There’s no question more people on Earth use Google than bank with JPM Chase.
But in March, when news broke of Google’s slew of cozy meet-and-greets with various White House officials, the real question became whether Google and Silicon Valley are the new JPM Chase and Wall Street in terms of political power plays.
The answer is complex.
Wall Street–Washington alliances go back more than a century and a half. By comparison, Silicon Valley and its progeny are babies. In terms of clout, though, they are well on their way to adulthood.
As the power and influence of big tech firms grow, so does the danger they pose to us.
We got stuck footing the bill for Wall Street’s risky practices in the wake of the recent financial crisis. Those who believe Apple and Google lack the capacity to inflict harm on individuals have forgotten Enron, the once-hot energy firm that committed crimes, went bankrupt and launched a meltdown. Stuff happens.
Meanwhile, the relationship between the Oval Office and technology sector could be setting us up for a major fall regarding our money and privacy.
Tech influence trending up
Total tech-sector lobbying funds hit a historic high of $141.7 million in 2013 (dipping to $139.5 million in 2014.) These were nearly triple dot-com-era levels. Campaign contributions are more than 2,000 times 1998 levels. Similar to Wall Street banks, tech companies are concerned with the benefits candidates can provide them. Money flows to the party and policies that offer the fewest barriers to global market domination. The tech sector has tended to favor Democrats, but, to spread its influence, it’s tactically shifting its funds to be near even with the GOP.
As the 2016 election looms, contributions are rising. The tech sector isn’t dumping as much money into politics as Wall Street does, but as technology becomes omnipresent in our social and financial lives, the sector’s political power is gaining traction — and is concentrated in the hands of a few individuals and firms. Sound familiar? More individuals are using the Washington-Silicon Valley revolving door, too.
Just as on Wall Street, there are firms whose combined size, market share and political prowess put them in the political-technological elite. During 2014, Google led Big Tech’s money-machine unit, replacing Microsoft, a longtime player. A decade ago, Google’s campaign donations barely reached $500,000. By 2014, they were up to a record $3.8 million, compared to Microsoft’s $2.9 million. Google doled out $16.8 million in lobbying for 2014.
Facebook and Amazon are angling for a piece of the political-influence pie too. Facebook began lobbying in 2009, when it spent $207,878 on cybersecurity and privacy issues. In 2014, it spent $9.3 million, adding issues such as immigration and taxes. Amazon spent under $1 million from 2000 to 2005, but coughed up $4.9 million on lobbying in 2014. As for Apple, the firm donated $129,000 to campaigns in 2014, but it ponied up $4.11 million in lobbying money during the same year.
When companies are awash with cash stemming from their dominant market share, buying politicians and policies are logical steps. The sector’s money opens many doors in Washington. Beyond money, its power to dictate policies — from privacy to taxes to mobile payments to trade to immigration — is picking up steam.
The revolving tech door
Though no tech CEO has nabbed the Treasury secretary slot as former Goldman Sachs heads Robert Rubin and Hank Paulson did under Presidents Bill Clinton and George W. Bush respectively, Obama plucked Megan Smith from her vice-president spot at Google to be his chief technology officer. The trend is clear.
Google used its might to rack up 230 meetings, nearly one a week on average, with the Obama administration since 2009. Perhaps because of this cliquey arrangement, the Federal Trade Commission dropped its antitrust investigations regarding the firm’s search engines in early 2013. Wall Street has bypassed many antitrust issues as the Big Six banks consolidated power at the top of their sector.
Taking a page from the Wall Street revolving-door playbook, 100 of Google’s 123 lobbyists during 2013-2014 previously held government jobs. They’re called “revolvers.” Google is not alone; 28 of 30 Facebook lobbyists, 54 of 71 Amazon lobbyists, 91 of 113 Microsoft lobbyists and 31 of 38 Apple lobbyists also were revolvers. In total, the tech sector boasts 1,108 lobbyists, of which 755 (68.1 percent) are revolvers.
