Democratic senator Mark Warner and Republican Marco Rubio led a bipartisan group of senators in writing a letter on August 3, 2018, that expressed grave concerns about the human rights and security implications of the project.
“Chinese authorities…censor a broad range of news and social media topics,” the senators noted, citing “a significant vaccine scandal in China, which may have affected the health of hundreds of thousands of Chinese children,” which had “run afoul of censors. News reports indicate that, as of last Monday, the Chinese word for ‘vaccine’ was one of the most restricted on Weibo, China’s Twitter-like microblog platform.”
The senators cited Financial Times reporting on how authorities were using technology to increase surveillance of the population. Tech companies in China—including Alibaba, Tencent, Baidu, and JD.com—are “inextricably linked with the Chinese state and its security apparatus, and the authorities retain the upper hand in the relationship.” The senators concluded that “Google’s reported activity to build applications compatible with Chinese censorship demands is all the more concerning in light of relationships that Google has made with these companies, including a technology cross-licensing joint venture with Tencent and an investment of $550 million in JD.com.” The letter ended with a simple but damning question: How could “this reported development [Dragonfly]…be reconciled with Google’s unofficial motto: Don’t Be Evil”?33
It was a question that Google’s own staff began to ask shortly thereafter. How could a company that claimed it could not (or would not) police its platform in the United States, or in many other parts of the world, be willing to work with an autocratic state with no assumptions of privacy or the sort of civil rights enjoyed in much of the developed world?
The answer, unsurprisingly, has to do with business. As many Googlers have told me, China is considered the world’s petri dish for digital technology. Even as it’s become more repressive, it’s become more tech saturated. China has the most Internet users, many of the most innovative services, and some of the world’s richest and most powerful companies—Baidu, Alibaba, Tencent, and others—that are completely unhindered by the privacy and antitrust conversations taking place in the United States. Chinese young people are even more digitally connected than their Western peers. This was a market Google was ready to risk everything to be in, as evidenced by a leaked speech from Ben Gomes, Google’s head of search. “China is arguably the most interesting market in the world today,” Gomes said. Google didn’t want to be there just to make money, but “to understand what is happening there in order to inspire us.” As he put it, “China will teach us things that we don’t know.”
Despite tremendous political pressure from politicians, security hawks, and human rights advocates, only when the company’s own engineers began arguing for Google to stop working on a censored search engine for China did the company really sit up and listen. It wasn’t an easy fight. Former Google engineer Jack Poulson spent more than a month arguing internally for the company to clarify its ethical lines around the project. In April 2019, he wrote an opinion piece for The New York Times in which he said he was told by a Google staffer during his exit interview, “We can forgive your politics and focus on your technical contributions as long as you don’t do something unforgivable, like speaking to the press.” Poulson ignored the advice.34
He’s since founded Tech Inquiry, a nonprofit that aims to hold Big Tech accountable to human rights standards and democratic norms. He is one of a growing number of technologists who believe that “the time has passed when tech companies can simply build tools, write algorithms and amass data without regard to who uses the technology and for what purpose.” Fourteen hundred of Google’s own employees signed a letter protesting the opacity of the company’s decision to launch Dragonfly. This followed on the heels of a similar employee protest a few months prior about the Pentagon’s use of Google AI technology. (The company subsequently ended its Department of Defense contract, a rich irony given that it went ahead with the Chinese work, which it has since also ended.)
The internal crisis over Google’s decision to reenter China reminds me of a telling quote from Ken Auletta’s book Googled: The End of the World as We Know It. This book was written way back in 2009, and the quote was from Columbia professor and tech expert Tim Wu, who has since written his own terrific book on the cognitive problems of Big Tech, The Attention Merchants.
As Wu put it back then, “Google is a precocious company. Great grades. Perfect IPO. A typical high school standout. The basic problem is whether they remain true to their founding philosophy. I don’t just mean ‘Don’t be evil.’ Will they stay focused on search, on their founding philosophy, which is really an engineer’s aesthetic of getting you to what you want as fast as you can and then getting out of the way?” Or, he asked, will Google become “a source of content, a platform, a destination that seeks to keep people in a walled Google garden? I predict that Google will wind up at war with itself.”
How prescient. But it’s not only Google that is at war with itself. The Internet has become a new kind of battleground for the world’s great powers. No longer a single entity, the Internet is becoming a “splinternet” as the United States and China fight to control the way in which it will be run and regulated, as part of a larger great game to control the high-growth, high-tech industries of the future. Both countries are becoming increasingly nationalistic, supporting their own homegrown giants in an effort to win a tech trade war that has become a new cold war. It’s a battle that threatens to worsen all the problems that this book has already laid out.
