Tuesday, 28 July 2015

Turkey’s hands-off illusion is crumbling

The Syria-Iraq battlespace is about to get another player. Turkey and the United States agreed this week to a shared goal of establishing an “Islamic State-free zone” along Turkey’s border with Syria.

Given Turkey’s historic role in the greater Middle East, dating back hundreds of years to the Ottoman Empire, it’s perhaps not surprising it wants to get involved in the conflagration to the country’s south. The entire world around Turkey is immolating in Europe, Ukraine, Greece and Syria and it now thinks something must be done.

But what, exactly? If Turkey thinks it can fix the present mess, then it would already have done so. Syria has been burning for four and a half years, and President Bashar al Assad is no friend of Turkey. Ankara has had ample opportunity to use its forces – the strongest military collection in Europe – to oust the cruel Syrian leader but has chosen not to.

That decision, reflecting America’s own choice not to get involved in Syria in the early days of the 2011 Arab Spring, is looking more short-sighted every day. Mr al Assad is no longer the leader of his country, he is simply the strongest warlord in a geographically vague state riven by factions and religious zealots. The weakness a retreating Syrian regime means the Islamic State (IS) is close to solidly occupying the vacuum.

But only a poor student of Levant history would believe the Turks have not been covertly involved in Syria and Iraq up until this July. Reports and leaks from across the region recite rumours of Turkish assistance to some Syrian rebels, yet those rumours are often balanced by tales of Turkish incompetence and amateurishness in helping those self-same rebels.

Turkey is also the country through which thousands of IS fighters move on their various ways into Syria and Iraq. The Turks have chosen not to intervene in these “rat lines” to avoid provoking IS militants and drawing a violent response inside Turkey. Some even suggest this non-interference is Turkey’s way of supporting IS (both are Sunni-majority entities). Both explanations may be true in their own ways.

So Turkey has for years been both active in Syria and Iraq, and not active. It is both indirectly assisting while also cutting IS supply lines. It is both waiting for the region to calm and covertly pushing the various players in useful directions. In other words, Turkey’s goal is to appear ambiguous – which is exactly the illusion it wishes to convey.

Turkey is too large, too strong and occupies a geography too critical for it to maintain a non-interference posture. Yet it is too weak and too immature to adopt a hegemonic posture reminiscent of its Ottoman days. Right now, its best option is building a balance of power with the other three regional powers of Saudi Arabia, Iran and Israel.

Turkish strategists would dearly love to remove Mr al Assad’s regime, but it lacks the bandwidth to control what would be an enormous humanitarian and political responsibility in the aftermath. It does not want to encourage an Islamist replacement either. On these lines, the US and Turkish strategy converge – hence the recent agreement to base US aircraft at Incirlik airbase and a buffer zone.

Where Ankara and Washington diverge is on the question of the Kurds. The US has historically supported Kurdish sovereignty and is backing the emergence of an autonomous Kurdistan in Iraq. But Turkey has dealt harshly with Kurdish separatism and isn’t enthusiastic about Kurdish autonomy spreading to Syria where it would surely spill into Turkey.

The question for Ankara is how long can it last without making clear, unambiguous choices about what its power actually demands in the region. Maybe the longer it waits, the chances of things naturally concluding will rise. Maybe they won’t. Either way, if it pulls closer to the US over the last half of 2015, it will get more difficult to maintain the illusion of non-interference.

The stark reality is that, unlike the US, Turkey cannot simply choose to leave the region for other pressing concerns. There is a lot of sense in Turkey’s plan to remain watchful yet unengaged, but even this choice is risky as the situation changes rapidly in its near-abroad.

Wednesday, 22 July 2015

Housing and the failure of Chinese soft power

Any country can grow strong enough to project military power, it is spreading of ideas that’s difficult. And if the current housing crisis is any indication, China is discovering the limits of its ideas.

