Twixt the old and the new economy

With many shared interests, oil and aerospace companies are the most important clients of Silicon Valley’s tech giants, despite their stance on Trump

On 19 October 2018 President Donald Trump held a meeting in Montana with the three main United States defence contractors: Northrop Grumman, Lockheed Martin and Boeing reaffirming the White House’s gratitude and that of the American people towards those who guarantee the United States’ defence capacity with modern, technologically advanced equipment, “the best in the world”, as the tycoon bluntly put it.

Ever since the days of President Eisenhower the American defence sector has represented the US’s capacity to defend its people’s independence and social progress against any enemy, but the end of the Cold War has opened up new scenarios even from an economic point of view.

In the summer of 1993 the analyst Samuel Huntington published an in depth assessment on Foreign Affairs emblematically entitled “The Clash of Civilisations?” according to which with the fall of the iron curtain religious and cultural conflicts would replace ideological ones. Huntington wrote that to avoid them one had to enable the dissemination of mutual understanding which essentially meant that people had to be connected through technology and communication. The following February “The coming anarchy”, a respected analysis by Robert D. Kaplan on the speedy and relentless decline of society which only technologically developed countries had any chance of surviving appeared in The Atlantic Monthly. Both these articles created a major stir in the US, stimulating internal debate and helping to influence the foreign policy of then Democratic President Bill Clinton that was meant to bolster the country’s role in international politics. The United States would provide its contribution to guaranteeing world stability and security thanks to its military, economic and technological predominance. It was therefore a time of great turmoil during which the Information Technology sector companies played a major role: thanks to the web (in those years at the very early stages of civil deployment) and digital technology it was going to be possible to affect the course of the world’s development and avoid the catastrophic scenarios envisaged by Kaplan and Huntington.

In that same year of 1993 the Fortune magazine put Microsoft on its front page claiming it was the most innovative American company: thanks to its 14 billion turnover of the time and its operating systems translated into 13 languages and adopted worldwide, the company founded by Bill Gates became one of the icons of the new “American society” that had been born under the aegis of the democratic administration.

At that time new companies were being set up that in a few years would make it big:  Google and the e-mail service of the Oath Yahoo group that started operating in 1994 are obvious examples.

Although these were commercial companies whose main objective was to build up their businesses, the political imprinting of the Nineties influenced the policies of the Silicon Valley companies: this was when the first philanthropic initiatives were organised which over time have developed into initiatives that promote the “human” side of these companies. Microsoft for example has a division that provides medical assistance to the third world, it funds job placement programmes for the unemployed and digitalisation in American schools.

During the subsequent decade and under another democratic administration Apple became the symbol of high tech communications made available over mobile devices. The company had been first set up in the 70’s but only when it entered the world of mobile telecommunications did it become hugely popular and gain large market quotas, thus attracting political interest. In his book Steve Jobs (Simon & Schuster, 2011) Walter Isaacson recalls the 2011 meeting between Barack Obama and Jobs which was also attended by Carol Bartz (Yahoo), Larry Ellison (Oracle), Mark Zuckerberg (Facebook), Erich Schmidt (Google) and Reed Hastings (Netflix), the leaders of the ‘Valley’ companies clubbed together for a meeting promoted by the US president. This was the year before Obama was re-elected to the White House and according to Isaacson the Apple CEO indicated he was prepared to back the incumbent’s electoral campaign.

Jobs died a few months later but S.V.’s backing of the democrats continued in the subsequent electoral campaign, which pitted Hillary Clinton against Donald Trump. In July 2016, 145 technology industrialists sent the Republican candidate a letter in which they identified him as the “enemy” of the principles of innovation and inclusion of the web. Among the most significant signatories were the co-founder of Apple Steve Wozniak, the co-founder of Tumblr David Karp and Ev William co-founder of Twitter. And it is on the very issue of immigration that the worst rift between the tycoon and Silicon Valley took place and especially the proposal made by the Republican administration to abolish DACA (Deferred Action for Childhood Arrivals), a measure introduced in 2014 that allows minors who entered the country illegally to benefit from a renewable two-year period  of deferred action from deportation and become eligible for a work permit. These disagreements were determined by a different sensibility, but also by more strictly economic considerations: in January 2017 the Center for American Progress estimated that the economic loss the USA would suffer if it closed the DACA programme amounted to 434 billion dollars (over 10 years).

In keeping with the words of Huntington and Kaplan the Silicon Valley corporations are therefore engaging in a policy that is designed to give public opinion the impression that they are the vehicles of change and innovation. After all, the goods they produce are among the biggest sellers in the world: smartphones are now part of everyday life and Google, Twitter, Facebook and Instagram are the brands heading the “connecting people made in USA” trend that has millions of users worldwide and … is worth billions of dollars.

A business environment that diversified into other fields such as research and development of alternative energies that have found a receptive audience in the Democratic Party and clearly oppose the policies in favour of fossil fuels promoted by Trump and, indirectly, the industrial groups that traditionally support the Republicans such as oil companies and the defence and law-enforcement sector. A clash of corporate titans the outcome of which is anything but a foregone conclusion. In spite of their solid financial base the Silicon valley companies are confronting behemoths that monopolise the world energy market in which oil and its derivatives continue to be the main source of energy in the West and in developing countries. Hardly surprisingly on an international level the “corps” with the highest turnover are those of the oil sector, the Chinese ones to start with followed by Exxon Mobile with 224 billion dollars of turnover and General Electric with 120 billion. Another stars&stripes monster is Berkshire Hathaway (finance) with a turnover of 240 billion as opposed to Apple with 220, Microsoft with 89 and the 40 billion raked in by Facebook.

But the numbers are not enough to provide a clear picture of how things stand: the oil and aerospace companies (Boeing, Northrop Grumman, Lockheed) are major clients of the Silicon Valley companies, one need only consider all the high-tech devices they supply Boeing with for the planes that are now covering the routes of most of the world’s airline companies. In other words, refusing an order from a corporation because it’s in league with Trump would cause damage in the millions and in any case is a rather fanciful idea. What is real is their ability to communicate, promote and sell their products to the public along with the faces and initiatives of the Valley’s business network: thanks to effective marketing campaigns, public opinion has the perception that Apple, Google and Microsoft are capable of influencing the political leadership, however, this is essentially a perception because the solid foundations of the old economy are hard to shift.

@marco_petrelli

You will find this article in the eastwest paper magazine at newwstand.