Does any­one real­ly have a monop­oly on wisdom?

Hans-Jür­gen Jakobs

In his new book, Hans Jür­gen Jakobs describes the monop­o­lies of our cen­tu­ry in some depth. He exam­ines issues, such as whether monop­o­lies engen­der depen­den­cies, for­feit diver­si­ty, erode healthy com­pe­ti­tion, and lead to anar­chy. Are our con­tem­po­rary monop­o­lists clever enough to deprive states­men of their pow­er? Or has human cre­ativ­i­ty always brought down monop­o­lies in the end?

In the lat­est of her Duet inter­views, Dr Cal­daro­la, author of Big Data and Law, and Hans-Jür­gen Jakobs dis­cuss the con­cept of monop­o­lies and their effects on today’s life.

In your new book “Monop­o­lies in the 21st Cen­tu­ry” you write that the new “ism” is no longer social­ism or cap­i­tal­ism, but monop­o­lism. Which monop­o­lies do you mean and in which coun­tries are they espe­cial­ly prevalent?

In my opin­ion, there has been a sus­tained, almost fright­en­ing trend towards con­cen­tra­tion in the econ­o­my for years. This trend is tak­ing place across the bor­ders of the var­i­ous eco­nom­ic blocs. Monop­o­lies have even become part of a new sys­tems com­pe­ti­tion between cap­i­tal­ism, finance cap­i­tal­ism and state cap­i­tal­ism, between democ­ra­cy and autoc­ra­cy and between the USA in the West and the Peo­ple’s Repub­lic of Chi­na in the East. The monop­o­lies that we encounter are either par­i­ty-type or pri­vate­ly owned and close­ly coor­di­nat­ed with gov­ern­ments. The eco­nom­ic monop­o­lies have become deci­sive instru­ments or even weapons in geopo­lit­i­cal con­flicts for a new world order. The most impor­tant monop­o­lies are those for raw mate­ri­als, cap­i­tal and data.

Com­pa­nies and states col­lect data on a large scale. What do you call this type of monop­oly? Data monop­oly? Data car­tel? Human monop­oly? Do those who con­trol these monop­o­lies have more users than tra­di­tion­al states­men have with regard to their respec­tive subjects?

The con­cen­tra­tion trend just men­tioned can be par­tic­u­lar­ly seen in data econ­o­my – per­haps the key mar­ket for the devel­op­ment and shap­ing of future mar­kets. We see how many busi­ness­es col­lect and ana­lyze more and more data and base their busi­ness process­es and devel­op­ments on them. The depen­dence on data is increasing.

In auto­crat­ic dic­ta­tor­ships, this data econ­o­my allows gov­ern­ments to use unre­strict­ed data aggre­ga­tion to achieve per­fect sur­veil­lance of the peo­ple. We see that in Chi­na. There is an app there, WeChat, which nobody in the Peo­ple’s Repub­lic can ignore. Chi­na is home to 1.4 bil­lion peo­ple and over a bil­lion use WeChat. It is the instru­ment used for han­dling almost all transactions.

In Chi­na, a con­cen­tra­tion of data is emerg­ing via WeChat. This ful­fils the dream of every monop­o­list, because in Chi­na he receives the max­i­mum amount of data via WeChat, which gives him max­i­mum trans­paren­cy con­cern­ing user behav­iour. Based on this data, Chi­na’s Social Cred­it Sys­tem was imple­ment­ed, which can reward or penalise user behav­iour with points.

This is a dan­ger­ous devel­op­ment in dic­ta­tor­ships which – as Shoshana Zuboff has impres­sive­ly shown in her book[1] – can lead to sur­veil­lance cap­i­tal­ism. Busi­ness­es are sug­gest­ed for the sup­posed good of the users – in the case of Chi­na, the cit­i­zens – so that the user is gen­tly guid­ed to the respec­tive busi­ness and con­se­quent­ly the gov­ern­ment gains more trans­paren­cy about the respec­tive user and his work.

To what extent this is com­pat­i­ble with the self-deter­mi­na­tion of users and con­sumers, which is an impor­tant val­ue in west­ern coun­tries, is anoth­er ques­tion. Here in Europe, dig­i­tal busi­ness is less con­cen­trat­ed but rather dis­trib­uted across var­i­ous providers, plat­forms and device man­u­fac­tur­ers. In democ­ra­cies, it is more dif­fi­cult for the state, as well as for the monop­o­lists, to obtain sole and com­pre­hen­sive insight into user behav­iour. Data pro­tec­tion reg­u­la­tions in West­ern coun­tries are still patchy, mean­ing not yet ful­ly devel­oped and not yet har­monised. There is more har­mon­i­sa­tion with­in the EU than there is in oth­er West­ern demo­c­ra­t­ic coun­tries, with the EU being well on the way to secur­ing infor­ma­tion­al self-determination.

