Man, market, state: In defence of a new social contract

Earlier this year, there was a huge uproar over the Cambridge Analytica data breach and Facebook’s role in it. This was followed by news of Uber’s self-driving car killing a pedestrian, Google showcasing a human-voiced AI device that can call a restaurant to make a reservation, and Amazon’s Alexa allegedly listening to users private conversations and sharing these with their relatives.

One might say that such occurrences are not uncommon with emerging technologies. True. The companies involved in these instances are the present-day internet giants. What’s interesting is this: Facebook co-founder Mark Zuckerberg apologised and vowed to protect user data, the General Data Protection Rules came into force, and Uber and Amazon made made public apologies. Such measured responses, similar to those from elected representatives.

A new relationship

We are at an interesting point in time where the relationship between man and the market and that between the market and the state is going through a fundamental transformation. The market, owing to the number of people it serves, has started showing some state-like tendencies. It is thus important to deliberate whether it still makes sense to look at these as two independent relationships or if it is time to think of a triangular relationship.

Economic history tells us that market and state have had alternating periods of dominance. The pace of alternation has heightened in recent centuries. While industrialisation in the West in the 19th century was characterised by the dominance of the market, the state took over during the period between the two world wars. By the 1980s, the wave of neoliberalism coded itself into the tenets of the Washington Consensus. And more recently, dominance has shifted towards the state with rising tones of protectionist policies and state induced economic growth.

But amidst all this, the clear line dividing the state and the market appears to be fading. Over time, the state-market debate has developed over some premises, some ideological and others empirical. For instance, if the market expands, the state shrinks and vice versa; the state may not be able to regulate itself but it can surely regulate the market; in its minimal form, the state must retain basic functions like health and education; that profit maximisation is the primary goal of the market; that the relationship between man and market is merely transactional and largely anonymous.

The market caps of the large multinationals have long been compared with the GDPs of many big economies. In 2016, the World Bank told us that there were 31 countries and 69 corporations among the world’s 100 largest economies. The last decade, however, has changed the focus from profits to numbers.

While the market has continued to chase profits, it has transformed its relationship with the consumer qualitatively in ways unknown before. Facebook has crossed 2 billion users as of June 2017. The ‘platform revolution’ has facilitated billions of users subscribing to platforms like Uber, Airbnb and YouTube. Investors flock to these companies, some of which are making little or no profit. These platforms enable transactions even among consumers. Consequently, there is a renewed perception of trust among users of the platform and that between the platform and its subscribers. It is through these platforms that users leave massive digital footprints of their personal lives.

The problem of self-regulation

This changed nature of commerce has given rise to another problem with which only states had to struggle so far—self-regulation. Owing to its huge user base, digital platforms are witnessing their own autonomous sphere of public discourse, and this is of course not decoupled from the discourse in the physical world. The Cambridge Analtyica scandal is being blamed only for the breach of privacy and for benefiting some of its political clients in an unfair manner. But consequences of such ‘digital public discourse’ are more universal and profound than what we perceive.

Twitter bots—automated, computer programmed user accounts on Twitter—are wreaking havoc in US domestic affairs in matters like gun control, mid-term elections, climate change, and perception of immigrants. Twitter has also been grappling with some miscreants publishing fake Initial Coin Offering while trying to siphon off money from innocent users.

This is the moment of reckoning. The market must realise that conventional principles of organisational management can’t be scaled up to any limit. The state must realise that it will face difficulties trying to regulate the market as the latter grows.

Market steps in

Public private partnership was once considered a good synergistic mix of capabilities of the market and the state. It remains a popular arrangement in public transport, infrastructure and public health. But consider this. Uber’s new ‘Uber Express Pool’ service requires passengers to walk a short distance to catch the cab and be dropped a short distance from their actual destination, all for a lower fee. This comes very close to mimicking the public transport system. Earlier this year, Amazon and Apple entered the healthcare sector in a big way. The market is augmenting the state’s capacity, in the sectors which were considered its ‘core’ responsibilities.

While the state regulators burn their administrative capital correcting various externalities of the market, the latter has undergone a metamorphosis. Google is considering buying large parcels of land in San Jose, California, to construct a new office. To allay the locals’ fears of soaring housing prices resulting from such a purchase, it has agreed to construct thousands of housing units to correct for a possible sudden price surge. And the Silicon Valley doyens are now engaging with larger societal questions like income inequality, much like the conversation in India over a universal basic income.

With the new relationships between man and the market and the market and the state, it is time to redefine the social contract that has so far has existed only between people and the state. As the market turns increasingly similar to the state in many ways, it is imperative for it to convert its largely legal “privacy policy” (which is the only contract between the market and its clients) into much widely deliberated public documents, more akin to state constitutions.

Without a new social contract that includes all three stakeholders—man, market and state—the state will continue to fight a never ending regulatory battle with the market, and with no clear winner, the assured loser will be man.

Amit Upadhyay is a freelance Sustainable Development Goals consultant.