Betting The Farm

Condescension toward farmers has been a bedrock historical fixture of urban middle-class understanding (In the United States, “clod-hoppers” is one of the more polite disparagements).  After World War II, U.S. social scientists incorporated this prejudice into what they termed “modernization theory,” which they developed as a rationale for compelling indigenous peoples to abandon “traditional” village life.[1] Walt Rostow’s formulation of the “stages of economic growth” became ubiquitous.[2]  In this conception, “development” took the form of a repeated sequence:  out of agriculture, into industrial manufacturing, and then on to the production of services.  In this scheme, the U.S. – conveniently – constituted a paragon of developed modernity.  Modernization theory was far from being merely an academic daydream.  The U.S. Government packaged its foreign policy toward the then Third World under the motto of “development” – and used it, among other things, to sell what was called the “Green Revolution.”  The Green Revolution pushed to increase agricultural productivity via “technology transfers.”  Fertilizers and pesticides and high-yield seeds from the U.S., alongside intrusive management practices, were the standard package.

Capitalist agriculture was thereby given a giant push. And the ratchet continues to turn:  capital has continued to transform agriculture. It comes as no surprise, therefore, that farming should increasingly exhibit some of digital capitalism’s trademark features.

Alongside the Green Revolution, industrial capitalist agriculture brought about massive land grabs, widespread destruction of biodiversity, climate change, environmental pollution, and unsustainable use of water resources. Heralding that the same social forces that caused the problems now will fix them, corporate capital is calling for a “digital revolution” and a shift to more information-intensive farming practices.

Drones, driverless tractors, sensors, robotics, mobile apps, global positioning system satellites, and cloud-based data storage are sweeping across the agricultural sector, as well as below and above, the landscape.[3] Farming is being digitized and data codified throughout the agricultural lifecycle – from the cultivation of soil, to plant breeding, to planting schedules, to pest control, to irrigation, to crop monitoring, to harvesting, to food production and distribution, all the way to ultimate consumption. Companies including Monsanto, John Deere, Cargill, and DuPont are at the forefront of this process. The public relations industry has been hard at work creating happy-talk names for what they’re doing: “maximizing crop yields,” “sustainability” farming, and so on. Broader social and economic ramifications are ignored, as is the fact that this initiative stems not from social-justice activism, or even from good-Samaritanism, but from a familiar drive for profit.

Biotechnology firm Monsanto – which built up a strong corporate position worldwide by patenting seeds, something that should not be legal – is heavily invested in “data driven” farming.[4] In 2013, the company acquired the data analytics firm Climate Corp.[5] Climate Corp crunches nationwide weather and geological survey data minute-by-minute, initially merely because it was trying to hawk weather insurance policies to large-event venues such as outdoor concerts and ski resorts. However, using its weather forecasting algorithm, the company then turned to target farmers. Integrating Climate Corp’s weather data with its own seed- and crop data, Monsanto’s business strategy is to intervene in every stage of farming practice by further dissecting farm practices and turning them automatically into 0’s and 1’s in order to package the results as a salable commodity.  Just as Google hones its search algorithm by extracting freely collected user data, Monsanto utilizes famers’ data to create and improve its service and products. By moving from sales of terminator seeds to sales of software and data services as well, Monsanto has become a powerhouse of digital capitalism.[6]

John Deere, which controls almost 60% of the U.S. farm-equipment market,[7] is reorienting its business in a comparable fashion. As the company struggles with falling profits due to low commodity prices, stagnating farm income, and a deep downturn in the agricultural equipment market,[8] Deere is intent on cultivating a new profit source.

In this quest, Deere is outfitting its machines with software, in effect turning them into Trojan Horses that collect hyper-local data in real-time, on weather, soil type, soil conditions, fertilizer, irrigation, crop history, and so forth. As famers plow their fields, John Deere collects data through its sensor-enabled equipment[9] and those data, data from other farmers and other external data are sold back to the farmers in the form of Deere’s licensed data management platform.[10] An additional revenue stream is thus created, based on the company’s tightening data-linkages with individual farmers.[11] Samuel Allen, John Deere’s CEO, emphasized the value to the company of this new line of business: “A farmer might not have to buy a new piece of equipment every year, but he’s still doing the data every year. That part of the business can be more constant.”[12]

