2. A Framework for Global Electronic Commerce

Drafting the Framework

The Framework outlines the Clinton administration’s vision for a transnational capitalism led by the United States and supported by a “global information infrastructure.” Intended to serve as the basis for all federal internet policy, the Framework was accompanied by a presidential directive that instructed “all department and agency heads to review their policies that affect global electronic commerce and to make sure that they are consistent with the five core principles of this report.”2 The five principles were:

1. The private sector should lead.
2. Governments should avoid undue restrictions on electronic commerce.
3. Where governmental involvement is needed, its aim should be to support and enforce a predictable, minimalist, consistent, and simple legal environment for commerce.
4. Governments should recognize the unique qualities of the internet.
5. Electronic commerce over the internet should be facilitated on a global basis.

There are significant parallels here with the Clinton administration’s first-term policy agenda from 1993. Most important is the consistent demarcation and hierarchy of roles for the public and private sectors. Business was in the driver’s seat. The state’s primary purpose would be to support the internet’s commercial development. The Framework sent a strong signal that the Clinton administration would not only defer to the private sector on many areas of domestic policy but would also advocate on behalf of U.S. business interests as internet markets proceeded on a global basis.

Magaziner’s papers provide a firsthand account of how the Framework was written. The archive shows that the policy positions advanced in the document were the outcome of sustained collaboration with an array of business interests and, to a much lesser extent, organizations from civil society. Those at the uppermost strata of private industry were afforded privileged access to Magaziner and his staff as the Framework was drafted. Records show that Magaziner repeatedly engaged with corporate executives and trade groups through correspondence, meetings, and speaking appearances. This priority access meant that the private sector’s interactions with Magaziner were far more numerous and impactful than those of civil organizations, whose motivations more often extended beyond purely economic concerns.

The Framework’s iterative drafting process illustrates this lopsided dynamic particularly well. Starting in fall 1996, some eight months before the paper’s official release, Magaziner’s office made a series of working drafts available to select business leaders for comment and consultation. The final document went through more than a dozen such revisions. Although the comprehensiveness of the archive is unknown, the available evidence includes correspondence addressing the substance of the Framework from thirty-seven private organizations. Broken down by category, comments were submitted by eighteen corporations, thirteen industry trade associations, and six civil society organizations such as think tanks and advocacy groups. Ten of the eighteen companies represented were Fortune 500 firms in 1997 including IBM, AT&T, Citicorp, BellSouth, Bank of America, SBC Communications, Microsoft, Sun Microsystems, and Oracle. Trade associations that were involved in the drafting process included the Information Technology Industry Council, Interactive Services Association, Direct Marketing Association, and Software Publishers Association. Advocacy groups and think tanks were more sparsely represented and included groups such as the Center for Media Education, Center for Democracy and Technology, and Cato Institute.

In addition to soliciting written feedback on drafts of the Framework, Magaziner met personally with top corporate decision makers to discuss industry policy concerns and objectives. For example, Magaziner met several times with Eric Schmidt, first as CEO of Sun Microsystems and later as CEO of Novell.3 They discussed trade policy, intellectual property, and the general task of “working to see that digital markets reach their full potential.”4 A memo from the president of the Software Publishers Association illustrates the typical back-and-forth of these interactions: “My senior staff appreciated meeting with you earlier this month to discuss the proposal, and it is my hope that you will call on SPA for further comment as the administration revises it.”5

As would be expected, many of these discussions reflected the pet issues of particular companies and trade groups. Those with strong intellectual property interests such as McGraw Hill and the Magazine Publishers Association argued for the importance of robust digital copyright protections.6 Multinationals such as IBM, Microsoft, and AT&T stressed the need for harmonization of international trade policies and strong federal action to fortify U.S. technology sector interests in global markets.7 Joseph Stiglitz’s summary of the lobbying he encountered while chairman of the White House Council of Economic Advisors maps nicely to the general discourse around the Framework drafts. “I observed three almost unfailing principles among those who came to us for help,” Stiglitz recalled. “First, businesspeople generally oppose subsidies, for everyone but themselves. . . . Second, everyone was in favor of competition, in every sector but their own. . . . And third, everyone was in favor of openness and transparency, in every sector but their own.”8

The companies and trade associations of the marketing complex did not stray from this pattern, lobbying Magaziner’s office about their concerns related to advertising and data collection. While still harboring uncertainties about how internet advertising would play out, marketers remained broadly interested in interactive media’s potential to use consumer data to improve the efficiency of advertising. Their political efforts broadened from the basic task of securing advertising’s role on the internet to include specific pleas for a business-friendly data collection regime. These goals were realized in the Framework, which explicitly endorsed ad funding as a driver of internet development and confirmed the Clinton administration’s intent to apply a self-regulatory approach to internet privacy. As in other policy areas, lobbyists played a central role in the Framework’s treatment of these issues.

