The New Tech World Order
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Throughout modern history, governments have worked with and invested in privately owned companies to spur innovation and advance national agendas. From the production of weapons to the development of communications technology, these partnerships have proven fruitful, if in some cases controversial over the years.

There's no better example than Washington's partnership with the U.S. tech sector. Starting in the 1990s with the help of government funding and a loose approach to regulation, technology companies produced innovation after innovation. This boosted U.S. financial markets to unprecedented heights.

and allowed the U.S. tech sector to dominate its competitors in other countries. In a break with historical moments like the Manhattan Project or the Space Race, the most advanced tech in the world began coming out of private American companies rather than government-directed projects. The arrangement was wildly successful in an era of relative peace and low-level threats to U.S. national security.

many say that it is showing some cracks in the new era of increasing competition between the United States, Russia, and China. And many experts are growing increasingly concerned.

And that's because the government now relies on trillion-dollar companies such as SpaceX, Amazon, and Google for things like space travel and satellite intelligence. Companies that could potentially put their own preferences above national interest when it comes to foreign policy and security. I'm Gabrielle Sierra, and this is Why It Matters. Today, are private tech companies becoming geopolitical actors?

Lately, there's been a lot of talk about large tech companies influencing policy, foreign policy. We've seen this for decades domestically. But why is this argument gaining steam now? I mean, really, for the last 20 years or so, private power relative to public power has been growing, gosh, in almost every developed country, in most industries. But it's been particularly pronounced in the U.S. in tech.

This is Rana Foroohar. She's the global business columnist and associate editor at The Financial Times, the global economic analyst for CNN, and an author.

And so taking tech in particular, you now have these private actors in the form of the largest platform companies, the Googles, Meta. But you also have something like Elon Musk's Starlink, which is actually a private company that is truly fulfilling the role of something that used to be done by the state.

SpaceX accounts for more than $15 billion in government contracts, with top contributions coming from NASA and the Department of Defense. And in 2022, Microsoft, Google, Oracle, and Amazon shared a $9 billion contract to provide cloud computing services to the Department of Defense.

Let's imagine a scenario where Microsoft eventually has full control over artificial intelligence and chooses not to share all developments with the government, but instead releases a new product in China. Or maybe SpaceX stops wanting to work with NASA, and then eventually the company colonizes Mars and establishes it as a privately owned resort town.

I know, this may sound far-fetched, but it illustrates concerns about the power these companies have when it comes to making decisions about our world, especially when they wield near-total control over technologies like AI, satellites, and social media. So does it worry you? It does.

This is Adam Siegel. He's the director of the Digital and Cyberspace Program at CFR. Adam also recently spent a year with the State Department, leading the development of a U.S. international cyberspace and digital policy strategy.

All of these decisions to kind of outsource a lot of these technologies to the private sector made more sense when you weren't really thinking about great power competition. When you were fighting the war on terrorism and you're fighting about ISIS and other types of actors, those decisions don't have the same impact and you just get the technology as fast as you can.

But now that we're in great power competition, it's a different kind of world. And especially for somebody like SpaceX or Musk, who has businesses across the world, and China in particular, the tensions around that are much greater.

It is not an easy position to be in. The U.S. government is operating in a tense and competitive, multipolar world. So far, it has largely prioritized innovation and growth in order to maintain a competitive lead over China and others. And this has largely meant a loose approach to tech regulation.

And the discussion around regulation continues to evolve as Donald Trump prepares to take office. It was recently announced that Musk and Vivek Ramaswamy, two entrepreneurs, will lead a new Department of Government Efficiency. Trump has said this department will "pave the way to dismantle bureaucracy/excess regulations and restructure federal agencies."

The US private sector is one of the great strengths of the United States. It's what drives innovation. It's what's given us all these great technologies. It's an amazing source of soft power. People want to come to the United States and become the next Elon Musk or Bill Gates or whoever else. In the strategy that I helped write in the State Department, when I went to the State Department, we have a whole section about working with the private sector and how important that is to the US government.

