#291 Geopolitics Takes Centrestage

State-Business Relations in the US, The Trump-Zelenskyy Meltdown, and India's Techno-strategic Doctrine

Global Policy Watch: A Tale of Three Capitulations

Insights on global issues relevant to India

— RSJ

To those forever suspicious of capital, industry and big tech, the past month has confirmed all their worst fears. Ideological convenience, pusillanimity in the face of political muscle flexing, opportunism, selfishness and plain old hypocrisy - big corporations have readily served examples of such failings in the past month as Trump 2.0 swung into action. For the ideological left, these are conclusive proof that the oligarchs run the world, and nothing short of smashing these structures will correct the course. The more extreme and firebrand left will find greater traction in the coming days. The view that the Democrats, for instance, will try to move towards the centre to regain the voters they lost to Trump won’t translate to any action. The recent actions of Musk, DOGE and Corporate America have ensured that, which is a pity for two reasons. One, at the risk of sounding cliched, there is a more nuanced view of the alleged hypocrisy on the key issues we see from the industry than just the good old Indian jibe of “sab chor hain”. Two, going further to the extreme at the multiple baits that Trump 2.0 and Musk offer isn’t a realistic path to power and relevance for the Democrats. But, going by the news cycle and reactions, I’m afraid the die is cast here.

However, we will look at the so-called capitulation with some nuance and understanding. That, as we have always argued, is a difficult thing to do in times when performative acts on media platforms tend to gather greater traction. However, nuance eventually builds a broader consensus and yields better outcomes, electoral and otherwise.

Let’s pick up the three different samples of the capitulation.

First, this:

“On Wednesday, Jeff Bezos, the third-richest person in America, who bought the Washington Post in 2013, announced that the paper’s opinion section would henceforth focus on defending “personal liberties and free markets”.

Anything inconsistent with this view would not be published, according to his statement. “Viewpoints opposing those pillars will be left to be published by others.”

…

Elon Musk, the richest person in the world, bought Twitter in 2022, laid off everyone who was filtering out hateful crap on the platform, renamed it X and turned it into a cesspool of lies in support of Trump.

Mark Zuckerberg, the second-richest person, has followed suit, allowing Facebook to emit lies, hate and bigotry in support of Trump’s lies, hate and bigotry.“

So, Bezos will support liberty and free speech on WaPo’s opinion pages by not allowing any opposing views. A nice Orwellian touch there.

Then, we have this:

“Goldman Sachs has dropped an entire section dedicated to "diversity and inclusion" from its annual filing released on Thursday, as Wall Street firms dial back their diversity initiatives after President Donald Trump took charge. Earlier this month, Goldman ended a four-year-old diversity policy that called for the bank to advise companies on IPOs only if they had two diverse board members.

Corporate America has softened its stance on diversity, equity and inclusion in recent weeks after Trump issued an executive order last month directing government agency chiefs to dismantle DEI policies at federal agencies and in the private sector. Trump on Wednesday also asked Apple to scrap its DEI policies after the tech giant's shareholders voted to keep them. Citigroup last week also dropped a requirement for a diverse slate of candidates for job interviews. Bank of America also scrapped some of its DEI initiatives earlier this week.”

So much for the diversity pledges, reams of pages in annual reports and all those ads about how a diverse workplace makes them more effective. All swept away by a single election.

And, lastly, we also have this:

As soon as he was inaugurated on Jan. 20, the US president confirmed plans to withdraw his country from the Paris Agreement in a widely politicised move aimed at, in his words, “ending Biden’s policies of climate extremism”. Since then, Trump has already signed dozens of executive orders, many of which vastly affect the green agenda. One example is the “Unleashing American Energy” Executive Order which, under a section titled “Terminating the New Green Deal”, pauses all funds from the Inflation Reduction Act and the Bipartisan Infrastructure Law.

The retreat started almost immediately:

JP Morgan is the latest to withdraw from the UN-sponsored net zero banking alliance (NZBA), following Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs. All six have left since the start of December.