You also write that monop­o­lies mean con­cen­tra­tion, effec­tive­ness, effi­cien­cy, pow­er and size, but at the same time they deprive peo­ple of diver­si­ty and com­pe­ti­tion and thus cre­ate depen­den­cy. Aren’t the monop­o­lies you men­tion rivals? What can a monop­o­list get out of raw mate­ri­als with­out ideas and mon­ey? What does a mon­ey monop­oly want and what can it do with­out raw mate­ri­als and ideas? It reminds me of the famous “desert game”, where the quin­tes­sence is that peo­ple, coun­tries, rulers, monop­o­lists achieve more togeth­er than alone. The “desert game”, in which a plane crash­es in the desert, deals with items such as a flash­light with bat­ter­ies, a pock­et knife with a spring blade, a mag­net­ic com­pass, a bot­tle with 1000 salt tablets, 1 litre of water per per­son, and a pis­tol, cal­i­bre 7.65mm, which the sur­vivors are sup­posed to rank accord­ing to their impor­tance for sur­vival. How do you see the rank­ing of the exist­ing monop­o­lies? Who is best equipped to rule the world or win the pow­er struggle?

In the best of all worlds, the prin­ci­ple of fair coop­er­a­tion with every­one applies. All cit­i­zens of this world would achieve the most prof­it and pros­per­i­ty with this prin­ci­ple if they could trade with each oth­er under fair con­di­tions and in open mar­kets and there could be an opti­mal bal­ance. This is the eco­nom­ic the­o­ry of the great fathers Marx and Engels.

What may be true in the­o­ry is usu­al­ly dif­fer­ent or even wrong in real­i­ty. We have recent­ly observed that oth­er polit­i­cal pow­er motives have been cru­cial. The prin­ci­ple of the fair opti­mum is fad­ing into the back­ground and is even being instru­men­talised for the goals of the respec­tive gov­ern­ments. We cur­rent­ly see this in Chi­na’s claim to become the first world pow­er replac­ing the US as a world pow­er, which Chi­na per­ceives as unfair. Monop­o­lies are being used in this strug­gle for first place. This changes the pow­er game enormously.

We were naïve and believed in the idea of ​​glob­al­i­sa­tion – mean­ing that goods can be obtained from any­where at any price. This has now changed. The raw mate­r­i­al monop­o­lies (e.g., cobalt, rare earths, etc.), which are extreme­ly impor­tant for the glob­al econ­o­my, are con­cen­trat­ed in Chi­na. As these raw mate­r­i­al monop­o­lies are state-run in Chi­na, the mon­ey need­ed for this endeav­our is avail­able. With these monop­o­lies, prices can be influ­enced at will. With a cre­at­ed scarci­ty in the mar­ket, the price ris­es while it goes down with an arti­fi­cial surplus.

Monop­o­lies cre­ate depen­den­cies. Because of the monop­oly, cus­tomers are unable to take advan­tage of oth­er offers from oth­er providers and to effec­tive­ly enforce eco­nom­ic pol­i­cy sanc­tions against the monop­oly – includ­ing against the state – espe­cial­ly if they can­not agree to the poli­cies of the coun­try in which the respec­tive monop­oly is based (e.g., the Tai­wan con­flict). Then, they kill them­selves. That is why monop­o­lies are not depen­dent on each oth­er. Instead, in the above-men­tioned con­stel­la­tions, they are an absolute pow­er being used in a tar­get­ed man­ner in geopo­lit­i­cal disputes

In the West, many are hap­py when GAFAM (data monop­o­lists) become com­peti­tors in adja­cent mar­kets. This cements the dom­i­nance of five big cor­po­ra­tions and demon­strates that no new com­peti­tors are enter­ing the mar­ket. The five major cor­po­ra­tions seem to have a ter­ri­to­r­i­al as well as a fac­tu­al divi­sion. Should a new tech­nol­o­gy devel­op – such as AI or Chat­G­PT – then some will rejoice at the pos­si­bil­i­ty of a pow­er shift – even though we don’t know how a new tech­nol­o­gy will trans­form the mar­ket. I think there are three key fac­tors: raw mate­ri­als, data and cap­i­tal. Regard­ing cap­i­tal, we have to remem­ber that we have an incred­i­ble con­cen­tra­tion of finan­cial and invest­ment resources. Here we have asset man­age­ment com­pa­nies or asset man­agers who own shares in all list­ed com­pa­nies. There are often 2 – 3 invest­ment groups from the USA that have at least the block­ing minor­i­ty in the respec­tive list­ed com­pa­ny – if not the major­i­ty of votes. And that, too is a con­cen­tra­tion of cap­i­tal and there­fore pow­er – and that, too, can be a deci­sive instru­ment of pow­er in crises.

Who is behind the monop­o­lies? Many of these peo­ple are unknown because their assets, their goods… mask the real own­ers through straw men, lob­by­ists, anony­mous let­ter­box com­pa­nies or also due to the lack of pub­licly acces­si­ble reg­is­ters. This makes it very dif­fi­cult to clar­i­fy and iden­ti­fy the true own­ers / monop­o­lists – the Rus­sia-Ukraine war has made this very clear. Is this an aspect of the new monop­oly? How can it be dealt with?