There are two kinds of geopolitical power in: soft and hard, carrots and sticks. They are extensions of each other. In the game of nations, all the pieces on the board are nation states. Those pieces are moved through hard power – masses of men and metal at the right place and right time.

Hard power is something most large countries can achieve. If another country is an ally, it was the promise of masses of men and metal; and if they are an adversary, it was the threat of masses of men and metal. Parking an aircraft carrier off the coast of a belligerent nation is a sure way to calm tensions. But it isn’t a long term strategy.

The US has spent the last half century parking aircraft carriers around the globe wherever flashpoints appear. Billions of dollars are spent annually on securing this precious world system. But it is how that system was developed which displays the true extent of US power.

The current world system is a cascade of Western ideas nested in processes interacting with clear rules and expectations. It is a US-delivered framework of default assumptions about what it means to be wealthy, how to think about problems, how a free government looks and many other aspects. It is a system adopted and evolved from the preceding British hegemony priding rationalism, science and democracy above the alternatives.

Most people living today take this structure for granted, not because it is biological, but because of the incredible reaches of soft power. Not only does soft power seep into the physical world, it crawls inside human brains through television, history and discussions making the ideas appear natural.

In 2015, US soft power is so strong that competing systems find it unconsciously necessary to employ some parts even while they attempt to usurp it. For instance, Chinese businessmen do not attend high-level meetings wearing traditional Chinese clothing, they choose instead a three-piece suit. This should tell us something.

This century the Chinese economy has grown phenomenally fast, closing in on parity with the US economy. With this new-found power has come the attendant purchases of an aircraft carrier, a blue-water navy, a modern air force and other projection capabilities. These are relatively simple hard power purchases to make, even if they are expensive.

The trick will be whether China can develop a viable alternative to the present US soft power system. After all, it’s easy to shout about the evils and realities of an overarching system, but shouting achieves nothing. The system isn’t afraid of the truth, it is only afraid of a more effective lie. Soft power is what China will need to develop if it is to nudge the US system from its perch.

But as of yet, Chinese soft power is dismally lacking. The Chinese way of doing business is almost never appreciated around the world, even in the destitute and backwards nations of Africa. There is no incentive to choose the Chinese way if it requires too much change, which it often does.

In New Zealand, this dynamic emerges in the purchasing of Auckland homes. Buyers from the US are probably involved in similar purchases, but rarely are Americans blamed for the rising prices. Yet when Chinese buy New Zealand houses in great quantities, the backlash is pronounced. This is not necessarily an issue with Chinese citizens, it is in great part a failure of Chinese soft power.

If it were seen as more acceptable for the Chinese to buy thousands of houses, or the characteristics of Chinese investment were more widely utilised, then an influx of capital from China wouldn’t be as controversial.

For the US to invest in New Zealand would be at minimum unusual and at most entirely expected. For Chinese to invest in New Zealand it will take a few more generations to become normal. Effective soft power takes time and immigration is a big factor, so maybe the Chinese are on to something here after all.

Saturday, 18 July 2015

The geopolitics of house prices

The geopolitics of the current house pricing puzzle suggests New Zealand should pay attention to the history of the Asia Pacific region.

If the central issue of high Auckland housing prices is the result of Chinese citizens buying New Zealand houses, then the question needs to be asked: why are Chinese buying Kiwi houses?

Understanding how similar the experiences of both Japan in the 1980s and China today offers an important perspective on the New Zealand housing problem, a perspective which might send shivers down the collective business community.

A few decades ago in the 1980s, Japan was the focus of breathless headlines about an impending economic shockwave tipped to upend the United States as the leading global power. In today’s world, replace the word “Japan” with “China” and the articles could almost be rerun without skipping a beat.

At the beginning of that decade what started as a trickle of Japanese investment into the United States turned into a torrent as Japanese corporations and citizens bought real estate, land and other assets on an enormous scale after both countries agreed to revalue their currencies.

