In this article, Ross Spelman, Director, Cyber Security and Technology Consulting, explains how the world is entering a new type of cold war which will be fought using the potent blend of economics and technology known as ‘techonomics’.
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he twin forces driving techonomics are the growing competition to shape the next generation of technology solutions, and the rise of a new breed of populist leaders with interventionist instincts. The weapons of choice in this new cold war range from tariffs and corporate blacklists to cyber war and disinformation, and many organisations could increasingly find themselves in the crosshairs.
The rise of populism is seen by many as a temporary anomaly, anticipating a return to the old normal customs in the near future. But the trend toward government intervention and protectionism is widespread and sustained. China’s “Made in China 2025” initiative, for instance, aims to promote domestic manufacturing across a range of high-technology sectors, from aerospace to robotics — an ambition that would increasingly put it in direct competition with the US. In India, the “Make in India” initiative has similar objectives.
Our view at EY is that populism is here to stay because the forces driving it, such as economic inequality and job displacement, are long term trends. While the COVID-19 pandemic has undermined the credibility of some populist leaders, others have used the crisis to consolidate power.
Heated global competition is set to dominate the next generation of technological advancement, from AI to supercomputers to electric vehicles. The stakes are high; significant economic benefit and power may accrue to those who shape these technologies. That is part of the reason for governments to weigh up intervention in these technology domains.
These interventions have seen national governments targeting foreign companies, platforms and individuals in critical technology infrastructure spaces such as 5G, AI and facial recognition.
Cyber warfare
Cyber-attacks are nothing new, but the line between state and non-state actors has blurred. Governments have begun using cyber-attacks not just for national security purposes against military assets or public infrastructure, but for economic reasons or to pursue other political goals. In many cases, they are collaborating with non-state actors on these cyber-attacks, to mask the state’s involvement and give it a veneer of deniability. Organisations are increasingly becoming victims of these attacks, either as intended targets or as collateral damage.
More recently, cyber warfare has expanded into the domain of disinformation. The target is truth itself. As we approach the next US presidential election in November, we are reminded of the experience of the 2016 election, when the stakes were raised significantly in the use of disinformation. The potential consequences for increasing use of sophisticated disinformation attacks in future political campaigns could be catastrophic. Similar tactics could also be used to attack individual organisations. Markets thrive on transparent information, undermining its credibility is a potent weapon.
We are seeing organisation blacklists, cyber warfare and weaponised disinformation become instruments of foreign policy and economic statecraft, and many organisations will be fair game in this scenario.
This form of warfare will be increasingly attractive to those waging it, which is why we expect to see more of it. Cyber and information attacks are considerably cheaper than conventional ones and can be deployed with pinpoint precision. Such attacks also offer the cloak of plausible deniability for governments and other state actors.
The commercial implications are very serious. Cybersecurity has never been more important while the definition of cyber risk is itself expanding. Organisations today need to guard against not just malware and phishing attacks, but weaponised disinformation. A second challenge is the growing lack of transparency. Commerce thrives on transparency, yet instruments such as organisation blacklists are opaque and seemingly arbitrary. To the extent these instruments undermine transparency, they create uncertainty for businesses.
There is also the added risk of an increasingly fragmented global economy being created as a result of this new cold war. Multinational organisations operate on a global stage, with sophisticated supply chains, R&D operations, and sales and marketing networks that transcend national boundaries. The techonomic cold war threatens the mechanisms that make these global operations possible. In the future, many organisations may be restricted to operating within the spheres of influence of their home states or economic blocs.
Organisations need to act now to understand how a fragmented hostile international order might affect their global operations. They also need to identify risks they face in an international order that is less transparent and not governed by traditionally accepted rules and norms. Finally, they must prepare for the cyber risks of tomorrow, such as weaponised disinformation and the rise of newer tactics such as deep-fakes.
