Digital Empires

1. Three Digital Empires Offer Competing Regulatory Models

Today, there are three dominant digital powers—the US, China, and the EU—who can metaphorically be thought of as “digital empires.”

Distinct visions. The global digital economy is shaped by three major powers, each with a unique approach to regulating technology. These "digital empires" – the US, China, and the EU – have developed distinct domestic governance models reflecting their core ideological commitments.

• US: Market-driven, prioritizing innovation and free speech.
• China: State-driven, emphasizing control and technological dominance.
• EU: Rights-driven, focusing on individual and collective rights.

Exporting models. Like historical empires, these digital powers export their models, technologies, and rules, influencing other countries and individuals. This expansion creates spheres of influence, pulling other nations into their respective orbits.

Contested choices. Each model involves societal choices based on differing economic theories, political ideologies, and cultural identities. Balancing innovation with civil liberties, wealth distribution, and national security leads to notable differences, and no global consensus exists on which model is best.

2. The American Model Champions Market-Driven Freedom

The American regulatory approach centers on protecting free speech, the free internet, and incentives to innovate.

Techno-optimism prevails. The US model is rooted in a belief that the internet fosters economic prosperity and political freedom, viewing government intervention as detrimental to both markets and individual liberty. This techno-libertarian view minimizes the state's role, except for national security concerns like cybersecurity.

Legal foundations. This market-driven ethos is embedded in US law, notably Section 230 of the Communications Decency Act, which shields platforms from liability for user content, encouraging self-regulation. Weak antitrust enforcement and the absence of a federal privacy law further reflect this limited government approach.

Criticism mounts. Despite fostering innovation and tech giants, the model is criticized for neglecting individual rights. Critics point to:

• Surveillance capitalism and data privacy violations (e.g., Cambridge Analytica).
• Rampant disinformation and harmful content undermining democracy (e.g., January 6th).
• Excessive concentration of power in a few large companies.

3. The Chinese Model Prioritizes State-Driven Control

The Chinese government seeks to maximize the country’s technological dominance while maintaining social harmony and control over its citizens’ communications.

Dual objectives. China's state-driven model uses technology for two primary goals: fueling economic growth to maintain the Communist Party's legitimacy and tightening political control through surveillance and censorship to ensure social stability.

Authoritarian tools. The government employs extensive measures to control the digital space:

• The Great Firewall blocks foreign content and platforms.
• Laws mandate censorship and remove user anonymity.
• Sophisticated AI, including facial recognition, powers mass surveillance programs like Sharp Eyes.
• The social credit system rates citizens' trustworthiness.

Tech companies as tools. Chinese tech giants like Alibaba and Tencent initially benefited from lax regulation but are increasingly harnessed as state surrogates for surveillance and control. Recent crackdowns aim to cement state control over these powerful firms.

4. The European Model Centers on Rights-Driven Governance

The EU embraces a human-centric approach to regulating the digital economy where fundamental rights and the notion of a fair marketplace form the foundation for regulation.

Balancing rights. Unlike the US focus on free speech or China's state control, the EU balances free speech with other fundamental rights like human dignity, privacy, and non-discrimination. Regulation is seen as necessary to protect citizens from both tech companies and the state.

Rule of law. The EU model insists that digital transformation must be anchored in the rule of law and democratic governance. Key regulations include:

• GDPR: Comprehensive data protection law granting individuals control over personal data.
• AI Act (proposed): Risk-based regulation promoting ethical, trustworthy, and human-centric AI.
• DSA: Binding rules on content moderation, transparency, and accountability for online platforms.

Fairness and redistribution. The EU also uses regulation to promote a fairer digital economy, addressing power imbalances through:

• Antitrust law: Challenging dominant companies' practices (e.g., Google Shopping).
• Digital taxation: Seeking to tax revenue generated in market jurisdictions.
• Platform work regulation: Improving working conditions and social protections for gig workers.

5. Imperial Rivalries Spark Horizontal and Vertical Battles

Due to the global nature of the digital economy, these leading regulatory models extend across jurisdictions, impacting foreign societies and shaping lives of foreign individuals.

Colliding models. The distinct US, China, and EU models frequently clash internationally, leading to fierce battles. These rivalries occur on two levels:

• Horizontal: Conflicts between governments (US vs. China, US vs. EU).
• Vertical: Conflicts between governments and tech companies operating in their markets.

