Life for technology companies was once, as the Fast Show character used to say, brilliant. They could make products and offer services worldwide and, especially in the software field, they would make money hand over fist; look at businesses like Microsoft and Oracle in the 1990s. Oil spills, environmental damage, government regulation – that was something for other sectors.
But with the rise of the internet, and companies’ ability to become not just transnational but supranational, active everywhere yet arguing that their responsibilities belong nowhere, attitudes have changed. Apple’s row with the FBI over access to a locked iPhone that belonged to the employer of one of the San Bernardino killers is just the latest example of technology businesses discovering that nothing they now do is without consequences.
Apple has been excoriated by presidential candidates, and backed into the tightest of corners by the FBI: the moral case for refusing to hack into a terrorist’s phone is hard to make – particularly in the US over an Isis-inspired attack during an election year.
But it’s not just Apple. Google’s Matt Brittin probably wakes up sweating about his appearance before the Commons public accounts committee, at which he couldn’t remember how much he earned, and the questions about Google’s sweetheart tax deal with HMRC kept coming.
More broadly, the EU is considering an antitrust finding against Google for promoting its own products ahead of rivals’ in search results. Facebook has been threatened with fines by the French data commissioner. Twitter is on-again, off-again in Turkey, depending on the mood of the government, which frequently censors its feed. Pakistan banned Google’s YouTube. Uber has made enemies of taxi drivers and even its own drivers in cities around the world as it undercuts the first group, then cuts payments to the latter. Airbnb is under investigation in New York, London and elsewhere over whether its accommodation site breaks short-let laws. Amazon is rebuked by MPs over its revenue-shifting, tax-minimising ways, and by bookshop lovers who have seen it undercut high-street retailers. Spotify (which hails from Sweden) is criticised by fans and players for the tiny amounts musicians get paid when people stream music through it rather than buying a download or – remember when? – a CD.
And that’s before we get to artificial intelligence, where people fear huge job losses as machines take over more and more complex jobs. Google, again, is at the nexus of that row, with UK company DeepMind (which it bought in 2014) having to try to dampen worries while raising expectations.
Technology companies may not create oil spills, but their effects on modern life are suddenly spreading across a gamut of topics – privacy, tax, regulation, safety, even housing.
That’s why the San Bernardino case could be the straw that breaks the camel’s back. The FBI knows that the publicity from this battle won’t be favourable to Apple, whichever way the courts rule. That worries every other technology company: it’s notable that Google chief executive Sundar Pichai’s tweets on the topic were carefully hedged, while Microsoft’s Satya Nadella was similarly unwilling to stand foursquare behind Tim Cook (unlike WhatsApp’s Jan Koum and Twitter’s Jack Dorsey). Facebook’s Mark Zuckerberg has been completely silent, though his company did issue a supportive statement.
Apple, of course, wasn’t looking for a row with the FBI when it improved the encryption on its phones. And that is what will worry tech companies. As their influence on our daily lives grows, the effects of new features become less predictable – but probably greater.
What if the next case involves taxis and short lets used for child trafficking? Or tax avoidance turning out to fund terrorism? Those may sound farfetched, but they’re only a form of Kranzberg’s first law: “Technology is neither good nor bad; nor is it neutral.”
This week, the tech business is learning, to its reputational cost, just what that really means.
An old-fashioned fix for the G20
When G20 finance ministers and central bank governors meet this week in Shanghai, the failure of low interest rates to stimulate growth in their economies will be top of the agenda.
The global economy is faltering and the knee-jerk response is the same today as it has been since 2008: extra monetary stimulus. But when it seems clear that cutting interest rates to zero – or even below, a move already deployed in Europe and Japan – has the same catalysing force as a weak decaff cuppa, surely it is time for a rethink.
The Organisation of Economic Co-operation & Development will be on hand with an alternative, though it will not sound very modern or innovative: it is recommending G20 nations coordinate an increase in spending to upgrade their infrastructure. Countries with the capacity to borrow should do so, and that includes the UK.
According to the OECD, the growth this plan induces will more than offset the cost of borrowing and will expand national incomes sustainably.
This embrace of Keynesianism is not before time. Economists outside the central banks have known for some time that flooding the financial system with cheap funds is a recipe for stagnation. It neither breeds confidence nor tackles structural imbalances, especially not the growing inequality that robs people on lower pay of decent wages to spend.
George Osborne will fight the OECD, primarily to defend his economically nonsensical pitch to voters that the exchequer will benefit from balancing the books by 2020. Likewise, Germany will oppose the plan because its ageing population wants to conserve cash, not spend it for the benefit of the next generation.
Other countries will resist for more practical reasons. China is investing like crazy and needs to continue switching to consumption, though it might be better if it encouraged the consumption of healthcare via taxation than the purchase of high street goods.
Which illustrates how political forces defeat economic arguments, even when those arguments make sense for almost every country and could end the reliance on increasingly exhausted central banks.
Banks need a nice thick cushion
The words “systemic risk buffers” may cause many eyes to glaze over. But they shouldn’t. This is the extra bit of capital cushion that banks should hold, on top of the regulatory minimum, to help protect them against a system-wide meltdown such as we saw in the 2008 crisis. Sir John Vickers, who in 2011 was charged with finding ways of preventing another taxpayer bailout of the banking system, concluded that banks should hold an extra buffer worth 3% of their assets.
Five years on, the Bank of England has set the buffer at around 0.5%. The Bank argues that when it is all added together, the amount of capital banks are required to hold is more than the overall total prescribed by Vickers.
Even so, Vickers spoke out last week to urge Threadneedle Street to think again. He says these buffers are as important as ever for the safety of the UK banking sector, which remains bigger than the nation’s GDP. He should be given a good hearing.