Remarks By Former Ambassador Jeff Bleich in AmCham U.S. Delegation
Tuesday, 22 October 2019
View remarks by former Ambassador Jeff Bleich in San Jose, 15 October 2019
Thank you, April. I’m so grateful to all of you for inviting me to speak tonight. Most of my other friends from the diplomatic corps have to rely on Congressional subpoenas for their speaking opportunities this week. So, in that spirit, up front, I swear to tell the truth, the whole truth, and nothing but the truth. Since we are here in my hometown of Silicon Valley, I will focus on issues of importance here. Fortunately, I’ve seen the Valley is already leaving its lasting impression on you. Those of you who had not realized that you actually need a puffer vest with a corporate logo to enter most buildings, we have you covered. I’m also pleased that we cured any and all kale or quinoa deficiencies you may have been experiencing prior to arrival. Hopefully, you’ve now learned to use the terms “stack,” “scale,” and “use case” in every other sentence. We want to ensure that you return to Oz sounding like a full-on 10X brogrammer instead of a “wantrepreneur.”
But very seriously, I’m grateful that you’ve made the trek here, because what you are doing now is important. In truth, most Americans and Australians never actually will meet another nations’ government leaders, diplomats or servicemembers. Instead, their main contact with one another comes through you — commercial leaders. Our respect for one another, our appreciation for a common set of values and laws, our shared sense of humor come first and foremost come from these types of gatherings. You are building trust. You are building confidence. You build the friendships on which our nations’ future depends. To me, AmCham and visits like this, are not just something nice to do; they are the most vital thing we do. So thank you sincerely for being the front-line of our nations’ diplomacy. I’m going to speak seriously tonight. You are thoughtful people on the front lines of our diplomacy. And this is an unusual and turbulent time for our democracies. And it will depend on business leaders to help us solve these challenges. Two massive events coincided about 30 years ago. We are standing at the epicenter of one of them. This valley created technologies that are producing one of history’s greatest social and economic transformations. The other event was the fall of the Berlin wall, and the collapse of an economic system that had locked up half the world. For decades we have focused on the wonderful opportunities these events have created. But we are now starting to appreciate other effects as well. The one I’d like to focus on tonight is a new and dangerous brutality in our economies. Let me start with my own personal story. I was born on a U.S. Army base in Germany 3 months before the Berlin Wall was built. My parents were there as the Soviets, overnight, divided that city, literally tearing friends, families, and neighbors apart. And we saw what happened on the opposite sides of that wall under two different systems: one hopeful; one brutal.
On our side, families lived what we called the American dream. With just a basic public school education, the West German kids that we went to pre-school with, knew they could grow up to get decent jobs, support their families, and be better off than their parents were. Their parents had the same faith. Their economy grew, their population grew, and commitment to each other grew.
On the other side of the wall, the opposite happened. Families in East Germany felt their economy stagnate. Their wealth declined, their rights were repressed, and they lost hope and faith in their system and each other. Men and women were so desperate, they risked gun fire to cross the Berlin Wall. They wanted democracy and capitalism so badly they would die for it. 30 years ago next month, that slow trickle of brave souls grew into a stampede. People chose freedom. They chose democracy. They chose capitalism. They chose a system that made them feel heard, valued, and hopeful. This was monumental. The great Stanford professor, Frances Fukuyama, famously argued that our generation may have actually seen the end of history; the end of competing ideologies. Democratic capitalism had proved it was the best and most effective form of governance. Autocrats would eventually disappear, their people would choose our form of democratic capitalism, and we’d all receive a peace dividend.
But that isn’t quite what has happened.
In truth, both of our nations misread that moment. And instead, 30 years later, we face an era of renewed uncertainty, anxiety, and brutality. The rise of autocrats, wealth-inequality, isolationism and xenophobia, and angry democratic populations feeling overwhelmed, undervalued, and manipulated.
I think there were two big miscalculations that helped allow this. And extraordinary tools developed right here have helped to scale and accelerate their effects. First, we believed that capitalism would overcome brutal short-term economic systems. We did not imagine how brutal nations would instead transform our capitalism. Second, we believed that in the new democratic era, our global technologies would inevitably advance democracy. Instead, we’ve learned is that nothing is inevitable about these technologies. Like any tool, they can serve us or harm us. A hammer can build a house or break a skull. And as Steve Jurvetson said yesterday, “we just make it; it’s not our department what you do with with it.”
And so, nearly 30 years after the fall of the Berlin Wall, our nations and our businesses need to reassess how to manage capitalism and technologies to restore trust, and faith, and hope.
So let me start with what has happened to capitalism. There is no better place on earth to discuss this than here. The is the wealthiest part of the wealthiest state in the wealthiest nation on earth. And ¼ of the people in this state today are either in poverty or just above the poverty line.
