Digitalization is evolving from an economic challenge to a governance and political problem. Some studies suggest that by 2030, Artificial Intelligence (AI) might contribute up to EUR 13.33 trillion to the global economy (more than the current output of China and India combined). The essence of the political conflict that raises the issue of global governance is what type of actor (a state or a digital corporation) will lead this process, creating global asymmetry in terms of trade, information flows, social structures and political power. This means challenging the international system as we know it.
AI is generating new large-scale systems based on (1) services (such as traffic management and smart vehicles, international banking systems, and new healthcare ecosystems); (2) global value chains, the Internet of things (IoT) and robotics (Industry 4.0); and (3) electronics with a new generation of microprocessors and highly specialized chips. The “food” for AI is the Internet – a major source of data, computing power and telecommunications infrastructure.
Not all countries will benefit in the same way, since AI-driven wealth will be dependent on each country’s readiness to be “connected” to the Internet. This is the essence of the political problem between a non-territorial space based on large-scale computer networks and nation-states.
Both democratic and non-democratic governments struggle to assert authority over different dimensions. First, they need to regulate de facto global private monopolies (such as Google, Facebook, Apple and Amazon) that are setting new rules of competition, creating new technology markets and blurring boundaries between industries. Second, many countries perceive Internet governance as too US-centric. A good example is the governance of IP addresses, which created the precedent of having a “universal resource” managed by a private, US-based institution like the ICANN. Third, a vast majority of digital innovations and AI technologies and applications come from a unique public-private ecosystem in the United States: Silicon Valley. Finally, although the Internet is global, investment in infrastructure (such as 5G) requires huge investments driven by local (ex-public) telecom operators whose business models are less sustainable.
While the European Union struggles to regulate Silicon Valley’s global platforms, China has started to block them with a “digital wall,” promoting protectionism to strike and compete in the global-tech game. Examples are tech giants such as Tencent, Baidu, Alibaba and the impressive Digital Silk Road to connect the European Union and China with various types of infrastructure, including satellites, 5G and submarine cables. This project could be the infrastructure that will enable China, by 2030, to become “the world’s primary artificial intelligence innovation center, transforming the country into a leading innovation-style nation and the greatest economic power,” as China’s national AI plan states.
The reaction of the US administration has shifted from promoting globalization to supporting protectionism and economic nationalism. We can interpret the veto on Huawei in both ways, since this move is not only challenging Chinese telecommunications technology to block its potential tech dominance but also subtly limiting the monopolistic power of the world’s most widespread mobile operating system: Google.
Silicon Valley is on the spot, facing opposition not only from supporters of economic nationalism. The region is known for its technological innovation and economic prosperity, but many residents are struggling due to significant inequalities in access to homes, health services and education. San Francisco Mayor London Breed is prioritizing a plan to promote accessible homes, and left-wing voices in the US Democratic Party are demanding regulatory measures to limit the power of large American digital platforms. But the United States cannot regulate their platforms unless China introduces similar measures.
In addition, the US Federal Reserve has kept interest rates positive since the end of the recession, in contrast to the negative rates in the European Union. Although the gap between the rates is small, it is possible to speculate about more control of technological start-ups and perhaps changes in investment flows from technology start-ups to other sectors and regions in the United States. This could drive the use of AI and robotics as a cheap labor force and the return of industry to blue-collar regions of the United States. If this hypothesis is correct, the US administration considers that manufacturing and serving its local market is more important than global trade – a game that China can win.
What can Silicon Valley do? Giant tech firms are promoting “open AI” infrastructure, which means “opening the box” of algorithms and spreading innovations, thereby helping industries access this technology and global digital platforms.
However, Facebook’s announcement of the cryptocurrency Libra has added a new dimension: the company is trying to innovate and challenge the banking system. The Libra AI and blockchain ecosystem embraces various sectors backed by deposits and public debt such as payment services, commerce, the global supply chain and the automotive industry. Its location – not by chance – is Geneva, outside of the eurozone but inside Europe; not in Silicon Valley but backed by an impressive US-based alliance. Facebook wants to become an institution in a neutral zone.
The critical question that arises now is about global governance in the struggle between states and global digital corporations: What types of institutions and leadership will emerge to manage this challenge?