Auckland University Asian studies senior lecturer Dr Rumi Sakamoto says in the early 1980s the US suffered a huge trade deficit and the US dollar was overvalued. At the so-called Plaza Accords, the US dollar was artificially depreciated in relation to the Japanese Yen. The yen soon rose in relation to the US currency.

“This started a bubble economy in Japan. Japanese exports suffered, the reserve bank rate reduced and low interest loans were used to buy real estate because the Japanese believed the widespread ‘land myth’ [that the price of land predictably rises].

“There wasn’t much point keeping Japanese money in the local banks because of the low interest rates, so people and companies started to play with shares and investments offshore,” Dr Sakamoto says.

In the United States during the 1980s, rich Japanese citizens began buying property in Pebble Beach, Hawaii and other exclusive neighbourhoods. There were still expectations that Japan would grow into a serious geopolitical force, potentially challenging the US for supremacy on the Pacific Ocean. There was even talk of a potential military clash with Japan.

Everyone knows what happened to Japan in the years ahead. Japan’s economy collapsed and the country entered the “lost decades” from which it is still trying to recover.

“The state of the overvalued economy was clearly a problem, and the Japanese government decided to pop the bubble. Law changes made it harder to buy and sell land in Japan, raising the official bank rate from 2.5 to 6%. As a result, the Japanese economy cooled down and entered a recession,” she says.

But many of the Japanese who purchased property in the US during the height of their country’s economic rise largely safeguarded their wealth during the collapse back home. However, leading up to the later years of the 80s, the question was apparently never asked whether those wealthy Japanese knew something about Japan’s economy that Western investors didn’t.

Federal Reserve Bank of San Francisco senior economist John Krainer says house prices in Hawaii were driven primarily by purchasers from the US mainland for most of the 1975–2008 period. But, during Japan’s “bubble economy” in the late 1980s and immediately thereafter, house prices in Hawaii were driven primarily by demand from Japan.

“For most of the 1975–2008 period, Hawaiian house prices appear strongly correlated with the wealth of US households, indicating demand from mainland buyers drove prices. But house prices in Hawaii rose sharply during the 1980s when Japan had its bubble economy, and shortly thereafter.

“During that period, we conclude that Hawaiian house prices were determined almost entirely by Japanese demand,” he says in a 2011 paper co-written with University of California, Berkeley, professor of economics James A. Wilcox.

What is happening in China’s economy today is more opaque than the 1980s Japanese experience, but the lesson should be clear.

If Chinese businesspeople wish to park their hard-earned money in New Zealand rather than reinvest in their own country, what exactly should that tell New Zealand businesses about the state of the Chinese economy in 2015?

Perhaps, rather than speedily and unthinkingly amending laws and regulations to fight a non-existent problem in the Auckland housing sector, New Zealand would better off ensuring diversification of its assets overseas.

Perhaps the Chinese citizens now buying houses in Auckland and expensive real estate in the US – who grew up and made their fortunes inside China – know something about the direction of the Chinese economy that New Zealand and other Western investors don’t.

“Japan’s economy grew phenomenally well but in reality it was all empty. The price of land and stock was not realistic. At one point, the land value of the Imperial Palace (one square kilometre) was more than the land value of the whole of California!” says Dr Sakamoto.

Friday, 17 July 2015

Houses are expensive, sure, but why all the rage?

Whether Auckland has a house pricing problem doesn’t really concern me. If there is a remedy to this situation, then it’ll be found by people smarter than me. What concerns me is the rage.

As a quick summary, the economic problem of expensive housing is essentially the danger of oversaving and undersconsuming, as the IMF recently pointed out. If young Kiwis do not have sufficient funds to purchase a house in a desired area, then their only options are delaying house purchases, moving away from the town centre or lowering their standards. This is an economic disaster in the making.

Too much money is invested in the housing, banking and construction cycles for Kiwis to avoid taking out loans or opening their wallets and keeping the cycle spinning. This is undesirable from the system’s perspective and reforms must therefore be made, apparently. And for those reforms to be popular, public opinion needs to be stoked in the required direction. Hence the media’s scapegoat of Chinese home buyers.

