Author: Observatory Admin

Big data may increase power disparity

Professor Dan Schiller was invited to deliver several lectures at the Global Fellowship Progam at Peking University October/November, 2016. Below is his interview on “big data” with Wang Jianfeng from Chinese Social Sciences Today (CSST) after his lectures. This interview was originally published in Chinese Social Sciences Today (CSST) on January 19, 2017.

Wang Jianfeng: How do you evaluate the trend toward what is called Big Data?

Dan Schiller: Big Data refers not just to the scale or volume and diversity of data that are now being created but also to the need to make sense of these data through data science, through network analysis, and through other specialized disciplines that are trying to grapple with this challenge. One problem is that this often accords a new priority to an old emphasis, which is empiricist. Anything can be data, so let’s just look for patterns. We don’t care if they amount to anything meaningful. Let’s just see what seems to be related to what. There is, however, a deeper issue. An instrumental purpose is typically encoded in the accumulation and subsequent analysis of Big Data.

Thus, we have a problem because we need to know whose instrumental purpose it is and what goals it serves. If the goal of Big Data is to preserve the fishing grounds of the people who have been fishing in some part of the ocean, maybe that is ok because maybe it can be used beyond that to preserve the fish as well as the fishermen. If, however, the goal of collecting and analyzing Big Data is to extract profit from any area of human interaction, direct or mediated by machines, then I am not so sure. Actually, I am sure: It is wrong. Because then Big Data is organized around the instrumental purpose of profit maximization, which is not only exploitative but also often carries what economists call externalities. It may have all kinds of other effects beyond the immediate goal of profit‐ making, but nobody pays for these—except the rest of us. Disease, environmental despoliation and inequality are primary examples.

So how do we build the system of organizing Big Data if we need Big Data? And I am not sure we do need Big Data, because much of the data collection that is happening should not be occurring. We need a process of what in Europe and Canada they call data protection. I am not sure that is the right term, but I am sure that we need a policy or a structure of decision‐making for data collection, as well as for data analysis.

And this poses wholly new problems of political organization. Who should be making the policy, and on what grounds? Big Data thus poses profound questions. Because on the one hand, it gives new power to the units of big capital that are learning to exploit it for profit‐ making, while, on the other hand, it takes away power from everybody else, often without anyone knowing what, specifically, is happening. So we have a really big problem of balance—a power disparity—and, looking ahead, of a need for political creativity.

The issue is partly about education. People know now that when they go online, they are giving up their data. They know that, but they don’t realize that when they turn on their washing machine, or when they open their refrigerator, or when they take a shower, or when they go to bed, they are giving data. We need a forum for the discussion and decision‐making about which data ought to be generated and collected, by whom and for what reasons. Until we have that, we don’t have an answer to the problem of Big Data.

Wang Jianfeng: Now that information is regarded as a commodity, could overcapacity in the informtion industry take place? Do we have too much information?

Dan Schiller: We have too much of the wrong information and not enough of the right information. So there continues to be a desperate need for more information on the environment, more information on workers’ safety and occupational disease, more information on epidemiology and public health, more information on the social conditions of working people and the inequalities that prevail across society. We don’t have enough information on any of these, and where we do already possess the information, it isn’t widely circulated. There is indeed a huge information deficit.

However, in some contexts, there is also too much information. There is too much information being extracted from the everyday interactions that people have as they use technology that is embedded not just in smartphones and tablets and computers, but in the Internet of Things. So I think the question needs to be reframed in terms of what information we need and what information we get.

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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.

Cause for celebration on the 20th anniversary of the Telecom Act?