Not every­thing is unknown. A monop­oly is rel­a­tive­ly open. The Chi­nese raw mate­r­i­al monop­o­lies men­tioned are under state super­vi­sion. The four largest banks in Chi­na are also state-owned and are also the world’s largest banks.

In the West, GAFAM’s data monop­o­lies are only mod­er­ate­ly masked. It is known that the founders of Google and Face­book still have the major­i­ty of votes and deter­mine the gen­er­al meet­ings via shares.

The fidu­cia­ry rela­tion­ships you men­tioned take place par­tic­u­lar­ly with regard to tax havens. In addi­tion to tax sav­ings, one goal may be to con­ceal influ­ence. But it is clear who is behind the data, cap­i­tal and com­mod­i­ty monopolies.

There are also large con­cen­tra­tions of pow­er on the goods’ mar­kets due to the pres­ence of only a few sup­pli­ers. Let’s con­sid­er the ven­dors in the gro­cery stores. In Ger­many, 75 – 80% of food is owned by four cor­po­rate chains. When it comes to food sup­pli­ers, we have around 10 inter­na­tion­al mul­ti-nation­als that stock 60% of what is offered in the super­mar­ket. They are in a price war and are very suc­cess­ful­ly pass­ing on the costs of the Ukraine war, the ris­ing ener­gy costs and the addi­tion­al costs caused by the pan­dem­ic to the con­sumers, due to their posi­tion of pow­er. With trad­ing com­pa­nies, one must not for­get that six com­pa­nies have their own pri­vate labels, which have goods man­u­fac­tured for them under their pri­vate label, sell them on their own shelves, set prices and are cur­rent­ly increas­ing them sig­nif­i­cant­ly. We are there­fore cur­rent­ly expe­ri­enc­ing high infla­tion in the food mar­ket, because monop­oly struc­tures result in infla­tion because high­er prices are enforced and because the con­sumers have no alter­na­tives. The entre­pre­neurs of the monop­o­lies are well known. Only the flim­sy “excus­es” and the rea­sons for their behav­iour differ.

Are we wit­ness­ing a change of pow­er from the clas­sic dis­trict pres­i­dents to the monop­o­lists – be they pri­vate or state monop­o­lies? If so, will it stop at the ter­ri­to­r­i­al bor­ders or will the new ter­ri­to­ries be defined more as a dig­i­tal ecosys­tem and its metaverse?

Here you address the con­flict between sig­nif­i­cant eco­nom­ic and polit­i­cal pow­er. Let’s look at Chi­na, where we were able to see how suc­cess­ful Chi­nese dig­i­tal cor­po­ra­tions became rebel­lious (e.g. Aliba­ba with Jack Ma) and how the (sin­gle) par­ty act­ed very quick­ly. No com­pa­ny can eas­i­ly evade the will of the state. Jack Ma dis­ap­peared from the scene and the Chi­nese Com­mu­nist Par­ty quick­ly cleared things up.

It’s a lit­tle dif­fer­ent in the west. Our con­sti­tu­tion and our laws arise from the prin­ci­ples of democ­ra­cy, the sep­a­ra­tion of pow­ers, the rule of law… and are organ­ised by soci­etal insti­tu­tions. Pow­er is spread across many lev­els and, unlike in Chi­na, for exam­ple, is not based on the pow­er of individuals.

There is a belief in cap­i­tal­ism that com­pe­ti­tion rel­a­tivis­es the pow­er of indi­vid­u­als. With the devel­op­ing monop­o­lies, this cher­ished prin­ci­ple no longer works. In the last 30 years, there has been no effec­tive com­pe­ti­tion pol­i­cy, par­tic­u­lar­ly in the USA. The emer­gence of monop­o­lies and the fail­ure to cor­rect them with com­pe­ti­tion poli­cies have enabled today’s con­cen­tra­tion of pow­er. Europe and Ger­many were a lit­tle bet­ter in their com­pe­ti­tion pol­i­cy – even if they did­n’t make the cru­cial cor­rec­tions consistently.

If we con­sid­er progress and inno­va­tion – in par­tic­u­lar the emer­gence of a new dig­i­tal soci­ety – then the ques­tion aris­es whether this progress is still pos­si­ble with­out GAFAM. It is symp­to­matic of the cur­rent sit­u­a­tion that the EU has opened an exter­nal rep­re­sen­ta­tion in Sil­i­con Val­ley, thus recog­nis­ing the impor­tance and pow­er of Sil­i­con Val­ley today for the real­i­sa­tion and shap­ing of digi­ti­sa­tion. It is also remark­able that the for­mer Min­is­ter of Health, Jens Spahn, coop­er­at­ed with Google for his health por­tal “gesund​bund​.de” and pre­ferred to dis­play infor­ma­tion from the Min­istry of Health as the result of a Google search query. It was only lat­er that the court stopped the use of Google by the Min­istry of Health with ref­er­ence to antitrust violations.

