between

the superpowers.

In dealing with China, the US and its

allies need to confront, compete and

co-operate across multiple domains.

Today, this seems inconceivable.

Instead, we are looking at a crumbling

alliance and afraught elationshipr

between the US and China. None of this

augurs well for humanity’s future.

Remember: it could be so much better.

[email protected]

Along with its allies, Washington

needs to confront, compete and

co-operate across multiple domains

For today’s politicians, the mistakes of

yesteryear or the shortcomings of civic

transit systems are immaterial. There

are new bogeymen in town and the most

visible is Uber. Together with its com-

petitors, at peak times the company is

estimated to account for about 25 per

cent of all vehicular trips in downtown

San Francisco. They are, in all but name,

the new utility companies and are being

treated as such.

The debates are becoming more

contentious. A couple of weeks ago,

Uber threatened a lawsuit against the

City of Los Angeles which, along with

other cities, is demanding that scooter

and bicycle operators share detailed

data on each trip. Just last week in San

Francisco,voters passeda special tax

that slapped a 3.25 per cent surcharge

on most ridesand a 1.5 per cent tax

on shared rides and zero-emissions

vehicles, starting in January 2020.

The proceeds — anticipated at about

$35m a year — are destined for the local

transit authorities. More significantly,

ity, streetcar and underground railway

companies. Politicians, goadedby taxi

companies, the public transit operators,

and complaints about urban congestion

(caused not just by automobiles but also

by electric bicycles and scooters and

thousands of delivery vehicles for

online goods) are rushing to intervene.

Many of the companies that rely on a

set of wheels to be in business started

because of the failure of politicians,

particularly in the US, to address

chronic urban issues. If the supply of

taxi medallions (or, in London, black

cabs) had not been as constrained as

it was, there would have been less of

an opening for Uber andLyft. The same

goes in citiessuch as Los Angeles

where, long ago, highly efficient tram-

lines were torn up and replaced by a

freeway system.

As for the bicycles and scooters,

one is left to wonder whether they

would be so visible if every city had

an efficient underground railway or,

where warranted, a ferry system.

the tinder-dry landscape. Predictably,

PG&E’s leader was castigated for

doing so, and publicly acknowledged

that the shutdown could have been

handled differently.

The new debate in California is

whether the state should assume oper-

ating responsibility for PG&E.

As for Uber, the challenge is a bit

different — but only by a hair. The

company started as a red-blooded

(many would say raw meat-eating)

enterprise. Now, thanks to its presence

on the streets of hundreds of cities

around the world, Uber is running into

the same issues that long ago beset the

original privately financed gas, electric-

citizens readily use open hearings to

vent their frustrations; and an entire

branch of the legal profession views the

utility as an annuity that pays for their

second homes and European vacations.

Critics will say that many of PG&E’s

problems are self-inflicted. They will

question managerial decisions, argue

that dividend payments are too high

and that insufficient capital has been

devoted to modernising generating

plants and thousands of miles of pipes

and cables.

The tragic fires of 2018,caused by

PG&E’stransmission lines, cost at least

86 lives, destroyed about 18,000 build-

ings, pushed the utility into its second

bankruptcy ithin 20 years and cost thew

chief executive her job.

Most of this year’s complaints, fortu-

nately so far accompanied by no fat-

alities, were distinct. They centred on

the utility’s decision to shut off power

to millions of consumers and businesses

north of San Francisco to prevent sparks

from transmission towers igniting

W

ould you prefer to be

at the helm ofUber ro

Pacific Gas & Electric,

Northern California’s

public utility service? I

ask because the past few weeks have

been testing for both organisations. For

PG&E, the fires that engulfed thousands

of acres north of San Francisco have

once again flushed all its critics into the

open. ForUber, an earnings announce-

ment has prompted its many doubters

to reiterate their concerns.

Running a utility is never the easiest

of jobs but California’s fraught political

and legal atmosphere heightens the

challenge. Unlike ordinary businesses,

PG&E’s rate increases have to be blessed

by a politically appointed commission;

Treat Uber as a modern utility alongside the rest

Debates about intervening

against young technology

companies are becoming

more contentious

California’s governor, Gavin Newsom,

recently signed into law a bill that could

change the nature of employment

arrangements for many of the same

companies: it will, almost inevitably,

result in expensive political campaigns

during 2020 and years of legal chal-

lenges.

The hue and cry aroused by Uber and

other young companies, that politicians

might consider the new generation of

utilities, is now as loud as the attacks on

Facebook, Google nda Amazon over

data privacy and monopolistic trading

practices. It’s certainly enough to make

the leaders of both Uber and PG&E

dream about what it must be like to run

a company free from such worries

andpressures. And, in a delicious irony,

no refuge looks more beguiling in the

current climate, than the company once

seen as the arch political villain and the

world’s most potent monopolist —

Microsoft.

The writer is a partner at Sequoia Capital

Michael

Moritz

Marietje

Schaake