Democracy Is Losing Its Race With Disruption

After decades of innovation by computer and internet companies unfettered by government regulation, Americans are enjoying the benefits provided by Big Tech—but also contending daily with problems that the industry has ushered in. Even consumers who love their smartphones and Instagram accounts may be concerned about how they siphon up personal data and lure users back with every new alert. While tech platforms help keep people in contact with family and friends, they also rely on opaque algorithms that shape the content we see. Seeing these dynamics, many politicians appear uncertain whether to get cozy with the visionary leaders of Google, Apple, and Facebook—or to campaign against the pollution of the American information ecosystem, the amplification of hate speech and harassment, and the striking concentration of market power among a small number of companies.

Emergent technologies have gained far-reaching power over our politics, our economy, and our lives, and no consensus exists on what—if anything—to do about it.

But this isn’t a new story. The race between technological disruption and democracy has been playing out in the United States for more than a century and a half. In the 1850s, the U.S. telegraph industry was intensely competitive. Twenty or so companies had laid more than 23,000 miles of wire, and multiple carriers served identical routes. Profits in this new business were low, triggering a period of consolidation that, by the late 1860s, left Western Union as the dominant provider of long-distance telegraph service. Despite some tentative early steps by the federal government to constrain Western Union’s power, the company’s monopoly lasted for nearly 50 years. It charged high prices, discriminated against disfavored customers, and translated its market power into political power by using access to its newswire to shape the behavior of politicians. In other words, a disruptive technology posed a previously unanticipated challenge to the health of our economy and our democracy, and not for the last time.

The history of the technology business in the U.S. reveals a predictable jostling among new technologies, business owners, politicians, and ordinary citizens. The cycle begins when human ingenuity and private capital create business opportunities. New companies proliferate. As the effects ripple across society, the market consolidates, and people begin to perceive negative economic or political consequences. But when democracies try to regulate new technologies or industries, they typically struggle to get a grip on these new problems—and many of the rules that they belatedly adopt soon become outdated as technology relentlessly pushes ahead.

It wasn’t until 1910 that the federal government meaningfully confronted Western Union. Congress finally recognized that telegraphy’s competitive era was over; the cost of building a coast-to-coast network of transmission lines from scratch would scare off any rational competitor. Lawmakers adopted “common carrier” provisions obliging telegraph and telephone companies—which economists would now call natural monopolists—to offer their services at a reasonable price to all customers without discrimination. These rules discouraged key players in the transport of goods, people, and information from exploiting their powerful position.

Yet the government struggled to stay on top of new developments. By the 1910s, as telephones fully displaced the telegraph, AT&T achieved a commanding position in the long-distance market by buying up local telephone companies. Only under the threat of antitrust action by the federal government in 1913 did AT&T agree to allow local companies to connect to its long-distance system. Yet AT&T’s profits and market power kept growing. Congress took another two decades to enact the next major regulatory overhaul—investing a new Federal Communications Commission with the authority to oversee both interstate telephone and radio. It also ensured that local phone companies could access interstate connections and compete as local service providers. Even then, AT&T’s near-monopoly over long-distance phone service persisted until a federal judge broke the company up in the 1980s.

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After its burst of regulatory zeal during the Progressive era, the federal government mostly went back to its policy hibernation, even as wave after wave of transformative technology arrived. By the ’80s and ’90s, cable-television services unregulated by the FCC had proliferated and the commercialization of the internet had begun, but the government’s regulatory approach—mostly designed for the age of Thomas Edison and long-distance telephony in the 1930s—was far out of date.

And then came the digital revolution. Hoping to secure American leadership in a wave of technological disruption that promised to change how everyone communicated, worked, and lived, the Clinton administration and Congress deregulated telecom markets and placed emerging internet companies in what was described at the time as a “regulatory oasis.” The federal government left private companies free to harvest users’ data as they saw fit, even while maintaining strict legal constraints on the use of data by public agencies. Congress enshrined a hands-off view of tech regulation in multiple laws, including the Communications Decency Act of 1996, which locked in the legal immunity of platforms for the content they host. And after an expensive effort by President Bill Clinton’s Department of Justice to challenge Microsoft’s market dominance in desktop computing yielded few tangible results, the U.S. government largely retreated from the business of policing mergers and acquisitions.