Mar­kets are first con­sol­i­dat­ed, bequeathed or cleaned up from the point of view of the cor­po­ra­tions and reduced to a few. The state then has to sub­sidise or take over com­pa­nies (see the recent exam­ple of Uniper). Then it becomes eas­i­er for the state and com­mer­cial enter­pris­es to dis­cuss some­thing bilat­er­al­ly and to act togeth­er – this is the pre­vi­ous­ly men­tioned rel­e­vance of monop­o­lies in sys­tem competition.

If we think about the digi­ti­sa­tion of our pub­lic admin­is­tra­tion, it is also impor­tant to remem­ber, with which providers of cloud sys­tems we can or should work togeth­er. Should it be Ama­zon or Microsoft or Google? Ger­many and the EU can­not ignore these GAFAM giants. Pow­er just cre­ates more power.

Let’s look at one of the monop­o­lists, Mark Zucker­berg. Dig­i­tal instru­ments actu­al­ly enable demo­c­ra­t­ic process­es. Will these monop­o­lies real­ly be demo­c­ra­t­ic, phil­an­thropic and ori­ent­ed towards the com­mon good? Will the monop­o­lists as the new “rulers” take over the wel­fare tasks of the state? For tax rea­sons, Mark Zucker­berg has set up foun­da­tions where he him­self decides where to invest the mon­ey he earns. What hap­pens to the inter­ests of the com­mon good that the state tra­di­tion­al­ly got from taxes?

The monop­o­lists define the com­mon good them­selves. They want to be inde­pen­dent of spec­i­fi­ca­tions, laws, gov­ern­ment and pop­u­lar wish­es. Rather, they have their own ideas about what can be good and bad for the world.

First­ly, every­thing has to ben­e­fit their com­pa­ny: share prices, prof­it, range… They argue that they want to make the world a bet­ter place and they know how to do it. They intend to improve the world through tech­nol­o­gy. That is the belief of the big com­pa­nies in Sil­i­con Val­ley- how­ev­er they don’t have to wor­ry about dis­sent­ing voic­es. Con­trast aris­es from those who think dif­fer­ent­ly – from the res pub­li­ca, from cit­i­zens, vot­ers, the com­mu­ni­ty… who decide for them­selves and do not let an indi­vid­ual deter­mine everything.

When Mark Zucker­berg says “col­lec­tiv­i­ty is a human right”, he means the right to con­nect every­one with the means at his dis­pos­al. He deter­mines what the algo­rithms should be like, where and when they will be dis­played (see the US pres­i­den­tial elec­tion 2020) – what results they deliv­er… He does not care about hav­ing a real overview of the argu­ments exchanged on a top­ic, but sole­ly achiev­ing max­i­mum range and which con­tent and algo­rithms will achieve this goal.

A cor­po­ra­tion that depends on online adver­tis­ing offers top­ics of debate in order to attract as much atten­tion as pos­si­ble from its users. This approach leads to polar­i­sa­tion, to good busi­ness fig­ures and, ulti­mate­ly, to the upris­ing and storm­ing of the US Capi­tol on Jan­u­ary 6, 2020.

The next esca­la­tion is that an indi­vid­ual – such as Elon Musk – uses the short mes­sage ser­vice Twit­ter to address and pos­si­bly also manip­u­late large parts of the glob­al pub­lic. There­fore, the last chance we still have is the elec­tion of our gov­ern­ment rep­re­sen­ta­tives – a chance that no longer exists in Hun­gary or even in Turkey. We need to make pro­vi­sions for the com­mon good. That requires responsibility.

More and more ecosys­tems are emerg­ing in which data sub­ject leave behind their data. This is now also shown by the dis­pute between Face­book and Apple, which is about the bat­tle for data sub­jects. The rea­son is that who­ev­er has the most data sub­jects can best devel­op algo­rithms and set trends. It seems as if the own­ers of the respec­tive ecosys­tems want to give them­selves an image. Apple wants to stand for “pri­va­cy and infor­ma­tion secu­ri­ty” while Face­book focus­es on “net­work­ing”. Will the own­ers of these ecosys­tems be the rulers of tomor­row? Are these images the true “par­ty pro­grams” of these new own­ers and rulers? What are their true intentions?

Plat­form own­ers have the pow­er to cre­ate. Since AI will also play a major role in future, those who use and con­trol the inter­ac­tion of AI with plat­forms will be in a deci­sive posi­tion of power.

Just as the var­i­ous app stores are pow­er­ful paid door keep­ers (access con­trols), AI ​​will also become a pow­er­ful influ­encer and pow­er fac­tor. Access to the store does not come cheap because it rep­re­sents 30% of sales for those who wish to offer their prod­ucts in the Apple Store. An agree­ment involv­ing Apple not using its own search engine but instead inte­grat­ing Google search would cost Google billions.

