Google executive chairman Eric Schmidt is pretty steamed up that the National Security Agency has been secretly monitoring private links between his company's global network of data centers. "It's really outrageous," he told the Wall Street Journal earlier this week.

Schmidt no doubt has to show some public indignation at the latest disclosures of former NSA contractor Edward Snowden. The hundreds of millions of Gmail users worldwide can't be too happy to hear that Google can't keep their messages secure. And American citizens in particular should feel uneasy about the possibility of warrantless collection of their data—in this case by the third-party of the British intelligence community working with NSA—as it moves across infrastructure based abroad.

But are Schmidt and his customers really surprised that the NSA looked for such a hole in Google's infrastructure and asked its foreign allies to exploit it? While Schmidt and many Silicon Valley entrepreneurs likely share the civil liberties concerns of many of their fellow citizens, the last several months of Snowden disclosures may be more troubling to leading internet firms for another less obvious reason: what they say about the role of technology on the world stage.

Schmidt and his colleagues are shrewd businessmen: in less than two decades, they built a company with 50 billion dollars in revenue serving countless users worldwide. Yet like many tech startups, Google has always suggested that it sees itself within a moral universe, with "Don't be evil" as its unofficial but highly visible motto. It's a posture closely associated with a techno-optimism that is pervasive throughout Silicon Valley and many other sectors. This camp tells that now hackneyed story: the internet has fundamentally upended all the old rules of the game—particularly when it comes to the role of states and geopolitics—and on the whole, this is a good thing, enabling virtuous companies like Google to change the world for the better.

It's a tale that Schmidt and his coauthor Jared Cohen—a former advisor to Secretary of State Hillary Clinton and now head of Google's internal think tank—retell at length in the book they released earlier this year, The New Digital Age: Reshaping the Future of People, Nations and Business. Schmidt and Cohen are careful, as they gaze into their crystal ball, not to see a utopia. New technology, they acknowledge, can be used by authoritarians and terrorists just as easily as democrats and human-rights campaigners. Still, they are clear that the arrival of the internet age signals no less than a new epoch of history—in which a virtual world must simultaneously exist as a new testament alongside the old one. As they write, their vision is "a tale of two civilizations: One is physical and has developed over thousands of years, and the other is virtual and is still very much in formation."

This week's Snowden leaks have shown that the virtual world created in part by Google is more subject to the verities of the physical world than Schmidt and Cohen might care to admit. As with the transformational networks of railways and shipping lanes that came before them, the industrial giants of what used to be excitedly called the information age—Google, Facebook, Apple, Microsoft and others—run operations that cross international boundaries. These transactions depend on a myriad of treaties that make easy movement of goods and people possible, and the so-called virtual world resides on physical infrastructure that exists within and is regulated by the decidedly older political technology known as the state. Despite their multinational character, these corporations still operate at the whim of states, as Google found out when China refused give up its control over networks within its borders. As Evgeny Morozov asked in a review of The New Digital Age, "Does anyone at Google really believe in the existence of ‘an online world that is not truly bound by terrestrial laws’? … Next time Google runs afoul of someone’s 'terrestrial laws,' I suggest that Cohen and Schmidt try their two-world hypothesis in court."

Schmidt and Cohen speak of "States, citizens and companies," as if all are on an equal, level playing field, but this is an illusion: today citizens and companies remain the subjects of states, which maintain ultimate sovereignty. In their 2006 book Who Controls the Internet?: Illusions of a Borderless World, Harvard's Jack Goldsmith and Columbia's Tim Wu write that despite the expectation among some that the internet would become largely self-policing, "the expected collapse of national sovereignty has not occurred."

There have been attempts to get around this hierarchy of state control, such as billionaire Peter Thiel's institute dedicated to studying the possibility of creating manmade islands known as seasteads, which the organization describes as "permanent, autonomous ocean communities to enable experimentation and innovation with diverse social, political and legal systems." Yet even the seasteading concept, with its emphasis on real estate, would seem to accept the realities of geopolitics.

If they take a careful look in the mirror, Google and other tech companies will realize that they are not only creatures of the United States, they are also key contributors to the country's global power. In at least one passage of their book, Schmidt and Cohen would seem to agree: "In the future, superpower supplier nations will look to create their spheres of online influence around specific protocols and products, so that their technologies form the backbone of a particular society and their client states come to rely on certain critical infrastructure that the superpower alone builds, services and controls." To be sure, Snowden's revelations about the U.S. intelligence community's exploitation of Google's infrastructure may have forever harmed any home-team advantage, but the mutual dependence between state and corporation cannot be ignored.

Google and Facebook, after all, regularly cooperate with law-enforcement agencies, as well as impose their own standards to censor certain content—a recognition of the limited sovereignty they enjoy on their own private systems. Meanwhile, grassroots efforts are underway to try to give the individual an edge over large-scale online snooping. The founders of encrypted email services such as Lavabit, which was used by Snowden and shut down in August rather than hand over its keys to the FBI, are now engaged in new attempts to provide truly secure messaging technology, in this case asking for donations for a new protocol to be known as "Dark Mail."

Shadowy, unregulated corners of the internet will likely always be there, just as such spaces pop up in the analog world anytime someone claims sovereignty. In the meantime, the debate concerning the amount and nature of surveillance that should be performed by states will continue, part of the eternally unresolved question about how to balance liberty and security.

Eric Schmidt and others may be right to question the current scope of NSA power. But they should not pretend that their dominance of virtual space gives them access to some kind of moral high ground. Glenn Greenwald and others have attempted to frame the Snowden revelations as part of some world historical struggle between good and evil, with techno-optimists on one side and abusers of technology on the other. But the debate would benefit from a return to more fundamental terms that have helped us understand geopolitics for centuries—sovereignty, liberty and the national interest.

Lewis McCrary is a contributing editor at The National Interest. Follow him on Twitter: @LewisMcCrary.

Image: Flickr/Surian Soosay. CC BY 2.0.