Putting tech and innovation at the service of people and the green transition

A European Alliance on Digital Sovereignty to reconquer democratic control of data

Photo by Curtis MacNewton on Unsplash

Author: Francesca Bria | Twitter: @francesca_bria

There is an increasingly broad awareness of the need to face the challenge of digitalisation in an ambitious way. Without grasping the impact that the digital transformation has on the economy, politics, society and the world of work, it is impossible to be able to plan the future. This future is one that is green, digital and democratic where innovation is synonymous with a real change of existing economic models that offer more opportunities for everyone — without creating new inequalities.

Digital is here. Data, artificial intelligence and connectivity are the critical infrastructures of the future, and are the basis of the fourth industrial revolution we are experiencing. Algorithms and big data could be used to serve citizens, improve public services and working conditions. But this cannot happen without posing the problem of governing technological progress and innovation. As the economist and Director of the UCL Institute for Innovation and Public Purpose, Mariana Mazzucato, would say, we must not only accelerate digitisation, but also give it a direction. It should be using digital technologies to achieve both social and environmental sustainability.

The existential challenges facing politics are many, but let me mention three major, more pressing issues:

1) The challenge of regulation: how to tame the overwhelming power of digital monopolies and the enormous market concentration by strengthening competition rules and antitrust.

Today, of the ten companies with the largest stock market capitalisation with a combined market value of over $6.3 trillion, seven are platform businesses. Just ten years ago, the top ten were dominated by oil companies, gas and banks. Of these seven companies, five are American (Apple, Amazon, Microsoft, Alphabet and Facebook) and two are Chinese (Alibaba and TenCent). No European companies. This dominance of technology companies can be explained by two structural causes:

Firstly, the economy is based more and more on intangible assets — data and IP. The rent extraction from intangibles allow these companies to convert their stellar revenues from investment in R&D and critical infrastructures, such as data centres and AI (15–20bn per year). Furthermore, digital platforms are quickly entering many sectors at the same time, taking advantage of a connected and distributed global supply chains. For example, Google is able to move from search engine optimisation to robotics to autonomous cars; and Amazon can move from online markets to cloud computing to healthcare.

Secondly, technology giants are highly financialised. The enormous financial power of the largest tech companies can be used to consolidate their dominant position in the market, they can also use equity as cash to buy up competitors. It is clear that, to regulate the tech giants, there is also a need for a new digital taxation system so that large companies stop using tax havens to park their profits. This digital tax would generate resources to be reinvested in public education, school and healthcare, and in the modernisation of infrastructure, making our economy greener. In addition to taxes, the rules of international trade must also be revised in a time when the real trade war is actually a technological war between the USA and China, focused above all on the race to develop 5G and artificial intelligence. Otherwise this will happen at the expense of our export-oriented strategic European companies.

2) The second major challenge is industrial and legal

We must act boldly to anticipate the profound changes in the labour market. We must make a more rigorous application of labour laws for the gig economy to stop the growing precariousness of the situtation, and the dislocation of well-paid jobs due to industrial automation and artificial intelligence that bring greater efficiency and higher returns.

It is clear that wealth in this changed economic scenario will have to be captured and shared in new ways.

3) The democratic challenge

We must give central importance to the issues related to civil liberties, individual privacy and the functioning of our democracies. These issues are too often at the mercy of technological giants who behave like States and use our data and personal information as bargaining power to consolidate their dominant position, resulting in negative externalities such as large-scale political manipulations and phenomena such as fake news.

Source: Bloomberg 25/5/18

A new battle for technological supremacy between China and the US: What’s the role of Europe?

Europe is in a situation of technological and economic dependence on such monopolies and has lost its technological sovereignty. Most EU critical national infrastructures (in terms of both hardware and software) are built outside of the EU, including companies managing data centres and large data flows. Since politics and technology are deeply intertwined, this will exacerbate existing global power asymmetries and have tragic effects on economic development, innovation and employment.

The geopolitics matters here — the EU, in order to regain its technological sovereignty, can successfully intervene only at level of the Union. A single country cannot do much, so a collective project is needed. Broadly, this is about setting the direction to repurpose the current digital revolution with a new social, economic and political purpose. To cope with this situation, a coordinated project for a new industrial strategy is needed. We can say that it is a matter of shaping a new pact in the digital society, which includes an industrial, social and democratic vision: a “Digital Green New Deal”. It is about using digital technologies to attain both social and environmental sustainability.

Europe fit for the Digital Age: Going beyond regulation, towards Europe’s digital sovereignty

Last week in Brussels, after presenting the Green Deal, Commissioner von Der Leyen presented the new strategy for Europe’s digital future, including the data strategy, which will invest 200 billion in 10 years for European artificial intelligence systems based on ethical criteria. Tomorrow the European Commission will also present a new industrial strategy that links the green new deal and the digital plan with an inclusive growth strategy. The increasingly clear idea in Europe is that we need to go beyond regulation and urgently develop our own digital industry, with strong investments both public and private. Otherwise, the EU will just be a huge consumer market, with little production capacity and little power to enforce its own rules. Let’s take 5G — it is clear that when we talk about this critical infrastructure we also talk about national security and not only about economic competitiveness. The struggle for digital supremacy that is played out in the domination of this technology, also represents the basis for the development of other strategic industries — mobility, healthcare, agritech, space etc.

Make data a public good

In this context, a key battleground is control over data, which is the raw material of the digital economy. The impact of data ownership on industrial development and the development of our cities is enormous. For this reason, we must regain control of the data and consider the data (which is fundamental for AI) as a public infrastructure such as electricity, water, roads and clean air. This can happen while creating a strong competitive environment at the level of services, by requiring large digital platforms to share data of public interest, so that they can be used by our SMEs, public administrations, social organisations, thus creating public value.