This week marks the 20th anniversary of the U.S. Telecommunications Act of 1996.  Celebrations have been sighted in and around Washington, D.C.[1]

Helpful clarification of the substance of the Telecommunications Act of 1996 was provided by Patricia Aufderheide in 1999.[2]  Ostensibly passed to support and strengthen market forces in networking, and signed into law at the height of the competition fever that had gripped the citadels of American power, the legislation was part of a more encompassing structural transition.  The early 1990s, when about ten giant local- and long distance carriers ruled U.S. networking, turned out to be the last gasp of a tightly bounded industrial giantism.  This circumscribed mode of ownership and control was, however, now rapidly supplanted. A much wider range of participants together constituted the giantism that followed:  proprietary intranets, operated by big companies based in every economic sector; content delivery networks, operated by the likes of Amazon, Google, Facebook, and Microsoft; and a scattering of huge backbone Internet providers.  One might say that capitalism in communications had been opened to capital at large.
foot fetish
There is little cause for celebration about this, as a quick review of the events occurring this week makes plain. Lawyers, engineers, executives and policy wonks:  these were the chief participants. Ordinary folk are as removed from these lackluster events as they were from the legislation itself.  On the dreary occasion of Congress’s vote on Public Law 104-104, if memory serves, the only praiseworthy statement came from Congressman John Conyers, a trenchant opponent.  Notable was the exceptionally strong bipartisan backing for the measure; and this was attributable to the extensive support that it gained from corporate America.  Less interesting was the parade of self-congratulatory speeches that ensued, in which legislators, lobbyists, and academic parrots declaimed on the virtues of competition.  Gas-baggery ruled.

Today’s party-ers are cast from the same mold.  They don’t seem to include many working people, let alone any trade unionists.  That’s not accidental:  these are the people whose interests were further marginalized by the Telecom Act of 1996. However, the revolving door between industry and government is spinning as fast as ever, as regulators and lobbyists exchange places.  The Center for Responsive Politics lists literally dozens of individuals who have moved between the Federal Communications Commission (FCC) and industry.[3

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U.S. Dominance Over International Communications: A Status Report

Two stories jump out this week. One concerns the Internet’s coordinating mechanism, the other the pact that enables European data to be sent to the United States.  Seemingly discrete, at a deeper level they are organically connected. The underlying issue is whether challenges to U.S. power over the system of international communications will intensify – or be shunted aside.

We have written before about the “Safe Harbor” agreement, which had governed data- transfers between Europe and the U.S. and which was struck down by the European Court of Justice three months ago because it did not offer sufficient guarantees that Europeans’ personal data were protected from eavesdropping by U.S. intelligence agencies.  Would a new pact be devised, incorporating Europeans’ demands to strengthen privacy protections? What kinds of guarantees would be supplied?

An answer is now at hand. Although the prescribed negotiating deadline passed without agreement, two days late a deal was announced.[1] The US firms escaped the obligation to store their data in European lands; while, a new “EU-US Privacy Shield,” the European Commission declared, “will provide stronger obligations on companies in the U.S. to protect the personal data of Europeans.” U.S. companies wishing to import personal data from Europe “will need to commit to robust obligations on how personal data is processed and individual rights are guaranteed.” The U.S. Department of Commerce will monitor that companies publish their commitments, which makes them enforceable under U.S. law by the US Federal Trade Commission. In addition, “any company handling human resources data from Europe has to commit to comply with decisions by European Data Protection Administrations.” E.U. citizens will have access to an ombudsman located in the United States. And, “for the first time, the US has given the EU written assurances that the access of public authorities for law enforcement and national security will be subject to clear limitations, safeguards and oversight mechanisms. These exceptions must be used only to the extent necessary and proportionate. The U.S. has ruled out indiscriminate mass surveillance on the personal data transferred to the US under the new arrangement.”[2]

We will need to see during the months ahead just what level of protection the “Privacy Shield” actually offers. What’s interesting, though, is that considerable effort needed to be expended to reach even such a seemingly minimal agreement as this.  Intense negotiations were conducted at the World Economic Forum in Davos, involving both governmental functionaries and trade groups. Satya Nadella, the CEO of Microsoft, editorialized that the Safe Harbor agreement – with its guarantee that corporations may transmit personal data from jurisdiction to jurisdiction – must be supplemented with “additional agreements, that enable privacy rights to follow data around the world.”[3]  Google, by appointing as head of its global policy unit a onetime Obama Administration negotiator known for her calm, conciliatory style, reportedly was “burying its confrontational stance” in favor of more moderate international diplomacy.[4]  Facebook publicized a report that it had commissioned, to emphasize disingenuously that the U.S. had actually become more “privacy friendly” than Europe.[5]  Transatlantic data flows are simply too important to be left to the lower echelons.