The Magaziner archive contains extensive correspondence from advertising trade groups and companies, including the American Association of Advertising Agencies, Direct Marketing Association, and ad agency giant Leo Burnett. As the Framework drafts evolved in consultation with these groups, Magaziner added a dedicated section on advertising that echoed industry arguments about the importance of ad subsidization and self-regulatory principles. “Advertising will allow the new interactive media to offer more affordable products and services to a wider, global audience,” the document stated.9 Although some countries restrict advertising in various capacities, “in principle, the United States does not favor such regulations.” It is worth emphasizing that this language was not present in any of the Framework drafts dated before January 1997, when a batch of comments arrived from advertising interests, including a detailed memo from Leo Burnett that argued that “the continued exponential growth of this medium can only be facilitated by the substantial investment of the private sector in supporting this media through advertising.”10 It was as if the lobbyists had channeled Dallas Smythe, who wrote in 1981 that “the fiction that advertising supports or makes possible the news, entertainment, or educational content has been a public relations mainstay of the commercial mass media.”11

If the White House’s endorsement of an advertising-subsidized internet was a culmination of the marketing complex’s earlier lobbying efforts, the Framework’s treatment of privacy pointed to internet advertising’s immediate future. In a dedicated section, the Clinton administration outlined its position on internet privacy and data collection. While noting the potential for privacy harms, the Framework officially endorsed a set of fair information practices to be implemented via private sector self-regulation. Such principles as “notice and choice” were important “if people [were] to feel comfortable doing business” online.12 The administration anticipated that technological innovation and market competition would “offer solutions to many privacy concerns” and pledged to “engage its key trading partners in discussions to build support for industry-developed solutions to privacy problems.”

Again, these points are in near total alignment with those made by industry groups as they commented on drafts. “We strongly believe that advertising industry self-regulation efforts should be promoted, endorsed and supported,” wrote an executive from Leo Burnett.13 The Direct Marketing Association argued that notice and choice principles were the cornerstone of “consumer empowerment” and must be “the basis of U.S. position and strategy.”14 Anyone raising concerns about commercial data collection was to be dismissed as a “privacy zealot.” “Private databases do not pose the serious threat to civil liberties that government databases do,” concurred the Cato Institute. The point of consumer data collection is “simply to sell people things.”15

The Framework made it clear that President Clinton’s promise to let the private sector lead would apply to internet data collection, though there was one caveat. Pointing to children’s information as an area of concern, the Framework issued a warning: “We believe that private efforts of industry working in cooperation with consumer groups are preferable to government regulation, but if effective privacy protection cannot be provided in this way, we will reevaluate this policy.”16 The inclusion of this language likely reflects campaigning from media advocacy groups led by the Center for Media Education, who lobbied Magaziner on issues of children’s data collection. Children’s privacy represented a crack in the armor of industry self-regulation, a weak spot that activists would attempt to exploit in the coming years. Chapter 6 addresses this policy battle in detail.

In 1997, amid a rapidly changing internet advertising landscape, the Framework was significant in that it represented the White House’s “first real stake in the ground” on privacy issues.17 The policy statement built on the earlier analyses of the Information Infrastructure Task Force and National Telecommunications and Information Administration discussed in chapter 1, but it ignored key elements of their recommendations. Those reports warned that without universal safeguards, a market-based approach to internet data collection would inevitably erode privacy norms. The NTIA argued that it was unreasonable to expect that companies facing market pressure to collect data would bargain fairly with consumers around privacy protections. By endorsing self-regulation, the Clinton administration signaled that it would ignore its own prior analyses and listen to industry instead. Everyone seemed to agree that companies should abide by “fair information practices,” but no one that mattered thought the government should be in the business of creating or enforcing any rules. The market would sort things out.

