The European Deep Transition Strategy

Written by Sebastiaan Crul
April 2, 2021

A lot has been written about the unfolding European Digital Strategy to reclaim the digital sphere from private interests and make it more equitable and fair. However, the EU is also becoming a regulatory superpower in the non-digital realm. This month, for example, the European Parliament paved the way for new European legislation that stresses corporate accountability and due diligence for human rights within value chains.

Furthermore, the ECB aspires to become a pioneer in fighting climate change, by slashing bond purchases by heavy carbon emitters and advancing “green bonds” and integrating climate risk in its stress tests for the banking sector. And last year, the EU adopted new “eco-design measures” that should make it easier to repair – rather than replace – old household appliances, such as washing machines, dishwashers and refrigerators. All these measures are meant to create more equitable and sustainable consumer practices, production processes, and value chains in the real economy. As such, the EU is leveraging the “Brussels Effect” to begin to establish the meta-rules of the Second Deep Transition.

Burning questions:

  • Will other countries follow Europe’s example or will this legislation cause more geopolitical friction?
  • Does the EU have the coherence and unity to push and enforce all legislation?
  • What is the goal or set of meta-rules that the EU has in mind?

Does the future belong to Keynes and Mazzucato?

Written by Sebastiaan Crul
January 14, 2021

In the past year, Keynes made a comeback into the soul of European economic policy. First intended to keep the economy going, then with a view to establish a sustainable and inclusive economy in the future. In order to facilitate the latter, Keynes was modernized with the mission-oriented innovation policy of economist Mariana Mazzucato. Together, they provide a substantial economic policy framework for governments to combat the “wicked problems” of the 21st century.

Our observations

  • Because of the coronavirus crisis, for the first time in twenty years, poverty is on the rise again. Depending on the severity of the economic crisis, an estimated 150 million people will join the ranks of those living below the poverty line, making the sum total nearly 10% of the global population. A wealthy continent such as Europe, despite there being more social security than elsewhere, is no exception to this trend.
  • In the past, crises have sometimes been great equalizers: In wartime, equity and capital evaporated more quickly than gunpowder. This does not apply to the coronavirus crisis, which has only exacerbated social and economic inequality in several ways.
  • CO2 emissions decreased by 8% in the past year and we’re unlikely to ever again reach the global peak levels of 2019. The main concern is now whether emission levels will be reduced fast enough, and which part of the population will “bear the brunt” of the decreased emission rates.
  • With the coronavirus as a tipping point, governments are now striving for a more active role in the economy to deal with the abovementioned “wicked problems”. In the course of the year, aid packages came to be accompanied by recovery packages meant to correct the unbridled neoliberalism of the past years. These recovery packages are largely made up of investment funds with a lot of reference to mission-oriented innovation policy, which gradually seems to be gaining ground in Europe.
  • The recovery plans and investment funds are crystal clear in one respect: sustainability is the main goal. The German government devised a green recovery plan of 130 billion euros which focuses mainly on hydrogen. The French government, unwilling to lag behind, presented a 100 billion euro plan soon after, of which 30 billion is reserved for the ecological transition. And recently, regulations on spending the European recovery fund of 672.5 billion euros were tightened, so that a significant percentage of the subsidies and loans would have to be used for sustainability purposes. The same applies to the Dutch growth fund of 20 billion euros, which initially incurred much criticism for the gray and traditional economic set-up of the investment fund, but has now become much greener.

Connecting the dots

Economists generally disagree. Put two economists in a room and you’ll get three opinions, the old economic saying goes. The consensus among economists about the global aid policy of governments was therefore surprising. Economists have rarely been this unanimous in their agreement on the necessity of government intervention. Moreover, with the financial crisis still fresh in our memories, central banks are asking governments not to start phasing out financial aid too soon. The rising government debt has been taken for granted so far; the fear of long-lasting economic stagnation unequivocally takes precedence over the fear of inflation. Initially, the emphasis was on keeping the economy going. Now, we’re becoming concerned about the future. The government wants to stimulate economic growth as well as realize societal goals such as reaching sustainability and social justice at the same time.