Tech companies caught in the middle. Global tech companies often face conflicting demands from different governments, making compliance difficult or impossible. For example:

• Microsoft was caught between US law enforcement demanding data and EU regulators prohibiting transfer.
• Apple navigates Chinese censorship demands while facing criticism in the US for compromising values.
• TikTok faces US national security concerns while its Chinese parent company is subject to Chinese data laws.

Interconnected battles. Horizontal and vertical battles are deeply intertwined. Governments are often reluctant to regulate their own tech companies too aggressively for fear of weakening them in horizontal rivalries, leading to strategic restraint.

6. The US-China Tech War Accelerates Decoupling

This superpower conflict, many would argue, is also the main theatre of war where the highest-stakes battles for the future of the global digital economy are being fought.

Escalating conflict. The US and China are locked in an intensifying tech war, viewing technological supremacy as key to economic and geopolitical power. This rivalry is accelerating the decoupling of their tech ecosystems.

US offensive. The US employs measures to counter China's rise:

• Export controls: Restricting China's access to critical technologies (e.g., semiconductors).
• Investment screening: Limiting Chinese investment in sensitive US tech assets (e.g., 5G networks).
• Human decoupling: Restricting visas for Chinese students and researchers.
• Sanctions: Targeting Chinese firms involved in cyberattacks or human rights abuses.

China's response. China counters US measures and pursues self-sufficiency:

• Export controls: Implementing its own laws (e.g., Export Control Law, Unreliable Entities List).
• Data restrictions: Limiting data outflow and requiring cybersecurity reviews for foreign IPOs.
• Investment screening: Formalizing review of foreign investment on national security grounds.
• Subsidies: Pouring state funding into strategic industries (e.g., semiconductors, AI).

Costly rivalry. The tech war is costly for both sides and fuels global techno-nationalism. While complete decoupling is unlikely due to deep interdependencies, the conflict will likely remain protracted and costly, featuring alternating periods of escalation and restraint.

7. The US-EU Regulatory Clash Reveals Value Differences

Thus, at the heart of these transatlantic battles lies a difference in philosophy about the relative roles of markets and the government in shaping the digital economy and digital society.

Clashing philosophies. The US and EU, despite shared democratic values, disagree on how to govern the digital economy. The EU distrusts tech companies' power, while the US distrusts government intervention.

Key battlegrounds:

• Data privacy: EU's fundamental right approach clashes with US national security/market approach, disrupting data flows (e.g., Schrems I & II invalidating Safe Harbor/Privacy Shield).
• Digital taxation: European efforts to tax revenue generated in market jurisdictions are seen by the US as discriminatory protectionism.
• Antitrust: EU's aggressive enforcement against US tech giants is viewed by the US as unfair targeting of successful rivals.

Moving towards convergence. Despite past friction, transatlantic alignment is increasing. The US is becoming more critical of its market-driven model and acknowledging the need for regulation, moving closer to the EU's stance.

Shared threat. The rise of China's digital authoritarianism provides a strong impetus for US-EU cooperation. Both recognize that their differences are manageable compared to China's model and that a united front is needed to defend liberal democracy in the digital age.

8. Digital Empires Expand Influence Globally

In addition to engaging in rivalries with each other, the three digital empires are also competing for global influence by exporting their regulatory models to other countries.

Competing for influence. The US, China, and EU seek to expand their spheres of influence, pulling other countries towards their respective norms and values. This competition shapes the digital destinies of societies worldwide.

Different methods of export:

• US: Private power, leveraging the global dominance of its tech companies.
• China: Infrastructure power, building digital networks and supplying technology.
• EU: Regulatory power, externalizing its rules through the Brussels Effect.

Externalities. This expansion generates both positive (e.g., access to valuable services, enhanced privacy) and negative (e.g., surveillance, harmful content, regulatory constraints) externalities in foreign jurisdictions.

"Empires by invitation". While criticized for potential dominance, these empires are often welcomed by foreign stakeholders seeking digital development, consumer products, or regulatory protections.

9. America's Influence Wanes Amidst Backlash

Consequently, when looking strictly at innovation and economic growth, the American market-driven model can be praised for its ability to nurture tech companies, but that economic benefit comes at the expense of risking fundamental rights, human dignity, political autonomy, and democracy.

