How Big Tech can help insulate the economy through the pandemic downturn

Big Tech - Google, Facebook and Amazon in particular - has had a serious image problem for several years. Whether it has been spreading misinformation, undermining democracies, or paying minimal or no tax, Big Tech has a lot to answer for. 

If those firms can step up and support struggling businesses through the pandemic with advertising grants, they can repair their reputations and make their balance sheets even stronger in the long run.

Big Tech CEOs’ mauling by Congress during July’s antitrust hearings should have been a wake-up call: as lawmakers in those companies’ biggest market consider breaking up what are de facto monopolies, many tech execs will be asking how they got here. 

It is those huge firms’ tax avoidance strategies that have raised perhaps the most criticism - in February the Internal Revenue Service sued Facebook for $9 billion in unpaid taxes, and I believe that governments would view them much more positively if they paid what is considered their ‘fair share’ of tax.

This tax position has become even harder to justify as much of the world enters a pandemic recession, which could be deeper and longer than the last downturn in 2008. But this recession is different. There is one sector - tech in general, and Big Tech in particular - that is not only immune to the economic fallout, but is prospering throughout this downturn.

In the last six months, Google’s stock price has risen by 30 percent. Facebook’s stock is up nearly 60 percent, as is Amazon’s, leading Jeff Bezos’s wealth to surpass $200 billion thanks to the pandemic.

A crisis for the world economy is a boom for Silicon Valley.

But the money is just part of the story of how Covid-19 has benefited Big Tech. Those firms are now more important than ever before, thanks to a global shift towards technocracy. Governments' ability to govern has never been more dependent on tech, whether that means using search data to predict virus hotspots, partnering with social media to convey public health messages, or relying on Amazon’s logistics to dispatch Covid-19 test kits and other essential supplies.

Beyond the pandemic itself, a pivot towards e-commerce can only mean more power - and dollars - for those firms. 

But with great power comes great responsibility. It has become clear that, despite their best efforts, there will always be a significant degree of misinformation on social media. The internet is simply too vast to attempt to regulate its content in the same way as traditional media, despite there being little or no legal or ethical distinction between a digital publisher and the print equivalent.

And social media will continue to be open to abuse or manipulation during election cycles around the world.

It is also unlikely that those firms will pay more tax than they are legally obliged to. The nature of tech means they will always be able to base themselves in tax havens with minimal profits being banked in high tax jurisdictions.

But there is a way that Big Tech can maximise the new digital economy, support small business growth online, and repair their reputations with both governments and the public - all of which is to their benefit.

Digital advertising grants could achieve all of the above. Google and Facebook in particular are the lifeblood of many small businesses I have encountered over the last decade or more. Some businesses are located away from urban centres and high streets, meaning online advertising is the only cost-effective way for them to seek out new clients.

These conditions are now part of the norm for many more businesses, as people spend more time at home and high streets are often deserted across the industrialised world.

A Google advertising credit grant of $1000, for example, could drive as many as 2000 potential new clients (at 50 cents a click) to that business. That could be the difference between insolvency and profit for the business owner. And it could lead to unprecedented growth in advertising demand for Google, Facebook and others.

It would also be a much more positive form of aid for struggling businesses. Rent-holidays and subsidised employee wages are welcome assistance, but all they do is buy time - those measures do nothing to help businesses adapt to the new economy and create sustainable profit models.

It is those new business models that are essential if today’s worst fears around economic crashes, mass unemployment and systemic business failures are to be averted.

Big Tech has often styled itself as the world’s saviour, and on occasion, it has delivered on this promise.  What it did for democracy during the Arab Spring, it can now do for the economy through the Covid recession