Donald Trump, Paul Le Roux and the Dutch East India Company - Part 2
The conditions which lead to the rise (and fall) of company states discussed in Part I may seem distant to us in the 21st century. Nation states are as powerful as ever, and social & technological conditions seem very different to the age of exploration in which these entities thrived. For example, in the 1700s it took orders from European rulers months to arrive in the far East. Companies had considerable leeway to do as they felt fit. Today we have instant messaging across the globe 24/7.
RX Limited: A 21st Century East India Company?
Perhaps Paul Le Roux’s criminal enterprise is the best example of what a 21st century East India Company could look like. As chronicled in the wonderful book The Mastermind, Paul Le Roux is a man whose entire life was tied to the ghost of company states. He was born in what was then called Rhodesia, a country founded by a failed company state. Like the British East India company, Paul amassed great wealth by selling opioids. But unlike the East India Company, Paul sold his opioids online directly to millions of consumers, which meant that Mr Le Roux had a distribution channel that vastly exceeded anything the East India Company could ever dream of.
At the height of the opium trade in 1850, the British East India company was 250 years old and was selling about 1.2 billion USD worth of opium a year in today’s money. The US government estimates that after a few years of operation Paul Le Roux’s company RX Limited was making between 250 and 400 million dollars a year selling opioid pills. Keep in mind that the British East India Company had to maintain armies, battleships, cargo ships and cannons, whereas Paul Le Roux only needed the Internet, encryption and ~1000 call centre employees. Paul Le Roux’s enterprise was vastly more profitable than the British East India company’s, because it had far fewer expenses. And the East India Company’s trade was so profitable that the West went to war against China several times to protect it.
Paul Le Roux’s ambition expanded with his wealth. At the height of his operation he was running a global business which stretched from the Philippines to Brazil that included logging, money laundering, illegal gold mining, opioid dealing, piracy and an attempt to build his own sovereign state in Somalia. Paul Le Roux of course failed, was arrested and is currently serving a prison sentence in the US. But his example offers us a glimpse of how technology is upsetting the balance of power between nation states and non-state entities.
Ransomware Gangs: 21st Century Pirates?
If Paul Le Roux operated a modern East India Company, ransomware gangs are the 21st century version of pirates. In 2022 Costa Rica, an OECD member state, was brought to its knees by a ransomware attack. For months essential infrastructure could not operate due to constant attacks by cybercriminal gang Conti. Costa Rica had to declare a state of emergency. The export & customs infrastructure broke. State employees protested when they didn’t get paid. Eventually Costa Rica managed to recover its IT infrastructure with the help of the private sector. In any case, technology has shifted the balance of power, making it possible for non-state entities like ransomware operators to exert significant leverage. It’s not just small countries either, there are dozens of examples of municipal governments in the US being attacked by criminal gangs.
The power of these cybercriminals is extensive, but it is dwarfed by that of tech monopolies. If the cybercriminals are pirates, the tech monopolies own the seas. De-facto monopolies in tech, such as Google, Amazon and Facebook, have arguably a more powerful influence on our daily lives than most world governments. Our communications and media is no longer dominated by the government run mail or broadcasting service, but rather private companies with significant leeway. Cloud infrastructure providers, such as AWS, operate a large chunk of what powers our daily life, ranging from tax collection to commerce. What could happen if Amazon, Microsoft or Google were weaponised? What if Silicon Valley tech CEOs decided to extort small countries? They already have all the power to do so.
From Tim Apple to William of Orange
Not only do they have the technological know-how to bring small countries to their knees in cyberspace. They also already have the money needed to raise small armies. Tech companies today do not require an army to maintain their monopolies, like the British East India company did in the 1800s, but if Apple wanted to raise an army it easily could. In March 2021 Apple had about $200 bn in cash and investments, which is roughly China’s annual military budget.
Why would Apple ever want to raise an army though? Military expenditures are incredibly expensive and are at odds with the profit seeking behaviour of companies. Hence, companies all over the world have been happy to leave the peacekeeping bill to the American state. But nation states are increasingly less interested in directly shouldering the costs for global peacekeeping. Large corporations have become global. They have a global shareholder base, a global employee base and global interests. The politicians and voters of wherever they are headquartered may not feel obliged to use local resources to defend their interests abroad. Even within authoritarian states such as Russia, the Russian elites have found it easier to use private military companies such as the Wagner group to represent their interests abroad. If a power vacuum needs to be filled, and if it is both the interest and within the means of a wealthy corporation to do so, it will.
A worrying prospect is that recent technological innovations might lower the entry cost for non-state actors to start projecting military force globally. Tanks, fighter jets and their crews are expensive. AI piloted drones are considerably less so. The war in Ukraine has demonstrated that low cost civilian drones can disable multi-million dollar weapons systems. Recent developments in AI are beginning to revolutionise the workplace and they are likely to transform the battlefield as well. The tech monopolies are at the very forefront of this AI revolution, and are better positioned than most states to take advantage of it. It might be the case that current military stockpiles and forces will be next to useless against a newly built AI powered army.
This comes off the back of the most significant financial technology innovation of the 21st century: cryptocurrency. The first company state, the Dutch East India Company, was the world’s first publicly listed stock company. This financial innovation was key in order to raise the funds needed to explore the world and raise a private army. In the same vein, Bitcoin and crypto make it possible for non-state actors to fundraise and transact digitally without the need of a state’s acquiescence.
In conclusion, the stories of Paul Le Roux and the Conti cybercriminal gang show us a glimpse of what a future with powerful anarchic non-state actors might look like. And yet the influence of these criminal enterprises is dwarfed by the power and resources that have been amassed by the tech monopolies of the world. The largest companies in the world have enough funds to raise their own armies and have the technological know-how to undermine all but the strongest states. As of yet, these companies have not felt the need to use force to protect their interests, but it may well be the case that they might have to do so in the future, particularly if their home states are unwilling or unable to safeguard their interests. Recent technological shifts in AI mean that newly built non-state armies might be frighteningly effective, and the invention of cryptocurrency means that they can be financed without any state acquiescence.