But the U.S. government is held to certain types of accountability because it's elected. Congress oversees it or everything else. And tech companies don't have that accountability. They're accountable to the market. They're accountable to their shareholders, but they're not accountable for foreign policy.

The United States International Cyberspace and Digital Policy Strategy states that, quote, "The Department of State cannot accomplish its objectives without strong partnerships with the private sector, civil society, academic, and technical communities."

New innovations spring from the private sector, and the decisions tech companies make on how their systems are developed and deployed have profound implications for how U.S. values and interests are realized. It goes on to say that, quote, So what's the worst that could happen here?

Well, the worst that can happen is that the U.S. government thinks that there's something in its national interest that it wants to get done. And a tech company says no, either for financial reasons or because the CEO of that company doesn't agree with U.S. foreign policy and takes it upon his or herself to say, I'm not going to do that. So I think we are

are used to the U.S. being able to pretty much do what it wants in foreign policy. I mean, with constraints of Congress and the American people and other countries, we're not used to one person or certainly one company saying, yeah, I'm not going along with that.

I mean, as far as I know, our foreign policy is supposed to be carried out by the U.S. government. And yet we are discussing these decisions potentially just fully being made by powerful tech companies. Is that even legal?

It's not illegal. I think it has to do more with just where the power is these days and a shift in capabilities. This is not a totally new thing, right? The British East Indian companies and the Dutch East Indian companies for a while had their own foreign policies too. In fact, they had their own militaries.

Okay, this is wild and totally true. The East India Company had a standing army of over 250,000 soldiers, which at certain points in the early 19th century was twice the size of the British army. And as long as profits to the crown continued to roll in, the British refrained from pushing any sort of regulation over the company's business.

And so as long as there have been companies and they have economic interests, they have often pushed against or either complemented or gone against the foreign policy of their home country. So it's not new. U.S. oil companies have played a similar role. We had this massive shift in the 80s and 90s. U.S. R&D spending as a percentage of what the federal government spent basically went flat.

And the private sector picked a lot of that up. So while we are living in the time where we're benefiting from U.S. government R&D, right, iPhone, the internet, we're now at the tail end of that. And so now most of the cutting edge research in AI and

space technologies and autonomous vehicles, semiconductors is happening in the private sector. And so we do live in an age now where the tech companies are going to have more cutting-edge technology than most of the U.S. government. As a result, the government must increasingly tap the brains and resources of private tech companies in order to pursue its objectives.

Okay, but you say this is not new. So then what separates companies like SpaceX or Meta from the East India companies of the past?

Yeah, I think in the past, it was really companies focusing on extracting resources from other countries and wanting to make sure that those governments were friendly to them. Right. So the oil companies, the Chiquita doles of the world, even, you know, the British East India and then the Dutch East Indian companies, it's all about extraction of that.

That's not what's really happening with the tech companies, right? I mean, yes, they want access to data, but they're not overthrowing governments so they could get access to data. It's just refusing to do what governments want them to do. Right.

So I think it's a broader but less sharp type of power, right? So they're not supporting, you know, right-wing militias and they're not funding civil wars and all the things that the companies sometimes did in the past. But the reach is so much broader because the technology just touches so many more people. But I think what's new is the degree of power that they have, right?

and that the tech companies pretty much touch every run around the world. And the oil companies was kind of more indirect. If you don't live in a oil producing country, yes, you still need oil, but the oil companies were probably not intervening with your domestic politics in the same way that they were if you produced oil. But the tech companies, because they collect data around the world, pretty much touch on everybody.

Apple operates in 175 countries, Microsoft in over 190 countries, and Google in over 210 countries. They certainly hold more power by a number of different metrics. One would be market cap. I mean, these are literally the largest and most powerful companies that have ever been seen in the history of the planet. You know, I mean, the first trillion dollar companies are tech companies.