The farm equipment business was once discrete; however, John Deere also is now forging alliances with biotech- agricultural commodities traders. The company acquired Monsanto’s high tech planting equipment and, in exchange, it made an exclusive agreement to connect its tractors, harvesters and other equipment to Monsanto’s data analytics platform.  This enables subscribing farmers to combine their own field data with other data, including real-time and historic data on soil, weather etc.[13] DuPont, Monsanto’s biggest competitor, also joined forces with Deere to link to Deere’s wireless data transfer technology.  This allows farmers to upload their field data directly to DuPont’s Field360 software – a subscription service – which offers a suite of farming data management tools. [14]

And, again, the promotional publicity conceals capital’s new-model attempts to lay new claim to the land – “smart farming,” “connected farming,” “precision farming,” “tele-farming,”cloud farming,” “digital agriculture” are but a few of the euphemisms being bandied around.[15]

From another direction, the digitization drive is also enabling the IT industry to invade agricultural markets. Tech giant IBM, which is going through a major restructuring and has shed thousands of workers over the last few years,[16] is now stepping into the agriculture sector as it searches for new profit sources. The company recently acquired the Weather Company, which holds a large quantity of weather forecast- and location data and is working with a Canadian agricultural data management firm Farmers Edge. Farmers Edge has integrated IBM’s weather forecast engine, serving real-time data on micro weather, soil conditions, air quality etc. and selling its service to farmers with the promise of ever-increasing crop yields. IBM is also targeting the Global South, where it is promoting “remote” or “tele-farming,” using real-time data to manage farms from afar through such products as its EZ-Farm application.[17]

Silicon Valley, which planted itself on what had been agricultural land, thus has turned its acquisitive gaze on farming. Between 2013 – 2014, Silicon Valley venture capital doubled its investment in agricultural and food related startups. In 2014, the Valley funded 151 agriculture-related startups for a total investment of $976 million.[18] Google is a leading participant. In 2014, Google, along with DuPont, Agco, UTC’s Sensitech, and 3D Robotics, launched Farm2050 to fund agtech startups.[19] In 2015, Google’s venture capital arm raised $15 million for the startup Farmers Business Network Inc., which evaluates public and private data on crop yields, weather patterns and planting practices.[20]

The US government is, predictably, backing this new ag-tech agenda and helping participating companies to drum up business worldwide. President Obama, on his trip to Ethiopia in 2015, announced that the U.S. Government’s “feed the future” initiative aimed to address global hunger and food security, by investing to scale up climate-smart technologies in Africa.[21] This, from the same government whose “Green Revolution” had devastated ecosystems built up over thousands of years by traditional farming practices.  Without a trace of humility, and with exactly the same institutional condescension, now the U.S. is flogging “smart farming” as a solution.

While capital continues to plow across the agricultural Midwest and the farmlands of the Global South, however, renewed struggle over the land is evident. In Latin America, campesino movements are at the forefront in fighting for land rights.[22] Brazil’s landless workers’ movement, The Unified Campesino Movement of Aguan in Honduras, Cuba’s ANAP Agro-Ecology Movement, The National Campesino and Indigenous Movement in Argentina, and Paraguay’s National Campesino Federation are becoming a Latin America-wide fight to access lands and food, sustain independent farming practices, and resist corporate-driven agriculture.[23] Farmers in Africa are calling for agricultural diversity and are building an alliance for food sovereignty. [24] In the United States, there is a growing protest against Monsanto’s use glyphosate, a toxic chemical in its roundup herbicide, and an accompanying demand for the EPA to curtail its use.[25]  In India, agrarian distress, deepening over two decades, has fueled huge marches and protests.[26]

Evidently, farmers are not so ignorant.  Indeed, as they mobilize against the ravages of today’s digital capitalism, they are giving object-lessons to all of us.

[1] Daniel Lerner’s The passing of traditional society: modernizing the Middle East (Glencoe, Ill: Free Press, 1958) is a classic instance.

[2] Rostow, W. W., The stages of economic growth: a non-Communist manifesto. Cambridge [England]: University Press, 1960).

[3] Quentin Hardy, “Working the Land and the Data,” New York Times, November 30, 2014, ;  Chris Anderson, “Agricultural Drone Relatively cheap drones advanced sensors and imaging capabilities are farmers new ways to increase yields and reduce crop damage,” MIT Technology Review; John Vidal, “Hi-tech agriculture is freeing the farmer from his fields,” Guardian, October 20, 2015; Clay Dillow, “Why 2015 is the year agriculture drones take off,” Fortune, May 18, 2015.