Supporters of self-regulation framed the government’s position as a “user-empowerment approach to protect consumer interests.”18 Although it was far from certain that this policy would benefit internet users, there was no doubt that it was a major victory for the marketing complex interests who helped write it. The federal government had done more than give advertising-funded internet development its official imprimatur, however. In its endorsement of self-regulation, the state had promised the advertising industry a kind of privacy that internet users would find increasingly difficult to come by: the right to be left alone.

Antidemocratic Policy Making

Beyond specific policy demands, nearly universal among industry comments on the Framework drafts was the request for continued influence over internet policy making. For example, the Information Technology Industry Council trade group praised the Framework’s market-led approach but cautioned Magaziner to “apply this principle faithfully” while keeping in close consultation with industry for “guidance and advice.”19 America Online requested that the Clinton administration explicitly “acknowledge the private sector’s role in advising our government” because “those involved in building businesses on the internet” were “in the best position to understand the need for and implications of government action or inaction.”20 For AT&T, “the active involvement of the private sector” was “of highest priority,” while Oracle went so far as to suggest the appointment of “an equal number of private sector representatives” to Magaziner’s team of federal policy makers.21

While corporate lobbyists demanded a permanent and prominent seat at the policy-making table, advocacy groups were largely marginalized. Non-business-oriented advocacy organizations account for about one tenth of Framework-related correspondence contained in the Magaziner archive. A note likely written by a member of Magaziner’s staff indicates that the civil liberties organization Center for Democracy and Technology received a “leaked copy” of the Framework draft and thus was not initially consulted in an official manner.22 Comments on a letter from the Center for Media Education are even more evocative of the peripheral status of advocacy groups. The bluntly phrased remark “not crazies, doesn’t seem to be an ambush,” penned in the margins of a request for a meeting with Magaziner, suggests that before a meeting was considered, the lone progressive advocacy group in the mix had to be vetted regarding its sanity.23 None of the available evidence suggests a similar level of scrutiny was applied to corporate executives and trade association lobbyists.

All told, the Framework was a near total victory for the private sector, including those elements interested in advertising and consumer surveillance. The policy-making process itself turned out to be perhaps the greatest implementation of the New Democrats’ promise to reinvigorate public–private partnerships. The Framework was the result of close collaboration among the government and industry, whose agents did not agree on everything but universally agreed on the main thing. Above all else, the internet would be an engine of private profits.

A memo from Electronic Data Systems, the information technology services giant founded by Ross Perot, illustrates both the degree of public–private collaboration and the business sector’s general sense of satisfaction. The correspondence, forwarded to Magaziner by an EDS executive, was prefaced with a note indicating that the document was “not meant for further distribution, but for Ira [Magaziner] to understand how pleased we are with the direction of the [Framework] white paper.”24 The opening paragraph is worth quoting in full:

This paper is excellent! . . . The theme of this policy announcement, to encourage industry leadership in developing electronic commerce with a market-driven industry self-regulatory approach should be applauded and strongly supported. In almost every area of the paper, the policy approach is supportive to EDS business objectives and the needs of U.S. industry in global markets. Although ‘the devil is always in the details,’ the policy initiative will greatly assist us in shaping similar policies in other foreign markets. The Administration has done an excellent job in this new electronic commerce area and EDS should find ways to tell them so publicly. We will meet with Ira Magaziner and other senior Administration officials to express our satisfaction with the paper and to determine how EDS can play a role in shaping follow-on implementation.25

Shortly after the Framework’s public release in July 1997, thirteen technology sector CEOs, including Microsoft’s Bill Gates and Intel’s Andy Grove, issued a joint statement of approval.26 Companies and trade associations distributed press releases praising the administration’s technological savvy and bold vision. Many of these organizations were directly involved in the drafting process, including the Software Publishers Association, which issued this statement: “The Clinton administration holds the keys to driving electronic commerce on the information superhighway. With this report, they handed us the keys for a Corvette—not an Edsel. They clearly understand the potential of electronic commerce to pump billions of dollars into the American economy over the next few years.”27

One of the takeaways from this case study is that formative internet policy in the United States was created through what can only be described as an antidemocratic process. Critical scholars including Patricia Aufderheide, Jennifer Holt, and Robert McChesney have written extensively about America’s history of antidemocratic policy making in the domains of communications and media.28 In the absence of robust popular activism, communications policy has generally been dictated by “elites and self-interested commercial interests.”29 As Aufderheide notes, “The public is endlessly invoked in communications policy, but rarely is it consulted.”30

