The data center backlash and the economic politics of AI
The beginning of a new age?
In today’s polarized America, it’s extremely rare to find an issue that unites 71% of Americans. But opposition to hosting a data centers in their local community is one such issue. That makes data center construction about as favorably viewed as animal cloning and less favorably viewed than abortion and assisted suicide.
This opposition isn’t particularly hard to understand. Voters oppose data centers for both material and symbolic reasons. Materially, data centers are huge ugly buildings that make a lot of noise. They also consume a lot of power and water and so place strain on local utilities, which increases costs. Symbolically, data centers also represent an AI-influenced future that a lot of people don’t want. Even tech CEOs like Sam Altman and Dario Amodei’s pitch for their own product is basically “this is going to take all of your jobs and possibly kill you”. It’s not an inspirational message.
As a result, data centers are playing an interesting role in the upcoming midterm elections, particularly in state-level races. Candidates of both parties are rushing to promise to do something about data centers, either by banning their construction entirely or attaching various conditions which are designed to blunt local concerns.
Look for instance at the Ohio governor’s race, where every candidate has now promised a moratorium on new data center construction until certain conditions are met. That includes Republican candidate and tech entrepreneur Vivek Ramaswamy, who says he’ll sign a day-one moratorium until the state legislature passes a package which (a) requires data center companies to pay the electricity bills of local homeowners; (b) requires the companies to provide property tax relief for residents; (c) imposes “strict environmental standards”.
With 71% opposition from the public, it’s not surprising that restricting data center production has become a bipartisan issue. But it also highlights an interesting dynamic, which is that this issue has become not so much one that divides Republicans from Democrats, but rather one that divides incumbents from challengers.
Governors and mayors typically put a lot of effort into trying to attract new investment into their region. When Amazon wants to build a new warehouse, it doesn’t just look around at available sites and make a decision - it calls up states and towns and asks them what they’re willing to offer in return for the investment. New construction generally means new jobs and downstream economic benefits, so states and cities are willing to offer tax breaks, infrastructure development or other helpful things to attract it.
Hosting a big new facility also allows governors or mayors to score a political win. In fact, the political incentive is so great that local leaders often end up promising so much that they cancel out a lot of the economic benefits just so that they can score a personal political win.
For a few years, data center construction has proceeded along these politics-as-usual lines. The insatiable demand of tech companies for new computing power - driven by the speculative boom in AI - had local leaders fighting like cats in a sack. Because they didn’t predict the backlash, they mostly only saw opportunity - new jobs, new investment, new praise for their own genius at attracting Amazon or Google to invest in their locality.
Then the resistance started. Negotiations over data center construction are usually covered by non-disclosure agreements, meaning they can proceed for months or years before the general public knows about it. Then the announcement gets made, and the anti-data center movement comes to town. Mayors and states who spent a long time doing something they thought was great suddenly found out that 71% of their residents don’t want it.
This rush to attract new data centers was bipartisan, because the struggle for jobs and investment generally is. But now that a new set of leaders are running for office, they have to distance themselves from this rush for AI dollars - also in a bipartisan fashion.
On one level, I find this a fairly heartening story about democracy in America. This is how democracy is supposed to work - the public hates something and so the parties rush to get on the same page as them. A lot of times in the United States, this feedback loop gets broken by polarization, warped media framing, and identity struggles. The reason there are few 70/30 issues in American politics is because nearly everything is polarized along partisan lines, and the partisan split in the population is very even. The data center issue might get a similar partisan inflection eventually and start polling closer to 50/50, but it isn’t anywhere near it yet.
This is also an instructive lesson about how the issue of AI interacts with U.S. party coalitions. Outside of Silicon Valley, there is not much of a pro-AI constituency in America. To Democrats, tech companies represent runaway corporate power. To conservatives, they represent an aggressive secular liberalism. To everybody, they represent a loss of individuality and control over their own destiny. You can find some people who feel positive towards some aspects of AI. But the whole package ends up repelling pretty much everybody on some level.
On a macro level, there doesn’t feel like much that the average citizen can do about any of this. New AI model development is continuing at a breakneck pace and completely outside of any political restraint. It’s going to happen whether we like it or not. But what people can do is demand restrictions on new data center construction in their local community. At the very least, they can try to get some of the economic benefits of the AI boom distributed to them. At most, they might be able to slow or stop construction altogether.
If AI proves as transformational as its boosters suggest, we might look back and see the anti-data center movement as the beginning of the economic conflict that will come to define the era: how to ensure that the economic benefits of AI are distributed to all rather than accruing only to the already-wealthy. If this initial movement is anything to go by, then this is going to be an era which scrambles party coalitions and assumptions about how distributional politics is supposed to work. But there’s also a strong chance that the grim logic of American politics eventually asserts itself, clouding the issue with partisanship and misleading framing.
The explosion in demand for AI data centres is a symptom, not a cause. This doesn't make it less relevant. What I mean here is that the demand for AI data centres is driven by the way how the AI models have been developed. These are LLMs using a so-called transfomer architecture as the poster child, which are not efficient in terms of compute power. Compute power lives in data centres (chips & computer racks), which in their turn are very hungry for cooling and electricity. Which has its ripple effect on local towns as it directly impacts their environment (physical building, demand for water & electricity).
There is research going on to make AI models more efficient and as such, 'more green' so you will. But that is still a way to go. Also because the LLMs have taken a very strong hold on the market, fuelled by a self-fulling eco system of tech companies, such as nVidia, OpenAI and Antrophic to name a few. As their mantra is that AI is going to be the salvation for human-kind. And they are (financially) desperate to show that AI does work, as for now, they are just burning money. Exception here is nVidia, which makes hand over fist as they sell the shovels & pick axes but let the digging for 'gold' to the OpenAIs and Anthrophics of their world.