"I no longer believe that freedom and democracy are compatible," wrote Peter Thiel in 2009. Free-market capitalism has failed so badly that a people armed with the right to vote will no longer wear it, reasoned the billionaire founder of PayPal.

Today his artificial intelligence company, Palantir, is running secretive technology used by the NHS to track the coronavirus outbreak. Palantir, which in its 16 year history has never broken even, despite substantial funding from the CIA, is doing the job for the token fee of £1.

Artificial intelligence, machine learning and big data are tools that, if used right, will enhance human freedom – and until we get a vaccine they may be one of the most powerful weapons we have to fight the coronavirus. But used wrongly they will lead to 21st century power-asymmetries so vast that they make the analogue techniques of Stalinism and Nazism look medieval.

So it is legitimate for British citizens to ask: what is Palantir doing with our data? What limitations have the UK government set on the commercial exploitation of the generic knowledge gained? How was the company chosen? Who performs the oversight, and how much of Palantir's actions can they see? And how has the government assessed the risk of moral jeopardy, and technology lock-in, by allowing a commercial organisation to do this gratis?

And that's where you run into the brick wall. When asked by journalists under Freedom of Information rules to provide details of the Palantir contract, and allied contracts awarded to the Vote Leave-linked firm Faculty, the government has stonewalled. It is so clearly in breach of its own rules that openDemocracy is set to begin legal action to lift the veil of secrecy.

Once you understand what Palantir is, and how its founder has contributed to thought-architecture of the new right, the stakes become clear.

Palantir – publicly at least – provides two basic products: Foundry, which aggregates data from many sources across an organisation; and Gotham, which pulls all data relevant to a single human being onto the screens of police, intelligence, corporate security or disaster control officials. The latter, it claims, also contains tools to ensure that the officials who use it are "compliant" with privacy and data protection laws.

According to a video on the company's website, it is the Foundry product that is being used in the NHS: "from prime ministers to healthcare workers... Foundry provides a secure and strongly access controlled single source of truth" it claims.

Paradoxically, if it had achieved this, it could have shown Matt Hancock where the PPE shortage was, how many health and care home workers were infected, and – that elusive fact that no Tory minister wants to talk about – the current rate of transmission.

So it's a non-trivial question, more than a month after the project went live (where? in the NHS? at what level? with how many users?): why is the government still floundering across an information swamp?

Either Palantir's product is yet another tech white elephant, which is what some NHS officials privately suspect, or there is some disconnect between what the technology is telling the government, and what the government is telling us.

And that's where the debate becomes existential. For techno-monopoly capitalism is now entirely reliant on information asymmetry. From the tech giants, to the major supermarkets and retail banks, the companies we buy from, and work for, make their profits by knowing more about us than we do about ourselves.

As an economics journalist, the moment I search for the spot price of gold on Google, I've learned to expect tawdry adverts for bullion sales to pop up in my Facebook feed. They do so because the data giants know I am a middle aged professional, probably with savings, and because somebody has paid to target me with ads. But that's the easy stuff.

In 2009 Palantir helped the investment bank JP Morgan not only to put its workforce under realtime surveillance, but to begin predicting who might be "disgruntled" on the basis of the time they swiped in for work and on digital analysis of words used in their emails and phone conversations. With the New Orleans police department, they took this to the logical conclusion of trying to identify individuals likely to commit crime.

It's axiomatic that anybody that can predict my behaviour can control my behaviour. And the temptation for any state – no matter how libertarian its prime minister – is to be that agent.

In the context of an information society, then, the only guarantee of freedom is privacy: the ability to say "I don't want the NHS to aggregate my data, even in the worthy cause of understanding the pandemic, unless it is anonymised, temporary and the permissions are revocable by me ".

Faced with a virus that could devastate our economy for years, and with no guarantee of a vaccine, some might make the rational choice to surrender aspects of their privacy for the greater good. If an algorithm could predict my likelihood of getting the virus, based on my DNA, my movements and local prevalence, I would probably surrender aspects of my privacy to use it. It may even be legitimate – after a democratic decision – for the government to require me to do so, as a condition of citizenship (as they do at border control).

But doing it in secret is not legitimate. And that's why it is imperative that the government starts answering questions about Palantir and Faculty, the London-based AI company linked to the founders of Vote Leave, which is analysing the NHS data.

Leaving aside the privacy implications, the "who gets what" issues look like they could blow a whole through the contractual conditions normally applied in public procurement.

Journalists investigating Palantir's policing contracts in America discovered a story of inappropriate access permissions and unacceptably long response times to complaints. Both in Los Angeles and New Orleans, the contracts were terminated once elected politicians got to scrutinise them. Even the value for money issues were hard to resolve because, as one sales rep told an official in LA, detailed pricing information was a "proprietary and trade secret".

If it looks like a bunch of right wing mates awarding politically-motivated contracts to each other at mates' rates, with the upside being free access to the world's most comprehensive healthcare dataset, then the onus on Boris Johnson is to prove it is not.

Because the worst case scenario is not that this is some tawdry corporate raid on Whitehall by an overhyped tech firm. It is that Dominic Cummings is using Palantir to build a highly-centralised, private and parallel architecture to the decision making apparatus of the state.

It has long been alleged that Palantir worked informally with Cambridge Analytica on the Facebook data it harvested in breach of privacy rules (though both companies deny this).

We also know that Thiel does not believe in the state as most citizens would normally conceive it. According to his 2009 essay, democracies where women have the vote, and where there are welfare obligations, place so many constraints on the market that they are dysfunctional to capitalism.

The answer, Thiel concluded back then, was no longer to go on fighting for libertarianism within the political sphere but to opt out of it, creating new, ungoverned spaces – in cyberspace, beneath the sea and in outer space. But Trump, whose transition team Thiel rushed to join, changed the game.

With politicians like Trump and Johnson in power, the official political sphere became hospitable once again for the rightwing libertarians: they could inhabit the state machine, shielded from democracy by – paradoxically – the very authoritarian powers they claim to dislike.

When the UK''s information commissioner unilaterally waived its own investigatory powers for the duration of the coronavirus, on 15 April, it erected just the kind of shield Palantir and Cummings need to make this happen. When the government chose to break the Freedom of Information rules, missing a deadline to meet requests on 11 May, it did likewise.

You may want to give the government the benefit of the doubt. You may be cool with the idea that a junior Whitehall official, or a health bureaucrat, can know your whereabouts, your habits, your blood pressure and the identity of your friends and who you’re meeting. But I'm not.

Dominic Cummings chose to wear a US Navy lanyard at his fateful press conference, saying "In God We Trust, All Others We Monitor". It may have been a joke, but if so the joke was on us.