Much like her efforts to break up big banks following the financial crisis, Elizabeth Warren emphasizes breaking up tech companies as society becomes increasingly technological.
On March 8th, Senator Warren unveiled her campaign to break up tech companies. The progressive proposal launched a wave of media attention and calculated responses from 2020 Democratic hopefuls. Now with Warren polling amongst the top democratic candidates, her progressive and detached tech regulation reforms are worth examining.
Dissolving the very business model of internet companies
Warren’s two-part proposal advocates for a big tech breakup by eliminating mergers and dissolving proprietary marketplaces to enhance data protection and competition in the marketplace. She points to big tech as the poster child for corporate consolidation without detailing a specific process for future antitrust enforcement or acknowledging the lagging track record big bureaucratic government has with fast-paced tech innovation.
The oxymoron is that despite pledging to not take any corporate funding, Warren does not shy away from paying for social media advertising knowing the potential reach of these platforms. Warren may have strategically placed ads on Facebook advocating for a big tech breakup using Facebook’s logo in the ad, violating Facebook’s terms and conditions. The ads were initially removed because of this as she intended, then later reposted by Facebook in the company's attempt to allow for “robust debate” around the issue.
Breaking up big tech is one of Warren’s many “1960’s Great Society” plans that entrust the government with its ability to provide benefit at large for social and economic applications. Under Warren’s policy, companies like Amazon will be limited in what it can sell and at a higher price. Platforms such as Netflix and Apple will no longer be able to offer their content. Small businesses would lose the opportunity to benefit from lucrative, innovative mergers and buyouts, while consumers will lose access to goods and services at free or low costs. Essentially, Warren’s plan bans the very “matrix form” business model of tech companies that would disintegrate efficiency and potentially serve as a policy that could have further effect in marketplaces like pharmaceuticals and generic brand manufacturing.
When it comes to data breaches, antitrust is the wrong way to go about it. As put by the Information Technology & Innovation Forum, “There is no reason to believe that consumer data is more protected if five firms each hold data on 20 million Americans versus if one firm holds data on 100 million Americans.” Larger firms have more financial opportunities in access to funding and the ability to write off security investment costs given economies of scale. These “honeypots” of new consumer data platforms would become targets of domestic and international hijacking while creating everyday hoops for consumers to jump through to connect with their networks in a process that is currently just one click.
The irony of net neutrality
Back in May of 2018, Warren took to the Senate floor advocating for the Congressional Review Act (CRA) that would restore net neutrality. She argues Americans want free and public internet, but also doesn’t agree that Americans should use their data as internet currency for such, and blames the FCC for becoming corrupt with private interests.
Warren often tries to misconstrue the public by associating net neutrality with words like “net freedom” or “fair and open internet.” Ironically, net neutrality benefited the exact tech companies Warren is trying to break up. With net neutrality, these big tech companies had various internet service providers (ISP) foot the bill for high bandwidth content and didn’t discriminate usage. Now, without net neutrality, ISPs are either asking customers and tech companies to pay up driving fewer consumers to major, expensive sites while big tech companies are forced to pay high fees to remain relevant allowing for competition to enter into the marketplace.
Technology, election security, and the Constitution
Co-sponsoring the Data Breach Prevention and Compensation Act, Warren wants to hold corporate officials liable for company data mishaps. The plan would expand government creating new offices and oversight into private companies. If approved, CEOs could face jail time for mistakes made along the supply chain of their company potentially outside of their knowledge.
Warren’s ideas on breaking up big industries are not new to her rhetoric. Wall Street has been Warren’s target for over a decade with her role in creating the Consumer Federal Protection Bureau under the Obama Administration and pressuring the court circuits to increase banking transparency. Similarly to tech CEOs, Warren wants to jail top Wall Street bankers for criminal misconduct and heavily regulate the industry. Still stuck in the 2008 banking disaster mindset, Warren’s adversarial approach is capitalizing on raw emotions associated with big banks and cashing in on the opportunity to exploit. However, doing a complete 180 from President Trump’s deregulatory approach would direct further scrutiny at the industry than in 2008, and dampen consumer interest and risk-taking in the financial sector.
Aiming to federalize voting, Warren is usurping power from states in a plan even Democrats are wary of. Requiring $20 billion over the next ten years, the proposal urges for a new voting rights amendment.
“We need a constitutional amendment to guarantee the right to vote. But the moral necessity of this amendment shouldn’t stop us from acting now. The federal government already has the power to regulate federal elections, secure our democracy, and put a stop to racist voter suppression.” -Elizabeth Warren, June 25th, 2019
In doing so, federalizing elections would take the voice and control over our constitutional right to vote. Instead of a “one size fits all” approach Warren and supporters of H.R. 1 are taking, empowering states and its citizens to implement voting procedures like absentee and early voting break down barriers and increase voter turnout. Federal mandates serve no purpose in administering ridgid voting procedures that are vague and out of touch with the needs of private citizens.
Emerging Technology and Competition
International trade regulation and expanding the financial sector
In the case of the trade war, Warren and many democrats agree with Trump’s hard-hitting tariffs that are pressuring China towards fair and lucrative negotiations. Claiming that China as “weaponized its economy,” Warren is aiming to reshape trade policy in a way that benefits the blue-collar workers that typically support republican ideals.
However, by breaking up tech, Warren could be giving the Chinese an upper hand. These big tech companies Warren bashes for stifling our economy have produced millions of jobs, driven down the prices of goods, and injected billions into the U.S. economy growing the digital sector by nearly 60% since 2007.
In another regard, looking to halt the expansion and productivity of tech in business, Warren and several other democratic 2020 candidates are questioning the ability for FinTech to remove itself from algorithmic bias. While there is an opportunity for the financial sector to address fair lending regulation, her polarized view does not account for the fast-paced progress of technology and the benefits that marginalized groups are experiencing.
There is no shying away from FinTech, especially with big tech developments and consumer demand forging ahead. Yes, fintech regulation needs to be handled with care. It’s disruptive nature outside of the traditional banking industry in consumer transfer and loan applications and cryptocurrency has the potential to have an overall effect on the financial stability of the U.S. Interestingly, fintech provides an opportunity to break what Warren calls the banking monopoly by introducing competitive financial alternatives into the market. The potential social benefit and facelift fintech offers the financial industry is reason enough to continue its exploration. Fintech is offering banking access to untapped minorities previously barred from financial products due to lack of confidence, stable income, or willingness to shoulder bank fees. With more people and small businesses having access to financial services, the economy is experiencing innovation on both the production and consumer sides of the spectrum.
Most of Warren’s proposals are a complete undoing of the current tech status. Unfortunately, the focus seems to be a vendetta against a few top companies as opposed to a constructive approach to consumer wants and needs while acknowledging the trajectory of the blossoming tech industry. While it is easy for Warren to expose weaknesses in tech that evoke raw public emotion, considering how to aid the expansion of our competing tech industry in conjunction with promoting innovation and a healthy consumer-oriented mindset would be far more constructive than pulling the rug out from one of our most profitable sectors.