Facebook under scrutiny. The practices of the world’s sixth largest company, Facebook,  dominated the US media last week following the revelations of a whistleblower, Frances Haugen, a former Facebook employee. Giving evidence to Congress, Haugen accused Facebook (which owns both Instagram and WhatsApp) of knowingly harming children’s mental health and fomenting violence and extremism around the world. The company puts its “astronomical profits before people”, she said. Haugen posted the video and text of her opening statement. 

  • Facebook’s business model. Over the last month Haugen has leaked hundreds of internal documents to the Wall Street Journal detailing Facebook’s awareness of the damage it causes. Haugen said Facebook could act on these but does not, because “the business model of Facebook is designed to maximise attention at any cost”. She compared Facebook to the big tobacco companies who for decades concealed the evidence they had on the link between smoking and cancer. She called for Facebook’s “unaccountable” algorithms and safety practices to be regulated. 
  • Reaction. Both Democrat and Republican Senators condemned Facebook’s behaviour but even relatively weak privacy legislation is currently stalled in Congress and observers do not expect serious regulation to be agreed. Facebook CEO (and 55% shareholder) Mark Zuckerberg reacted to the accusations - and to the six-hour outage which the company also experienced last week - in a blogpost

Further evidence. Haugen’s evidence is the latest in a series of revelations about Facebook’s behaviour and business model, as the Washington Post and Carole Cadwalldr (the Observer journalist who broke the Cambridge Analytica story in 2018) explained.

Big tech and monopoly power.  In October 2020, a House of Representatives antitrust subcommittee published a landmark report investigating Amazon, Apple, Google and Facebook. It argued that all four platforms abuse their monopoly or near-monopoly power to enhance their profits at the expense of competitor companies. 

  • Platform capitalism. Nick Srnicek’s book Platform Capitalism offers an analysis of how the ‘platform’ business model enables digital companies to accumulate monopoly power through the ownership and sale of users’ data. He summarised his argument for IPPR
  • Surveillance capitalism. Harvard academic Shoshana Zuboff’s book The Age of Surveillance Capitalism (summary here) details how digital platforms have created a “fundamentally anti-democratic new economic logic”. (Read this interview with the author and watch this video documentary for more.)
  • Advertising models. The Open Markets Institute, the leading US campaign organisation against monopolies, summarised in a Twitter thread the way in which Facebook’s and Google’s “surveillance advertising” model invades privacy, promotes discrimination and supercharges incendiary content. 

Alternatives. Mariana Mazzucato, Rainer Kattel and colleagues at UCL explain how the state can redress the problems of the major tech companies’ monopoly power. Maximising the public and social gains of technological innovation whilst minimising their harms requires a combination of legal changes, stronger antitrust/competition regulation and changes to the ownership of data and companies. Yale University organised a timely event last week on possible legal and regulatory reforms with Facebook whistleblower Frances Hagan, Tristan Harris, subject of the Netflix documentary The Social Dilemma, Shoshana Zuboff, author of Surveillance Capitalism and other experts; you can watch it here

Weekly Updates

Industrial strategy

Rising gas prices and heavy industry. The FT reports that Chancellor Rishi Sunak is now considering a rescue plan for energy-intensive sectors to ameliorate the impact of extremely high gas prices. The Business Secretary, Kwasi Kwarteng, is believed to have proposed “loans and other support worth in the low hundreds of millions of pounds” to firms in the steel, ceramics, glass and paper industries.


Energy markets and ownership. Brooke Masters in the FT explained how the “natural gas crisis highlights the limits of free markets in decarbonisation”. We Own It’s Johnbosco Nwogbo explained why greater public ownership in the energy sector will allow for better security for the industries affected by fluctuations in commodity prices.

Learning from past mistakes and other countries. The Cambridge Bennett Institute published a report exploring the deficiencies of industrial policy in the UK since the 1970s and contrasts them with the experiences of other advanced economies. The authors, Cambridge economist Professor Diana Coyle and Adam Muhtar, recommend “embedding a more systematic mechanism of policy updating” than frequent policy reversals driven by political cycles.