[4] Time McDonnell, “Monsanto Is Using Big Data to Take Over the World,Mother Jones, November 19, 2014 ; “Digitization: The Next Revolution in Agriculture,” Monsanto blog; “Digital Disruption on the farm,” Economist, May 24, 2014.

[5] Bruce Upbin, “Monsanto Buys Climate Corp For $930 Million,” Forbes, October 2, 2013.

[6] See Schiller & Yeo (forthcoming), Re-Absorbing Science and Engineering Into Digital Capitalism In The Routledge Handbook of the Political Economy of Science edited by David Tyfield, Rebecca Lave, Samuel Randalls, and Charles Thorpe.

[7] Michal Lev-Ram, “What John Deere is Doing to Fight Slumping Sales,” Fortune, November 15, 2015.

[8] Bob Tita, “Deere Profit Falls as Equipment Sales Drop,” Wall Street Journal, May 22, 2015.

[9]  Bernard Marr, “From Farming to Big Data,” Data Science Central, May 7, 2015.

[10] Bernard Marr, “From Farming to Big Data: The Amazing Story of John Deere,” Data Science Central, May 7, 2015; John Deere, Agriculture Technology Solutions.

[11] Katherine Noyes, “Cropping up on every farm: Big data technology,” Fortune, May 20, 2014; James Correa, “John Deere: Growing and Harvesting Value,” Open Forum, April 15, 2015.

[12] Michal Lev-Ram, “What John Deere is doing to fight slumping sale,” Forbes, November 15, 2015.

[13] Bob TiTta, “Deere Profit Falls as Equipment Sales Drop,” Wall Street Journal, May 22, 2015; https://digit.hbs.org/submission/big-data-in-big-agribusiness-monsanto-monopolizes-americas-farms/.

[14] Jane Slusark, “DuPont Pioneer and John Deere Offer Next Level of Decision Services to Growers,” Investor News, November 8,  2013. ; “DuPont Pioneer Launches Pioneer Field360 Select Software.”

[15] Federico Guerrini, “The Future Of Agriculture? Smart Farming,” Forbes, Feb 18, 2015; Laruen Helper, “Bosch and Flex Planting an ‘Internet of Soil’” Huffington Post, May 6, 2016; Carey Gillam, “DuPont, with Deere & Co, to roll out precision farming program,” Reuters, November 8, 2013.

[16] Jessica Davis, “IBM Layoffs Hit Canada, Europe, Australia; US Likely Next,” Information Week, April 4, 2016.

[17] David Kariuki, “The Internet of Things: Making Smart Farms in Africa,” Cleanleap, January 15, 2016.

[18] Katie Fehrenbacher, “Farming data continues to be hot in Silicon Valley,” Fortune, May 19, 2015.

[19] Josh Constine, “Eric Schmidt’s Farm2050 Collective Will Back Agriculture Tech To Feed Earth’s Growing Population,” Techcrunch, November 20, 2014,

[20] Jacob Bunge, “Google Ventures Invests in Agricultural Technology Startup,” Wall Street Journal, May 19, 2015.

[21]What You Need to Know About Climate Smart Agriculture and Why It Matters,” Feed the Future, July 29, 2015; “Aiding Africa Through Climate-Smart Farming,” Voice Of America, Auguest 28, 2014.

[22]5 Latin American Campesino Movements You Really Need to Know,” Telesur, April 16, 2016; Eric Holt-Giménez, “Scaling up sustainable agriculture – Lessons from the Campesino a Campesino movement,” agriCultures Network, January 13, 2015.

[23] ibid.

[24] Mamadou Goïta, “Food sovereignty in Africa: The people’s alternative”, Pambazuka News, July 13, 2010.

[25]500,000 Petitioners Demand EPA End Glyphosate,” Beyond Pesticides, May 5, 2016.

[26]2016: Three Months of Non-Stop Farmer Protests Across India,” The Citizen, April 3, 2016.

Billionaires who owe their wealth to information

Bloomberg has recently released a list of the world’s 200 wealthiest people based on their net worth. From Boomberg’s list, IO collated the billionaires who have accumulated their wealth from information and communication – “Telecommunications, Media and Technology,” or “TMT,” as this sector is called in the world of finance of which it’s such a big part. The TMT industries supply a hefty proportion of billionaires.

In the listing, individuals whose wealth stems from companies based in TMT accounted for no less than 46 of the top 200 – including numbers 1, 4, 5, 8, 10, 11, 12 and 15 on the list.  The one percent is top-heavy with TMT, as we might expect in our era of rampaging digital capitalism.

