... the state should tighten regulations on big tech

commented by Toby Walsh

Finally! (Issue I/2020)

We made a big mistake in giving the tech sector complete freedom. That was fine to begin with and we had thirty amazing years of innovation since we invented the internet. But there are downsides – and we are discovering them at the moment. In part because now there are technology companies among the five biggest companies by market-capitalization.

The biggest worry is that the politicians tend to not understand technology. There was this mistaken idea that we cannot and shouldn’t regulate the internet. Because it is digital, it is different than the physical world, and because regulation would stifle innovation.

But we can and we should. In fact, if we don’t intervene, we will stifle innovation. The tech companies have exploited the idea, that regulations will harm innovation. But people are now waking up to the idea that the market place would be much better, if there were more regulations in place.

Bits live in physical places, just like servers live in physical spaces and companies engage in business in physical spaces. So, you can regulate all those things. And it doesn’t even have to be global or transnational. The GDPR (General Data Protection Regulation) is a good example of how we need to introduce regulations, and Europe is leading the way. Before it started, many thought the GDPR was a terrible idea, but now it is mostly welcomed. We definitely do need more things like that.

In Australia, we pretty much have GDPR, by default. Large tech companies have come out and said they will give you exactly the same rights in Australia as people as in Europe. They do not want to implement different versions of everything, so it’s convenient for them. At the same time, they say: “Look, we give you the highest possible data privacy standards”. They use that as a way of making themselves look good.

I am in favour of regulating tech firms and making them pay taxes. It is absurd, that they pay proportionally far less taxes than any other sector. According to figures from the European Commission, technology companies had an average tax rate of 9.5 percent in 2018, compared with 23.2 percent for conventional companies. These companies are sitting on cash mountains. They do not know what to do with this money. They keep it stacked offshore. Paying taxes would not affect their operations. They could innovate just as effectively if they payed tax. If they were smart, they would realize that it is in their own interest, because the markets in which they are generating their wealth will be will decimated if they don’t pay taxes. These markets need state infrastructure to generate wealth.

Another key thing is to deal with the monopolistic nature of many of these businesses. There are immense economies at scale and network effects at play. It is impossible to compete with them. It is not clear if the consumer got any benefit, for example, from Facebook buying Instagram or Whatsapp. The market would be more competitive if we break them up, something we saw with the telecoms, and the oil companies. We cannot have players that are both markets and sellers. It is not in consumers’ interest that Amazon is both a seller and product and a market place. Google’s reach now is too large. We have to urgently look at ways of limiting the numbers of companies they can buy.

Transcribed by Timo Berger

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