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Jun 4,2024 1 comment By Origo

The Danish Cloud Standoff

eFor those unaware of it, things in the cloud business are heating up here in the Northern part of Europe. It seems to be finally dawning on the EU, that “the cloud” is not some minor issue that should be handled as an afterthought after all the “real” market issues like industry, agriculture, fishing, oil, banking, etc. have been handled. The reality is, that the cloud is one of the most important and most pressing issues of our time, and the EU is very late to the game. Today, the cloud is how we place phone calls, discuss political issues, maintain personal relations, find information, stay updated, communicate and perhaps even more importantly, how our companies do all of their communication, financial transactions, in short all of their business. Cloud fiefdoms, search engines and social networks have replaced markets. All communication, commerce and finance today depends on the cloud. By extension, those who control the cloud, control our societies.

A new economic reality – life as happy serfs

Yanis Varoufakis, The former Greek minister of Finance, calls this new reality Techno Feudalism in his important recent book with the same title. He calls those who own and control the cloud “cloudalists”. He also makes the salient point that Europe today has a cloud capital of zero. Zero percent of the “cloud” we use to run our lives and our societies is owned and controlled by ourselves! He also points out that interestingly, the situation is exactly the opposite in Communist China. And the cloudalists of China are even further ahead than their American counterparts. The autocratic, centralized and highly organized society of China, which never really embraced Capitalism, seems like the perfect fit for Techno Feudalism.

On the backdrop of the above the EU has, for some time and without much luck, been trying to find a fitting stance. While Techno Feudalism is a nice moniker for the mess we’re in, there is one important difference between this kind of Feudalism and Feudalism proper: While the current Feudalist overlords also extract rent and fees and control our societies in various ways, they are, unlike their predecessors, popular, some would even say loved. The situation is very much complicated by the fact that the masses of Europe in general love their Instagram, Facebook, SnapChat, Twitter, Gmail, Microsoft 365, Teams, Slack, Onedrive, Google, Amazon, Netflix, Ebay, MasterCard, Paypal, etc., etc. Add to this that European businesses completely voluntarily, in droves have migrated all their digital infrastructure to AWS, Google and Microsoft Azure, including their most sensitive data, and it becomes clear, that the situation the EU finds itself in is complicated, to say the least.

Why try to change such a popular thing?

As always, follow the money. As Varoufakis points out, we have since the end of the Bretton Woods system in 1971, lived in a market reality where the US went from being a net exporter of goods to being a huge importer of goods, and therefore a huge exporter of dollars. Under Bretton Woods dollars would find their way home as payment for American goods. After Bretton Woods dollars would still find their way back home, no longer directly to the US industrialists, but through the bankiers of Wall Street and the elaborate US-controlled financial system to the US capitalist elite, who would increasingly invest in foreign assets. This great dollar circulatory system was what kept the late stage of Capitalism going, to the tune of production moving around the globe in chase of cheap labour. The cloud is upending this system, and the EU is keenly aware of it. Huge amounts of money can now be extracted without production, simply as rent. And rent tributes paid to the cloudalists do not get distributed among the old capitalist elite, but generally end up in some tax haven. Unfortunately the EU cannot simply slap a 10% import tax on US cloud as they did on US cars, and let the market find a way. There are simply too many ways to dodge taxes and regulation on digital products, and worst of all – Europe has no cloud industry. Meanwhile the cloud has in record time gone from being mostly a political issue, to also being a very important economic issue, in fact perhaps the biggest and most defining economic issue of our time. The amount of capital that the cloudalists extract from the European economies can simply no longer be ignored.

Heading for a standoff

Instead of import taxes or outright bans, EU regulation of the cloud has until now taken the form of “privacy” regulations and huge fines placed on the cloudalists for violations of these. A proxy trade war of half measures. Fining US cloudalists billions of Euro will not create a European cloud industry. Trusting the cloudalists with all our data, and all the information and communication tools we use to run our societies, while at the same time believing we can dictate how they should handle these, is just plain naive and frankly ridiculous. We have no leverage since we are completely dependent on the cloud, with zero cloud capital of our own. All of this drama is generally of little interest to the average European consumer, who of course just enjoys her or his cloud services. However in Denmark the reluctancy to outright ban US cloud services combined with the apparent inability of Europe to produce even the simplest of cloud services, has somewhat unexpectedly resulted in a dramatic standoff in, of all places, the Danish elementary schools. Google Classroom is the battle ground of choice.