You can­not leave or emi­grate from a dig­i­tal ecosys­tem as quick­ly as you can from a par­ty or a coun­try. The porta­bil­i­ty of data is tech­ni­cal­ly more dif­fi­cult, although it is required by law. Where is this head­ed? Do antitrust laws, state bud­gets, tax laws, the Dig­i­tal Mar­kets and Ser­vice Act, the GDPR, the pro­mo­tion of the start-up scene and medi­um-sized companies….do all these means offer enough oppor­tu­ni­ty for a cor­rec­tion to take place?

Yes, the new Euro­pean laws pro­vide for porta­bil­i­ty. The extent to which com­pa­nies will actu­al­ly imple­ment this porta­bil­i­ty remains an open ques­tion at the moment. Of course, every­one will try to bind their users, cus­tomers… to them­selves as close­ly and as skil­ful­ly as possible.

There are dif­fer­ent strate­gies. One of these strate­gies is the use of the net­work effect. If friends, fam­i­ly, col­leagues… are in an ecosys­tem (e.g., What­sApp), oth­ers will also be in it because they don’t want to lose touch with the “com­mu­ni­ty”, also enjoy­ing the infor­ma­tion exchanged their and want­i­ng to take part in that type of social life.

Of course, these pos­si­bil­i­ties in an ecosys­tem of this type are not free- because we pay for them with our data. As long as pri­va­cy has no demand mar­ket and peo­ple are not will­ing to pay any­thing to pro­tect their pri­va­cy, these tools and plat­forms will keep boom­ing. At present, there is not enough aware­ness of the prob­lem of pri­va­cy. In addi­tion to the sup­posed “free ser­vices” there is the con­ve­nience for users, the net­work effects, the sup­pos­ed­ly dis­tant and vague threat as well as the com­mend­ably smooth tech­ni­cal func­tion­al­i­ty of these dig­i­tal tools that ensure success.

Even though many peo­ple are strug­gling to sur­vive every day because of infla­tion, the few­er jobs that Indus­try 4.0 is caus­ing etc., this all means that peo­ple aren’t up to deal­ing with the social con­se­quences of digi­ti­sa­tion, and it is our task – espe­cial­ly that of the gov­ern­ment – to pro­vide infor­ma­tion and ini­ti­ate the debate.

You men­tion the “World Car­tel Office” in your book. Is that anoth­er new monop­oly? You also talk about “data trustee”. Isn’t that also a monop­o­list for data? You men­tion the use of a “data toll”. What form exact­ly do you think that could take? Who will pay for it and who will ben­e­fit from it?

We need data trustees so that we can have more trans­paren­cy, trace­abil­i­ty and qual­i­ty with regard to the algo­rithms. The com­pa­nies in ques­tion are cur­rent­ly sit­ting on their algo­rithms as if on a secret inven­tion. They are like Coca-Cola, which con­tin­ues to keep the recipe of their fizzy drink a secret. I imag­ine a data trustee to be an inde­pen­dent third par­ty who takes a look at the com­pa­ny’s algo­rithms and checks them – maybe also has them cer­ti­fied and approved for the mar­ket. This is an idea that has been brought up by Bun­des­bank Pres­i­dent Jens Wei­d­mann. This is the only way we can iden­ti­fy and elim­i­nate bias; this is the only way we can ensure equal treat­ment; this is the only way we can guar­an­tee fair process­es and equal rights for all users… It’s about fair­ness and objec­tiv­i­ty with regard to the pro­cess­ing of news.

GAFAM views Europe as a colony. They make sales, save tax­es at the same time through clever tax mod­els, use the good infra­struc­ture which is in place ‑such as the train­ing of Euro­pean cit­i­zens in Europe- use the data of Euro­pean cit­i­zens for eval­u­a­tions and AI devel­op­ments… Here it would only be fair if GAFAM ben­e­fi­cia­ries also had to pay data toll to a fund, which in turn could sup­port the infra­struc­ture of the dig­i­tal tools and the nec­es­sary rules with money.

Our com­pe­ti­tion pol­i­cy is still nation­al­ly ori­ent­ed. There are also bilat­er­al forms or the Car­tel Office of the Euro­pean Union. There are also many dis­cus­sions among coun­tries on how to deal with GAFAM.

If we open the mar­kets and com­pa­nies oper­ate on a glob­al basis, then we also need a glob­alised struc­ture for com­pe­ti­tion and its insti­tu­tions. There were con­sid­er­a­tions about this in the 1990s – e.g., by Jür­gen Haber­maas – but no con­crete imple­men­ta­tions took place. There have been advances in oth­er areas – such as the Inter­na­tion­al Crim­i­nal Court in The Hague – even if not all states have agreed to this.

My opin­ion is:

A world that wants to work togeth­er on a glob­al basis also needs glob­al rules.

I sup­port reg­u­lat­ed globalisation.