Hewing closely to this historical pattern, policy makers cultivated the appearance of democratic participation in writing the Framework but did not follow through in any substantive way. In late 1996, the White House website posted a draft of the whitepaper and invited email comments from the general public. “What we wanted to do was reach out and consult with as many people as possible to try to get a wide series of views,” reported Magaziner, and “for that reason, we . . . treated it as a virtual document.”31 This was held up as an example of the democratization of public policy making in the internet age. Whether motivated by a genuine commitment to democratic principles or not, the move also functioned as a cynical public relations tactic. It was a way to demonstrate the White House’s technological savvy while also claiming democratic legitimacy for the elite political project of commercializing the internet.

A few months after the Framework’s release, Magaziner did not disagree with an interviewer’s suggestion that making a draft publicly available online had contributed to a “more direct form of government emerging from the internet.”32 Instead of mentioning the disproportionate levels of private sector access, Magaziner responded by saying, “We heard from hundreds of people we never would have heard from in Washington. . . . I think it will have a profound effect on future government procedures.”33 By this account, the Framework was more than just enlightened internet policy; it was enlightened policy making.

Indeed, the Magaziner archive contains dozens of printed email messages from citizens interested in internet policy. This batch of correspondence, the comprehensiveness of which is not specified by the archive, includes its share of antigovernment missives, but it also features some authentic feedback pertaining to privacy and security issues. More than a few commenters wrote to the White House to seek assurances that their personal and financial information would not be abused when conducting transactions online and requested that the government address these concerns. Limited citizen participation notwithstanding, all available evidence undermines the notion that the Framework was written through some experiment of participatory cyberdemocracy. Among the most jarring examples is that the first draft of the report posted publicly online was actually at least the ninth version, which had already been written in consultation with private sector elites well before becoming available on the White House website.34

As political leaders assembled to plan a national strategy for internet development, they could have easily convened public hearings and debates.35 A broad range of stakeholders might have been brought together to have public dialogues about the country’s collective goals for the communications revolution that politicians and business leaders had been promising for several years. What Americans got instead was a glorified digital suggestion box and the assurance that private enterprise would unerringly steer the country into a prosperous digital future.

Like all neoliberal policy initiatives, the Framework for Global Electronic Commerce was part of a political project to narrow the field of legitimate government action. Even if the New Democrats could not explicitly endorse the conservative project of shrinking the state to a size where it could be “drowned in the bathtub,” they agreed that the proper role of government should generally be confined to facilitating private sector growth.36 As stated in the Framework, in order for the internet to fully realize its potential, “governments must adopt a non-regulatory, market-oriented approach to electronic commerce, one that facilitates the emergence of a transparent and predictable legal environment to support global business and commerce.”37

Neoliberal governance proceeds from the basic tenet that markets stand alone as the natural and benevolent mechanism of social ordering and that state action invariably gums up the works. Of course, the truth is that the government always plays a structuring role, even if the result is creating a business environment in which companies can “operate in a relatively unhindered way.”38 There was never any real question about whether or not the state had a part to play in internet system development. The 1993 Agenda for Action identified the government’s role as “essential” to that project. The real questions were always about whose interests would be prioritized and whose would not. To paraphrase Herbert Schiller, internet development was a matter of “power for whom and for what?”39

From this ideological baseline, government action that supports capital expansion and profit making is normalized and framed as nonregulatory or noninterventionist. Ira Magaziner described his policy approach as fundamentally “cautious about government action,” while explaining that his team “did not start with any ideological position.”40 At the same time, public initiatives that do not overtly serve business interests are delegitimized as government interference or the overreach of a “nanny state.”41 Under these conditions, free trade agreements and deregulation are worthy government projects. Social welfare programs, labor protections, and, yes, internet privacy safeguards are all sent to the chopping block.