Technology outstrips both Media and Telecommunications. Not only are 31 of the 46 members of this elite ranking from Tech; but Tech also accounts for a greater share of overall TMT wealth: some $600 billion out of an estimated total of around $765 billion.  We know some of these men – there are only three women on the list – by the fawning publicity that they are routinely accorded: Bill Gates, Jeff Bezos, Mark Zuckerberg, Larry Page. In an afternoon, they may lose or gain hundreds of millions of dollars in net worth, exceptionally even more.[1]  Extending a trend first clarified by Leo Lowenthal in 1944, these men are accorded the status of heroes – idols.[2]

It’s also significant that nearly three-quarters of the reigning titans of information and communications are domiciled in two countries.  More than half – 25 of the 46 (if we count both Elon Musk and Rupert Murdoch as Americans) – are US inhabitants.  Another nine are from China.  After this, a limited diversity presents itself: Three are from Japan; two from India; two from France; and one each from Mexico, the Republic of Korea, Germany, Canada, and Italy.

Wherever they may live, these are the capitalists who occupy the citadels of power.  For this reason, it’s worth knowing their names.  After all, we know the names of the eighteen countries whose Gross Domestic Product exceeds the $765 billion possessed by these 46 billionaires.[3]

[1] Tom Metcalf, “Bezos Tops Slim With a $6 Billion Gain on Amazon Results,” Bloomberg, April 29, 2016.

[2] Leo Lowenthal, “The Triumph of Mass Idols,” Literature, Popular Culture, and Society (New York: Prentice-Hall, 1961).

[3] List of countries by GDP (nominal)

Name Net Worth (Billion) Sector Rank
Bill Gates $84.20 Technology 1
Jeff Bezos $58.10 Technology 4
Carlos Slim $55.50 Telecom 5
Mark Zuckerberg $50.80 Technology 8
Larry Ellison $42.70 Technology 10
Larry Page $36.90 Technology 11
Seregey Brin $36.20 Technology 12
Jack Ma $33.10 Technology 15
Steve Ballmer $22.00 Technology 30
Pony Ma $19.80 Technology 35
Michael Dell $17.60 Technology 41
Paul Allen $17.60 Technology 42
Laurene Powell Jobs $17.50 Media 43
Charlie Ergen $15.10 Media 54
Azim Premji $14.60 Technology 57
Robin LI $14.10 Technology 63
Rupert Murdoch $12.00 Media 76
KunHee Lee $12.00 Technology 78
Dustin Moskovitz $11.50 Technology 86
Shiv Nadar $10.80 Technology 97
Masayoshi Son $10.70 Telecom 99
Elon R Musk $10.60 Technology 101
Phil Anschutz $10.50 Telecom 103
Si Newhouse $10.50 Media 105
Hasso Plattne $9.90 Technology 114
Eric Schmidt $9.90 Technology 115
Takemitsu Takizak $9.80 Technology 116
Donald Newhouse $9.50 Media 119
Jan Kou $9.30 Technology 123
Yeung Kin-Man $8.80 Technology 130
Jim Goodnight $8.80 Technology 131
William Ding $8.40 Technology 140
John Malone $8.10 Media 145
Blair Parry-Okeden $8.10 Media 146
Jim Kennedy $8.10 Media 147
Patrick Drahi $8.00 Telecom 149
Xavier Niel $7.60 Technology 161
Silvio Berlusconi $7.50 Media 167
Richard Liu $7.40 Technology 168
Lei Jun $7.20 Technology 174
Pierre Omidyar $7.10 Technology 177
Zhang Zhidong $7.10 Technology 181
Sherry Brydson $7.00 Telecom 182
Hiroshi Mikitani $6.60 Technology 192
Zhou Qunfei $6.60 Technology 195
David Geffen $6.50 Media 198

Source: Bloomberg

 

 

 

 

Strike

After nine months of frustrated bargaining, 39,000 workers from Virginia to Massachusetts called a strike against Verizon on 13 April. Represented by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW), these telecom workers are pushing back. Their goal is to preserve job quality and security. They want to prevent further off-shoring and out-sourcing of jobs and additional call-center closures; and they want to make Verizon stop transferring technicians to work sites far from home, for up to two months at a stretch.[1] The walkout is about preserving the kinds of high-pay, high-skill jobs that used to be held by millions of working-class Americans.