Still, the data-hogging transnationals are not yet in the clear.  Europe’s national privacy regulators are slated to release their own decision tomorrow, February 3d, on how data should be moved between the two regions. And a clamor that the EC had sold out 500 million Europeans is already audible. It is possible that some nations’ data protection authorities will prove more vigilant than their colleagues in the Commission.  Thousands of U.S. companies, rooted in every sector, will be watching – eagle-eyed, we might say. No matter which way tomorrow’s decision goes, transborder data flows will still continue to constitute a crucial point of vulnerability for corporate capital.

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Free Markets In Action

Even when it isn’t election season in the United States, there’s a lot of noise made about “the free market” and “entrepreneurialism.”  Government, goes the refrain, simply needs to stand back to let the alchemy of capitalism proceed.  Already, the new year has disclosed two small but revealing news items that clarify the actual – contrary – reality.

The first concerns driverless cars.  Much ballyhooed, the major story has been whether the transition to software-powered vehicles will be shepherded by the big automakers – or by Silicon Valley.  The news peg, as we all have learned, is “disruption”: the competitive market in action.

Not so fast.  Consider recent disclosures that the U.S. Government will “expedite regulatory guidelines for autonomous vehicles and invest in research to help bring them to market.” The Obama Administration, it turns out, has pledged no less than $4 billion in its proposed budget for the next fiscal year, “to fund research projects and infrastructure improvements tied to driverless cars.”[i]  The relationship between government regulators and corporate carmakers is aptly described as “cooperative” – including with regard to vehicle safety as the National Highway Traffic Safety Administration (NHTSA) is ready to exempt carmakers from safety standards.[ii] Are driverless cars the answer to the environmental despoliation caused by automobiles?  An open-ended and inclusive public deliberation could give us the answer.  We won’t get it.  The objective of the Obama budget item is already taken for granted:  “to accelerate the acceptance of driverless cars on U.S. roads.”[iii]

Four billion dollars isn’t what it was; still, it’s a sum that would suffice to fund a lot of college scholarships for students from poor families – 49 million people are struggling to have enough food to eat in the US according to a report from the U.S. Department of Agriculture.[iv] But the government trough remains full, instead, for the big units of corporate capital – the ones whose executives so often pontificate about free markets and the evils of big-government.

Here’s another tidbit that imparts a comparable lesson.  It turns out that billionaire Michael Dell – of the eponymous PC company – has drawn on his investment fund to purchase a dozen or so mostly small U.S. television stations since 2011. Is Dell’s purpose to enter the broadcast market, and to innovate in ways that lead to further profitable success?  Not exactly.  His investment is based on his knowledge that the airwaves – the electromagnetic frequencies – used by these small broadcasters are going to be auctioned by the U.S. Federal Communications Commission later this year – bought, and then resold to big wireless operators like AT&T.

Dell acquired this whole lot of TV station frequencies for $80 million; he might be able to resell them to the government for as much as several billion dollars.  The several stations he acquired in Pittsburgh, for example, might garner as much as $1.47 billion; the $8 million he spent on KTLN in San Rafael California might win him as much as $370.5 million from the FCC.  And, the Wall Street Journal imparts, Dell “isn’t the only spectrum speculator.”  As might be predicted, likeminded predators hail from what is euphemistically referred to as the investor community: Fortress Investment Group and the infamous Blackstone Group in particular.[v]

Why couldn’t the airwaves simply be reclaimed by the government – what we so often term “our” government?  After all, despite storms of popular protest, they were preferentially allocated to commercial broadcasters without charge.[vi]  A fair reimbursement would be Dell’s purchase price for each station. This option, however, is not deemed worthy of discussion in mainstream policy discourse. Also off-limits is that the natural resource on which broadcasting, mobile telecommunications, and satellites each depend, the electromagnetic spectrum, is being transformed into a proprietary good rather than a public resource.  Is this its best use?