CHAPTER 13
A New World War
In 2018, I experienced something quite odd during a day of reporting on the growing U.S.-China trade and technology conflict. I was talking to a variety of politicians and advisers in Washington to get a better sense of how various political factions felt it should be dealt with. I spoke to, among others, a former Bernie Sanders staffer who was now advising a new crop of progressives like Congresswoman Alexandria Ocasio-Cortez. I also spoke to a high-level Defense Department official. Their views—that China was indeed an existential threat, and that America needed to ring-fence some of its supply chain and prepare for what might be a long-term tech and trade war—were oddly similar, given the divergent political factions that they represented.1 Both sources recommended the same book to me: Freedom’s Forge, which lays out the way in which the U.S. auto industry helped the country during the Second World War.2 The industry, including not just big automakers but also their suppliers, had been marshaled by government officials to ramp up production and aid in the war effort, creating synergies across supply chains that were later leveraged to great effect in the postwar period, when American industry was dominant relative to Europe and Asia—for at least a couple of decades.
The book had been on the reading list at a June 2018 event sponsored by the National Defense University that brought together military and civilian leaders to discuss the big challenges of the day. Dozens of experts, government officials, and business leaders gathered to talk about the decline in the postwar order, the rise of China, and how the United States could strengthen its manufacturing and defense industries. The goal would be to create resilient supply chains that could withstand not just a trade war, but an actual war.
Amid the broad and varied discussion, speakers shared a general sense that the conventional approach to globalized business, and in particular the idea that American multinationals could do business wherever they liked and however they liked, was over, and that there would be serious ramifications for U.S. industry. “If you accept as your starting point that we are in a great power struggle [with China and Russia], then you have to think about securing the innovation base, making viable the industrial base, and scaling it all,” said Major General John Jansen, the event’s organizer.3
Much of the discussion focused on the way in which Ameri
ca’s high-tech supply chain had been outsourced for years to China. Back in the 1980s and ’90s, our government made a decision to prioritize service jobs, which were perceived as higher up the economic food chain than manufacturing, and to allow companies to outsource large parts of the industrial ecosystem abroad. At the same time, changes in the financial system, the weakening of unions, and a variety of regulatory tweaks that favored capital over labor led to a short-term, balance-sheet-oriented mentality in which quarterly stock prices (always buoyed by cost cutting) took priority over long-term risks. Consumers and companies were the priority; not citizens, or workers.
This topic, which I covered at length in my previous book Makers and Takers, created a bifurcated economy in the United States—one in which there are plenty of software millionaires and burger flippers, but not enough middle-class jobs in between. From a corporate perspective, it has also left many U.S. firms unable to find the products they need outside of China, including key chemical components of crucial weaponry.4
That’s not only an economic problem—it’s increasingly perceived as a security risk. A 2018 Pentagon report to the White House found that the past four decades of manufacturing outsourcing, combined with China’s industrial policies and the degradation of STEM and trade skills in the United States, has left America’s supply chains—along with its companies, consumers, and citizens—in a vulnerable position.5 According to Defense Department research,6 the fragilities are myriad: consumer product security; sagging U.S. innovation in key areas like artificial intelligence; 5G wireless technology; and the fact that China is the sole source for a variety of manufacturing inputs, including many that directly touch the military and defense industries. Most interesting were the industries covered in the report, which included not just the military-industrial complex, but the broader manufacturing supply chain: electronics, machine tools, software, and so on.
While America was once the dominating force in the high-tech sector, over the past few decades of globalization and outsourcing, the landscape has shifted. China is now the world’s major supplier of telecommunications equipment. It has moved ahead in mobile apps and payment systems, and it even owns the highest number of patents necessary for the rollout of the new high-speed 5G mobile services that will be necessary to connect the Internet of things and create new growth opportunities for all sorts of businesses. China has also made great strides in artificial intelligence. While companies like Google are still ahead in terms of sheer know-how, far more money is flowing into China’s AI efforts; according to a report by the global strategy and research company 13D, roughly 48 percent of global investment in AI is currently going to China, versus 38 percent to the United States.
That’s a key reason why, over the past few years, the Pentagon, the Treasury Department, and the Office of the U.S. Trade Representative have been stressing the strategic threat posed to the country by China, which is now officially considered to be America’s biggest mid- to long-term adversary. Trump’s China troubles are merely the tip of a massive iceberg—a new and most-likely ongoing tech and trade war against a country with a fundamentally different economic and political system. As Daniel Coats, the former U.S. director of national intelligence, put it in a report released in early 2019, “Chinese leaders will increasingly seek to assert China’s model of authoritarian capitalism as an alternative—and implicitly superior—development path abroad, exacerbating great power competition that could threaten international support for democracy, human rights and the rule of law.”7 It’s a statement that resonates not just among Trump supporters, or conservatives in general, but also in Democratic circles. Increasingly, both sides of the aisle view a clash of cultures between the United States and the Middle Kingdom as inevitable.