Paddy McCully, a senior analyst at the campaign group Reclaim Finance, said: “The sudden exodus of these big US banks out of the NZBA is a lily-livered effort to avoid criticism from Trump and his climate denialist cronies. A few years ago, when climate change was at the front of the political agenda, the banks were keen to boast of their commitments to act on climate. Now that the political pendulum has swung in the other direction, suddenly acting on climate does not seem so important for the Wall Street lenders.”

The anti-ESG backlash is interesting. Barring the loony climate deniers, the evidence of climate change is all around us. Yet, the backlash to ESG and retreat from it had started even before Trump’s re-election. Companies overstated their credentials (greenwashing), large institutional investors overplayed it as a factor in making financial decisions in funding companies and the conventional short-term metrics of return on investment were applied to ESG. All of this led to scepticism and disappointment. Trump just hitched ESG to his anti-woke bandwagon, and soon, “drill baby, drill” was back in currency.

Now, all of the three above aren’t the same kind of capitulation, and bunching them together to paint the industry as villains will only hurt these causes more.

Let’s take the first case - of tech oligarchs owning media platforms and then capitulating to Trump in the name of personal liberties and freedom. Much of the ire towards them for their ideological shift is justified. Bezos hardly interfered in WaPo in the past seven years. But the moment the first real political threat to him because of owning a newspaper with a particular ideological position was apparent, he started interfering in the key decisions. Outrage followed—such humongous wealth and influence and no spine to speak of, and all that. But beyond a point, it is his newspaper, and he can run it however he wants. Those who don’t like it can unsubscribe, convince others to, dissuade journalists from joining it, and boycott the advertisers who support it. I don’t think either the world’s second-richest or the richest man really bothers about these things. Also, there can be no denying that the way the Biden administration allowed federal bodies like the FTC to be dominated by an activist mindset with a premeditated view about Big Tech didn’t help. It is a common retort you hear from the so-called tech bros on how it was the Biden administration that started the ideological war against them and drove them into Trump’s arms. They are only taking the war to its conclusion. It might well be true, and I have been no fan of Lina Khan on these pages. However, the likes of Musk and Bezos should realise they have only queered the pitch on this issue for the future. Any change in power in future will mean they will be under pressure to capitulate to the new political masters or risk direct harm to themselves and their business. They have made themselves a fair game in this. Let them live with that risk.

On DEI, the old problem of a metric becoming a target has come into play. In the past decade or so, DEI became another performance metric for corporate leaders that had to be set higher and better than competitors every year. It didn’t matter whether there was a real conviction about it among the leaders or a genuine effort to explain its long-term benefits to the staff. The virtue-signalling leaders kept up the rhetoric on diversity with targets that stopped making sense. And the DEI activists kept up the fear of deplatforming any leader who would not toe the line. Is the backlash now any surprise to anyone watching this dispassionately? I fear that the pendulum has swung quickly the other way. And we might undo the gradual gains made over the years in improving diversity across private and public institutions through persuasion and consensus. This brings me back to the problem of loading private or public institutions from the top with reform objectives where the underlying problem is within the society. History has shown this creates a new cadre of empowered bureaucrats to police adherence, opportunistic pursuit and manipulation of metrics, new power centres and ultimately, a different set of distortions often worse than the original problem. Ultimately, you reach a place where you call mathematics a racist subject or celebrate unisex toilets as a real achievement in society. This is precisely where the DEI activism of the past decade in corporations and universities has ended up. This doesn’t mean the ideals of DEI have lost their meaning. This Trump reset won’t last long. But the reset should help in moving away from a top-down imposition of such goals and some restrain on how to do DEI next time around.

