by Alec Ross
After the French court’s decision, Google released a statement saying, “We remain convinced that a coordinated reform of the international tax system is the best way to provide a clear framework for companies operating worldwide.”
When governments lose tax revenue, societies suffer the consequences. Every dollar that companies or wealthy elites stash offshore is a dollar that is not contributing to the economic growth of their home country or the well-being of their fellow citizens. When money can flow freely across borders, it pools in places that are best for capital, not people.
If we want to build a more equitable, inclusive, and just society in the 2020s and beyond, we need to start with tax reform, so that wealthy companies can no longer transcend national tax authorities, wealthy individuals can no longer bank with anonymity, and wealthy countries can no longer siphon off resources from the developing world. A fair and just tax system would ensure that each group pays its fair share and each country receives its rightful slice of the pie. It is also the best way to avoid raising tax rates for existing taxpayers and to make sure the gods of rentier capitalism actually pay taxes on the rents they collect.
It is said death and taxes are the only certainties in life. For more and more of the world’s largest corporations and richest people, the latter no longer applies. Without more cohesive tax laws and the resources to enforce them, the cost of building a better society will fall not on the people and institutions with the greatest means to effect change, but on those who need change the most.
5
FOREIGN POLICY: DOES EVERY COMPANY NEED ITS OWN STATE DEPARTMENT, PENTAGON, AND CIA?
In the months prior to the outbreak of civil war in Syria, I led a State Department delegation on a controversial trip to Syria that included a sit-down with Bashar al-Assad. Our intention was to muscle the Syrian dictator on a series of security issues in the field of technology. The weaponization of widely available consumer technology was making it easier to surveil, spread disinformation, and both develop and destroy political movements. Our delegation was there to apply political and economic pressure to try to get Assad moving in the right direction.
The thing that made this delegation walking into Assad’s office different from any other was that it was not composed of diplomats or government officials from the Pentagon or CIA. It was comprised of senior executives from American companies including Cisco Systems, Verisign, Microsoft, and others. Our view was that the companies held the power to be more persuasive under the circumstances and given the topic.
Not all the world’s problems can be solved by governments and citizens alone. Tax avoidance offers a fairly unique issue, where the world’s governments all lose out and stand to gain together by ending the race to the bottom. But other issues we face as the 21st century unfolds are far knottier. Some—like the weaponization of AI and data and cyber war—break along geopolitical fault lines, pitting major powers against each other with citizens hanging in the balance. Still larger dangers, like climate change, loom so totally and immediately that all hands are needed on deck—governments, citizens, and corporations of every nation.
In the case of Assad and Syria, digital technology did end up having deadly effects. The Assad regime followed digital organizing on open social media platforms, including Facebook, and then targeted attacks at the locations of protests organized online. When they detained people, they would take their mobile phones, force them to log on to Facebook, and then make a kill-or-let-live decision based on the person’s posts and Facebook friends. The Syrian government developed Android apps that outwardly appeared to be apps tied to the COVID pandemic, in one case masquerading as an app to take users’ temperatures, but which also served as powerful spyware, accessing users’ data, texts, and contact lists and providing real-time geolocation data to the Syrian government.
America and our technology companies did not persuade Assad. Instead, he stood with Russia, and in the same way that Russian aircraft bombed Assad’s Syrian opponents, Russia and hackers who worked inside and outside government conducted the cyber war for Assad. Companies and countries were combatants. The entire cyber war in Syria blurs the distinction between what is being done by business and what is being done by government.
Companies have carved out a unique place for themselves on the global stage in recent decades. This new role can be harnessed to exploit gaps in geopolitics, as we saw with the subject of tax avoidance. Or it can be used to plug those holes, by using companies’ expertise and scale to help create a more stable social contract. In this chapter we will largely use the subject of AI and cyber war as a case study in the stabilizing effect that companies can have on international issues. But we will also examine the risks and difficult trade-offs that emerge when companies enter the global arena, and explore how to navigate them. First, however, it is worth stepping back and looking at how the role of the world’s companies has shifted over the past thirty years, giving them unprecedented independence.
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HISTORICALLY, COMPANIES HAVE been subservient to the state. This has been the case for 99 percent of the era in which government and commerce have coexisted. Loyalty to the state was simply a cost of doing business, and every company was expected to serve its country at home and abroad as part of its responsibilities under the social contract. In the case of our State Department delegation to Syria, the companies were acting as loyal American institutions—flying to Syria and going face-to-face with a genocidal dictator because that was what would advance US national security interests. It was corporate patriotism.
For centuries, countries relied on that loyalty to project and exercise power beyond their borders. During the age of exploration, European nations used companies as tools of empire. Monarchs from Portugal to Russia granted different “chartered companies” monopolies over trade with certain parts of the world. Indeed, the very first companies were embodiments of the state—that’s the literal sense of the word corporation. They were created by rulers with the explicit purpose of serving the Crown.