If there is any country in the world in greater need of more people and more foreign direct investment, it is New Zealand. News articles often show statistics proving that Auckland is one of the most “liveable” cities in the world. Yet only 1.3 million people call the city home, indicating it’s perhaps not quite as “liveable” as first assumed. But as soon as people start immigrating to the city, all of a sudden this “liveability” is a bad thing.

So the problem of Chinese home buyers can’t be economic because we need both them and their money. But to turn this into a problem it must be packaged as if the housing crisis is a morally “bad” thing.

Whenever a moral argument is made by either the corporate sector or government, it is imperative to search for the manipulation. In a narcissistic consumption society like ours, the only goal for making people feel good is if it leads to more consumption. I smell some narcissism.

After all, no one wishes to highlight how many New Zealanders also treat housing as a commodity and have been driving up housing prices for years. Attacking the Chinese is a defence against change for the collective identity. Remember this, we’ll come back to it soon.

A parallel problem is that foreign buyers do not – and this is crucial – further contribute to the New Zealand economy by renovating those homes. Foreigners generally don’t live in New Zealand (that’s why they’re called foreigners), preferring instead to buy houses as a store of wealth.

At least Kiwis live in the houses or upgrade them for resale. Simply put, the wider “housing” system wants a house to be just the first purchase. There’s a whole other industry in need of servicing. This is why home improvement reality TV shows are positively correlated with household savings trends, and another reason why the negative attention is on Chinese buyers.

The media helps with this by redirecting us away from a re-evaluation of our underlying assumptions and expectations of a good life, and creating a xenophobic and nationalist narrative. In presenting the problem of foreign home purchases, the default argument is structured to assume that young Kiwis already desire to buy a house. This is not biological, this is conditioning. The question you are not supposed to ask is: why should owning a house be desirable?

The form of the question expects every answer to be made in the required direction. The moral argument that all young Kiwis should be able to buy a house and it is immoral that they cannot is introduced to expedite this process.

By this logic, whatever stops them from buying a house is the cause of immorality and must be eliminated. Hence the call to introduce capital gains taxes, immigration quotas and foreign investor taxes, etc. So the media nudges us in the wrong direction because it too has been hooked on the moral argument that buying a house is somehow an unspoken “right” for good, hardworking young Kiwis.

If the central ideology of the present economic society is narcissism, then only narcissism will explain it. What we are seeing with housing is a narcissistic injury drawn from generations inculcated to expect a certain flowchart of life that no longer exists. And they aren’t happy about it.

When young Kiwi first home buyers were 17 they probably imagined life at their parent’s age, a glimpse of a bourgeois future to which they thought they were entitled. This fantasy was predicated on information received from multiple sources – which I will collectively call the system – preaching that every generation does better than the last. The message was that future happiness was inevitable with a safety net for our aspirations.

Since the 1960s, the middle class have been implicitly promised a series of “life steps” and led to expect those steps in a predictable order. There was an expectation of upward mobility. Access to education, entry into the workforce, steady annual income raises, a house, promotions and an eventual retirement. It is the message that’s still delivered every day on the internet and television in newspapers and by our friends and families.

This hope of growing wealth was connected with an individualistic ideology elevating the narcissistic self as individualism became the main driver of consumerism. The individual has become the central character in their own movie, while everyone else is simply an extra. If citizens tick all the boxes then the promised next step was always a first home, just like your parents and grandparents.

None of this is reasonable to expect anymore. Some would argue that the answer is for laws to transfer wealth from the rich to the struggling middle class. That might increase consumption but it would also deter investment by eliminating incentives.

After all, you can't invest what you don't have. Yet if the message of upward mobility is preached as possible if the required boxes are ticked, but is then ripped away as the economy changes faster than the message can travel, people will demand a restoration.