Lastly, we come to the more complex problem of ESG. Climate change is a real issue, and its effects are already evident. Unfortunately, its somewhat catastrophic impact is a few decades away, leading to two problems. First, it gives sceptics ample opportunity and time to rubbish clear scientific evidence with counterclaims on how science has been proven wrong on many occasions. The other problem is making investments today for unspecific benefits that may materialise many years later. Very few fund managers have that kind of investment horizon. A possible way to solve this was to have corporations and their financiers build climate and sustainability goals into corporate strategy with defined interim milestones to access long-term capital. And punish them with a higher cost of capital if they didn’t meet those promised milestones. That’s how ESG programmes were planned with some of the largest institutional investors in the world committing to a global ESG framework. However, the problems crept up even before Trump and his band of loony climate change deniers showed up once again. The issue is that capital allocation decisions at corporations are made based on hard numbers by professionals who are driven by their short-term scorecards. And despite stacking the deck in favour of ESG, eventually markets punish any sustained poor return on investment as they think of it as misallocation of capital. Unfortunately, this has been the reality of all major ESG programmes, and the patience of shareholders and investors has run thin. The more I see it, the more I’m convinced that Friedman was right almost half a century ago. That corporations should focus on maximising the value for the shareholders because they have the final, residual stake in a business, all said and done. Any attempt at bringing other objectives, however pious, will eventually run into the same problem of optimal capital allocation. The impact of climate change is a negative externality. The state should deal with it directly through penalties and taxes instead of holding businesses to somewhat nebulous ideals of sustainability, conscience and purpose.

There’s a bit more at play in these areas than what appears to be a pathetic capitulation of the industry. It is essential to appreciate this distinction.

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Matsyanyaaya: Lessons from this Week’s Showdown

Big fish eating small fish = Foreign Policy in action

— Pranay Kotasthane

The Trump-Zelenskyy kalesh is all over the news over the last two days. The focus has largely been on pinning the blame for the fiasco. Some have called it a setup by the US government, while others have blamed Zelenskyy for derailing a meeting going his way. For India, these questions are of limited significance. The Indian external affairs minister’s line that “Europe’s problems are not the world’s problems” seems appropriate. Let the US, Europe, and Russia figure it out.

American politics has changed quickly, and we must update our Bayesian priors about its foreign policy. The almost 180-degree change in the American government’s position on Russia vs Europe is a significant development. If India had gone along with the Biden government and become more adversarial towards China and Russia, Trump2.0 would have become more difficult to navigate. Here I concede that India's strategic autonomy stance has held it in good stead.

But the strand that opposed Russia and China within the US runs deep, and it will make a comeback, which might again become difficult to navigate if India now jumps on the “Russia is not to be blamed” bandwagon. Thus it makes sense to deal with the US in a transactional manner devoid of any long-term bilateral strategic goal.

At the same time, it's clear that the US has accepted the limits of its national power. This realisation is resulting in economic coercion and geopolitical retrenchment. America’s geopolitical retrenchment is not all that bad for India. It opens up many opportunities to expand its influence. But American unwillingness to intervene in areas beyond its borders also demands newer defence coalitions and a step-change in defence capabilities.

On the other hand, America’s economic coercion and protectionism have the opposite effect of hampering India's growth prospects. Converging on a good mini trade deal is important to mitigate the economic effects.

In the past, many Indians rued that the US was hypocritical. Now they will have to contend with a US that's direct and abrasive.

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Matsyanyaaya: Why India Needs a Techno-strategic Doctrine

Big fish eating small fish = Foreign Policy in action

— Pranay Kotasthane

(This is an unedited draft of my essay for the inaugural edition of an excellent new magazine on international affairs, India’s World)

The technology agenda in India’s partnerships with the West has undergone a sea change over the last fifteen years. Consider the joint statements from the meetings between President Obama and PM Manmohan Singh in 2009 and 2010. Issues like counterterrorism, global security, climate change, and economic cooperation are prominent. In contrast, high-technology cooperation—focused on the single issue of the India-US civil nuclear agreement—finds only a cursory mention. Compare those statements with the joint fact sheet released during PM Modi’s visit to Washington in September 2024, and it becomes clear that technology is now firmly in the driver’s seat of the relationship. The fact sheet begins by highlighting concrete actions in wide-ranging technical areas: semiconductors, critical minerals, telecommunications, space, quantum computing, and artificial intelligence, to name a few.