In terms of the profit margins, yeah, huge, high, double-digit profit margins. That's really unheard of. To put this into perspective, the largest companies in the world, Apple, Nvidia, Microsoft, and Google, are worth more than $12 trillion combined. That is more than the GDP of every country in the world, besides the U.S. and China.

Also, the ability that these companies have had to move across borders, which is something that may be changing for geopolitical reasons. But I like to pull back and look at the whole paradigm of globalization, which was basically about the idea that capital, goods and labor can all move around the world wherever they want. Well, capital always traveled faster than either goods or people. That's why banks got so big and that's why the financial economy got so big.

But data can travel even faster than capital can. And so globalization has just put these companies on steroids. And they really are private power of a kind that I think we've never seen. Spell it out for me a little bit. What factors might make lawmakers and executives reluctant to challenge tech titans? What does the government seem reluctant to regulate and what do we stand to lose?

There's a national champions argument that's being put forward at a time when US and China are decoupling, de-risking in a Cold War, whatever you want to call it. A lot of American tech firms have kind of tried to portray themselves as, hey, we're the US champions here.

Private actors are private actors. They're profit-making entities. They want to make profits no matter where they are in the world. But there's this kind of myth that's been put forward and people sort of buy into it that we need to protect these companies. Otherwise, we won't win the tech war against China.

The national champions argument also gives these companies an opportunity to make arguments that, well, China is a state-run monopoly. Do you want to have China running the world's digital ecosystem or do you want to have five US companies running it? And a lot of policymakers and even certain labor advocates, defense hawks will buy into that argument.

I want to throw a term at you because who doesn't love new words? What is a technopolar order? And are we moving closer toward one? So I think it's Ian Bremmer's term.

If the digital order becomes increasingly dominant and governments erode in their capacity to govern, and we've already seen the beginning of this, technology companies will become the dominant actors on the global stage in every way, and we will have a techno-polar order.

Broadly, the idea is that we're used to the idea of a multipolar world, which is, you know, we used to have a bipolar world, the US and the Soviets. Then we multipolar world is the US, China, India, the EU, Russia. So a technipolar world is, well, we have the nation states and now we have the tech players, another set of power.

We've had these types of arguments around other types of organizations in the 70s and 80s and 90s. So people would talk about international organizations were a new type of center of power. NGOs were a different type of set of power. So, you know, kind of throughout the history of political science, which is not a particularly interesting history, but there have been people who have written about other types of polarity and looking at actors that are non-state. So technopolar would be kind of in that historical lineage.

I am a pretty strong statist. And while I definitely think there are new challenges, I don't think we're in a technipolar moment. I think we're at a moment where the tech firms affect, shape, limit, amplify state power, but it's still really only states that can invade countries and arrest people and do all those really, really coercive things.

But certainly, you know, you give your data to all the same companies that I give my data to. And there are certainly things that I could not do without the tech companies. So it gives them a lot of power. Yeah.

I think the case that's probably most well-known is Starlink. So Elon Musk's internet communication company provided through SpaceX. So many satellites that are placed in orbit and provide high bandwidth internet to places that are generally not connected to the internet and have become essential to Ukraine, to their defense, to their e-government services.

And there's been a lot of reporting that Musk has made personal decisions about where those systems can operate, and that has affected...

in some cases, the actual conduct of the war, how far Ukrainian forces can go into Russian territory and what Russian forces can do in Ukrainian territory. SpaceX CEO Elon Musk said over the weekend the company's Starlink internet satellites are now active over Ukraine. Elon Musk is again under fire, this time because he's threatening to cut off financial support for his Starlink satellite terminals in Ukraine. Musk, a

effectively sabotaged a military operation by Ukraine, a US ally, against Russia, an aggressor country that invaded a US ally.

In 2023, SpaceX launched over 2,000 Starlink satellites, averaging a launch every five days. Today, Starlink controls about two-thirds of all active satellites orbiting Earth, operating across 99 countries, including Ukraine.

So the war in Ukraine gets expanded, right? So the Russians invade, full-scale invasion in February, and lots of physical and cyber attacks on Ukrainian infrastructure, internet and other types of telecommunication, which go down and are more susceptible to attacks.