This is the biggest U.S. strike in five years – in fact, since CWA last took action in 2011.  This is telling, because it shows that the telecommunications sector remains a bastion of organized labor’s strength – in a country where just 6.7% of the private sector is unionized.[2] Right away, despite the company’s use of ten thousand non-union Verizon employees as scabs,[3] the strike began to slow new installations of Internet and television service.[4] If the past is a guide, soon it will hit at corporate users’ more complex and sensitive telecom needs.

However, labor’s strength is concentrated on just one side of the networking industry: CWA and IBEW represent workers in Verizon’s wireline business.  Services delivered over copper wires and optical fibers accounted for just three-tenths of the company’s revenue and a mere 7 percent of its operating income in 2015.[5]  In the face of mounting competitive pressures in its wireline business,[6] furthermore, Verizon is revising its profit strategy.  On one hand, it has invested a couple of hundred billion dollars in wireless systems and in what it calls FiOS – a bundled service of internet, telephone and television run over a fiber-optic communications network built and maintained by unionized workers.  On the other, hoping both to increase the profitability of this gargantuan network investment and to steal a march on new “over-the-top” competitors such as Netflix, Verizon has been purchasing digital content and advertising services,[7] and selectively pruning its wireline assets.  Last year, notably, it sold its copper-wire and FiOS West networks to Frontier Communications despite heavy opposition from telecom workers, who demanded unsuccessfully that the Federal Communications Commission block the deal.[8]

The proceeds from this sale to Frontier helped Verizon to pay for additional spectrum with which to expand its wireless services.[9] The company’s 112 million wireless subscribers account for the majority of its outsized profits – not surprisingly, given that the wages and benefits drawn by its wireless workers are lower than those of their peers in its wireline segment.

This disparate working environment, as CWA posted on its website, results from the fact that “Collective bargaining rights and the right to organize have been under corporate assault for three decades”[10] – and telecommunications workers have been directly in the line of fire.  As recently as 2005, Verizon’s workers were nearly 70 percent unionized; today it’s about 27 percent.[11] Verizon was only able to introduce and expand mobile systems and services as a union-free zone, however, because of pro-corporate government policy changes. Market liberalization and deregulation were, as we’ve explained in a previous post, code words under which to attack working-class living standards and self-organization in telecommunications.

This, finally, is why the high-level political attention drawn by the Verizon strike is important.  Both Bernie Sanders and Hillary Clinton (probably reluctantly) have offered words of support to the strikers; Sanders marched with the CWA members whose union had endorsed his candidacy.[12] It’s too soon to suggest that the political pendulum may begin to swing in a different direction.  However, the Verizon strike adds momentum to a gathering trend.  The Chicago Teachers’ Union is standing up, both to the city’s mayor and the state’s terroristic governor,[12] while movements are building nationwide to organize fast-food and Wal-mart employees and to introduce a higher minimum wage.  Change is in the air.

[1] Standing Up to Verizon’s War on Unions, Socialist Project • E-Bulletin No. 1250, April 22, 2016

[2] Bureau of Labor Statistics, Union Members 2015

[3] Ryan Knutson, “Verizon Turns To Shadow Workforce Amid Strike,” Wall Street Journal, April 19, 2016

[4] Reuters, “The Verizon Strike Is Already Hitting New Customer Installations,” Fortune, April 15, 2016

[5] Noam Scheiber and Brian X. Chen, “In Verizon Strike, Blue-Collar Stress Hits Sidewalks,” New York Times, April 14, 2016

[6] The Lex Column, “Verizon: Cutting the Cords,” Financial Times,  April 19, 2016

[7] Hassan Ali, “Verizon Communications Inc and Hearst To Jointly Acquire Complex Media,” Bidness, April 19, 2016.

[8] Andrew Stewart, The Verizon Standoff and the Future of Labor, Communication and Privacy, counterpunch, September 15, 2015; “CWA, IBEW Protest Proposed Verizon-Frontier Communications Deal,” Maritime Trade Department, AFL-CIO, April 10, 2010

[9] Kevin Rizzo, “What’s Going on with the Verizon Strike?” Law Street, April 16, 2016

[10]Collective Bargaining,” Communications Workers

[11] Mackenzie Baris, “Five Reasons to care about the Verizon Strike,” Jobs with Justice, April 11, 2016