In the same vein, no policy analyst would have imagined fifteen years ago that the readout of a meeting by the two National Security Advisors would go beyond traditional areas such as defence cooperation, intelligence sharing, and volatility in India’s neighbourhood. Today, however, the two NSAs are steering the Initiative on Critical and Emerging Technology (iCET), which includes ideas for building “innovation bridges” through expos, hackathons, and pitch sessions, developing joint venture partnerships for semiconductor fabrication and biomanufacturing in India, and launching a public-private dialogue on telecommunications and regulations. Beyond the US, India and the European Union launched a joint mechanism to deepen coordination on trusted technologies in February 2023, even as significant breakthroughs in trade and investment remain elusive.

These seemingly implausible developments illustrate that once a barrier in the strategic relationship between India and the West, technology has become a bridge. It is the new site for international collaboration, competition, and conflict, and India needs a strategic doctrine that takes a long view of technology.

Technology’s relationship with Indian diplomacy has gone through many ups and downs. Technology has always been an important consideration for India’s strategic ambitions. Unhindered access to state-of-the-art and foundational knowledge was, and still is, perceived as a core Indian national interest. Since independence, Indian diplomacy’s intersection with technology went both ways—foreign policy was deployed to derive technological benefits, and technology was used to reaffirm foreign policy goals. The first dimension came into play immediately after independence when India engaged with Western powers to gain access to advanced industrial technologies. The second dimension gained shape in 1964 when India started offering technical courses to students in developing countries via its Indian Technical and Economic Cooperation (ITEC) programme.

However, the Cold War drastically changed India’s techno-strategic outlook. As Prof C Raja Mohan explains, ‘economic populism, anti-Americanism, growing bureaucratisation of science and technology, marginalisation of India’s private sector, Delhi’s drift towards Moscow, India’s nuclear test of 1974, and the consolidation of the global non-proliferation regime’ reduced the overlap between technology and diplomacy. Specifically, multilateral technology-denial regimes in the nuclear and space sectors meant that India’s techno-strategic stance became defensive by default—one that involved standing up to the West on technological issues while developing and shielding domestic capabilities.

This low-level equilibrium is unsuitable for the Information Age. We are in an era where nation-states have internalised that technology can disproportionately impact their national power and security. In recent years, trade wars have increasingly morphed into aggressive technology competitions. Despite the high costs, governments are willing to pursue decoupling in select high-technology domains on one hand and form technology-centred coalitions with trusted partners on the other. Consequently, technology has made a grand comeback in global foreign policy discourse and practice.

The current geopolitical and geoeconomic architecture presents several opportunities for India. Today’s high-tech industries rely on extensive cross-border movements of intermediate products, talent, and intellectual property. As R&D costs for technological improvements have risen across sectors, erstwhile 'national' industries have been transformed into global supply chains. Instead of national champions making complete products independently, companies only specialise in specific parts of technological value chains. Thus, even the most technologically advanced nations cannot become technologically atmanirbhar; plurilateral cooperation is a necessity and no longer a choice. If India plays its geopolitical cards right, the likelihood of technology collaborations with the West is higher than ever. Second, high-skill tech talent is the currency of the Information Age. India’s globally connected talent base makes it an indispensable node in high-tech supply chains, especially in a world searching for alternatives to China. Third, India’s deployment of billion-scale digital public infrastructure for payments, identity, and e-commerce has made it apparent to the world that India can also be a technology giver, not just a technology taker. Fourth, the Indian foreign policy establishment realises that autarky is not an option; instead, the concern is to ensure that technological dependence doesn’t become a strategic vulnerability.

For these reasons, India’s foreign policy establishment now has a far more positive view of the technology domain and its usage in collaboration, competition, and contestation. Over the past decade, India has actively deployed its technology diplomacy tools. Taking a step further, we at Takshashila Institution believe India must adopt a techno-strategic doctrine. Given that today’s high-tech sector spans governments, private corporations, civil society, academia, and individuals, a doctrine can help these stakeholders work in tandem, each bringing their comparative strengths to the table.