And the Ukrainians rely on Starlink for a lot of military communications. Starlink was providing that free to the Defense Department, which was then providing it to Ukraine. Since the Russian invasion, battlefield communications have depended on the continued use of Starlink. And around 42,000 Starlink terminals are used in Ukraine by the military, hospitals, businesses, and aid organizations.

And as the Ukrainian and Russian forces are fighting, there is an extent that Ukraine wanted to do attacks past the border into Crimea, which Musk thought would be escalatory. Given that Crimea had been seized in the earlier conflict, he essentially said, this will cause a nuclear conflict, and I'm not going to allow Ukrainian forces to use Starlink past this border.

You know, while I think it's on the same scale, there was certainly that potential of sort of a mini-Bulhava with the results of a mass escalation of hostilities. But this would not defeat Russia, it would enrage Russia. And that's what happened. And so the Ukrainians could not operate beyond that border and whatever the military operation was that they had planned did not happen.

Musk later disputed some accounts of this incident, saying that Starlink access had never been present in the region and that he had merely refused to turn access on in support of the attack.

It followed an earlier incident in 2022 when 1,300 Starlink terminals were turned off because the Ukrainian government could not pay the monthly bill. This required that the Pentagon strike a deal with SpaceX to keep Starlink satellite internet available in the country.

Both incidents serve to act as an example of what it can mean when one company or even one person winds up in charge of these types of foreign policy decisions. And as tech leaders continue to gain outsized power, Musk's role in Ukraine sets a precedent for tech companies and the decisions they make in the future.

It's kind of incredible that you have a single company, particularly one that is run by such a singular individual that has this level of power in the sphere that has really been the public sphere. Elon Musk has the power to keep the Ukrainian internet up and running, but he also has the power to take the internet down if he wants. I mean, it's just Elon with SpaceX, with Starlink has understood that just as

really almost every part of the economy on the planet has been privatized, that space itself would also be privatized, that communications could be privatized. So it's just another venue for what we've already seen. But because we're talking about communications and we're talking about space and we're talking about defense and areas that have been purveyed by the military, it's just a big shift.

But the partnerships with SpaceX have led to some incredible feats. In 2020, SpaceX sent the first NASA astronaut to space since 2011. Since then, the company has made over 40 visits to the International Space Station, launching 10 crewed flights on behalf of the U.S. government. And this past October, SpaceX successfully completed the world's first rocket booster recapture.

The company's reliability and innovations have not gone unnoticed. As of 2022, SpaceX pulled ahead of Boeing and several other historical partners as one of NASA's top contractors. This after only 20 years in the industry.

We're seeing that the US government's reliance on SpaceX, right? We've had this long discussion about the US astronauts being stranded at the International Space Station because the Boeing launcher, which is usually what we think about the US government,

having so many technical issues that NASA's afraid to bring them back in that. NASA says they're not stranded, they're just staying there longer than we all expected. But yeah, we're reliant on SpaceX to bring them back and reliant on SpaceX to put up lots of US satellites into space there. So again, another choke point where the US government made decisions that made sense in a different world.

In many cases, the choices of the tech firms within these partnerships are totally aligned with U.S. foreign policy goals. For example, this September, Indian Prime Minister Narendra Modi met with tech company CEOs to discuss semiconductor production as part of the U.S.-India Comprehensive Global and Strategic Partnership.

But that's not always the case. Another point of contention that has made news for Elon Musk is tensions between Taiwan and China. Taiwan is entirely dependent on subsea cables, which could be easily cut. And then you have to move to satellite communications. And Musk himself has basically suggested that Taiwan should go back to China.

Taiwanese were like, yeah, we don't really like that. And the Taiwanese are now trying to figure out, do we need to launch our own satellites? What do we need to do? Satellite internet would be critical for Taiwan in a conflict with China, a scenario that would usually make them a candidate for Starlink access. In response to Musk, the island's foreign minister said, quote, Taiwan is not part of the PRC and certainly not for sale.