This will be one hell of a job. Classical Keynesian undifferentiated innovation policy is no longer the solution, as not all innovation is good and not all consumption is wanted. Keynes needs an update. The neoclassical economic idea that innovation is ultimately best judged by the market, is abandoned in the innovation policy of economist Mariana Mazzucato. Her ideas include a preceding process of elimination by civilians and the government, who join hands in formulating ambitious societal goals, or “moonshots” as Mazzucato likes to call them.

In Europe, in part because of the coronavirus crisis, Mazzucato’s ideas have gained much momentum. Following the Green Deal, governmental aid packages often contain clear references to mission-oriented policy, with social justice and sustainability as the most prevalent missions. These societal missions are ambitious and this is precisely the point, according to Mazzucato, so that passion will return to government policy, which otherwise is at risk of becoming uninspired and providing a culture with little direction. Yet, the economic reality presents a challenge for European policy makers. Mission-oriented innovation policy is a three-fold struggle in which crises from the past, present and future influence each other.

The legacy of the past is a financial system in which capital is (too) profitable. Indeed, private savings abound: in the year of the coronavirus, European savings accounts and nest eggs were amply stocked. Moreover, central banks are copiously adding to the money supply with their extensive buy-back programs. Because of this, collecting money isn’t the problem, but, eventually, this money should be flowing into the real economy, which has been an issue for over a decade. The way the financial system is organized ensures that returns on stocks and capital are often more interesting than risky innovation. It speaks volumes that in the year of the coronavirus, more young people opened a private investment account than ever before, and house prices merrily kept on rising during the crisis. Speculation counters innovation and discourages companies from making daring long-term investments.

The legacy of the present is simply the economic damage of the current crisis. Inequality has increased in many domains. The crisis greatly divides society, resulting in clear winners and losers. Consequently, we’re witnessing increasing resistance against some forms of public spending, especially where climate policy is concerned. Economists therefore advocate a joint approach to reaching sustainability and economic equality. Their approach boils down to higher (environmental) taxes for the upper class, and tax exemptions or financial compensation (e.g. for road pricing) for the lower and middle classes to restore their disposable income. According to economist Dirk Bezemer, tax and wage measures should be in one and the same package as sustainability laws, otherwise, the intended acceleration of the green transition in Europe would be completely unrealistic.

Our “legacy” for the future is the advance we’ve taken on this future and the necessity of growth to be able to pay this back. With sufficient economic growth, government debt becomes lower in relative terms and tax income rises, so that it becomes easier to pay interest charges without this affecting other expenses. And it’s not just government debt that makes economic growth desirable. The future pension costs and increasing healthcare costs of an ageing population, make economic growth essential to Europe.

Economic growth is thus very desirable, but to what extent are economic growth and societal missions reconcilable? This is a controversial question, especially as regards sustainability. Too much emphasis on quick recovery in the form of a single-minded focus on economic growth would have disastrous effects on, among other things, absolute emission rates. Yet, an economic downturn, is not the time to experiment with economic paradigms that do not center around growth. The fact that societal missions are still mostly framed as interesting investment opportunities for growth is exemplary of the dilemma governments face. Innovation, it is still felt, is mostly meant to be interesting economically, and only to benefit society by derivation.

Thus are government policy-makers forced to struggle with the legacy of a financial system marked by perverse incentives, with the economic downturn of the current crisis, and, finally, with the considerable loan we’ve taken out from future generations. If Mazzucato’s ambitious mission-oriented innovation policy is to have any chance of success, this threefold legacy will have to be taken deathly seriously.