There has always been a link between the grand strategy of countries and their economic philosophies, binding state and company together.
But in the rise to modernity, the nature of companies changed. They gathered distinct legal rights and protections, inhabiting a niche between the state and individuals. In the United States, for instance, corporations gained many of the rights of individuals—such as freedom of speech and protection against unwarranted search and seizure. Still, the general rule held that businesses owed loyalty to their home countries and served them in times of need. During World War II, Allied and Axis nations alike tapped into their private sectors to be able to wage war, and the fate of the war hinged on how robust and flexible their industrial powers would prove.
In the United States, General Motors, Ford, and Chrysler stopped assembling cars and started building tanks, airplanes, guns, and ammunition. The Lionel toy train company built compasses for warships. The Mattatuck Manufacturing Company went from producing tacks to making rifle clips. General Motors president William Knudsen, who became the government’s wartime production chief, summed up the expectations of the business community in a 1941 speech to industry executives: “Gentleman, we must out-build Hitler.”
Meanwhile, the German private sector worked to help Hitler out-build the Allies. Daimler-Benz, BMW, and Volkswagen supplied the Nazis with cars, motorcycles, and airplanes. IG Farben, then the world’s largest chemical company, manufactured synthetic rubber, fuel, plastics, and the poison gas Zyklon B. On the Pacific front, massive corporate conglomerates known as zaibatsu provided the war materiel for imperial Japan.
With the advent of the Cold War, the bond between state and commerce only strengthened. The high stakes of the Cold War forced multinational businesses and democratic governments to work in lockstep on foreign policy issues. They represented two faces of the same political and economic model—democratic capitalism—and they both stood to lose if communism spre
ad across Europe, Asia, Africa, and Latin America. It was at the dawn of this era that General Motors president Charles E. Wilson famously said, “What was good for our country was good for General Motors, and vice versa. The difference did not exist.”
Throughout the Cold War, there was an expectation that Western multinational companies working around the world would assist the government, or at least not get in the way. The Cold War created a mostly binary world for both government and business: either you supported American-sponsored democratic capitalism (or at least American-aligned capitalism) or you supported Soviet-sponsored communism. Each side of the Iron Curtain developed its own unique sets of economies, and for decades there was little crossover between the two. American consumers drove Chevys, drank Budweiser, and smoked Marlboros. Their Soviet counterparts drove Ladas, drank Zhigulevskoye, and smoked Belomorkanals.
When the Cold War ended, however, the rules that had held for centuries started to change rapidly. With the dissolution of the Soviet Union, capitalism became the triumphant economic model. In the “end of history” euphoria, the United States, United Kingdom, and other Western democracies rolled back many of the financial and legal guardrails that tethered businesses to the government. They simultaneously set out to build the infrastructure for a global economy based on free-market capitalism. The European Union was created in 1993, the North American Free Trade Agreement (NAFTA) went into effect in 1994, and the World Trade Organization kicked off its operations in 1995. China, the world’s largest nominally communist country, joined the WTO in 2001.
The West’s companies, now free from constraint and with the whole world accessible to them, increasingly set up global operations. The number of multinational companies around the world increased from approximately seven thousand in the late 1960s to thirty-seven thousand in the early 1990s. By the United Nations’ last count in 2008, there were eighty-two thousand multinational corporations operating around the globe, and there are probably twice that again today. The growth of multinationals is exponential.
As these companies grew and invested across global markets and built relationships with foreign governments, their ties to the community back home grew weaker. Once bound by the patriotic obligations of the Cold War, companies’ loyalties now shifted to the countries that most benefited their balance sheets. With enough resources, a multinational company can effectively customize its social contract. It can choose to adhere to the tax laws of the Cayman Islands, the labor and environmental regulations of China, and the trade policies and capital markets of the United States. It can tap into the educational institutions of virtually any country and leverage whatever human capital and research funds it provides. Its customer base is global, and its political alliances are flexible.
If businesses have been subordinate to the government for 99 percent of history, we are now in the other 1 percent. Large corporations can now act as sovereign players on a 196-country chessboard.
“The mid-20th century stands out as a period where there’s the sort of near identity between the interests of big companies and the big governments where they reside,” said historian and Stanford University professor Niall Ferguson. “It only really starts to change in a meaningful way, I think, in the ’80s and ’90s as exchange controls and capital controls were gotten rid of. It just becomes easier to invest in other countries—the Europeans were actually in some ways pushing as hard as the Americans in this respect.
“There’s this tremendous shift away from national bases, and I think that gives rise to a very different corporate culture. Facebook … Google and Apple think of themselves as global companies and not American companies. They don’t say ‘what’s good for the United States is good for us.’ They say ‘we’re building a global community.’”