Musk's statement, originally said at a summit, came after an earlier statement he made to the Financial Times recommending a, quote, special administrative zone for Taiwan. The island has chosen to pursue other satellite options in light of Starlink's record in Ukraine, Musk's own commentary, and his business ties to mainland China.

But again, the assistance of technology companies has also led to much-needed help for our allies. Also drawn from Ukraine on what, you know, it's probably thought of as a more positive example is the role that private tech companies have played in the defense of Ukraine. So we've seen Microsoft, Mandiant, Google Cloud, AWS,

providing a whole range of services to the Ukrainian government in the face of both physical and cyber attacks. So essentially, Ukraine moved all of its essential data into the cloud with help from U.S. technology companies.

Ukraine is receiving more Western technology support as Russia's invasion of the country continues. Part of what has sustained Ukraine is moving their digital infrastructure into the Microsoft Cloud, into our data centers across Europe. So we've been operating in Ukraine to primarily see what Russian military and Russian intelligence organizations do when they have a cyber campaign.

And in some ways it reinforces U.S. foreign policy because it helps defend Ukraine, but it also, in a weird way, reinforced U.S. foreign policy because before the war started, Ukraine was talking about the need to store its data locally.

and to control it locally. And the experience with the cloud kind of reinforced U.S. arguments, foreign policy arguments, about why data localization often is bad for cybersecurity and countries should think about just using the best storage capabilities out there, which often happen to be U.S. With a Taiwan scenario, I think there is...

some expectation that U.S. cybersecurity companies would be called in to play the same role, that they would help the Taiwanese government defend networks, they may help relocate data into the cloud. But here,

those assumptions could be challenged because the economic interests of the companies are so much more tightly linked to China. Now, companies themselves, you know, often have been pushed out of China over the years as China has censored the internet or censored U.S. companies. But they still have some economic interests in China greater than they do in Russia. And so,

That assumption that we'll be able to, U.S. government will be able to mobilize U.S. cybersecurity and tech firms around the Taiwan defense, I think probably are more questionable than they have been with Russia.

So is innovation then what might make American officials reluctant to challenge someone like Musk and other tech giants on, you know, important issues like disrupting the cyber capabilities of U.S. allies or allowing for misinformation to spread on social media platforms or allowing for a monopoly on data and search? Innovation in China. Yeah.

Quite honestly, Musk in China gets complicated because, you know, Musk has other business in China with Tesla in particular, but around the AI debate, certainly China, right? Because

The argument about regulation tends to be, oh, we're going to slow ourselves down and the Chinese are not going to choose to do the same thing. Although there is plenty of AI regulation in China right now. But the argument would be, you know, we can't really inflict these harms on ourselves when we're facing a peer competitor in this space. So you see that argument a lot.

In 2021, the U.S. spent around $800 billion on research and development, maintaining a lead over China, which spent roughly $660 billion that same year.

When it comes to critical industries like advanced tech and manufacturing, China has outpaced the U.S. on several counts. One of these, featured in a previous Why It Matters episode, is hypersonic missile technology. Another is lithium battery production, an industry in which China enjoys an 80% share.

But again, I think that the advantage of the US has always been decentralization. I don't think you're going to win the big against big game with China. And so I think that we have to just make sure that there is a lot of public oversight of data and making sure that more people in multiple ecosystems get access to it. Small businesses, workers, consumers, the public sphere.

So I was going to ask how other governments are regulating and whether it matters given that most of, again, those huge tech firms are American.

Well, we see it playing out in the story this week about X in Brazil, right? So the Brazilian judge who made the ruling that X was not taking down disinformation and misinformation and so basically blocked X inside of Brazil. We've seen it in the past in India, again, with X. They investigated content moderation and raided the offices of X.

We see it in a number of countries that pass laws that say you have to have some people on the ground, the American companies, and that's basically so they can arrest them.

and exert some leverage there. You know, the European Union is able to legislate because it's so big and the market's so big and it has a longer history around what's known as the GDPR, the General Data Protection Regulations that are around privacy in particular. But there's a new EU AI Act that's going to try to control certain types of models and the degree of risk that it sees.