Implications

  • There are risks involved in a more active role for government. If we fixate too much on the promises made, we’ll lose sight of the fact that in the past decade, many companies have become too dependent on the government, with dire effects on innovation. Economic renewal requires the creative destruction of old and lumbering companies that should not be able to keep getting handouts from the government or obtaining debt obligations at extremely low cost. Economists have long feared the rise of zombie companies, that are all too eager to look to the government for bailouts. Like unbridled neoliberalism, this “sunflower capitalism” (i.e. these companies turn to the government as a sunflower turns to the sun) creates the wrong conditions for innovation.

Transatlantic troubles

Written by Alexander van Wijnen
December 18, 2020

Since the U.S. election victory of Joe Biden, there has been a widespread expectation of renewed transatlantic cooperation between the U.S. and Europe. However, while it is likely that the Biden administration will reinvigorate some alliances, as opposed to Trump and his strategic pressure on both adversaries and allies, it is unlikely that the U.S. and Europe will grow as close together as is widely expected.

The main issue is hegemonic shift. The rise of China is primarily a threat to the U.S., but while Europe is cautious and also feels threatened by China in several domains, it is much more open to the strategic opportunity of a rising China. An implication is that the U.S., aware of Europe’s position, will not allow Europe to freeload off U.S. security while refusing to follow American policy towards China. Overall, although we should expect policy proposals such as transatlantic strategies and agendas to emerge, they will be much more difficult to implement than is widely expected.

Biden: neither friend nor foe to big tech

Obama’s presidency was paradise for big tech. After that, Trump was a gift from the gods, tax-wise, but caused some rocky and restless years in Silicon Valley nonetheless. Biden will partly restore peace in the Valley, but we shouldn’t expect a return to the heyday of the Obama administration. During Biden’s first term, we will see a relationship with big tech that is less than clear-cut in terms of amity or enmity. Big tech and Biden need each other and don’t appear to want to make life difficult for each other, but the tension between big tech and society and Silicon Valley and Europe won’t be easily resolved.

Our observations

  • For tech companies, there will be a large contrast between Trump’s fiscal policy and that of his successor Biden. Trump’s tax reforms were a present to big tech, which was able to withdraw money from abroad at low cost and drive up its own share price by buying back shares with this money. Biden wants to tax large companies more heavily by raising corporate taxes to 28%. In addition, he may want to make it more difficult to deposit money on offshore accounts untaxed or to transfer it to tax havens.
  • As a consequence of Trump’s immigration policy, tech companies struggled to attract foreign talent. Biden is a proponent of a friendlier immigration policy and has promised that, during his presidency, it will become easier to apply for a permanent visa again.
  • Under Biden, we can also expect a reintroduction of net neutrality. He has repeatedly expressed approval of net neutrality, which was instated by Obama but subsequently repealed by Trump. Without net neutrality, telecom providers are able to discriminate between content providers and slow down access to certain websites or platforms or charge differentiated fees.
  • Trump and Biden are different in many respects but both of them want big tech to take more responsibility for content moderation. The debate centers around Section 230. In the early years of the internet, Section 230 was devised to give digital platforms legal immunity regarding the content posted on the platform. The law is widely criticized now, though it’s helpful to understand it in the context of the rise of the internet as a free public space.
  • The left flanks of the Democrats have long advocated the forced sale of business units to tackle market concentration and big tech monopolies. Biden is less eager to break up tech companies and has indicated that it’s still too early to discuss this.

Connecting the dots

During the Obama presidency, big tech companies were given a free hand regarding growth and the president frequently sang the sector’s praises. Obama was (too) friendly with big tech. Under Trump, things became a bit more ambivalent, leaning towards hostility. Trump often expressed criticism of tech platforms. Moreover, he became the key player and catalyst in the societal problems that currently characterize the industry (e.g. misinformation, polarization, foreign interference, etc.). At the same time, it’s mostly tech companies who seem to have reaped the benefits of Trump’s fiscal policy (e.g. cheap repatriation of foreign cash and lower taxes). Societal criticism became immensely widespread, but the share price rose with it. With Biden, we’re starting a new chapter that’s more difficult to define in terms of amity or enmity towards big tech. The consensus is (see observations) that Biden will implement stricter regulation of big tech and higher taxes, so it would appear as though there’s some hostility. But in other respects, Biden and big tech are completely on the same page and mutually dependent.