Hans-Jür­gen Jackobs

Glob­al­i­sa­tion is cur­rent­ly being polit­i­cal­ly mis­used. Today, glob­al­i­sa­tion is under­stood as think­ing in terms of spheres of inter­est and of pow­er blocs. This is a new glob­al­i­sa­tion – a glob­al­i­sa­tion that oper­ates between pow­er blocs. I’m very much in favour of exchange and plu­ral­i­ty. At the same time, I am also for reg­u­la­tion and I am very much against the inequal­i­ty that glob­al­i­sa­tion has brought so far. I’m all for peo­ple shar­ing the returns.

We cer­tain­ly need “Chi­na cap­i­tal­ism” as a neg­a­tive image in order to con­trast it with a pos­i­tive image in the West. IAR by Joe Biden is the first reac­tion to it We also need clos­er coor­di­na­tion between the FCC and the EU Com­mis­sion on com­pe­ti­tion mat­ters before we think about a world antitrust agency.

Are state monop­o­lies such as Chi­na bet­ter equipped than pri­vate monop­o­lies, democ­ra­cies and so on?

Yes, these are state monop­o­lies if you allow them to exist. These are con­struc­tions that work with the advan­tages of the mar­ket econ­o­my in order to actu­al­ly work against them in the end. It’s a dialec­tic trick. It is a planned econ­o­my that is expand­ing by means of par­tial mar­ket solutions.

We need coun­ter­mea­sures – such as import duties into the EU – when it comes to imports into Europe – espe­cial­ly when dump­ing prices are specif­i­cal­ly under­pinned by gov­ern­ment sub­sidy strate­gies (con­sid­er the exam­ple of dump­ing prices for solar tech­nol­o­gy). This is the only way to cre­ate bal­anced com­pet­i­tive con­di­tions again. An indus­tri­al pol­i­cy is need­ed in these pow­er blocs – and Joe Biden is doing exact­ly that with IAR. Struc­tur­al aid and com­pen­sato­ry mea­sures are need­ed. We must main­tain com­pe­ti­tion while sup­port­ing and main­tain­ing promis­ing, high-qual­i­ty and just plain good industry.

Digi­ti­sa­tion brings with it automa­tion and enor­mous speed. Of course, dig­i­tal media and tools reach the indi­vid­ual cit­i­zen direct­ly and of course these means could be used for a direct and imme­di­ate analy­sis of the peo­ple’s wish­es: for opin­ion-form­ing, clar­i­fi­ca­tion, trans­paren­cy, and the find­ing of a viable con­sen­sus. In oth­er words, demo­c­ra­t­ic process­es can be sup­port­ed even more effec­tive­ly by dig­i­tal pos­si­bil­i­ties. On the oth­er hand, these tools are also prone to mis­use. Democ­ra­cy needs time to form opin­ions and find a major­i­ty con­sen­sus so that deci­sions can be imple­ment­ed that some­times are in oppo­si­tion to the speed of digitisation.

It is not always clear whether quick deci­sions are always the best ones. Even quick deci­sions can turn out to be bad. It’s about the qual­i­ty of the deci­sions and I think it’s impor­tant that the affect­ed peo­ple are involved – even if it’s cum­ber­some and involves many lev­els. There are advan­tages as well as dis­ad­van­tages in dig­i­tal­i­ty as well as in the var­i­ous forms of gov­ern­ment of democ­ra­cy and autoc­ra­cy. Let’s look at Chi­na’s Covid strat­e­gy, where vac­ci­na­tion, vac­cine, lock­down, dis­cus­sion oppor­tu­ni­ties etc. were quick­ly decid­ed. Now, in ret­ro­spect, it is only pos­si­ble to assess whether one or the oth­er strat­e­gy was more suc­cess­ful, whether it was decid­ed demo­c­ra­t­i­cal­ly or auto­crat­i­cal­ly, whether it was imple­ment­ed quick­ly or after a major­i­ty vote.

The range of dig­i­tal­i­ty is also an impor­tant aspect. Data, infor­ma­tion and knowl­edge do not stop at nation­al bor­ders. On the con­trary, they cross them every sec­ond, so that influ­ence from out­side can be felt. Here democ­ra­cies need pre­cise rules of gov­er­nance and improved vot­ing qual­i­ties as a time­ly reac­tion to the speed of dig­i­tal tools, the clout of cen­tral struc­tures, the use of monop­o­lies and the ideas of autoc­ra­cies. The cur­rent sta­tus quo is still insuf­fi­cient because many nec­es­sary adjust­ments are still pend­ing. The USA is a democ­ra­cy which, for exam­ple, wants to counter high infla­tion with a bold step in the form of the IRA Act (Infla­tion Reduc­tion Act) and wants to pro­mote cli­mate pro­tec­tion in the USA. This allows for­eign com­pa­nies to estab­lish them­selves and, in this way, val­ue is cre­at­ed. With start-up aid and start-up sub­si­dies, the USA is aim­ing for a change in its nation­al econ­o­my and an increase in its own val­ue cre­ation. That kind of goal can be designed. Ms. von der Leyen gave the Euro­pean answer to the IRA Act in the form of the Green Deal. The imple­men­ta­tion of the Green Deal will cer­tain­ly take a long time because the Euro­pean Com­mu­ni­ty con­sists of many mem­ber states, requires dif­fer­ent majori­ties (usu­al­ly even una­nim­i­ty) – in short, it is set up and organ­ised very differently.

