To remain competitive in the digital world, states, and the bureaucratic organizations that run them, must digitalize. This transformation requires several innovations such as the creation and maintenance of digital infrastructure, the collection and maintenance of large digital databases, the assignment of unique digital identities to citizens and businesses, the digital delivery of services, and new digital-friendly regulatory regimes.

For states that are able to successfully digitalize, several benefits will materialize, including improved economic performance, decreased administrative costs, and geopolitical or military advantages.

Yet, digitalization also poses significant risks, especially risks relating to the loss of privacy due to the creation of new opportunities for (digital) surveillance. These risks can be minimized if digitalization programs follow and respect democratic values and norms.

While the United States is well-positioned to lead the world in the development of digital states, it is currently falling significantly short of its potential. Instead, it is now other geopolitical actors, especially the European Union and China, that are leading the world.

The United States

The current digital shortcomings have not always been present. During the 1990s, it was the United States that was driving the world’s interest in the digitalization of the state. This is well captured by the 1993 report “Technology for America’s Economic Growth, A New Direction to Build Economic Strength” and the subsequent significant investments that were made in the development of America’s digital infrastructure.

These investments led the United States to consistently place as a leader in international rankings. Availability of internet access improved, opportunities to engage with the government (digitally) became available, and many of the internal operations of the government digitalized. Under the Obama administration, digitalization was made a priority and the chief technology officer of the United States was created to help drive and steer digitalization within the United States.

Yet, while the United States has made significant investments in its technical infrastructure, during the coronavirus pandemic it became increasingly clear that its digital infrastructure is antiquated and crumbling. In international digital government rankings, the United States has been on a consistently declining trajectory. Internet access is widely available, but there is still a problem with the digital divide.

Similarly, the United States continues to see significant failures with its digitalization projects, most notably the initial launch and failure of Healthcare.gov. While the United States has had a chief technology officer in office since 2009, under the Biden administration this role has been left vacant.

European Union

In contrast to the United States, the European Union (EU) has quickly become a world-leading digital superpower and is unlikely to fall from this position soon.

The EU has made one of its core focus areas the digitalization of its societies and governments, supported by the launch of the “digital decade” policy program. The program’s goals are ambitious but are being supported both politically and financially.

In the EU, public services and government data are being transformed so that they may be offered across state borders. Regulatory developments, such as eIDAS, have fostered the creation of interoperable and cross-border digital identity systems. To ensure that citizens and businesses thrive in the emerging digital society, numerous initiatives have been launched to bridge the digital divide.

The EU’s digital successes have led states around the world to adopt European approaches to digitalization—both technically and regulatorily. This process is what is known as the “Brussels Effect,” where international states and businesses adopt EU best practices while being based in a separate jurisdiction.

As states and businesses continue to adopt EU-supported digital innovations, they will only grow as a global digital leader.

China

Like the EU, China has made digitalization a significant priority and proposed a clear path for the creation of a “digital China” by 2035. To China, digitalization is essential for the long-term sustainability of the existing political regime; technology is a core component of their “social management” strategy.

Though there are many components to this, the most well-known digital component is the “social credit system,” which, to the surprise of many in the West, enjoys a high level of support from the general public. Infrastructurally, China is less hindered by legacy technologies like in the United States and is making quick progress in constructing state-of-the-art digital infrastructures—from 5G to quantum computing to data storage.

Drawing on this expertise, China has made a conscious effort to propagate its digital worldview internationally by exporting its digital technologies as part of the Digital Silk Road initiative. Though the West, and in particular the United States, is trying to push back against these initiatives, China is still seeing success in its digital development ambitions.

Coming Competition

To remain competitive in the emerging digital geopolitical competition, states must digitalize their governments and maintain cutting-edge digital infrastructure. As states begin to digitalize and develop such infrastructure, they will grow in strength and power.

However, this digital transformation does bring about real risks for the creation of a centralized or authoritarian future. These risks can only be confronted by the creation and development of digital infrastructure that is inscribed with democratic values.

Traditionally, this has been a role that the United States has willingly filled. Unfortunately, today, the United States is failing in this role, living within the shadow of the EU and an increasingly-digitalized China. 

If the United States wants to remain competitive in the world’s emergent digital future, it must invest in and modernize its crumbling digital infrastructure, making the digitalization of the state a priority. This will be hard to do and will require substantial transformations: funding must be made available, new regulations must be developed, new technologies must be built and implemented, and capacity within the public service must be developed.

Failing to develop itself as a digital state, the United States will quickly find itself a bystander between the EU and China as the world’s new digital powers. 

Dr. Keegan McBride is a lecturer in AI, Government, and Policy at the Oxford Internet Institute, University of Oxford. His research explores how new and emerging disruptive technologies are transforming our understanding of the state, government, and power.

Albi Nani is a research assistant at the Oxford Internet Institute, University of Oxford. His work focuses on the impact of digital transformation on industries, organizations, and wider society.

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