[12] Mike Snider, “Sanders, Verizon Spar Over Striking Workers,” USA Today, April 15, 2016 ; Sean O’Kane, “Verizon Workers Take Over Mid-Town Manhattan in the Second Week of Their Strike,” The Verge, April 18, 2016

[13] Juan Perez, Jr., Monique Garcia, and Celeste Bott, “CTU’s Lewis Calls Rauner ‘the new ISIS recruit,’” Chicago Tribune, April 21, 2016

Now it is official

Last November, we wrote on how US tech firms with support from the US government, were moving into Cuba, occupying the country’s information sector ahead of any political détente with the US and threatening Cuba’s national sovereignty.[1] This week, US President Barack Obama made a three-day state visit to Cuba, the first US president to visit since President Calvin Coolidge in 1928.  On this “historic trip,” the US president didn’t go alone. Along with his family, Obama was accompanied by a phalanx of executives from US firms including Google, Xerox, Airbnb, Priceline Group, PayPal, Xerox, Stripe, and Kiva[2] – as well as nearly 40 members of Congress.[3]

Obama’s visit of course was not a spontaneous occurrence but, rather, a result of long  preparations by the US government and US industries, whose shared aim is to reintegrate Cuba into the US-led global capitalist economy.  Predictably, the president deployed the language of “universal human rights” and “democracy” in his address to the Cuban people[4]; however, the U.S. president actually was there to green-light US capital’s self-interested program.

The U.S. strategy, it is evident, is to exploit the promise of modernizing Cuba’s information and communication infrastructure, in order to re-annex chunks of the country’s economy.  Under the pretence of freeing the flow of information (obligingly symbolized by the superficially defiant Rolling Stones) it is actually U.S. capital that is to be set free, to work its will upon a small country that has stood up against the full measure of US power since 1959.  Obama sought to entice the Cuban people by stating that, “The Internet should be available across the island so that Cubans can connect to the wider world and to one of the greatest engines of growth in human history.”[5]  In reality, these are at most secondary considerations:  Obama was fronting for US business interests.  The US President thus brazenly announced that “Google has a deal to start setting up more WiFi and broadband access on the island.”[6] In actuality, Google is doing more than this; the search giant also is establishing a technology center equipped with glittering new capabilities, where Cubans will be able to gain access to the “free” Internet. Obama thus offered a tantalizing taste of a modernized high-tech US capitalism, hoping that this may go down better than military force ever did to bring Cuba back into the US orbit.

Assuredly, further flashpoints of conflict will need to be addressed.  The US Congress has not given any sign of curtailing the economic blockade of Cuba that was imposed in 1962.  On the other hand, the Cuban government has insisted on an end to the US occupation of Guantanamo – a transgression on national sovereignty that has persisted since the “Spanish”-American War.  We may hope that Cuba’s leaders still possess sufficient bargaining strength to put in place safeguards and restraints against this new attempt at what, in an earlier manifestation, was called “coca-colonization.”

[1] Dan Schiller and ShinJoung Yeo, “Uncharted Territory: Cuba’s information sovereignty & US digital capital,” Information Observatory, November 19, 2015.

[2] Todd Weiss, “More U.S. Companies Line Up to Seek Sales in Cuba After Obama’s Visit,” eWeek, March 23, 2016

[3]An American Invasion,” Economist, March 26, 2016

[4] “Remarks by President Obama to the People of Cuba,” Office of the Press Secretary, March 22, 2016.

[5] ibid.

[6]Google set to expand Wifi, broadband access in Cuba, Obama tells ABC,” Reuter, March 21, 2016

 

Apple’s Public Battle

Apple is in the spotlight for having kicked off a battle against the Federal Bureau of Investigation (FBI), after the FBI demanded that Apple unlock the encrypted iPhone belonging to San Bernardino, California shooter Syed Rizwan Farook. An encrypted iPhone means that nobody is supposed to be able to have access to the data on the device – including contacts, photos, emails etc. – unless the passcode is entered. The FBI is using a 227-year-old law, the All Writs Act of 1789, as legal justification for its request. By refusing the FBI’s demand that it make available a backdoor to get around its encryption, Apple’s CEO Tim Cook picked up the torch for privacy rights. Tech industry executives and privacy advocates rallied behind him; and the U.N. High Commissioner for Human Rights, Zeid Ra’ad Al Hussein, declared that Apple should be supported for acting as a beacon for privacy and freedom of expression.[1] The case then escalated further as the FBI’s parent agency, the US Justice Department, considered whether to bring a court case against the encryption used by Facebook’s WhatsApp – the world’s largest mobile messaging service.[2]

