Rana Foroohar, global economic analyst and Financial Times columnist, gave a fascinating presentation to FIA Boca on Wednesday on surveillance capitalism that melded finance with global politics and foreign affairs as well as some history, current events and a little prognostication. While the title of the talk was surveillance capitalism, Foroohar included a discussion of the death of neoliberalism and U.S. and EU global policy changes.
In Foroohar’s view, the market-oriented reform policies, or neoliberalism, that marked the 90s is gone. The economic upheaval caused by COVID revealed what was already there the past several years. Brexit and the presidency of Donald Trump are not something new, but rather the end of an era. There is no returning to the days of Reagan and Thatcher. “Asset ownership and the ownership society as Bush would have called it,” she said.
Where the Bretton Woods agreement after World War II was meant to help reign in nationalism, we now have a world where the globalization that Bretton Woods started has become so dominant that it is fueling nationalism, she said.
The recent fuss with GameStop was, “one of the really telling stories in the market over the last few weeks and months and in some ways is just the apex of this 40-year trend towards an economy that’s really based on the democratization of markets,” Foroohar said. She mentioned that the financial economy is now three to four times bigger than the real economy. It has become “the tail that wags the real economy.”
All of this has led to great wealth; it has also driven inequality and fueled nationalism, according to Foroohar. The collection and use of data is now a substantial part of the economy and it can be moved across borders with ease. Foroohar mentioned that 80 percent of corporate wealth now resides in 10 percent of the companies and the majority of those are big-tech companies. There is now a fight between the Washington Consensus and Beijing Consensus of economic reform, and Foroohar added in the “Facebook Consensus.” A few of the biggest companies like Facebook are now operating in the same spheres of power as countries are, she said. Even cryptocurrencies are a way to sidestep national policy efforts.
How countries react to this policy-wise remains to be seen. Currently the EU, U.S. and China are seen as the major players. Foroohar thinks it is likely the EU and U.S. will band together, but this is not certain. Germany has a huge economic interest in trade with China, and Germany is one of the main players in EU politics.
Foroohar believes that China will, ultimately, be at a disadvantage. Their strict, state control simply does not engender innovation. Already China is seeing its wealthy citizens trying to take their money and leave.
The EU and U.S. will align, Foroohar said, but it will not be simple or quick. There is much the two must agree on and, currently, they are not pulling in the same direction and there is a lot that needs to be resolved.
Foroohar believes there is some ground for some shared tax regimes between the U.S. and EU. In other areas, though, it is less clear where there will be cooperation. Antitrust actions will likely become more common, but expect the big tech companies to fight zealously against them. Fights over who will dominate certain tech fields such as 5G are playing out now. Who comes out on top is partly a business function, but it also is heavily influenced by international politics.