But what exactly does this mean? There are obvious ways in which this shift can cause problems, as we saw in the case of international tax avoidance. But there are also ways in which an air gap between companies and the state—so long as it is not abused—can be beneficial and even make for a more stable social contract. When companies are not operating in lockstep with government, they can serve as a check on the abuse of power or a push toward addressing global problems where government might be lagging. For all the ways in which shareholder capitalism has twisted businesses’ ability and incentives to help address the world’s problems rather than exacerbate them, it is still possible to turn the corner and harness corporate power. Doing so requires companies to accept the responsibility that comes with their power, and it also requires governments and citizens to monitor that power.
To wrap our arms around what this can look like, we can turn to one of the most complicated problems to emerge out of the last two decades of foreign policy—the explosive potential of artificial intelligence, ubiquitous data, and the new theater of cyber war. The dangers of weaponized code have been approached very differently in the world’s two protagonist nations—the United States and China. And the difference offers a glimpse of both the perils ahead and the role that the corporate sector needs to grow into.
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THE PENTAGON IS not the most inviting place for first-time visitors, and it was no different for Chris Lynch. When he rode the escalator out of the Pentagon metro station, Lynch was greeted by guard dogs and security personnel wearing body armor and toting machine guns. He lost cell service upon entering the building and was forced to run through more than a half mile of hallways to make his meeting in the office of the secretary of defense. He showed up late and out of breath, his hoodie and gym shoes soaked with sweat.
It was a surreal experience, Lynch said, and it marked the beginning of “the most delightful detour of my entire life.”
Lynch had just completed a forty-five-day posting in the United States Digital Service (USDS), an organization formed in 2014 to fill what many officials viewed as a critical gap in the government’s technology expertise. That year, the White House had launched Healthcare.gov to help enroll Americans in government health insurance, but it had been a technological debacle that almost derailed the Affordable Care Act. The website was so buggy that on its first day only six people were able to sign up through the site. In response, and to prevent similar flops from occurring in the future, the White House created the USDS. The group is meant to act as a SWAT team of technologists who can come in whenever a government system needs fixing.
Chris Lynch’s first project at the USDS involved building software to let the Pentagon and Veterans Affairs Department (VA) more reliably share veterans’ medical records. The problem his team sought to solve was a simple one with severe consequences—the VA could accept the records only in PDF format, but sometimes the Pentagon would send them as JPEGs. As a result, doctors sometimes mistreated patients and overlooked underlying conditions simply because they had incomplete records. Lynch said, “If you have cancer, it could be literally the difference between life or death.”
Lynch and his team set about building file conversion software that would reformat such misfiled records, and the effort was a success—so much of a success that when Defense Secretary Ash Carter wanted to spin up his own military-focused branch of USDS, the Defense Digital Service, he tapped Lynch to lead it.
The Defense Digital Service was the reason Lynch found himself at the Pentagon that day in the summer of 2015. Before moving to DC, Lynch knew nothing about the military. The closest he had come to the national security world was watching Saving Private Ryan and Full Metal Jacket. He does not fit the stereotype of the military man, either. Lynch is five-foot-nine, slim built, and in his own words, “very, very average for a human being.” He smiles often and boasts a pair of geometric tattoos, a Fibonacci spiral on his left biceps and a spirograph down the length of his right arm. His days begin with a trip to a coffee shop in DC’s hip Shaw neighborhood. His dog—a miniature pinscher named after the film producer Dino De Laurentiis—is afraid of motorcycles. When I went on a walk with Lynch and Dino in March 2020, Chris wore a black
fitted T-shirt, white Ray-Bans, and gym shoes with tie-dye laces. The look spoke more to his background in the Seattle start-up scene than his current role as one of the top technologists in US national security.
Lynch also came in with the same skepticism of the government that many in the tech industry share. There is a perception that “you can’t do anything in government … bureaucrats don’t care about technologists … it’s a waste of your talents,” Lynch told me. When his friend first announced he was joining the US Digital Service, Lynch told him flat out “that is the dumbest fucking idea I’ve ever heard.”
It was not until Todd Park, the White House’s chief technology officer, personally flew to Seattle to recruit Lynch that he decided to join the organization himself. After spending a month and a half building file conversion software for military doctors, Lynch had a change of heart.
The experience was “the turning point in my entire life,” he said. “I realized that having a mission is meaningful work. Just because a bunch of nerds did the most seemingly simple project, somebody would not potentially die.”
But it also showed just how far the American military had fallen behind the rest of the world in its technology expertise. The same year Facebook released software that could describe images to the blind, the Pentagon needed help converting JPEG files to PDFs. If a small team of programmers could make this much of a difference in forty-five days, Lynch thought, something was very wrong.
Lynch was right. Traditionally, a military’s power has been defined by its strength in air, land, and sea. For decades, the United States had raised a military that could outmatch any other global fighting force in each of these domains. However, over the last twenty years, we have seen a paradigm shift in the domain of national security. No longer is a country’s military strength defined solely by the size of its fleets, the speed of its vehicles, or the destructive power of its munitions, as it was in the 20th century and every era before. In the 21st century, militaries must also project their strength in a new domain: cyberspace.