How a Great Power Falls Apart
Decline Is Invisible From the Inside
A screengrab of the Google Doodle on France's election day last May.
As California's high-tech firms grew to become economic powerhouses in the American economy, they punched below their weight politically. For the most part, they are not very savvy about the ways of Washington -- they came late to the lobbying game -- and their political strategies were naïve compared with those of old industrial sectors like oil and automobiles.
That seems to be changing. In January, a group of high-tech heavyweights, including Google and Wikipedia, along with less prominent combatants (155,000 Web sites in all) and nonprofits such as Fight for the Future, joined in a massive online blackout to protest the Stop Online Piracy Act (SOPA). Since the bill's introduction in May 2011, a wide mix of representatives from the film, television, music, and publishing industries had been championing SOPA and its sibling, the PROTECT IP Act (PIPA), two pieces of legislation designed to address international theft of copyrighted U.S. intellectual property.
But then something remarkable happened: After Wikipedia and others went dark in protest, petitions circulated, and Silicon Valley CEOs had their say, the other side blinked. Support on Capitol Hill evaporated, and SOPA's lead congressional sponsor, Lamar Smith (R-Tex.), pulled the bill from the floor.
SOPA's defeat has been held up as a triumph for Internet freedom. But in combination with a few earlier examples, including Google's 2010 courageous but lonely stance against the People's Republic of China, it represents something more transformational. January's legislative battle marked the first time the major U.S. tech firms and their friends and followers came together and leveraged their political might like the globalized, information-age colossus that they have been for a long time.
Over the last 30 years, even as the United States transformed from a manufacturing economy into a service economy and the economic epicenter of innovation and progress shifted decisively toward high-tech frontiers such as Boston and North Carolina's Raleigh-Durham Research Triangle, the technology industry's political engagement remained paltry. Lobbyists were considered by many such enterprises to be The Man; lobbying was taboo. Tech firms were very slow to assign staff to Washington, and when they did, their numbers were puny relative to industrial-age companies that are not so politically retiring. Compare information-industry goliaths to those in the U.S. oil industry. In 2010, ExxonMobile employed nine in-house lobbyists and worked with 41 outside registered ones, according to a Center for Responsive Politics compilation. That same year, Apple employed three in-house lobbyists and worked with 13 others. Facebook worked with two, so it was telling when that number ballooned last year, pre-IPO, to 23.
Tech's lack of engagement is curious, considering the sector's role in the U.S. economy. In 2007, according to the U.S. Chamber of Commerce, some 60 percent of total U.S. exports came from intellectual-property-intensive industries. In 2010, according to Forbes, 15 of the top 50 U.S. brands were in the tech sector; financial services and the food and beverage sectors were distant runner-ups, with six each among the top 50. The federal government estimates that the information sector's contribution to the gross domestic product is a seemingly scant four percent, but experts such as MIT's Erik Brynjolfsson argue that even that figure is an underestimation, since today the worth of even an automobile may reside as much in its information technology systems as in its steel and other materials. Meanwhile, agriculture hovers at approximately one percent of the GDP and yet reaps and sows benefits from its long-past legacy.
The upshot is that the United States' foreign economic policy has suffered. In the last decade, it should have been geared toward promoting fast-growing, innovative sectors. Instead, it sat by as Washington pursued a hodgepodge of uncoordinated, often ineffective efforts that did little to advance the economy and instead threatened to leave the United States behind more tech-supportive international rivals. This was all the worse considering that in every economic age, government taxation, employment, and capital access policies have been instrumental to companies' competitive successes at home and in international markets. The United States will not be able to maintain its global advantages if the country fails to craft policies that maximize information-age soft and hard powers.
But before defining an ideal high-tech foreign economic policy, one has to recognize that, as often as not, the sources of most policy lay in particular economic interests. When the interests are as politically sophisticated, organized, and strategic as agriculture and energy, then they successfully articulate and lobby for their own agenda. That has not been the case with Silicon Valley.