This is the contradictory logic of a neoliberal political economy that enabled the marketing complex to demand self-regulation on privacy issues with its right hand while clamoring for a new regime of copyright protections with its left.42 It is the rationale behind marketers’ insistence that government support of advertising-funded media is the only way to keep media free of government control. It is how AOL was able to remain coherent when calling for a “market-driven approach” to internet policy while simultaneously petitioning the government to take “aggressive” action to shape global markets to serve the interests of U.S. companies.43

The case of the Framework reveals protracted government/private sector partnerships rather than minimalist state intervention. Early in the drafting process, internet policy positions were hashed out with corporate stakeholders down to the last detail. Instituting a moratorium on international and domestic taxation of electronic commerce, pursuing global harmonization of intellectual property protections, and outwardly supporting an advertising-based digital media economy do not indicate a government unwilling to get involved the operation of so-called free markets. Rather, the policy positions laid out in the Framework and the processes by which they were constructed clearly demonstrate the unwavering support of the U.S. government for private sector business imperatives.

Instrumental Power and Structural Imperatives

The principle of “private sector leadership” articulated in the Framework for Global Electronic Commerce exemplifies the neoliberal political consensus that solidified in the 1990s. Throughout this period, free market orthodoxy was applied not only to the internet, telecommunications, and media sectors but also to banking, finance, and international trade agreements such as NAFTA. Each of these areas doubtless saw a fair share of dedicated lobbying, but there were also overarching political economic forces at play. Clinton’s internet policy fits into a larger neoliberal agenda that was shaped by both instrumental and structural factors. Vincent Mosco defines instrumental power as “the ways a dominant class uses the state to achieve its ends.”44 Here the emphasis is on “how the capitalist power structure shapes the state’s major policy decisions.”45 The case study of the Framework demonstrates this kind of instrumental power.

Attention to instrumental power is complimented by a structuralist approach, which “focuses less on processes of class rule and more on the why of class rule.” It “considers the vital functions the capitalist state must satisfy in order to maintain the system on which the state depends for its survival.”46 From a structural perspective, neoliberal internet policy grew out of political and economic elites’ response to the “long downturn” that began in the 1970s.47 As I outline in the Introduction of this book, a debilitating profitability crisis prompted elements of the private sector to reorganize in earnest around computing, communications networks, and global “commodity chains.”48 This included political efforts to shape domestic and international policy around expanded investment opportunities in technology, telecommunications, and media. Although both mainstream political parties in the United States were receptive to these initiatives, the Democrats were quickest to embrace technology as a means to drive “growth, not redistribution.”49 The story of the Framework is not simply about New Democrats bowing to the demands of a handful of powerful corporations (that is, instrumental power). It is also about how the Clinton administration commercialized the internet as a matter of national strategic interest in the face of increasing global competition and domestic economic stagnation. Staring down these structural factors, Clinton made jump-starting the growth of the U.S. private sector a priority from day one.

The neoliberal ideology that provided justification for the internet’s commercialization was produced as a political project of the capitalist class, a concentrated effort to overcome crises of profitability.50 In other words, instead of replacing a politics of redistribution with a “politics of growth,” as the New Democrats claimed, neoliberals pursued growth by reversing the flow of redistribution from top down to bottom up. The evidence of their success is overwhelming. The wealth gap between the owning class and everyone else has steadily increased over the last forty years. According to Gabriel Zucman, the richest 1 percent of the U.S. population now possesses around 40 percent of total household wealth.51 In 2019, the ratio of CEO to typical worker compensation was 320 to 1.52

While the rich have gotten richer, real wages for working people have remained stagnant for decades.53 As Elise Gould shows, the story is “not only rising inequality in general, but also the persistence, and in some cases worsening, of wage gaps by gender and race.”54 Economic inequality is a multifaceted phenomenon, but it clearly reflects the power of elites to shape public policy around issues like taxation, antitrust, trade, and the evisceration of organized labor, which once functioned as a political counterweight to the instrumental power of the capitalist class.55 The internet’s privatization, commercialization, and laissez-faire approach to surveillance advertising fit squarely within this trajectory and deepen its entrenchment.