As people realise these promises are no longer assured, society feels the pain as an attack on the self, a narcissistic injury. These injuries against the self are unlike other injuries in that they attack a person’s assumed identity. What makes it so dangerous is that the assumed identity is a public identity – the way they wish others to see them. And when this identity is attacked, an individual often feels there are only two reactions.  

The first reaction when narcissism is confronted with a greater power is to take the offence personally and quietly seethe while fantasising about finding information that will expose the injurer as a hypocrite.

But let’s do this correctly. What we are seeing is collective rage channeled at a minority. If it is rage, then the rage is because of a threat to identity. So what could possibly threaten the identity of hardworking young Kiwis? In this case, the whole point of owning a house is not for an abode but to show other people something important about how young Kiwis identify themselves.

Finding hypocrisy is always satisfying because the narcissist’s identity is defended. They judge the offender as a stereotyped identity. Chinese home-buyers are easy to hate because of their weakness as a minority, but attacking fellow New Zealanders who are a reflection of the self would be as an attack on our own identity. This is the danger in connecting nationalism with narcissism.

Because the second reaction to a narcissistic injury is violence. Remember, narcissists don’t feel guilt, they only feel shame. So the removal of the source of shame is the only way to defend an assumed identity. In the case of the Chinese home-buyers, New Zealand’s response is funnelling towards violence.

When a weaker people-group is singled out as a cause of societal or individualistic narcissistic injury, it really shouldn’t surprise anyone that violence is the eventual outcome. Rather than search for hypocrisy, the choice of the New Zealand government and public was to remove freedoms by implementing special laws and regulations directed at the Chinese demography. You might not think this is violence, but it is.

In the age of the Leviathan, not all violence comes from weapons. Often it is leveraged with the weapons of the state, by creating laws to favour one group of people above others. French philosopher Jean-Paul Sartre called the violence of laws built to remove freedom the “exis” and “praxis”.

Sartre also wrote that violence helps raise the consciousness of the oppressed. What better way to spur young Kiwi home buyers into opening their bank accounts than to highlight a narcissistic injury and enact violence on the injurer? Job solved, identity defended.

People much smarter and luckier than me will have to find a solution to the quickly changing global and domestic economies. I am simply pointing out the potential consequences of not talking correctly about the underlying structure of outdated narcissistic expectations and the inadequacy of all the ideas I have seen so far.

Wednesday, 15 July 2015

So, we have an Iran nuclear deal. What now?

Winston Churchill was probably drunk when he said “jaw-jaw is better than war-war”. This week’s Iran nuclear agreement between the five permanent members of the UN Security Council (UNSC) and Germany – the so-called P5+1 – proves the great statesman was right to bet on diplomacy.

The deal has been a long time coming. Since the P5+1 first discovered Iran’s nuclear project seven and a half years ago, negotiations to stop the programme have threatened to collapse, succeed and everything in between. But three Iranian presidents and two American presidents later, a final deal is now on the table.

This column has previously discussed the importance of a US/Iran rapprochement for a number of years and the geopolitical inevitability of an eventual deal between the two. Not only will the calming of tensions help the Iranian people recover from a crippled economy, Iran is set to play an integral role in the shift of power across the region. The deal is a diplomatic win for the US.

Included in the agreement’s 159 pages, now sitting in front of the US Congress, are nine crucial points. These include the redesign and conversion of reactors away from uranium enrichment, a limit to how much uranium fuel Iran can enrich and a stipulation for “anywhere-anytime” managed access for International Atomic Energy Agency (IAEA) inspectors.

Iran still holds the potential for a “break-out”, where the regime could race for a nuclear weapon, but the constraints on this activity are now much higher. Those watching the deal aren’t so sure the inspectors will have the time to spot such a break-out. Yet Iran has essentially been given a pass to become a nuclear state. Neighbouring countries already suspicious of Iran’s intentions may now think of beginning their own nuclear programme as a counter response.

