Tech wars threaten global business
Companies today need to guard against weaponised disinformation
We are entering a new kind of cold war, driven by the growing competition between countries to lead innovation in technology infrastructure and the rise of a new breed of populist leaders with interventionist instincts.
As the line between the political and business worlds blurs, a variety of protectionist tools emerge, from tariffs and corporate blacklists to cyberwar and disinformation.
Companies could increasingly find themselves in the crosshairs, according to findings from EY’s “Megatrends 2020” report, which assesses how businesses need to respond to rising challenges.
Populist and nationalist leaders have been gaining power across the world. To varying degrees, such leaders have interventionist and protectionist instincts. These leaders are emerging in democracies and shifting long-standing norms across the global system.
Many see this as a temporary aberration, anticipating a return to the old normal in the near future. But the trend towards government intervention and domestic “boosterism” is widespread and sustained.
China’s Made in China 2025 initiative, for instance, aims to promote domestic manufacturing across a range of hi-tech sectors, from aerospace to robotics — an ambition that will put it in direct competition with the US. The Indian government of Prime Minister Narendra Modi has launched Make in India, which gives preference to domestic manufacturing across a spate of industries.
Since populist and nationalist leaders tend to have interventionist instincts and, by definition, favour nationalist policies, these examples are likely a sign of things to come.
Initiatives such as Made in China 2025 are driven in part by competition to dominate the next generation of technological infrastructure, from artificial intelligence (AI) to supercomputers and electric vehicles. The stakes are high; significant economic benefit and power may accrue to those who shape these technologies.
Is thiswhy governments are intervening in these technology domains — and not just with traditional tariffs and quotas?
The US has banned specific foreign (mostly Chinese) companies. There are reports of increased scrutiny of Chinese scientists working in the US.
Russia has banned smartphones, computers and smart televisions that are not pre-installed with Russian software, even announcing plans to set up its own alternative to Wikipedia. And the US military has banned service members from using Chinese-made social media platform TikTok amid growing concerns about security risks.
It is hard to untangle the true motivations behind these actions. They’re often justified not by protectionism but issues such as national security risks, industrial espionage or human rights violations. While these concerns may be valid, it’s difficult to tell since much of the relevant information is classified.
Regardless of the motivation, the result is the same: national governments are targeting foreign companies, platforms and individuals in critical tech infrastructure spaces such as 5G, AI and facial recognition.
Cyberattacks are nothing new. But in the decade since Stuxnet (a computer virus that is often regarded as the world’s first cyberweapon), the line between state and non-state actors has blurred.
Governments have begun using cyberattacks not just for national security purposes against military assets or public infrastructure, but for financial reasons (for example, the theft of millions of dollars from the Bangladeshi central bank) or to pursue other political goals. In many cases, governments are collaborating with non-state actors on these cyberattacks, to mask the state’s involvement and give it a veneer of deniability.
Meanwhile, the targets of state-directed cyberwarfare have expanded beyond military and infrastructure assets. Companies are increasingly becoming victims, either as targets or as collateral damage.
More recently, cyberwarfare has expanded into a new domain: disinformation. The target is not physical infrastructure, data or money, but truth itself.
This form of cyberwarfare burst into the public consciousness after the 2016 US presidential election. There’s every reason to think similar tactics could be used to attack companies. Since markets thrive on transparent information, undermining a company’s credibility is a potent weapon.
These trends create significant challenges and risks for government and business leaders.
The implications for governments are more apparent. States typically don’t disclose their cybercapabilities, whether offensive or defensive, but this is clearly an increasingly important area of focus.
The other instruments of intervention, from company blacklists to information warfare, are newer. They undermine existing norms and make international relations more complex and unpredictable.
The implications for business are no less disruptive.
For one, these trends reinforce the importance of cybersecurity, while emphasising that the definition of cyberrisk is itself expanding. Companies today need to guard against not just malware and phishing attacks, but weaponised disinformation.
The net result of these trends could be an increasingly balkanised global economy. Multinational companies operate on a global stage, with sophisticated supply chains,
R&D outfits and sales and marketing networks that span national boundaries.
The techonomic cold war threatens the mechanisms that make global operations possible.