How did this happen. Part of it was not understanding what happens when you introduce capitalism to a brutal country that is hungry for capitalism. The collapse of the Soviet regime was a virtual starting gun for global competition. The whole Eastern Bloc went crazy for capitalism. China joined the WTO. In the early days, it seemed that all the Russians wanted were blue jeans and McDonalds cheeseburgers. And we imagined our capitalism who ensure stable democracies.
We wanted to help them; we worked to export the kind of positive capitalism that raises all boats. So we worked to foster the kind of win-win competition my parents and I had seen in West Germany. And now, with new technologies like the internet and long-haul aircraft, and shipping containers we could build supply chains that would embed them in our capitalism. But this is where we were wrong. Not all capitalism is the same. The capitalism that developed in other nations wasn’t our brand of winwin capitalism. It was a new form that reflected the conditions of those nations. For decades, Eastern European and Chinese and Russian entrepreneurs had been locked up in brutal autocratic systems. They didn’t trust the future. They learned to horde and hide their money. They distrusted any kind of government regulation. They were schooled in the tactics of authoritarians. And they were hungry. They weren’t looking for win-win. Their concept of capitalism was zero-sum. They practiced a brutal capitalism, that reflected the brutal social orders in which they grew up. It was every person for him or herself. It exploited workers, it exploited the environment, it preyed on unsophisticated consumers, children or elderly people. It did not believe in paying taxes or in regulations. Oligarchs emerged who used their vast wealth to buy politicians, bend the laws to favor them, and consolidate their control. That’s the story of Ukraine. Capitalists weren’t trying to build a society where everyone would benefit, where middle class families like mine could own a share of a much bigger dream. Their capitalism said “whatever it took to get and keep wealth was okay.”
The leaders of that new world order reflect this concentration of wealth with power. Xi Jingpin, a lifelong public servant, has an estimated personal wealth of $1.5 billion. Vladimir Putin, a lifelong civil servant, has amassed a personal fortune of over $50 billion. Incidentally, his daughter, who works at a university and does competitive dancing, somehow has built her own independent fortune worth billions. Which I’m sure is the normal salary for dancing administrators here. My point is this. The autocrats did not disappear. They simply found new tools and a new path to restoring autocracy. Even worse, they crafted this new brand of capitalism not just to enrich themselves, but as an opportunity for revenge. They
deliberately distorted capitalism — one of the most powerful tools of democracy – and sent it back to us as competitors as a way to fracture our democracy.
We see that happening. Rather than fighting this form of capitalism, many of our global businesses have adapted to it and even emulated it. They have relied on workers in other nations with lower labor standards or they’ve scaled back their own benefits. They’ve stopped measuring people on the qualities that build institutions — integrity, leadership, loyalty, inspiration. Instead they have become ruthlessly efficient at measuring only two things: productivity and profitability. They have used their wealth to bend political systems and deregulate. They found ways to stash money off-shore and avoid taxes. They have surreptitiously monitored, data-mined, and manipulated their fellow citzens. They have allowed more and more wealth to pool in fewer and fewer hands. And democracies are fracturing because workers are putting in more productive hours than ever before and they can’t get ahead. There is no more damning statistic than this: I won’t even talk about the top 10% or top 1% or top 1tenth of one percent. 400 families, just families, have more wealth than the bottom 150 million Americans combined. Business leaders know that we’ve lost our way with capitalism. Last month, the Business Round Table — composed of the leading CEOs in the U.S. — issued an extraordinary statement reminding people that capitalism isn’t here to make people worse off. It was created to make society better — looking after not only investors, but consumers, employees, and the broader community. Marc Benioff the founder of Salesforce published an article today in the New York Times entitled “We Need a New Capitalism.” Steve Jurvetson, yesterday, said basically our capitalism is broken. Making sure that the new digital economy works for everybody; serves democracy rather than undermines it; must be part of whatever we do with these amazing products and technologies. We need to re-install norms that make communities resilient, and that restore trust. We need to help like-minded governments develop international models and identify new technologies to help fix things like a broken tax system and to prevent cheating. We need to develop new compensation models that gives people a stake in their nation’s wealth, and
reward people fairly for their actual contribution to society. This work offers the chance to fulfill capitalism’s true promise – the ability of all people to pursue the best version of themselves. Government can’t figure it out on their own. We need capitalists to help save capitalism from what it has become.