First, to expect that big tech has some rough years ahead because of the extra regulation would be misguided.  After all the (internal) unrest and increasing societal criticism, more regulation, even if it affects companies’ profitability, may even be desirable within the sector. The fact that big tech, despite Biden’s campaign promises of fiscal reform, made prodigious donations to the Biden campaign, supports this theory. Moreover, Biden and Harris have close ties with the tech sector, so there might be an assumption that in (a divided) Congress, the lobby will have enough room to water down propositions. And perhaps regulation might benefit big tech anyway: the GDPR is widely held to serve the big players, who are far better able than their smaller competitors to build the necessary infrastructure. For smaller companies, this is likely to be very expensive and time-consuming.

Big tech welcomes Biden but the reverse is true as well. Among other things, Biden plans to rejoin the Paris climate deal and seems to be of a mind to revive multilateral institutions. But in other domains, he will want to continue Trump’s protectionism and protect big tech. Commentators all agree that stricter regulation of big tech will play into the hands of Chinese competitors, and this will certainly be taken into consideration by the Biden administration. It looks like Biden is aiming for a softer, more differentiated version of Trump’s America First policy, so the trade-off between protective industry policy and restrictive competition policy could work in big tech’s favor.

There is, then, enough amity and/or mutual dependence in the relationship between big tech and Biden, but under the surface, hostility and tension remain. Breaking up big tech is one of the most radical plans of the Democrats and was a spearhead in the campaign of other candidates, such as Elizabeth Warren. Because Biden has never made any such extreme statements and there was no “blue wave”, this plan doesn’t seem to be a priority. Nonetheless, CEOs will not rest easily after their recent hearings with the House Judiciary Committee’s antitrust subcommittee. In a lengthy report, the latter considers the monopolies or market forces of big tech proven and urges the forced sale of business units or subsidiaries. It will be difficult to get this through Congress, but the battle for the Senate is not over yet, as a new voting round in Georgia will decide who gets the last two seats in the Senate. It should be noted here that not all big tech companies are the same. Especially Mark Zuckerberg will have sleepless nights, because Biden and his tweeting deputy communications director seem to have set their sights on Facebook in particular.

Ultimately, we shouldn’t set too much store by Biden’s current intentions and campaign promises and stay attuned to what happens societally and ideologically. Societally, in his close-to-victory speech, Biden presented himself to the world as the president of reconciliation. But in the unfortunate case that the power concentration, misinformation, polarization and societal tensions in the digital realm continue to increase, so will the pressure to act on this. Finally, we are in the midst of an ideological reappraisal of the internet itself. Among academics, politicians, organizations and platforms, there’s a growing push for an overhaul of the digital economy, with the foundation of a decentral and open infrastructure of the internet. At its core, this ideology criticizes the way tech companies have been able to privatize the open space of the internet in the past decades and seeks technological alternatives. The strength of this new ideology could have more severe consequences for the revenue model of big tech than Biden’s policy.

At this point, it’s not easy to draw any straightforward conclusion about the consequences of Biden’s first term for big tech. Despite stricter regulation, big tech seems to be headed for a period of amity under Biden, but with subterranean long-term insecurities that could result in some heavy blows for companies.

Implications

  • Compared to Trump, Biden will undoubtedly be more eager to cooperate with Europe, but this doesn’t pertain to tech policy. In this regard, the EU and U.S. have drifted apart in the past years, among other issues because of privacy and data regulation, and Biden apparently doesn’t intend to change much about that.

