The politics of data centres

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Like everyone I’ve been watching the $7tn story of data centre rollouts and the backlash against it. This has become a major political issue in the US, where seven out of ten Americans oppose the construction of such sites in their own neighbourhoods. Several colleagues recently wrote an excellent Big Read on the topic, and I’ve invited one of them, Lee Harris, to join me in the Swamp today to look at the politics of data centres.

Republican incumbents who’ve supported the rollout of data centres are under pressure from constituents worried about how they are driving up electricity, land and water prices. But Democrats are also in a pinch, because unions tend to support data centres. Consider the recent New York Times opinion piece by Don Slaiman, who represents union electrical workers in Washington DC. He argues that the public is too negative on data centres, points out how many hours of union work they provide, and notes that Silicon Valley firms are working with labour on data centre rollouts and staffing — unlike the way corporations behaved in previous multi-decade infrastructure booms like the race to build railroads across the west (during which time bosses tended to put down labour unrest by force of arms).

But that’s hardly the dominant view on the topic among working people. The electrical workers’ perspective underscores how labour politics in America are very different than in other countries, because each union tends to represent itself and its own interests, rather than working as more of a consolidated political bloc. Most working people in America, union and non-union, are worried about affordability, inflation and jobs. Data centres aren’t creating those in bulk yet (indeed once they are built, they create very few jobs, rather like the extractive industries). But they are sucking up capital that might have gone to other high-capex projects in areas that do (like factories, hospitals or housing).

How will all this play out in the midterm elections and into the 2028 presidential elections? Given that Republicans under Trump have made pushing data centres a national priority, they are likely to take something of a hit, particularly in swing states such as Ohio, Pennsylvania and Georgia, where the affordability issue is particularly pressing. The Republican position presents Democrats with a unique opportunity to try to move themselves away from negative associations with Silicon Valley. In recent years they’ve been more culturally associated with California and tech, and that isn’t playing well at a time when a handful of billionaires are throwing so much money at tax avoidance in the state.

More Democrats, particularly progressives, support moratoriums on data centre building than Republicans, but there are also questions about what people are really against when they protest data centres. This interesting Vox take argues that data centres have become a proxy for existential worries about AI and its seemingly unstoppable advance. It’s easier to argue against a bricks-and-mortar project that you can see and touch than it is to rail against surveillance capitalism and the algorithmic control that is in everything, everywhere, all at once (see my Monday column here which touches on that topic).

To me, the backlash against data centres is, at heart, about the growing sense among the American public that the deck is stacked against them, and powerful interests have subverted the will of the people. Lee, what’s your take on the topic from London? Is the debate in Europe the same or different from the one in the US right now?

Recommended reading

• This front-page New York Times piece on NYC mayor Zohran Mamdani’s bumpy rollout of his second-home tax mirrors what I’ve heard from some friends who aren’t pied-à-terre owners but have nonetheless received letters saying they might have to pay.
• I quite agree with FT guest writer Brij Khurana that high asset prices are playing an important role in driving inflation now. This is one of the many downsides of the K-shaped economy.
• I really enjoyed this New York magazine cover story, “Habibi City”, looking at the rise of Arab and Muslim culture in New York. I’ll be checking out the recommended clubs, restaurants and boutiques owned by the various entrepreneurs and influencers profiled.
• And finally, don’t miss my brilliant colleague Robin Wigglesworth being interviewed about the bond market by the New York Times’ Ezra Klein.

This front-page New York Times piece on NYC mayor Zohran Mamdani’s bumpy rollout of his second-home tax mirrors what I’ve heard from some friends who aren’t pied-à-terre owners but have nonetheless received letters saying they might have to pay.

I quite agree with FT guest writer Brij Khurana that high asset prices are playing an important role in driving inflation now. This is one of the many downsides of the K-shaped economy.

I really enjoyed this New York magazine cover story, “Habibi City”, looking at the rise of Arab and Muslim culture in New York. I’ll be checking out the recommended clubs, restaurants and boutiques owned by the various entrepreneurs and influencers profiled.

And finally, don’t miss my brilliant colleague Robin Wigglesworth being interviewed about the bond market by the New York Times’ Ezra Klein.

Lee Harris replies

Hi Rana. I agree: the backlash against AI infrastructure seems to be less about these projects’ water use or the grinding noise they make than about the public’s fear that power is slipping out of their hands.

The animosity towards data centres reminds me of comments by a far-left group that scolded activists after the global financial crisis of 2008. The group criticised protesters around the world who, over the next few years and for many different reasons, stormed parliaments and occupied public squares, holding signs.

To find out where power really lies, the group suggested, look beyond presidential palaces and consider the Euro banknote, which displays not political figures or founding fathers “but bridges, aqueducts, arches”. Power, they wrote, “is a sewage system, an undersea cable, a fibre optic line running the length of a railway, or a data centre in the middle of a forest”.

But is infrastructure sabotage an effective tactic? European far-left groups have spent decades targeting, for example, high-speed rail and airports, trying to slow the pace at which money, goods, tourists whizz around the world. To investors, this has amounted to little more than a nuisance pushing up financing costs.

Are data centres a strategic point of leverage for people who oppose AI? We reported that hyperscalers are struggling to find enough insurance for these mega-projects, and some project financiers, such as the $1.3tn asset manager Blackstone, have declined to invest in some data centre offerings, nervous about exposure to their uninsured risks.

While investors are paying attention to public backlash, it is so far just another manageable cost — another inflationary pressure driving up, at the margin, the price tag of the seemingly unstoppable AI boom.

Still, it is early days, with many of these projects only in the construction phase. And data centres are an attractively concrete target for Americans who report that they lack trusted institutions through which to organise politically. This includes unions, whose leaders, you rightly point out, seem to be expressing the short-term interests of a fraction of the workforce.

So I agree with you, Rana, that although the backlash seems to express fears about affordability, a concern for consumers, it ultimately speaks more to anxieties about ownership and control — about a frictionless world in which the means of producing money and resources are owned by a small and politically powerful minority of investors.

Your feedback

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