Private power abroad. The US model's global influence stemmed from its tech companies' expansion, shaping foreign digital economies through their business practices and embedding American values. The US government actively promoted this through its "internet freedom agenda."

Backlash grows. The unmitigated power and harmful practices of US tech companies abroad have triggered a significant backlash:

• Facilitating genocide (Myanmar) and election interference (Brexit).
• Hosting hate speech and disinformation leading to real-world violence.
• Enabling government propaganda and surveillance.
• Inadequate content moderation in foreign languages.

Internet freedom's failure. The US government's internet freedom agenda, promoting non-regulation and anti-censorship, has largely failed to foster democracy abroad and lost credibility due to US surveillance practices (Snowden revelations) and domestic issues (January 6th).

Decline of the model. This growing resentment and the model's perceived failures are eroding the global influence of the American market-driven regulatory model, creating space for the EU and China to gain traction as alternatives.

10. China Exports Digital Authoritarianism via Infrastructure

Moreover, as a growing number of countries are choosing Chinese technology, Chinese technical standards associated with those technologies are also becoming more common—ultimately reaching the point of becoming default standards around which other technologies must be built.

Infrastructure as influence. China expands its global influence by supplying digital infrastructures (5G, cables, data centers) and foundational technologies (AI, surveillance) through the Digital Silk Road, establishing "infrastructure power."

Path dependency. By building the digital backbone, Chinese companies lock recipient countries into using Chinese technologies and standards, tying them closer to China's tech ecosystem and potentially exposing them to Chinese government influence.

Standard setting. China actively seeks influence in international standard-setting bodies, promoting its national standards (e.g., New IP proposal) to gain economic advantage and strategic leverage.

Digital authoritarian export. The DSR facilitates the spread of China's state-driven model by providing tools for surveillance and control (e.g., smart/safe cities), appealing to authoritarian governments seeking to cement power.

11. Europe Globalizes Rights Through Regulatory Power

In this way, market forces and companies’ business incentives alone are often sufficient to convert the EU’s data privacy regulation into a global regulation.

The Brussels Effect. The EU's global influence stems from its regulatory power, leveraging its large market and stringent rules to shape global markets. Companies comply with EU rules to access the market, often adopting them globally (de facto Brussels Effect).

Regulatory export. EU regulations also serve as templates for foreign governments, leading to the adoption of EU-style laws (de jure Brussels Effect). This is most evident in data privacy (GDPR inspiring laws worldwide).

Beyond privacy. The Brussels Effect extends to other areas:

• Content moderation: EU codes and the DSA influence global platform policies and inspire foreign legislation (e.g., Australia, UK).
• Antitrust: EU enforcement inspires foreign probes, and the DMA serves as a model for new regulations (e.g., UK, Japan, South Korea).
• AI: EU's proposed AI Act is influencing global AI ethics frameworks and potential regulations.

Regulatory superpower. The EU's ability to externalize its rights-driven model makes it a major player in shaping the global digital economy, often using foreign companies to spread its norms.

12. The Ultimate Battle: Liberal Democracy's Fate

In the end, it is this existential battle over the fate of liberal democracy as a form of government that will provide the US and the EU with the greatest impetus to join forces in both their horizontal and vertical battles—knowing that, if that fight is lost, the battle for the soul of the digital economy is also lost.

A bipolar future. A unipolar or multipolar digital world is unlikely. The most probable outcome is a bipolar order where a US-EU-led coalition of techno-democracies confronts techno-autocracies led by China, with battle lines drawn along ideological divides.

Threats to democracy. Liberal democracy faces threats from two directions:

• Losing the horizontal battle to China, leading to the spread of digital authoritarianism.
• Losing the vertical battle to tech companies, leaving societies at the mercy of corporate power.

Convergence and cooperation. The US is increasingly aligning with the EU's regulatory approach due to domestic shifts and the shared threat from China. This convergence strengthens the potential for a united front among techno-democracies.

The soul of the digital economy. The stakes are the future of liberal democracy itself. The battle will determine whether technology empowers individuals and serves democratic values or becomes a tool for state control and corporate exploitation.

Last updated: June 4, 2025