So lots of people are kind of trying to figure out what you do with these companies that are transnational, that kind of violate sovereignty in many ways. And the technology violates sovereignty in many ways, but they still have tools. There is a responsibility, I think, for the US government. And I think especially the technologies like AI, which are going to remake technology.

business and national security and education and all these other things. We've already lived through the first experience with social media where the US government's approach, certainly for the first decade and a half, was hands-off. That we wanted to encourage innovation, we wanted to encourage the spread of these technologies.

And then, you know, starting 2016, 2014, we're like, oh, there's a lot of these bad things that come from social media. And it's, you know, not just constrained to the US. It happens in other countries as well. Those countries are struggling to regulate Twitter or Facebook.

X or Facebook or whatever, because they're not headquartered in their countries and they're putting demands on it. And I think with AI in particular, the Biden administration has made it clear that we are going to need some regulations, but the U.S. can't do it alone. Okay. So we've reached the part where you tell us how to fix everything. What should be done?

There aren't a lot of great short-term examples. Cool. Solutions. There's some stuff that can broadly be said about the U.S. spending more on R&D and making sure that it has more of a say on some of the cutting-edge technologies that people are always talking about. It's unclear if the money will ever come. There'll be some money there, but it won't do enough. But probably the most important thing would be competitors, right? Because if there were two competitors to Starlink, you could probably find another company that said...

"Oh yeah, we're happy to provide the service and we're not going to get involved in the politics." Or it doesn't even have to be something like Starlink. It could be a different type of technology that serves the same purpose, right? So you could imagine being able to provide internet coverage through drones and other kind of mesh networks that you could deploy very quickly and cheaply that would then lessen the dependence on something like Starlink.

I think probably the outcome that will have more of an impact would be thinking about what the technological alternatives are and encouraging markets in those spaces. And that's happening now through things like the Defense Innovation Unit and other alternative ways of trying to fund new technologies.

While big tech companies might not have their own militaries, their negotiating power over national and foreign policy is increasingly close to that of state actors. And with tech firms now essential for critical infrastructure and even military support, the question looms: What happens when a corporation, rather than a government, holds the keys to global power? Who holds them accountable?

In the US, you know, we expect our foreign policy to reflect what the US government decides. And as a democracy, we then vote for that US government. So while lots of people have critiques of our foreign policy, but we still generally say, you know, I elected these people and these people made the foreign policy. So to the extent that the companies go off and do things that counter US policy, that seems to be anti-democratic.

and to create new sources of power, as you have pointed out several times, the accountability is to who, right? It's not to the US people. So I think that matters tremendously. And one day it may not be a US company. For US listeners, we've just been talking about US companies, but in the future, we have now seen globalized Chinese tech companies

We could see, you know, AI companies come out of India or France or some other place that has different views of how these things should be governed. And, you know, we're probably not going to like it much like they don't like it when the U.S. companies do what they want.

The tech companies all have a foreign policy. They love laissez-faire globalization. They love the idea of a kind of a world is flat, all boats are rising, let data travel freely. So there's a tremendous amount of power and persuasion they have at a time when states in general are beleaguered. States are really on their heels and the private sector just has a lot of power relatively.

For resources used in this episode and more information, visit cfr.org slash whyitmatters and take a look at the show notes. If you ever have any questions or suggestions or just want to chat with us, email whyitmatters at cfr.org. Or you can hit us up on X, better known as Twitter, at cfr underscore org.

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Our interns this semester are Colette Yamashita Holcomb and Emily Hu. Robert McMahon is our managing editor. Extra help for this episode was provided by Mariel Ferragamo. Our theme music is composed by Carrie Torhusen. You can subscribe to the show on Apple Podcasts, Spotify, YouTube, or wherever you get your audio. For Why It Matters, this is Gabrielle Sierra signing off. See you soon.