  • In addition, though at first glance Biden seems tougher on big tech fiscally and appears to comply with Europe’s desire to tax American tech companies more fairly abroad, when we look closely, it’s clear that he plans to give big tech free rein in certain fiscal areas to remain a strong competitor of foreign counterparts. European countries, for instance, have been pressing for years for a tax on digital services that would affect mainly American tech companies, but Biden – like his predecessors – isn’t likely to respond to this call. Biden, it seems, wants to limit the power of big tech somewhat, without inordinately weakening Silicon Valley economically.

  • Nevertheless, there is still agreement and room for mutual inspiration. Europe is able to indirectly exert influence with its own tech policy. The European model of internet and the local legislation that’s derived from it could inspire other democratic countries (e.g. GDPR, Digital Services Act, etc.), including the U.S. In 2018 the GDPR, for example, led to similar privacy legislation in California, which, in one fell swoop, gave forty million Americans the right to request their data, correct it if necessary and prohibit its sale to third parties.

Carbon border tax

What do semiconductors and artificial intelligence have in common? Both have great impact on the economy as well as national security. Historically, such “strategic technologies” trigger a predictable pattern of politics, as shown by Jade Leung. The pattern pertains to the role of the state, firms and researchers, whose roles change in each phase of technological development. During the first phase of emergence, there is primarily synergy between them as the state supports its firms.

However, in the second phase of commercialization, fearful images arise as the impact on security gains more attention, and in the third phase of maturation, a big shift occurs as the state attempts to take back control to prevent foreign actors from gaining access to its strategic technology. We have seen this happening in the semiconductor industry and it is likely to happen in AI as well. Part of the pattern is that some firms will cooperate with the state (e.g. Palantir), whereas others publicly distance themselves from the state (e.g. Google). Overall, the politics of strategic technology will shape the future of semiconductors and AI.

Trump is making opposition media great (the platform becomes the bubble)

On November 5th, CNN interrupted a speech by President Trump because he was making unfounded claims about electoral fraud. Twitter and Facebook have also repeatedly labeled statements by Trump as misinformation. Moreover, Twitter has announced that it will not grant him anymore special treatment when he is no longer president and will delete his account if necessary. Supporters of Trump and his ideas have long sought alternative news sources and platforms where they can freely express their views.

When Trump began retweeting Newsmax, a conservative American news and opinion website that refuses to acknowledge Biden winner of the elections, it saw its visitor numbers soar (from an average 500,000 to 7.3 million a week). Conservative Twitter alternative Parler is currently even the most downloaded app in the U.S. Trump may start his own media outlet, but in any case, his departure from the White House will considerably boost these existing “opposition media”. Slowly but surely, completely separate universes will arise, even more so than now, with different groups each inhabiting their own platforms.

The sharing economy is dead, long live the rental economy

Written by Sjoerd Bakker
October 22, 2020

After hearing a lot about the sharing economy in the past ten years, the craze now seems to have passed. Society is more critical of the use of the term and the actual added value of platforms that offer these services. However, this doesn’t mean that the as-a-service-model has become any less popular. In fact, the coronavirus crisis seems to create even more demand for access to products and services at low cost and with minimal obligations. The difference is that this is now grouped under the much more pragmatic heading of the “rental economy”.

