The State Has Lost Control: Tech Firms Now Run Western Politics

By now, the fact that transatlantic democratic capitalism, once the engine of postwar prosperity, has run into trouble can hardly be denied by anyone with the courage to browse a daily newspaper.

Hunger, homelessness, toxic chemicals in the water supply, the lack of affordable housing: all these issues are back on the agenda, even in the most prosperous of countries. This appalling decline in living standards was some time in the making – 40 years of neoliberal policies are finally taking their toll – so it shouldn’t come as a shock.

However, coupled with the spillover effects of wars in the Middle East – first the refugees, now the increasingly regular terrorist attacks in the heart of Europe – our economic and political malaise looks much more ominous. It’s hardly surprising that the insurgent populist forces, on both left and right, have such an easy time bashing the elites. From Flint, Michigan, to Paris, those in power have accomplished such feats of cluelessness and incompetence that they have made Donald Trump look like a superman capable of saving planet Earth.

It seems that democratic capitalism – this odd institutional creature that has tried to marry a capitalist economic system (the implicit rule by the few) to a democratic political one (the explicit rule by the many) – has run into yet another legitimation crisis.

This term, made popular by the German philosopher Jürgen Habermas in the early 1970s, aptly captures the dissonance between the stated objectives of our political institutions – the need to promote equality, justice, fairness – and today’s harsh political reality, where the very same institutions often stand in the way of upholding those values.

Habermas’s initial conception of legitimation crisis emphasised its cultural dimension, for, as he assumed at the time, the smoothly running welfare state, despite all the naysaying by the radicals, was reducing social disparities, empowering the workers and ensuring that they got a growing share of the still-expanding economic pie.

That argument did not age well. As became obvious a decade later, governments were increasingly forced to resort to a panoply of means to continue satisfying both capital and labour – a trajectory that has been well documented by Habermas’s main opponent in Germany, the sociologist Wolfgang Streeck.

First it was inflation; then it was unemployment; then public debt; eventually it was financial deregulation in order to facilitate private debt, so that citizens could at least borrow money to buy things that they could no longer afford and that the government, now subject to neoliberal dogmas about the virtues of austerity, could subsidise no more.

But none of those solutions could last, simply postponing – but not resolving – the legitimation crisis. Today, global elites face two options for dealing with its latest manifestation. One is to accept the anti-establishment populism of Bernie Sanders or Donald Trump. Even though the two disagree on many social and political issues, both oppose the neoliberal consensus on globalisation, challenging the mainstream views on the virtues of free trade (as codified in treaties like Nafta or TTIP) and the need for America to play a robust role abroad (both would prefer a more isolationist stance).

The other option, and a much more palatable one to the Davos crowd, is to hope for a miracle that would help convince the public that the structural crisis we are in is not structural and that something else – big data, automation, the “fourth industrial revolution” – will step in to save us or, at least, delay the ultimate rupture, a process that Streeck, brilliantly, has characterised as “buying time”.

Today, however, there’s a major change. While the financial industry has historically been key to “buying time” and staving off the populist rebellion, in the future that role will be assigned to the technology industry, with a minor role played by the global advertising markets – the very magic wand that allows so many digital services to be offered for free, in exchange for our data.

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