Wednesday, 1 November 2017

Facebook is crushing China’s superpower dream

Chinese President Xi Jinping closed the 19th Party Congress by committing to make China a global power. Mr Xi is the strongest leader since Chairman Mao, and some call him a dictator.

Mr Xi says the world needs “capitalism with Chinese characteristics” (capitalism in a Leninist cage). China is in a “cold economic war” with the US, he says, which is now only a rival to China. Impressions matter a lot in geopolitics, and the US hasn’t maintained credibility in the last decade.

But the US is magnitudes more powerful than China, no matter how power is defined. Sure, it isn’t in a good spot to counter Mr Xi’s ambitions, such as the One Belt, One Road infrastructure project which China hopes will better connect it with trading partners by land and sea.

China wants this project because it has excess cement and steel, and its partners need those materials. However, those partners tend to complain that although they appreciate the gesture, it’s hard to sell the benefits when so few local workers are hired and China ships in thousands of welders and excavator operators.

If he’s so worried about excess steel and cement, the obvious step would be for him to tell the factories to just stop producing them. But he knows the moment he does that, millions of Chinese will lose their jobs or income. Chinese authorities already have to cope with thousands of protests each day. Mr Xi needs the project of One Belt, One Road more than he needs to sell steel.

This is because, historically, regime change in China had less to do with external than internal forces. Its geography dictates living standards will always rise disproportionately along the coast, while the inland lags behind. Even Mao used the angry peasant class in his Long March. The only question is how long Mr Xi can avoid it happening again because it certainly will.

Mr Xi is correct on one thing. It certainly appears Washington is leaking power like it leaks secrets, but this is an illusion. Government power has always resided in the collection and utilisation of information. Knowledge = power.

It matters far less where US aircraft carrier groups are positioned, or how many Hollywood movies reach number one in China. What matters is how data is generated, what entity captures it and how it is used. This is why the map below is so important.

By 2020, an estimated 30 billion objects such as ovens, toasters and cars will be generating data. And in the second quarter of 2017, Facebook had 2 billion monthly active users, more than 1.74 billion of whom use a mobile device. Facebook is a quintessentially American inventions and it is transcending borders in the way only a faceless corporation can.

China has its own social networking sites, and its largest social network, Weibo, boasts 938 million monthly active users. Beijing uses it as a large-scale census tracker to “see” every citizen. Even without an active account, the software uses a shadow account built by the interactions they have with a person who does own an account. Facebook uses shadow accounts too – except it has one for every person on the planet (outside Russian and China).

A deeper discussion about how social networks are changing the nature of human interaction is probably worth its own column. But what’s most important here is how social networks are facilitating the rise of the US artificial intelligence industry.

AI needs data, but it also needs instructions. What better way to create robust AI than to let hundreds of billions of human hours teach the machines everything they need to know? The computer chip may well have reached diminishing returns, but AI still has a long way to go. Everyone is contributing to its development, largely for free. And the civilisation that controls the development of AI will be the first to truly deserve the classification of “global.”

Mr Xi might look like he’s leading an emerging superpower – and people will still need goods to be shipped on roads and across oceans for the foreseeable future – but China has barely left the starting blocks in the race for control over the most important economic development since the discovery of the New World. AI is not just technology, it is the core mechanism of global governance.

Left and right political distinctions are fading. The spectrum is now open or closed, no barriers or lots of barriers. The key point is that this is the way businesses talk, not governments. In China’s desperation to maintain social cohesion, it failed to connect with the world at a deep level: it is now playing a minor role in setting up the default assumptions of what it means to live in the good society.

In a market state, governments do not facilitate the wealth creation of their citizens, they maximise it. Mr Xi is distracted by the illusion that in the 21st-century central governments will be moving the pieces on the chessboard. He has to believe this because that's how he draws his power. But governments just keep the lights on. New players in business – specifically, US businesses – now sit at the geopolitical game board.

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