Part of the problem is its unique structure. Northern California's start-up corporate culture, the sheer distance from the region to the nation's capitol, a high enterprise churn rate, and an emphasis on individual choice over collective action all feed into an inability of individual high-tech corporations and their leadership to come together to take mutually beneficial collective action.
Complicating matters further, the tech sector is hardly homogeneous. One can spot at least four distinct subsectors: content/software companies, equipment manufacturers, search firms, and telecommunications operations. Each serves different markets and has somewhat different concerns about technology and capital investment. Telecom companies, for example, have long-term perspectives on markets, thanks in part to the huge amounts of capital investment they sink into infrastructure with long payback periods. Telecoms often hold cozy relationships with national governments, giving them their quasi-utility-company status. In contrast, software firms are more nimble and mobile in an industry likely to be worried about next week and next quarter and preferring to stay as far away from governments as possible.
Industrial heterogeneity makes it difficult for firms throughout the digital economy to come together around common concerns. The SOPA battle was unique because it struck at what most Silicon Valley companies, whether in search or software, viewed as central to their interests -- the openness of the Internet. But when it comes to reaching industry-wide agreement, there is other low-hanging fruit. Tech firms, especially those founded by foreign-born visionaries, should be able to unite on immigration, particularly in support of an expansion of the H1-B visa program for skilled positions such as engineers, since skilled immigrants are a big factor in the Valley's successes. Research by AnnaLee Saxenian, a dean and professor at the University of California, Berkeley, has likewise chronicled how at the height of the Internet boom a substantial number of C-suite executives were Chinese and Indian.
Additionally, tech firms should also be able to come together to demand domestic policies that lead to world-class broadband service and more investment in education. Such measures would help the country gain competitive footing with the 15 or so nations around the world with faster Internet connections. Values-based commonalities, such as freedom of information, freedom of speech, and an open and democratizing voice, are other areas in which U.S. enterprises can improve market share abroad.
All that said, it is one thing for information-age corporations to start finally acting in their own long-term political self-interest. It is another to get government on board as well.
Institutionally, no branch is prepared to lead the way. Congress is especially ill suited because various committees and subcommittees currently take on small areas of a Silicon Valley foreign policy without one central clearinghouse providing consistency. Further, there are just a few small boutique government bureaus (in the State and Commerce departments and at the Office of the United States Trade Representative) devoted to tech, fiefdoms that do not always work well with one another.
The failure is greatest at the top, where there is insufficent long-term vision or leadership. Without high-level presidential and cabinet leadership, however, neither bureaucratic clout nor federal dollars will be forthcoming. Therefore, the president and his most authoritative spokespeople must chart the course to the digital future.
To get there, corporate stakeholders first need to accelerate, broaden, and deepen their conversations about their shared interests and whether they need common policies. The firms with the greatest investment in a new digital foreign policy must collectively put forward a framework outlining what a new Silicon Valley foreign policy would look like, and then engage with think tanks, universities, and governments at all levels to explain their preferred policies.
And while the U.S. government should not cede policy, regulatory, or other control to these firms, it should independently work on similar policies. It is in Washington's best interest to do so; the United States is no longer all about cows (agriculture) or cars (manufacturing). The country is now -- and will be for the foreseeable future -- about communication and content. So Washington needs to be more proactive in defining the contours of a postindustrial foreign policy and the critical domestic elements to complement it such as investments in education, research, and critical infrastructure.
Looking forward, the tech industry needs to come together and be more vocal, and the federal government, rather than waiting for tech-savvy Generation-Y staffers to rise to positions of authority, must now align the strengths of the nation's economy with the nation's foreign policy. Otherwise, the very tools that the country has created and nurtured will wind up being deployed by other rising emerging powers. By the same token, the long-term benefits of a serious and sustained Silicon Valley foreign policy will be greater international competitiveness, a higher standard of living at home, and a United States able to inspire and lead in the information age.