This underscores an uncomfortable truth, one that will have major impacts for the private sector. America’s system of free market capitalism has for decades allowed companies to do business wherever they like, outsourcing labor wherever it was cheapest to do so, and offshoring profits to the most favorable tax regime. American companies created and led the process of globalization. But in a world in which the United States is now being challenged by China—a country that has its own system and doesn’t play by the usual rules of democratic capitalism—there is a growing group of people who believe that it will be crucial for American security and economic interests that there be an untangling of the investment and supply chain links between the United States and China.
This view is often dismissed as China bashing, and certainly there’s plenty of that, particularly in advance of presidential elections. But it’s also not quite that simple. It’s becoming clear that the United States, Europe, and China have different views about what the rules of the new digital economy should be. That means globalization as we know it may shift. In the new digital world, different regions may choose different Internet governance regimes based on different values and priorities. China, for example, may choose to completely disregard user privacy in favor of moving ahead with data collection for the purposes of artificial intelligence innovation. Europe may create public data banks that companies will have to ask to dip into. The United States has so far been lax about regulating Big Tech, but that could change, particularly given that every important 2020 Democratic candidate has made antitrust a core issue.
What will be the result of all this for you and me? There’s already a “splinternet,” with information and data rights that differ quite widely from one country to another. Companies and governments can do vastly different things with your personal data depending on which country you live in, and you as a consumer and a citizen have different kinds of recourse based on nationality as well. No one country has yet found the perfect system (though I tend to favor the policies supported by both the European Union and California, which start with the notion that individuals own their own data and should have a clear understanding of how it’s being used). Choosing the right balance between innovation, competition, and privacy will be crucial to creating both jobs and a stable society.
What’s more, it’s likely that the geopolitical battles of the future will be waged in cyberspace. Eric Chewning, deputy assistant secretary of defense for industrial policy at the Pentagon, told me, “The US is strategically repositioning for [a] period of interstate competition [meaning, between the West and China]. A competition that recognizes the inter-relationship between economic security and national security.” That means that the era of American companies being able to fly thirty-five thousand feet over local concerns may well be coming to an end. Global business itself will change, and with it the nature of our economy and our politics.
There are no clear rules yet for the new era. Should Western companies be allowed to do business as usual with China? And if not, why not? Politicians have different answers to that question, but companies themselves are also taking different approaches depending on their own strategic interests. Amazon, for example, has almost no access to the Chinese market, since Beijing has chosen to support its own homegrown e-tail giant, Alibaba. That means that Amazon has put its resources into becoming the U.S. government’s main supply and procurement platform, in ways that have upset some competitors who feel that Amazon has been given unfair advantages.8 Facebook, on the other hand, is eager to become a greater presence in China—it has been known to keep data locally in China, and share it with app companies there, something that could not only compromise the privacy of U.S. citizens, but present all sorts of hacking risks, à la Google’s experience with Operation Aurora. Even Apple, which has tried to brand itself as a defender of privacy, has capitulated in China. While the company has been quite protective of user data in the United States—it refused to help the FBI break into a locked iPhone during investigations of the 2015 San Bernardino terrorist attack—it plays by local rules in China. Beijing has, for example, forced the company to move all of its iCloud data centers for Chinese customers to the mainland where they will be
run by a local company that does not need to comply with U.S. laws about data protection. So much for privacy, at least for Apple users in China.
Google, for its part, does not appear to share user data in China the same way that Facebook does. (PR reps insist that they don’t hold any data locally in China, but rather keep it in cloud servers, supposedly away from the eyes of the government.) But it has operated a research facility in Beijing and explored the idea of launching a censored Chinese market search engine, all while working with the U.S. Department of Defense on various projects. It’s hard to imagine a U.S. defense contractor like, say, Raytheon, ever having been allowed to have the same sort of arrangement with both the United States and China. And yet, Big Tech companies that do the most cutting-edge research in areas such as artificial intelligence are arguably more important to the Defense Department than the old military-industrial complex represented by Raytheon. And they still get to play both sides of the field.
All of this is top of mind for the Pentagon, which has begun having ongoing conversations with many U.S. multinationals about how they do business with China. “Based on our conversations, corporations recognize that the strategic conditions are changing,” says Chewning. “As China continues to pursue the objectives laid out in Made in China 2025 and actively distorts the economic playing field in favor of their national champions, Western businesses will also likely need to re-evaluate their confidence in the long-term China business case.” Already, many companies are doing just that, rethinking supply chains that run through the South China Sea, moving production out of China to places like Vietnam and Mexico, and considering how political risk and conflict between the two powers may affect their businesses.
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