Is the tech industry’s stand a crusade based on political principle – a relinquishment of commercial self-interest by companies that are fired with public purpose?  How may we untangle the economic and political elements that are being expressed in this legal drama?[3]

Market-Driven Privacy Right

“At Apple, your trust means everything to us,”[4] proclaims the company in its privacy statement.  By showcasing that its products are secure from government’s hands, Apple has all but stolen the motto of one of its foremost rivals: “Don’t Be Evil.”  And in fact, through the FBI case, Tim Cook is attempting to differentiate Apple’s business model from that of Google and other competitors. On several occasions, Cook has reiterated that “our business model is very straightforward: We sell great products. We don’t build a profile based on your email content or web browsing habits to sell to advertisers.”[5] While he didn’t name-check Google, his statement was unmistakably aimed at the king of search, whose business is to sell ads predicated on user data.

Google, for its part, requires full encryption for Android phones and promotes end-to-end encryption in Gmail, ads platforms and other products; and Google also retains access to copious quantities of user data to exploit for its profit making.[6] Vint Cerf, Google’s Chief Internet Evangelist, confessed that:

We couldn’t run our system if everything in it were encrypted because then we wouldn’t know which ads to show you. So this is a system that was designed around a particular business model.[7]

Yet Google, like Microsoft and several other big tech companies, had little choice after Apple took on the FBI but to join Apple’s side.[8]  Though they are exposed, because the rely so heavily on user data, the risk of appearing to be a stooge of the US government was too great.

Cook tries to emphasize that, because Apple generates a majority of its profits by selling devices, not selling ads like Google, its economic interests align the company with privacy rights. This is, however, a convenient fiction. Apple not only collects lots of personal data through its App Store, but also has acquired Twitter’s fire hose of tweets to gain commercial access to particular types of behavior- and language data. Apple also has experimented with building its own ad-based businesses, attempting to figure out ways to tap into the gigantic and lucrative ads market. It was only after a five-year effort to monetize apps and challenge Google on the mobile ads front that Apple abandoned this business.

This said, it is in Apple’s commercial self-interest to proclaim its support for privacy rights. In 2014, Apple generated more than $130 billion from the sale of its iPhones and iPads, compared to $11.8 billion for Google’s mobile search revenue during the same year. In light of this, Apple’s strategy was refocused. For both offensive and defensive purposes, it began to promote ads-blocking apps on its devices.[9] Well before the current face-off, in other words, Apple began to sell privacy as a marketing feature – exactly as the US Government has recently charged.[10] Privacy is a business strategy rather than a political principle.

That Apple is not in fact acceding to principle is evident from developments touching a different corner of its global business. At the same time that it is loudly challenging the US government, Apple is willing to dance around to please the Chinese state by agreeing to comply with government security checks on all Apple products sold in China.[11] In 2014, after being criticized for iPhone’s national security risk by the Chinese media, likewise, Apple moved its Chinese consumer data to a Chinese facility operated by state-run China Telecom.[12] But the Apple-FBI drama possesses ramifications that go beyond all of this.

Read more

What is CFIUS?

Comes now, the news that Tsinghua, a Chinese tech company, has abandoned its $3.8 billion plan to become the largest shareholder in the U.S. data storage group, Western Digital.[1] Two months into 2016, this marks already the second time this year that a planned Chinese investment in a tech company has collapsed.[2]  In both cases, the precipitant has been the threat of action by the Committee on Foreign Investment in the United States (CFIUS).[3]

CFIUS, created by an Executive Order issued by President Ford in 1975, operates, according to a legislative report, “in relative obscurity.”[4]  Yet it is charged with a vital purpose:  to review transactions that might confer control of an existing company by a foreign interest – purportedly, to determine the prospective effect of such deals “on the national security of the United States.”[5] CFIUS was initially established in response to concern about increasing investment in American portfolio assets (Treasury securities, corporate stocks and bonds) by the Organization of Petroleum Exporting Countries (OPEC) countries.[6]

Chaired by a representative of the US Treasury and based in that Department, CFIUS is composed entirely of delegates selected from the Executive Branch.[7] It operates within the military-corporate nexus. The U.S. Department of Treasury states that “if CFIUS finds that a covered transaction presents national security risks and that other provisions of law do not provide adequate authority to address the risks, then CFIUS may enter into an agreement with, or impose conditions on, parties to mitigate such risks or may refer the case to the President for action.”[8] The mere threat of a CFIUS review often has been sufficient to put an end to an intended investment.