In fact, lax oversight of a fast-evolving communications industry may have been the right choice at the time. But only now—25 years later—are politicians waking up to the consequences. Congress is flooded with new pieces of legislation, including measures to protect personal data, limit internet platforms’ power to moderate content, and rein in monopoly power. And state attorneys general have joined forces with the federal government to challenge Big Tech’s power in the courts.

The response of many tech leaders to the recent upsurge in regulatory zeal has been predictable. Preaching libertarianism, they say government interference will slow innovation or cede technological leadership to China. But regulation is just a loaded word for an important thing: the actions taken by those we elect to transform our shared values into rules that serve the common interest. So when technologists and venture capitalists bemoan the very idea of regulation, they are rejecting the role of democratic institutions in minimizing the potential harms of new technologies and establishing rules of fair play that benefit everyone.

A further barrier to concerted action is a political system that is organized to perpetuate the status quo and, in practice, readily accommodates behind-the-scenes requests by companies and their lobbyists. Furthermore, partisan polarization in Washington makes a shared vision for a far-reaching regulatory overhaul of the tech industry seem highly unlikely.

But even as lawmakers differ on whether to “break up Big Tech,” as the slogan goes, they should still strive for agreement on addressing some of the most immediate, concrete harms. For example, lawmakers need to rebalance the relationship between users and companies when it comes to control over personal data. It should no longer be acceptable for companies to bury their plans for our personal data in long, hard-to-read terms-of-service agreements, or for a platform to lock users in by making it difficult or impossible to take back their data if they want to leave. Federal privacy legislation that mandates greater transparency, provides incentives for companies to seek meaningful consent, and requires data portability across platforms should be a top priority.

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Congress should also bring the use of high-stakes algorithmic decision making out into the open. Algorithms are replacing human judgment in countless domains, including hiring, the determination of creditworthiness, and the allocation of important public services. A new legislative framework for algorithmic accountability is needed that ensures transparency; mandates regular, independent audits for bias; and protects Americans’ due-process rights.

And the growth of Big Tech will only accelerate the rise of artificial intelligence and automation—a revolution with potentially massive implications for the American workforce, especially low-wage workers. Lawmakers must start getting ahead of this labor-market transformation by investing significantly in education and job-training programs to mitigate the disruptions lurking just around the corner. Successful legislation in these areas can help to renew public confidence in the government’s ability to work in the public interest, creating a foundation to tackle even thornier issues in the tech sector through regulation.

Grappling with these issues—and others that new technologies will present in the future—will require a reboot of the policy-making process, with a serious investment in bringing technologists into public service. It also requires that elected officials themselves be more educated about technology. Policy making suffers when lawmakers are informed primarily by the lobbyists who are paid to offer them a particular view. This means a more substantial role for science-and-technology-policy expertise in the executive branch, as well as the creation of robust mechanisms for providing independent policy advice to policy makers and legislators, including a revival of Congress’s Office of Technology Assessment. Some progress is already evident: The awkward 2018 scene in which a confused Senator Orrin Hatch grilled Mark Zuckerberg about how Facebook could make money if it’s free has given way to the House Judiciary Committee’s in-depth, bipartisan efforts to investigate Big Tech’s power.

The ability of our government to digest digital innovations—and to respond nimbly and pragmatically to the problems they create—is essential to the health of American society. As the Partnership for Public Service put it in a recent report, “Nearly every national priority depends on an accurate, thorough, and contemporary understanding of how to use and leverage modern technology.” Society needs what experts term “adaptive regulation,” which enables us to try new policy frameworks and learn about their effects before locking in a strategy for the long-term. The United Kingdom and Taiwan have been leaders in experimenting with this new approach through “regulatory sandboxes.” The financial-technology industry has been the major beneficiary; firms can test new offerings on consumers in real markets while regulators observe and evaluate their potential benefits and harms. The idea is to give new ideas a chance to take root while also protecting consumers and the public interest.

Coming to terms with the impact of technology is nothing new. The race between disruption and democracy goes on. But now it’s time for democracy to pick up the pace.

The article was adapted from “The Winner-Take-All Race Between Disruption and Democracy” in System Error: Where Big Tech Went Wrong and How We Can Reboot, to be published by HarperCollins on September 7.