Our observations

  • The term sharing economy has been bandied about in the past decade by various digital platforms in order to portray themselves favorably. The term suggests that platforms and services make valuable contributions to society. That is, that they bring people closer together and liberate the world from its abundance of things. Misuse of the term by companies that are actually not a part of the sharing economy has considerably weakened the craze surrounding the sharing economy.
  • Whereas the sharing economy is essentially based in consumer-to-consumer services, the rental economy, now coming (back) in vogue, is more focused on business-to-consumer services. The use of this term as opposed to the more idealistic “sharing economy” reflects a pragmatic shift, both rhetorically as well as regarding the services referred to. In the rental economy, low costs and minimal obligations are the main objectives.
  • A number of these rental services initially suffered because of the coronavirus crisis. Especially services to do with travel and mobility were hit hard at first. Airbnb and car rental services are examples of this. Now, these and other rental companies have found ways to profit from the coronavirus crisis (e.g. by providing an alternative to public transportation or offering temporary workspaces). Business models based on temporary use are as old as the economy itself. Since the early days of the car industry, cars have been rented out to people who can’t afford their own car or only need one occasionally. Telephone companies such as AT&T even obligated their customers to rent phones from them, supposedly so they could guarantee the quality of the phone connection.
  • Because of digitalization, a lot of things or spaces can now be rented out that previously could not. First, this is because supply from large numbers of providers and demand can be more efficiently brought together, with digital means of communication also awakening much latent supply and demand to become manifest (e.g. people with a car in the driveway who would be open to renting it out can do so more easily by signing up to a platform, while people with a smartphone can quickly find a car near them). Second, administration costs have decreased dramatically, making it more lucrative to process modest transactions (from cheap products to short-term rentals).

Connecting the dots

One of the most significant promises of digitalization is that it can make a wide array of transactions simpler and cheaper. This is where especially the rental, lending and sharing platforms excel; they enable us to have a simple and real-time overview of the availability of various goods, to book them and pay. This provides us access to an assortment of products and services, without having to purchase anything or being tied down by long-term contracts.

In the past decade, the term sharing economy was widely applied. In the ideal sharing economy, consumers offer their own means when they’re not using them themselves. This allows for all sorts of capital goods to be used more efficiently, leading to a decrease in the use of natural resources and pollution in the manufacture of these goods. This would enable consumers to (partly) earn back their investment and increase their wealth. Moreover, the sharing economy would stimulate social cohesion by bringing people together and could revive old practices of shared ownership.

Now, the term sharing economy has lost much of its cachet and, both in the framing of this market as well as in the services involved, we’re seeing a shift to a more traditional rental economy.  The framing of the sharing economy has been done away with because the practice has failed to live up to the ideal, with all sorts of companies claiming to be part of the sharing economy without actually contributing anything in regard to the values the sharing economy purportedly upholds. Many of these companies (such as Uber) are in fact more a part of the gig economy or operate partly or entirely in a traditional rental market (such as Airbnb). As such, these companies have failed to contribute anything to achieve the societal goals of the sharing economy. With respect to the services involved, we can now carefully conclude that real consumer-to-consumer sharing is not without disadvantages. Although digital platforms are specifically able to bring together supply and demand and facilitate financial transactions, this doesn’t mean the transaction is always smooth, cheap or fair in the end. In practice, the use of a private share car is more complicated than hiring a car from a 24-hour car rental service; think of the key exchange and possible damage claims. On the side of the private provider, there are still high costs involved; a rented-out residence needs to be cleaned afterwards and acquiring good ratings requires time and effort. In other words, amateurism is inhibiting the growth of the real sharing economy.

Nonetheless, the demand for cheap and temporary services is increasing and the (digital) rental economy is eagerly playing into this. Before the coronavirus crisis, it was already clear that the as-a-service model, in mobility for instance, caters to the needs of new generations. The crisis has enhanced this. First, because it has led to a demand for temporary solutions, e.g. regarding work space and office furniture and personal mobility solutions. In the longer term, the crisis will also leave us with lasting economic and societal trauma, and chances are that many of us will not be very eager to commit to any long-term obligations for fear that another crisis, of any nature, will create problems for us. This kind of no-strings-attached mentality plays into the hands of as-a-service providers.

The rhetorical and factual transition from a sharing economy to a rental economy is also interesting and relevant with respect to the long-term success of this kind of service. We could view this as the unmasking of the supposedly socially committed millennial. The sharing economy has specifically fed into this image, with its ideals such as cohesion and sustainability, but it now appears that millennials mostly want user-friendly services at low cost and with minimal obligations. In the longer term, this offers better (economic) perspective for providers of rental services than the “youthful idealism” aimed for by the sharing economy. The same appears to apply to Gen Z, who are said to have had an overprotective upbringing, causing in them a strong aversion to any potential source of worry. The success of Swapfiets is telling in this respect; Gen Z are more than willing to pay for services that relieve them of responsibilities.