Which are the criteria that CFIUS relies upon to render its determinations?  What sorts of documentation does it deem to be dispositive? Does it adhere to due process procedures and norms of democratic accountability?  What conception of “security” does it follow? [9]   Why, in short, does CFIUS exist?  In the absence of answers to these basic questions, we are forced to rely on accessible documentation.

CFIUS is obligated to report to Congress annually.  However, full discussion of its activities remains secret:  only redacted versions are available to the public, and these are substantially belated.  From its most recent report, filed in 2015[10] but detailing its activities between 2009 and 2013, we glean that companies filed 480 notices of transactions that CFIUS determined were covered by its mandate. Among these, CFIUS investigated forty percent of the deals that entered its system – 193 transactions.  Its targets came from a range of industries.  More than one-third of them involved manufacturing; and an additional one-third covered companies based in finance, information, or services.  The computer and electronics subsector made up the largest portion of manufacturing notices; and the bulk of finance, information and services notices (over two-thirds of them) originated in professional, scientific and technical services – notably, computer system design; telecommunications; publishing; and data processing.  Acquisitions by investors from China accounted for the largest single share of CFIUS notices – though its attention was also drawn to transactions involving investors based in Britain, Japan, France, Canada, and Germany. Telecommunications, software, and technology transactions were among those sectors for which CFIUS’s review resulted in legally binding mitigation measures in 2013.[11]

What may we conclude?  Demonstrably, CFIUS is a major U.S. policymaker – meriting far more critical scrutiny than it has obtained.  Equally certain, CFIUS has granted a high priority to deal-making within the international information industry.  As those who keep up with the Information Observatory will recognize, information constitutes a rare growth pole in today’s depressed world economy; and CFIUS’s job has seemingly come to involve an effort to ensure that U.S. business interests retain a pole position with respect to this industry within the U.S. market.  No less evident, finally, CFIUS has been targeting China.  Going forward, the global contest to appropriate profits from information is all but certain to involve China more and more – and, again, CFIUS intends that the U.S. should retain its advantages.  CFIUS actually has played a significant background role in US tech policy for years.  The Internet equipment maker Huawei’s repeated unsuccessful attempts to penetrate the US market for network gear testify to its effectiveness.

A Committee on U.S. Foreign Investment, that is, on U.S. companies’ own deal-making outside the United States, might possess much greater relevance for the actual security of the U.S. populace than CFIUS. Under present political circumstances, of course, the establishment of such an agency seems unthinkable.  Circumstances, however, may change.

[1] Arash Massoudi, James Fontanella-Khan and Shawn Donnan, “Tsingua Pulls Western Digital Deal over US Scrutiny Fears,” Financial Times,  February 24, 2016.

[2]  See Don Weinland, Arash Massoudi and James Fontanella-Khan, “China deals collapse amid regulatory fears,” Financial Times, February 17, 2016,

[3] See James K. Jackson, The Committee on Foreign Investment in the United States (CIFUS), Congressional Research Services, February 19, 2016.

[4] Ibid.

[5] U.S. Department of the Treasury, “The Committee on Foreign Investment in the United States (CFIUS).”

[6] Jackson, “The Committee on Foreign Investment.”

[7] Consists of nine members: the Secretaries of State, Treasury, Defense, Homeland Security, Commerce, and Energy, the Attorney General, the United States Trade Representative, and the Director of the Office of Science and Technology Policy.

[8] Treasury Department, “Process Overview.”

[9] According to one legal scholar, “Neither the statute nor the implementing regulations provide a definition of “national security,” but they do contain a non-exhaustive list of factors that may be considered when determining whether a threat to national security exists. These factors include domestic production needed for projected national defense requirements, the capability and capacity of domestic industries to meet national defense requirements, the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the United States to meet national security requirements, the potential effects of an acquisition on sales of military goods, equipment, or technology to countries supporting terrorism or raising proliferation concerns, and the potential effects on U.S. technological leadership in areas affecting national security.”  See George Stephanov Georgiev, “The Reformed CFIUS Regulatory Framework: Mediating Between Continued Openness to Foreign Investment and National Security,” Yale Journal on Regulation (25), 2008: 127-28.

[10] Committee on Foreign Investment in the United States, “Foreign Investment in the United States: Annual Report to Congress,” Issued February 2015.

[11] Ibid.