Often, inequality is characterized as a condition that is inexorable.  Some are rich, some are poor:  it’s always been so.  In fact, inequality is continually extended and enlarged via routine political-economic mechanisms.  The state plays an essential role in this larger process.  In communications and information, the state endows companies with franchises and rights of way, allocates spectrum, makes supportive R&D expenditures, and contracts for services with private providers.  Boondoggling and corruption of course are regular features.  This, however, should not obscure the fundamental structural reality:  Capital needs the state, no matter how often individual capitalists may protest its supposed incursions.  That’s the lesson of these two stories – the beat goes on.

[i] Bill Vlasic, “Administration Proposes Effort on Driverless Cars,” New York Times, January 15, 2016

[ii] Allisa Walker, “Everything You Need to Know About Obama’s Autonomous Car Plan,” Gizmodo, January 21, 2016..

[iii] Mike Spector and Mike Ramsey, “U.S. Wants to Steer More Driverless Cars,” Wall Street Journal, January 15,  2016.

[iv] US Department of Agriculture Economic Services, “Food Security Status of U.S. Households in 2014.

[v] Thomas Gryta and Kate Linebaugh, “Computer Mogul Michael Dell Stand to reap Billions from FCC Auction ,” Wall Street Journal, January 19, 2016.

[vi] Robert W. McChesney, Telecommunications, Mass Media, and Democracy: The Battle for the Control of U.S. Broadcasting, 1928-1935.  New York: Oxford University Press, 1993.

Low-Wage Workers & the Internet Industry

What are the overall impacts of tech companies on occupational structures, employment patterns, and labor practices? This question is large, complicated, and vital.[1]

To engage it, a meaningful starting-point pertains to low-wage workers. As well-compensated engineers and entrepreneurs have been raised up as the Internet industry’s public face, low-wage workers have become a mere afterthought. The very terms that analysts use to characterize this category of workers suffer from ambiguity and imprecision: “flexible,” “independent,” “temporary,” “contingent,” “freelance,” “casual,” “precarious.”  The International Labor Organization (ILO) states, simply, that such workers fall within a “non-standard form” of employment.[2] Two facts, however, are certain. First, low-waged workers are crucial to the business models that are being advanced by Internet companies.  Second, low-wage workers in the “new economy” are increasingly pursuing “old-economy”-type job struggles and demands.[3]

To press ahead from here, a conception of the labor process is essential.

The Labor Process

Identified and explicated forty years ago by Harry Braverman,[4] and further clarified by historians and political economists, the labor process provides an irreplaceable analytical fulcrum. Both to cheapen costs and to augment control,[5] capital has continually attacked the labor process as it exists, with the aim of altering and even reconstituting everything from the content and sequencing of specific job-tasks, to the technical division of labor within companies and industries, to the location of production processes. Beginning during the 1970s, a new and expanded cycle of innovations around networks and other ICT tools permitted capital to intervene in the labor process across an unprecedented range, which encompassed an increasing number of information-processing jobs.[6] Making explicit, aggregating and codifying what had been workers’ tacit knowledge, and/or generating and collecting new categories of data, corporate suppliers and corporate users of networks worked to standardize more tasks and to quantify more outputs. Managers, as Huws explains, gained new freedom to disaggregate and reorganize work, and to relocate or contract it out in line with their varied corporate strategies.[7]

Prominent recent examples of this much wider trend include Uber and its rival, Lyft, alongside rental platform Airbnb, labor outsourcer TaskRabbit, the Instacart grocery delivery service, and the dry cleaning service Washio. Such companies invade existing industries by deploying network resources to compile, codify, rearrange and contract out existing labor processes. In the process they extract data from, and push costs onto, workers and users alike.

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