Avoiding The Tyranny of Technology
This brings me to our second miscalculation, and Silicon Valley. The day the Berlin Wall fell I was in a place that I thought had helped dismantle it. I was here. Digital technology had helped bring glasnost to the Soviets. Our computing power gave us an overwhelming advantage. It seemed that the world wide web was the ultimate tool of democracy. Suddenly, almost overnight, a computer made it possible for every person on earth to access all of the world’s accumulated knowledge simply by clicking “google.” We could make friends with everyone in the world by clicking “aol” and then “myspace” and then “facebook.” We could exchange goods with anyone in the world by clicking “ebay” or “amazon.” Nations like ours imagined how technology would be used to spread the two most important ingredients of democracy – truth and trust. The power to share information and connect was going to be truly in the hands of the people. And – at first -- we were right. I was serving as Ambassador when Tunisia’s repressive leaders fell. Not to a military coup. Not to a foreign invasion. Not to a well-funded and armed insurgent party.
They were taken down by social media. There was no leader of the Tunisian opposition. The government was felled by a digital mob with smart phones – democratic people coming together through social media and rising up against authoritarians. The Arab spring was a heady moment. It seemed like proof of the end of history. But there was one group that took a different lesson from the Arab spring. Autocrats and other repressive regimes. They realized that if a disorganized, unsophisticated, and under-resourced rabble in Tunisia could topple an iron-fisted leader with social media, imagine what a powerful, organized, wealthy and ruthless authoritarian with all of the levers of government at his disposal could do. With digital technology, Authoritarians could use the very tools of democracy – its freedom, its openness, its voting systems, its entrepreneurship, its innovation, its media, its trust -- to undermine democracy. It should be no surprise that within a few years we saw a rise of autocrats who relied on disinformation, hacking, surveillance, and other tools of digital technology.
Putin in Russia, Xi in China, Kim Jun Un in North Korea, Rohani in Iran, Erdogan in Turkey, Orban in Hungary, Duterte in the Phillipines, Bolsonaro in Brazil. They use digital technology not only to control their own populations. They use it to disrupt ours. Digital information comes from all sources, including anonymous or spoofed sources, and now deep fakes, and other technologies make it hard to know what is accurate and what isn’t. We’re having a big fight in the Valley right now, because Facebook has said its policy now is not to distinguish among them. They will not fact-check ads. This is a just what autocrats and would-be autocrats want. Autocrats thrive on misinformation, Democracies die from it. The vast bulk of attacks by autocratic governments have been directed at you – at the private sector. China hacked the New York Times.
Iran devastated the Sands Casino network with a malware bug. North Korea hacked Sony costing it tens of millions not to mention the sacking of half their C-Suite. Russia disabled Ukrainian power plants. And these are just government sponsored hacks that have made the headlines. Hundreds of billions of dollars of sensitive IP has been exfiltrated, corrupted, or destroyed by Governments and hacktivists. This is not for money – but to weaken us froma government. The one thing we know, is that change will never move more slowly. This threat is going to accelerate if we do not get out ahead of it. Just one example. Adopting the wrong kinds of 5G technology will turn virtually every device we own, touch, pass, or use into a vehicle for collecting, storing, and delivering data. The potential for distorting, hiding, and blocking the source of information or the ability to test it will grow exponentially. And unlike its predecessors, the backbone of this system does not exist in wires or servers – it exists in a set of constant downloads that will be vastly more difficult to monitor for hacks. The potential for hacking and for surveillance are as unlimited as human imagination. Which is why this work is urgent. Again we need you help. We need it to develop new agreements and new tools to protect the integrity of information, to prevent and punish commercial espionage, to protect voting systems, to prevent the abuse of good technolgies for bad purposes, to protect citizens from censorship and surveillance, to create international norms regarding kinetic cyber attacks, etc. Again, the technology exists to expose lies -- attribution, ledgers, and the ability to quickly respond to false or corrupted information. But it won’t happen if we business leaders don’t take action and produce it. Australians and Americans need to work together on this. No one nation or business can possibly solve it alone. Hostile nations coordinate and collaborate, and we need to do the same thing. But I am optimistic because of you. Aussies and Americans are at our best in a crisis. One of the most vivid memories of my time as Ambassador was a dark night on an airstrip out in Western Australia. After the tsunami at Fukushima,
we had frantically gathered on an airstrip to send a water cannon there to cool the second reactor. Neither of our nations had never disassembled one of these cannons to fit in a cargo plane. And our men and women worked through the night until the wee hours when we stood and watched the C-17 airplane takeoff to help our friends here. And I thought, only 70 years earlier those same airstrips had been used by us to fill cargo planes to attack our mortal enemies in Japan. And yet in less than a human lifetime, we had built friendship and trust and an alliance with Japan as well. Now, instead of using those technologies to attack, our urgent mission together was just the opposite – to protect and to save the people of Japan. That is what trust can do, that is what alliances can do. And so, in that spirit, I want to thank you. We’ve got this. If you’re an Aussie, you say: “she’ll be right mate” and “it’s okay buddy.” And because I’m an American and we always invoke God — may God bless you all and your lucky Country.