The Danish Chromebook Case

A disgruntled dad

The case has been brewing for a few years, but has now reached a boiling point. In short, it all started when a dad in the Danish school district of Helsingør filed a formal complaint over the fact that his daughter was obligated by her school to have a Google account and sign in to this, in order to participate in her classes. The school had issued free Chromebooks to all students and used Google Classroom and a variety of Google services in their classes. In order to use these services, all students had to agree to Google’s terms which included handing over to Google the rights to all their data, personal and otherwise, for the purpose of “improving their product”. This is of course a blatant violation of EU’s GDPR legislation, so in the end, after long deliberation, in December 2024, the Danish digital watchdog, Datatilsynet, had no choice but to issue a ban on using Chromebooks and Google services in the Danish elementary schools. This affected 52 of the 98 municipalities in Denmark, who were and still are using Chromebooks and/or Google services in their elementary schools.

Who will cave in?

On the surface this looks like a small case. Over the years there have been plenty of these cases here in Denmark. Ever since the famous Screms II ruling it has been obvious that pretty much all usage of cloud ressources by Danish public entities are in violation of EU law. This has resulted in a cat-and-mouse game where various public instutions have been issued warnings, they then complained to Microsoft or Google, whereafter lawyers and law makers colluded to somehow make the cloud usage legal, resulting in Microsoft and Google signing some very long forms and agreements promising to handle everything very responsibly, promising to build data centers in Denmark and only keep data in data centers on European soil (which of course is completely irrelevant), or promising to “encrypt” everything. With this case, it looks like we are reaching the end of that cat-and-mouse game, and for the moment we do not know who will cave in:

  1. Google: The easiest resolution would be for Google to cave in, and sign more documents promising not to use data from Danish school kids for anything, i.e. agreeing to a different set of terms for Danish school kids than for everyone else. In quite an astounding show of arrogance, they have so far refused to do this. They are well aware of the sorry state of any alternatives to their wares.
  2. The state of Denmark:  The public Danish schools, the Danish trade organizations and the Danish municipalities apparently love so much paying their tributes to Google that they have made a petition to the government, asking for local Danish legislation to be passed, that would somehow legalize turning over school kids’ data to Google (I’m not kidding). Denmark has a number of “opt-outs” from the EU, which in theory would allow Denmark to reject EU legislation like the GDPR. For Denmark to reject a piece of very important EU legislation would be a quite dramatic turn of events and quite a show of force by Google – forcing an EU member state into submission.
  3. The EU: The EU could pass some kind of legal exception specifically for the Danish schools and their use of Google’s services. 

Are the cloudalists overplaying their hand?

The most surprising thing to me about this standoff is the choice of battle field. The argument usually presented by our local cloud lobbyists is that Google/Microsoft have such enormous ressources and have invested such enormous ressources in developing this or that product, that we have no hope of producing something remotely as usable. But Google Classroom? A nice product to be sure, but nothing that a small team of web developers worth their salt could not produce in a couple of months. And installing Ubuntu on a Chromebook literally takes a few minutes.

Has Europe’s IT sector really degraded to a point, where a country like Denmark is unable to create their own basic tools and infrastructure for teaching classes in elementary school? To understand why Google is not caving in, consider the possible implications. If school kids are not allowed to hand over their personal information to Google in school, why are grown-up public employees? And if the public sector cannot use Google’s services, exactly why are they allowed to use Microsoft’s services? And if public servants are not allowed to use cloud services at work, exactly why should private sector employees be exempt?

The Danish minister of education has promised a resolution by July 1st. I think we’ll see then who really rules Europe. The most likely outcome in my opinion is number 2. It will probably take the form of the minister on July 1st declaring that after long and hard work, they have found a way to legalize the transfer of school kids’ data to Google within the framework of GDPR.

Comments

  • Origo | Jun 11,2024

    A bit earlier than expected it seems like Google caved in: https://www.folkeskolen.dk/aalborg-kommune-chromebook-it/aftale-de-52-kommuner-vil-fortsaette-med-chromebooks-efter-sommerferien/4771261
    What still remains to be seen is how any paper Google signs will legalize the transfer of personal data from school kids to Google. Will the parents have to sign forms authorizing this? Is that even legal within GDPR? Wouldn’t it just be easier to build stuff ourselves?

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