Such a doctrine could have five objectives. The first goal should be to establish India as a major power in international affairs India. Second, India must invest in developing advanced scientific and technological capabilities in the public, private, and social sectors. Third, India must harness its technological capabilities to achieve national goals. Fourth, India must promote sustainability using technology, given the long-term threat of climate change. Fifth, to underline the whole-of-society approach, India must ensure that technology empowers citizens and safeguards constitutional rights.

The doctrine should boldly declare that India will be prepared for cooperation, competition, and conflict in knowledge creation, human capital, influence, raw materials, and norms. It should assert that India seeks a global environment where technology is accessible to humanity and that India promotes a global order where technology strengthens the values enshrined in the Indian Constitution and the UN Charter.

Articulating a doctrine would force us to consider the approaches and strategies required to make India a technological powerhouse. For example, the centrality of talent in techno-strategic statecraft means that India must aim to maintain the largest talent pool in every technological sector. This would require India to bat for the free movement of tech talent, knowledge, and capital across national boundaries, as a permissive global environment is better suited to India’s technology ambitions. Attracting, developing, and retaining top high-tech talent is a strategic imperative, not just a business goal.

Translating the goal of strategic autonomy to the technological domain is equally important. High-tech supply chains are often global, lean and agile, with just a handful of companies from a select few countries dominating important stages. These bottlenecks can be used as leverage against other countries, as the American export controls against China demonstrate. Thus, one component of India’s techno-strategic approach could be to champion open hardware and software technologies so that they can compete with bottlenecked proprietary technologies. Another approach could be aggressively pursuing international cooperation to widen India’s access to technologies, raw materials, and human resources because India will have to build strong links with states that share its interests and values and with which it enjoys economic complementarities. Finally, strategic autonomy also has a cognitive dimension. Given that today’s information ecosystem is global by default, adversaries use information weapons to achieve disproportional results by "hacking" minds rather than attacking critical or military infrastructure. Thus, India’s techno-strategic approach must include developing top-tier capabilities for information warfare.

The last dimension of India’s doctrine would be inward-facing. Despite manufacturing capability in most sectors, India is insufficiently integrated into high-tech global value chains. High import tariffs, weak intellectual property enforcement, complex tax regime, low private sector R&D spending and logistical barriers are public policy reasons for its underperformance. Reducing these barriers is a strategic priority. A doctrinal stance that India will champion governance frameworks that enable research and development, early deployment, and adoption of technological innovation will go a long way in aligning stakeholder perceptions. To gain the confidence of its citizens and international partners, India must commit to a robust legal framework and enforcement mechanism that protects citizens’ data, privacy, cybersecurity, and cognitive autonomy. This doctrine could be a statement released by the Cabinet Committee on Security (CCS), like how India’s nuclear doctrine was announced.

As the joint statements of various multilateral and bilateral fora bear out, technology is no longer the backwaters of diplomacy; it is quite literally its cutting edge. Translating these impressive announcements into strategic gains is a decadal game that requires institutional support beyond specific individuals and governments. That’s where a techno-strategic doctrine can be of immense help.

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HomeWork

Reading and listening recommendations on public policy matters

1. [Paper] Check this Pune International Centre study by Maj Gen Nitin Gadkari on lessons from four Indian technological successes—C-DOT’s digital switches, the PARAM Supercomputer, High-powered Lasers, and Advanced Sonar.

2. [Article] One of us has an article in ThePrint making an argument that readers of this newsletter are familiar with: India isn’t competing with China, but its nearly 300+ city governments.

3. [Post] Edition #52 dealt with the importance of hypocrisy in international relations. Seems relevant.

4. [Podcast] Our Puliyabaazi with Prof Gurbachan Singh on the root cause of high land prices in India has become somewhat popular on YouTube. Prof Singh has fantastic insights into the economics of real estate in India. Do check it out.

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