We see in the west­ern states that the attacks from the left and from the right are becom­ing more and more pow­er­ful. We can also observe that the polit­i­cal­ly lib­er­al cen­tre con­tin­ues to shrink. But I am con­vinced that democ­ra­cies could be well pre­pared with bet­ter gov­er­nance rules.

Could the monop­o­lies arise because of digi­ti­sa­tion and the growth of the real econ­o­my? In the 1980s, invest­ments in the real econ­o­my were twice as high as in the finan­cial econ­o­my. Today – that is, 50 years lat­er – invest­ments in the finan­cial econ­o­my are 10 times high­er than in the real econ­o­my. Is this finan­cial econ­o­my and its returns financ­ing the pan­dem­ic today and per­haps uncon­di­tion­al income tomor­row? If so, the real econ­o­my and the finan­cial econ­o­my are depen­dent on one anoth­er. What effects will this have on the real econ­o­my – espe­cial­ly if the real econ­o­my employs few­er and few­er peo­ple, because the finan­cial econ­o­my actu­al­ly needs the real econ­o­my, its invest­ments and the huge depreciation?

The finan­cial sec­tor has par­tial­ly extri­cat­ed itself from the real econ­o­my. Many things are now being cre­at­ed in the finan­cial sec­tor itself. The long-last­ing low-inter­est pol­i­cy has led to a large sup­ply of cap­i­tal mar­kets. There has been a sys­tem emer­gency for more than 10 years. New prob­lems and depen­den­cies have arisen – espe­cial­ly when the mon­ey need­ed for old-age pro­vi­sions needs to be found then there are big ques­tions out there when crises occur.

After the finan­cial cri­sis of 2008, there was – at least for a short while- the idea that banks and the finan­cial sys­tem had to become an enti­ty for and of its cit­i­zens and com­pa­nies – in short, the real econ­o­my. That was for­got­ten just as quick­ly as the claim “too big to fail” wasn’t sup­posed to exist.

The inher­ent momen­tum in finance is so great and the con­cen­tra­tion of cap­i­tal so immense that the deci­sive change has not yet tak­en place. I am talk­ing about laws to con­tain shad­ow bank­ing (hedge funds, asset man­age­ment, pri­vate equi­ty…). Risky loans are offered here and the risks of a lack of liq­uid­i­ty in the event of a cri­sis also exist. This is a big prob­lem that has been talked about and debat­ed for years with­out any progress being made. In the event of a cri­sis, this can fall on our heads.

We see bank runs at region­al banks, at Sil­i­con Val­ley Bank and at Cred­it Suisse. In the shad­ow bank­ing sec­tor, the effects and thus the risks are even greater. The rea­sons for this are the low inter­est rate pol­i­cy and digi­ti­sa­tion. Many finan­cial trans­ac­tions are con­duct­ed dig­i­tal­ly. There is no longer any human work at the ETF. It is com­put­ers, soft­ware and algo­rithms that invest the mon­ey. Investors are hap­py because they hard­ly have to pay any more fees.

The result is a mas­sive con­cen­tra­tion of cap­i­tal. The ratio­nale of the mar­kets only works if there are enough mar­ket par­tic­i­pants with dif­fer­ent opin­ions. If every­thing fol­lows the same mech­a­nism and pur­sues the same goal, because algo­rithms and automa­tisms organ­ise it that way, then the game changes enormously.

With AI, which we can use in both finance and the real econ­o­my, there is a new pow­er fac­tor that will change the cur­rent sit­u­a­tion. Today we can only guess what will hap­pen. There will cer­tain­ly be changes in pro­duc­tion process­es, job cre­ations, work restruc­tur­ing, speed­ing up of deci­sions… It will be hard to accom­pa­ny this new pace with good busi­ness deci­sions and bal­anced leg­is­la­tion. AI is a dis­rup­tive tech­nol­o­gy that brings many changes and there­fore needs a pub­lic dis­cus­sion. We can’t let this go unnoticed.

We have to think about the goal of digi­ti­sa­tion. Digi­ti­sa­tion is not an end in itself, but the result of a pub­lic debate. We need clar­i­ty about where the jour­ney should go with the help of digi­ti­sa­tion. AI is a dri­ver of new busi­ness, mar­kets and thus new prof­it. Stock trends will go up.

