Skip to main content
Faculty Viewpoints

Social Media, the Corporation, and the State

Recent reports have shown that the Russian government used social media platforms in an effort to interfere in the 2016 election in the United States. Prof. Shyam Sunder assesses some of the complications that arise when multinational corporations become implicated in political questions.

  • Shyam Sunder
    James L. Frank Professor of Accounting, Economics, and Finance

On October 31, lawyers for Facebook, Google, and Twitter explained to the U.S. Congress their business practices on privacy and political advertising. Governments around the world wait and watch Washington before deciding on managing the novel information age interactions between economics and politics.

Geographically, the earth’s land mass is divided into approximately 200 countries, each with political sovereignty and some control over its territory and people. The governance of economic activity is different; shareholders, labor, customers, suppliers, and governing jurisdictions of business corporations cannot be uniquely identified within geographic and political borders. As long as the economic activities of multinational corporations remain largely independent of the political sphere, the potential for conflicts between them is manageable.

Problems arise, however, when the economic and political imperatives bring the conflicts of overlapping identities from the periphery to the center. In congressional hearings, these three social media behemoths, including two of the largest corporations in the world, testified on matters arising from this conflict. And this is just the beginning....

These three companies—Facebook, Google and Twitter—are in the business of selling advertising. Their vast social media services (putatively free) gather and store information on visitors to their sites, and use the information to sell targeted advertisements to their paying clients. Most clients seek to sell goods and services; that part of their business is confined to the economic domain, governed by commercial law and regulation.

However, not all the advertising is commercial; some of it sells ideas, policies, legislation, and political candidacies with economic as well as political consequences. Website content, especially the news, can be manipulated or even fabricated. Commercial advertising across political boundaries has been largely unobjectionable. What happens when political advertising crosses political boundaries?

Radio Free Europe and Radio Liberty are two examples of pervasive Cold War tactics of the Soviet Union and the U.S. government created to target each other’s citizens with propaganda and “news.” Foreign governments subsidized newspapers, magazines, and books in Asia and Africa to gain political influence with the population.

In contrast to these Cold War tactics, technological advances of the internet and the social media raise new concerns:

  • Cross-border propaganda and manipulation has been concealed under commercial and domestic political advertising, and its foreign sources went unnoticed for some time.
  • These technology platforms are built of software with little transparency about what they do behind screens. Only the companies know what data they gather, and how they choose and transform what they disseminate. 

  • Because the scale of these modern companies is so large (with billions of users and millions of advertisers), only a minority in the world is beyond their reach. A data leak from their computers will make the Equifax leak look like child’s play. 

  • The world outside watches with bemusement the self-righteous anger in the U.S. media and political circles regarding Russian interference. Things look very different depending on which side of the lens you stand on. The U.S. government’s covert financing of political parties in legitimate constitutional democratic elections in Asia and Africa, even Europe, is hardly newsworthy. 
Facebook, Google, and Twitter are multinational companies with a strong global, monopolistic footprint. When the U.S. legislates regulatory power and access to their internal mechanisms, will the governments of other countries demand similar rights and access? What would prevent any government from using such powers to their own political ends? Will the business models of these firms survive sharing of their internal mechanisms with so many governments? 

The interaction between politics and economics has never been easy. The current world order is based on the assumption that there are two types of boundaries—political (government) and economic (business corporation)—largely independent of each other. Freer international trade has brought much prosperity to the world. When the two kinds of boundaries engage with each other in unacceptable ways, businesses may have to be contained within the political boundaries (e.g., Baidu in China to exclude Google’s search engine), unless we are willing to contemplate the reverse and its consequences for a changing world order. 

Department: Faculty Viewpoints