David Hesmondhalgh points out that neoliberalism’s ascent involved “struggle and negotiation” and that “policy is not utterly at the mercy of the wealthy and powerful.” In an argument that adds nuance and complexity to a process that might seem overdetermined by economics, Hesmondhalgh notes that policy is always the product of a “balance of social forces” that are deeply impacted by structural inequalities of various kinds, including the uneven distribution of resources among those seeking political influence.56

This was certainly the case in the construction of the Framework, where access to the policy-making process was highly unequal across intersectional categories of difference. In addition to the lopsided access between business elites on the one hand and everyone else on the other, there were almost certainly severe inequalities along lines of gender and race. Although it would be challenging to find archival sources specific to the inequalities of the Framework’s policy formation, reasonable conclusions can be drawn from broader studies of diversity among corporate and government elites during this time period. For example, researchers analyzed the makeup of the boards of directors of Fortune 1000 companies in 1997, concluding that the average board size was eleven people, among which 1.1 were women and 0.7 were racial minorities.57 Similarly, women made up just 3 percent of top managers in Fortune 1000 firms.58 Although public policy may not always be dictated by the wealthy, the Framework represents a moment when ruling class interests prevailed, as articulated by a narrow group of white male elites.

To conclude this chapter, I want to emphasize the Framework’s role in spelling out a self-regulatory policy foundation for internet advertising that carries on to this day. The neoliberal consensus around internet commercialization narrowed the terms of debate around advertising, privacy, and commercial surveillance. Victor Pickard calls this process of contraction “discursive capture,” whereby dominant political economic narratives take hold and “systematically write off alternative policy options.”59 For most of the 1990s, questioning the desirability of internet advertising or consumer data collection was beyond the bounds of legitimate discussion. Self-regulation was the only “serious” idea on the table. Recall the internal government studies from the Information Infrastructure Task Force and the National Telecommunications and Information Administration outlined in chapter 1. As early as 1995, these groups cautioned that, absent a universal regulatory framework of privacy protection, market forces were sure to unleash a torrent of consumer surveillance. That these warnings went unheeded reflects the potent mix of neoliberal ideology, instrumental power, and structural imperatives that characterized this crucial period of policy formation. As I show in chapter 6, a real policy debate occurred only at the end of the decade after activists pressured Congress to respond to increasingly invasive consumer monitoring practices. By then, surveillance advertising was well on its way to becoming the preeminent internet business model.

Magaziner’s papers reveal how discursive capture played out regarding matters of internet privacy and data collection. As the Framework was being drafted, policy makers examined a proposal to create a new federal privacy agency. One of the earliest mentions of this idea came from a 1996 letter to Magaziner from Marc Rotenberg of the Electronic Privacy Information Center. Rotenberg suggested that a dedicated privacy regulator was necessary because “market solutions do not work.”60 Observing that there was “no part of the government that has privacy as its primary mission,” staff from Magaziner’s office and the National Economic Council discussed how a privacy regulator might be empowered to “create and administer legally enforceable regimes of fair information practices.”61 Their correspondence noted, however, that such a proposal “would be inconsistent with Administration policy to date.”62

The final version of the Framework did not include any trace of the discussions about a federal privacy regulator. A later memo from Magaziner’s archive hints at why the proposal never saw the light of day. Summarizing the views of a privacy working group staffed by the Department of Commerce and the White House Office of Management and Budget, the memo states: “There was a general agreement in the group that . . . a comprehensive regulatory role across all sectors would be inappropriate.”63 The reason? The majority of staffers “thought it would be viewed unfavorably by the business community and therefore counterproductive.”64 In this formulation, the only valid public policy goals are those that align with business interests. Anything else is “counterproductive.”

Des Freedman’s concept of negative policy helps to clarify the dynamics of the neoliberal praxis outlined in this chapter and is especially apt to explain Clinton’s self-regulatory approach to surveillance advertising. Freedman points to policy makers’ unwillingness to develop regulation out of “fear of undermining innovation or of imposing bureaucratic restrictions on market activity.”65 Negative policy is found “not in policy visibility, but policy opacity, not decision-making, but non–decision making.”66 For Freedman, negative policy refers not simply to inaction but to “the options not considered, the questions that are kept off the policy agenda, the players who are not invited to policy table, and the values that are seen as unrealistic or undesirable by those best able to mobilize their policy-making power.”67

The story of the Framework document, told through archival records, is a vital part of the larger history of the coevolution of the internet and global neoliberal capitalism. It illuminates the concrete practices of internet policy development that supported the buildup of surveillance advertising on the internet. The outcome of Clinton-era negative policy was a political void that provided open terrain for companies to experiment with advertising business models that depended on harvesting consumer data. The next chapter looks at these how these companies became the first generation of surveillance advertisers.