Implications

  • The pragmatic transition from the sharing economy to the rental economy means that the platforms offering services of the latter kind are likely to be successful in the long-term, as they are less dependent on ideals that may go out of fashion. Nonetheless, the professional rental economy could still contribute to a more efficient use of resources and goods and serve (some of) the ideals of the sharing economy in this way.

  • With the label of the rental economy, these parties are now once again expressly part of the regular economy, subjecting them to stronger regulation (already visible in the fact that Airbnb and its lessors are now treated more like regular hotels in many places).

  • The demand for professional rental services, not offered by “amateurs”, will also compel some of the platforms to operate in a more “asset-heavy” way. This trend was already incited by an increased need among platforms to gain more control over the user experience and acquire more data with their own hardware. This does mean, however, that because of the investment costs, these platforms will be less scalable and there will be less of a winner-takes-all dynamic.

The geopolitics of rare earth metals

Short Insight written by Pim Korsten
October 22, 2020

Last year, China scared markets when it threatened to halt the export of rare earth metals to the U.S. For decades, China has invested heavily in rare earth industries (Deng Xiaoping compared them to oil) and it is now home to 90% of global production. Rare earth metals are used in everything from chips to batteries to military and green technologies. As such, these raw materials are the material backbone of our digital technology, powering data centers, electric cars and solar panels.

Given the fact that nascent exponential technologies such as AI, 5G, and quantum computing will determine who achieves digital hegemony, these materials will become important vectors of geopolitical interest. Last month, China again stockpiled huge quantities of the strategic resources, citing the coronavirus crisis as the cause of the dwindling exports, since an outright export ban would mean an act of economic war. In response, both the U.S. and Europe are trying to secure their supply, through investments as well as new exploration. In the foreseeable future, these materials will be in the crosshairs of a great power competition.

The not-so United States of America

Short Insight written by Pim Korsten
October 7, 2020

In the run-up to the U.S. elections, a lot of attention is paid to partisan, generational, ethnic and socio-economic dividing lines. These differences, however, are transcended by the various American “nations” with their distinct geography and economic systems and unique history and culture. For example, the East and West Coast share a “Yankee” mentality of individualism, combined with belief in reform and social engineering by the state. In Yankeedom and the Left Coast, support for egalitarian and liberal policies is highest.

Washington, around Tidewater, on the other hand, was founded by English gentry who created an aristocratic and very unequal society. The central regions of Greater Appalachia and the Midlands were founded by Irish and Scots with a fierce warrior ethic. These nations have suffered from deindustrialization, and still support Trump against Yankee domination, while also opposing southern nations they see as “El Norte”. Within these southern nations, large differences also loom, such as the difference between Texas and California, which hold different views about the future of the U.S. In fact, the United States might be even less united than we think.

Who do we trust in the stack war?

Short Insight written by Arief Hühn
October 7, 2020

After threats from Trump to ban TikTok on security grounds, Oracle, Walmart and TikTok’s mother company Bytedance have proposed a deal in which the U.S. will have a 20% stake in TikTok Global. Furthermore, Oracle will host the service for the U.S. as a ‘trusted technology provider’, in order to guarantee the safety of U.S. citizens’ data. However, the deal will not involve the transfer of the service’s algorithms.

The fight over services and underlying algorithms and user data seems to be a progression of the tech war that mostly has been focusing on lower layers of the stack, whether it be rare-earth metals, hard infrastructure (Huawei) or soft infrastructure (new IP). Even though the deal still has to be approved by the U.S. and China, we can already expect that the dependency on trusted providers and tech could become a future template for popular services that aim to operate across adversarial national stacks. In fact, Apple and Amazon are already subjected to a similar treatment for their services in China.