In social terms, AI can lead to an improve­ment in the rela­tion­ship between pub­lic author­i­ties and cit­i­zens by mak­ing admin­is­tra­tive trans­ac­tions eas­i­er and faster (e.g. tax returns, reg­is­tra­tion cer­tifi­cates, smart meters for opti­mal ener­gy con­sump­tion…). AI could also lead to con­sumerism in soci­ety… Many of these advan­tages added to the mix will lead to a new world. Amer­i­cans refer to this as the pur­suit of hap­pi­ness 4.0. The task of social dis­cus­sion must be how we humans deter­mine this “hap­pi­ness”, how we con­trol abuse and how the advan­tages of a changed world ben­e­fit everyone.

Does Europe still have a chance, even though it has few monopolies?

We have strong cor­po­ra­tions. In Bernard Arnault we have one of the rich­est men in the world. But Europe does­n’t have real­ly the biggest beacons.

What mat­ters is where the deci­sions are made and who has the last word. These deci­sion-mak­ing cen­tres are main­ly locat­ed in the USA and the Peo­ple’s Repub­lic of China.

Europe is strug­gling to organ­ise itself. There are good pro­grams, ideas, ini­tia­tives and mon­ey is being made avail­able. Unfor­tu­nate­ly, a lot of things get mixed up, such as Gaia X.

Progress can­not usu­al­ly be achieved in large work­ing groups. There are too many par­tic­i­pants, the deci­sion-mak­ing process is just too demo­c­ra­t­ic and the organ­i­sa­tion and the rules of the game are most­ly unsuitable.

I am putting my hopes in start-ups. Due to our good edu­ca­tion sys­tem, Europe has very well edu­cat­ed and resource­ful young peo­ple. We have a lot of good uni­ver­si­ties that both the US and the Peo­ple’s Repub­lic have their eyes on in order to poach tal­ent from there. Exact­ly this start-up scene as well as the inven­tive­ness of the Euro­peans can be our strength. Europe should ensure that inno­v­a­tive com­pa­nies that come from Europe stay in Europe. We should net­work strong­ly in Europe and let start-ups grow. Medi­um-sized com­pa­nies have poten­tial, while the large Euro­pean cor­po­ra­tions cer­tain­ly had their peak in the indus­tri­al rev­o­lu­tion and can­not assume the role of resource­ful, agile speed­boats. His­to­ry has taught us over and over again that peo­ple have always been resource­ful and have always found a way out from bot­tle­necks, a lack of raw mate­ri­als, goods, cap­i­tal and depen­den­cies…. When the demand for nat­ur­al rub­ber increased and resources were insuf­fi­cient to meet demand, syn­thet­ic rub­ber came along. I am sure that Europe with its ideas and inno­va­tions will influ­ence the monop­oly game.

Mr Jakobs, thank you for shar­ing your insights on the evo­lu­tion of monop­o­lies and their impact on today’s geopo­lit­i­cal confrontations.

Thank you, Dr Cal­daro­la, and I look for­ward to read­ing your upcom­ing inter­views with recog­nised experts, delv­ing even deep­er into this fas­ci­nat­ing topic.

1 Shoshana Zuboff, The Age of Sur­veil­lance Cap­i­tal­ism: The Fight for a Human Future at the New Fron­tier of Power

About me and my guest

Dr Maria Cristina Caldarola

Dr Maria Cristina Caldarola, LL.M., MBA is the host of “Duet Interviews”, co-founder and CEO of CU³IC UG, a consultancy specialising in systematic approaches to innovation, such as algorithmic IP data analysis and cross-industry search for innovation solutions.

Cristina is a well-regarded legal expert in licensing, patents, trademarks, domains, software, data protection, cloud, big data, digital eco-systems and industry 4.0.

A TRIUM MBA, Cristina is also a frequent keynote speaker, a lecturer at St. Gallen, and the co-author of the recently published Big Data and Law now available in English, German and Mandarin editions.

Hans-Jürgen Jakobs

Hans-Jürgen Jakobs is an economist and one of Germany's most respected business journalists. He has worked for Der Spiegel, among other magazines, and was head of the online edition and the economics editorial department of Süddeutsche Zeitung. Since 2013, he has held various positions at the Handelsblatt publishing group, until 2015 as editor-in-chief and since 2016 as senior editor of the Handelsblatt. Since 2018, he has also been the editor of Handelsblatt Morning Briefing, with a circulation of more than 130,000 readers. His most recent bestselling publications are "Who Owns the World" and "The Monopoly in the 21st Century".

Dr Maria Cristina Caldarola

Dr Maria Cristina Caldarola, LL.M., MBA is the host of “Duet Interviews”, co-founder and CEO of CU³IC UG, a consultancy specialising in systematic approaches to innovation, such as algorithmic IP data analysis and cross-industry search for innovation solutions.

Cristina is a well-regarded legal expert in licensing, patents, trademarks, domains, software, data protection, cloud, big data, digital eco-systems and industry 4.0.

A TRIUM MBA, Cristina is also a frequent keynote speaker, a lecturer at St. Gallen, and the co-author of the recently published Big Data and Law now available in English, German and Mandarin editions.