Here we can learn from the Barcelona model that I have been implementing for the last four years and that now is an example for many cities globally. We declared that data produced by the citizen belongs to the citizen, so that the immense economic value that such data represents is returned back to citizens. We changed the old deals between city hall and its private sector partners and included “data sovereignty” clauses in public procurement contracts, in a way that any supplier that works for the city of Barcelona must give back the data they gather to deliver services to the City in machine readable format. This data in this way becomes a public, infrastructure- a data common- owned by the citizens of Barcelona and open — with the right privacy protection- to innovators, start-ups, data journalists that can use it to create new applications that benefit citizens. On top of that with the DECODE project, we developed a blockchain and new cryptographic protocols that enable citizens to decide what data they want to keep private, what data they want to share, with whom, on what terms. The tools are now being tested and scaled in two of the leading European smart cities, Barcelona and Amsterdam, and the project can become a reference to set up a European ‘data trust’.

https://decodeproject.eu

Institute a European 100bn fund for digital sovereignty

Now, if all this seems like a necessary program, the fundamental question is who will invest in this green and digital future and how? There is a real race in terms of strategic investments in future technologies, to obtain long-term geo-political and industrial advantages. The Chinese central government has invested 130 billion dollars until 2030 for the development of AI alone, and in the field of 5G and hardware with Huawei. But it’s not just China. The Japanese Vision Fund with $100bn of which 45bn are from Saudi Arabia, is by far the largest investment fund for technology and infrastructure, investing billions in unicorns such as Uber and WeWork. Norway, Singapore and Israel have Sovereign Funds which invest heavily in technology and innovation. Here in Europe things are also changing — in the new InvestEU program there are huge resources for research, innovation and digitisation. The French government and Bpifrance announced last year a 5 billion investment to encourage the growth of their tech champions, also persuading the private sector to mobilise institutional investors and asset managers to invest in risk capital.

Finally, since last month in Italy too, we have our 1bn National Innovation Fund. A strategic project and crucial tool of Italy’s industrial strategy. We have powerful tools that have already started, such as already active funds — one of 80 million for early stage start-ups; one of 150 million for innovative companies in southern Italy and the 300 million Fund of Funds (which will have the task of investing in other venture capital funds to enlarge the market). Then we will start with a fund dedicated to boost accelerators, technology transfer between universities and businesses, especially with great emphasis in involving large companies, public or private in using and acquiring the innovation that is made by our growing number of start-ups. In this way we will strengthen the innovation ecosystem with funds dedicated to strategic sectors (agri-tech, aerospace, energy, smart infrastructures, life science, robotics) at the same time addressing the very large generational, territorial and productive divide between the most advanced companies and others who feel left behind.

It is also important to align this new financial capacity of the public fund with industrial strategies in Europe, as the development of national AI, cybersecurity and infrastructures such as cloud and 5G are new strategic sectors. In an era of digital capitalism in which States are struggling to find the best way to capture corporate wealth that can move anywhere, Europe should leverage its investment capacity, federate existing tools and create a European Fund for Digital Sovereignty. The EU should use all public instruments at its disposal — a mix of investment in research and pilots, setting standards and regulations, subsidising venture capital (for instance by creating public VC Funds as France and Italy are now doing), becoming a customer of specific interest tech firms, or engaging in direct investment. These funds could for example be used to invest in public interest digital technologies that are decentralised, privacy-enhancing and rights preserving and where data is a public good. These new infrastructures are the foundations of the XXI century society, that will enable us to democratise the knowledge economy and leverage it for everything from education to healthcare needs to pensions for gig workers. Such a plan would address the imbalance of power between the state and the private sector, while preserving the European social model based on individual freedom, autonomy and collective rights.

Francesca Bria

A digital economy “made in Europe” more democratic and sustainable

To conclude, Europe has a unique chance to be a force for change, by proposing a sustainable and more democratic, human-centred, digital economy. Europe can take a stand between the extractivist and monopolistic model of US digital capitalism and the authoritarian model of Chinese capitalism — proposing a positive vision for digital Europe economically, socially, and politically.

These are existential questions that need an ambitious political agenda fit for the digital and ecological transition. This is not a technocratic fix, nor a top-down project that will be executed from above. It should be driven by a movement from below, by the creation of new alliances involving innovators, cities, workers, unions, businesses, researchers, political parties, social movements, and citizens at large. We can perhaps start from networked cities to promote an ambitious digital policy that has the participation of citizens at the centre and that allows us to solve the great urban social and environmental challenges. It is about creating new alliances to put the technological revolution at the service of the ecological transition and to make it a right and an opportunity for the many and not a privilege for a few.

Francesca Bria is a Honorary Professor at the UCL Institute for Innovation and Public Purpose IIPP. She was also recently appointed the President of the newly created Italian Innovation Fund.


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UCL IIPP Blog

UCL Institute for Innovation and Public Purpose

Written by

Changing how public value is imagined, practiced and evaluated to tackle societal challenges | Director: Mariana Mazzucato | Deputy Director: Rainer Kattel

UCL IIPP Blog

The official blog of the UCL Institute for Innovation and Public Purpose | Rethinking how public value is created, nurtured and evaluated | Director @MazzucatoM | https://www.ucl.ac.uk/bartlett/public-purpose/

UCL Institute for Innovation and Public Purpose

Written by

Changing how public value is imagined, practiced and evaluated to tackle societal challenges | Director: Mariana Mazzucato | Deputy Director: Rainer Kattel

UCL IIPP Blog

The official blog of the UCL Institute for Innovation and Public Purpose | Rethinking how public value is created, nurtured and evaluated | Director @MazzucatoM | https://www.ucl.ac.uk/bartlett/public-purpose/

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