The political-technological elite firms are formulating domestic and foreign policy, as banks have done. Key lobbying issues include copyright, patent and trademark, antitrust, telecommunications, trade, immigration and homeland security.
Taxes also rank high as a lobbying priority. Google has tax shelters moving foreign profits through Ireland and the Netherlands to Bermuda. Apple is headquartered in California but incorporated in Ireland, so it pays nearly no US federal income taxes. Some members of Congress invest in these firms anyway: 25 hold Google shares; 55 have Microsoft; and 51 own Apple.
Pitfalls of monopolies, deregulation
There are 6.8 billion mobile-cellular subscribers in the world, according to the International Monetary Fund. That’s almost as many subscribers as humans. Those figures render limitless possibilities for tech-company penetration into all aspects of our lives.
The overriding force driving big tech firms is converting information, communication platforms and hardware into profitable commerce. Banks compete to leverage deposits into lucrative assets imbued with risk. Facebook and its ilk boost stock values by transforming members into consumer-bots and using their money in the expanding mobile-payments space.
Today, most mobile payments are funded through bank accounts and credit cards, but as banks are increasingly displaced by techno non-banks, the related illusion of independence from the financial sector is being replaced by reliance on the tech sector. We should be very concerned about our privacy and money-protection issues.
Apple Pay addresses security by not storing information on its servers, instead using the iPhone’s secure-element chip. Yet iCloud breaches mean promises of cybersecurity should be taken with a grain of salt.
Last summer, Google announced the integration of Google Wallet with Gmail. Google claims its fraud protection covers 100 percent of verified unauthorized Google Walle
t US transactions — but also that “much of the data is stored but may not be shared outside Google except under certain circumstances.” This leaves privacy protection vague.
The Gramm-Leach-Bliley Act of 1999 requires banks to explain how they use and personal information, and allows customers to opt out of certain sharing. That doesn’t stop banks from giving data to advertisers or the government. Privacy protection is worse in the tech industry, where no such legislation exists.
Problems go beyond information-selling to manipulation and stealing. Google is fighting British regulators over circumventing iPhone settings on Apple Safari to track and sell customer web usage, claiming it isn’t subject to UK privacy laws. A similar case was thrown out in the US, though the Federal Trade Commission did levy a $22.5 million fine on Google for secretly bypassing Safari privacy settings. The point is that opportunity invites behavior that, at worst, is criminal and at best, immoral.
Who’s regulating this stuff?
The mobile-payments arena is ripe for complications regarding our money. As the Federal Deposit Insurance Corporation notes, “no federal laws or regulations specifically govern mobile payments.” There is no uniform contract for mobile payments, nor legal recourse or one oversight body to address when things go wrong. (Not that rules governing Wall Street banks work out so well.)
For instance, PayPal acts like a bank, but doesn’t call itself one (it goes by the label “money servicer”), and isn’t regulated like one. Thus, it isn’t required to maintain the security, customer protections or dispute-resolution services that banks are.
Apple, Softcard, Square, Coin, Android Pay, Samsung Pay and others keep pushing mobile-payment boundaries, but don’t offer the real bank independence that users think they do. Apple deals with Visa, MasterCard, American Express and major US banks as another arm of that establishment. Only if users elect to siphon off and “keep” money with Apple Pay or Google Wallet does independence creep into the equation. But therein is another cyber-wrinkle.
The FDIC insures deposits coming from a traditional bank, but not from a non-bank entity. In the case of bankruptcy, insolvency or legal or financial meltdown, one’s “money” in Google Wallet could disappear without recourse.
If large pools of capital are transferred in digital space, it’s even harder to track or stop criminal behavior. Apple Pay wasn’t required to set up an anti-money-laundering program with the US Treasury Department, arguing it is merely a device and service provider, not a deposit taker (though it is). That was the same logic Goldman Sachs used when it bet against one set of clients and sided with another using complex derivative concoctions. But hey, Goldman said, we were just the middleman.