Paradigm shift

PM’s vision of a new economy. Boris Johnson’s keynote speech to the Conservative Party conference pledged to “turn Britain away from the political and economic orthodoxy of the past 40 years”, characterised by “an old broken model with low wages, low growth, low skills and low productivity, all of it enabled and assisted by uncontrolled immigration.” Minus the point about immigration, the passage echoed criticism more familiar from the left: see for example the final report of the IPPR Commission on Economic Justice

  • Criticism from the right. The speech attracted strong criticism from right-wing free market think tanks such as the Adam Smith Institute - which called it an “agenda for levelling down to a centrally-planned, high-tax, low-productivity economy” - and the Institute for Economic Affairs, who similarly criticised a strategy based on “unnecessarily restricting the supply of labour to lead to wage increases”.
  • Analysis. Goldsmiths political economist William Davies noted that “Johnson’s newfound interest in economic models tells us something about how this weird new Conservative party is operating. It is equally significant that Keir Starmer – in contrast to his two predecessors – shied well away from discussing the state of British capitalism. The terms of political debate appear to have flipped.”
  • Public attitudes. NEON polled Conservative voters and found majority support for a variety of progressive policies. These included a minimum income sufficient to meet living costs, banning zero hours contracts, moving to a 32 hour work week with no loss of pay, rent controls, a pandemic profits windfall tax, wealth tax and more. 
  • A new paradigm? The Berlin-based Forum for a New Economy are running a workshop at the end of the month to evaluate the idea of a new economic paradigm. Register here.

International cooperation and tax

International corporation tax deal signed but watered down. A historic deal to impose a global minimum corporate tax of 15% by 136 countries was agreed at the OECD. But tax Justice Network’s (TJN) Alex Cobham explains how the deal was watered down during the negotiations:

  • Pillar 1. Pillar 1 aims to reduce profit shifting by allowing countries to tax multinationals based on a company’s sales in that country, rather than registered profits (as these can be shifted to lower tax jurisdictions). This was originally intended to be universal, but now only applies to a small part of the profits of just 100 multinationals. TaxWatch’s George Turner explains that Big Tech companies will end up paying less under Pillar 1 than they do under current Digital Services Taxes so “the new plan represents a tax cut for big tech in the UK and many other European countries”. (More analysis from TaxWatch here)

Monetary policy and finance

An inflation hawk? Huw Pill, the Bank of England’s new chief economist, gave his first public remarks, indicating his “great concern about the inflation outlook”, which “looks set to prove more long-lasting than originally anticipated”. This was widely interpreted to mean that he would vote in favour of an early rise in interest rates

Post-Brexit deregulation of financial services. Chancellor Rishi Sunak suggested a move towards more regulatory divergence with EU rules on financial services to help the City of London “boost its global competitiveness”

Local economies and public services

Conservative MPs call for community power. A group of Conservative MPs from the 2019 intake have published a report calling for a ‘double devolution’ to councils and communities. The report, Trusting the People, includes recommendations to “remodel our economic institutions to put the values of ordinary people, rather than the abstract forces of finance, at the centre of decision making”.

Local government funding struggles. The IFS’s Green Budget chapter on local government funding examines the impact of the pandemic on councils’ ability to maintain services, finding that “English councils will likely face large funding gaps over the next two years under current spending plans, even with large council tax rises”. The IFS said that keeping services running at pre-pandemic levels and funding the government’s social care reforms could require raising council tax by as much as £220 per year by 2024/2025

Reducing health inequality through local economic development. Professor Sir Michael Marmot’s Institute of Health Equity and Public Policy Projects have published a report outlining place-based problems and solutions to UK health inequality, arguing that “when the private, public and voluntary, community and social enterprise (VCSE) sectors and communities work together, it is possible to create more equitable and healthy societies.”