William H. Janeway: American Political Economy, Disrupted: "Digitalization has also opened up a new front in the age-old confrontation with the state...

...At issue is the integrity of the underlying political process itself and the authority that the state derives from that process. To be sure, there is a long history of media giants abusing their power for political ends. In 1800, the second contested US presidential election was distinguished by the dissemination of falsehoods and calumny by a partisan press. A century later, the newspaper tycoons William Randolph Hearst and Joseph Pulitzer more or less precipitated theSpanish-American War. And a century after that, the arrival of Fox News deepened the polarization of the American body politic.

For its part, digital media is uniquely powerful as both a polarizer and an amplifier, owing to its narrowcasting capacity and frictionless means of distribution. The sheer volume of digital communications renders the task of filtering and validating what is posted online technically impossible. After the 2016 US presidential election, those economically responsible for the new distribution channels could expect to be held politically responsible for the content they disseminate. But, if anything, that further validates the de facto power they already wield.

After being sponsored by the state and funded by speculation, the IT revolution is not just transforming the market economy, but also undermining the state’s capacity to address markets’ coordination failures and self-destructive outcomes. As the new technology confers ever more political and economic power on established firms, all other market participants increasingly operate under conditions of radical uncertainty.

In this way, the IT revolution is reconfiguring the Three-Player Game. After World War II, the state, finance, and markets were constructively aligned; together, each player had a key role in creating the digital revolution. But now the game has shifted from alignment to polarization and paralysis. Looking back, this is most evident in the state’s failure to protect its constituents from the economic consequences of the technological transformation that it spawned. Looking ahead, it is foreseeable in the US federal government’s premature abdication from any meaningful role in the coming Green Revolution. The question now is whether a Three-Player Game with Chinese characteristics will succeed where America’s is failing...