Plenty of doomsday talk about proliferation and a new Middle Eastern arms race saturates the media suggesting this week’s agreement is bad. The consequences are too dark to contemplate, analysts say, and US President Barack Obama should kill the deal. However, the region has factored in a nuclear deal to its broader strategic calculations since late 2013 when an interim deal was reached with Iran.

Iranian oil is sure to come back online, of which about 300,000 barrels are reportedly stockpiled, but the country’s energy infrastructure will take years to recover, hence the excitement of foreign investors. Iran’s proxy wars in Syria, Iraq and Yemen will likely heat up as sanctions are lifted and money floods back into the country. But it has to be remembered that sudden billions tend to effect political instability, and Iran’s next elections are scheduled for February 2016.

The overarching geopolitical reality for the deal is sound. The United States, as the strongest of the P5+1 group, is heavily committed to Middle Eastern security. It has the military bandwidth to cope with the threats in the region, but lacks the capacity to prosecute multiple security issues around the world. In Europe, the US struggles with Russia and Mr Obama’s “Asia Pivot” is stalling.

The US must redirect its strength. It needs to depart the Middle East, but must first secure it. Washington’s emerging strategy aims to balance the regional powers of Turkey, Saudi Arabia, Iran and Israel with each other. None can defeat the other, and together the demands of security outweighs the temptations of hegemony. This Iran deal is a major step for this strategy.

To build the agreement, the Obama administration has conceded important ground, some of which clearly has only occurred recently. The idea that this is a bad deal isn’t entirely inaccurate considering one sentence in the deal says it will “produce the comprehensive lifting of all UNSC sanctions as well as multilateral and national sanctions related to Iran's nuclear program."

White House image outlining Iran deal points
It’s those side additions which are worrying. At the beginning of the negotiations seven years ago, convincing the Iranians to agree to talks required narrowing the discussion to include only the nuclear enrichment programme. All of Iran’s bad activity was not up for discussion and neither was Iran’s larger nuclear programme. Only the nuclear enrichment was under negotiation.

Isolating the discussion like this was the only way the P5+1 thought it could secure a final deal from Iran. Yet the Iranians now want the effects of the current deal to expand back up to include those pieces which were presumably off the table. So lifting the arms embargo for instance is worrying, especially considering Iran’s continued belligerent activity in the wider Middle East, and not something a nuclear deal was supposed to include. Something important has changed, and changed drastically.

If the US Congress refuses to pass this deal, Mr Obama has already said he’ll veto that decision. This’ll essentially lock the agreement in place, but it will not be until later this year before it can be implemented. At this point, the central question will be whether the Iranians will actually allow the “anytime-anywhere” inspections and stick to its other promises. Given the history, that’s certainly not guaranteed.

The burden of proof for Iran to show that its nuclear programme is peaceful is important, because the deal is not a voluntary procedure similar to US and Soviet arms agreements. Iran has a long way to go before it can convince the world it is ready to be a part of the international system. But bad deal or not, every reconciliation starts with a smile. Hopefully the understanding is mutual.

Thursday, 9 July 2015

How to be powerful and why you are not

I would like to bring to the reader’s attention a long con. This isn’t any con. This is the con at the bottom of every debate about internet security.

A report posted on July 6 discusses a report by Massachusetts Institute of Technology (MIT) which warns government interference with internet communications will contribute to “extreme economic harm” for online security.

British Prime Minister David Cameron and FBI director James Comey are reported to be encouraging tech companies not to use end-to-end encryption, such as WhatsApp or iMessage, because it makes it harder for law enforcement and intelligence agencies to spy on the communications passing over those networks. The MIT report, written by leading computing experts, says this encouragement will “open doors through which criminals and malicious nation states can attack the very individuals law enforcement seeks to defend.”

FBI director James Comey
These dastardly government plans are sure to “raise enormous legal and ethical questions, and would undo progress on security at a time when Internet vulnerabilities are causing extreme economic harm,” say the experts. In case you weren’t sure, it’s the “economic” bit which is responsible for the shiver running down your spine. It’s almost as if these experts, on behalf of the business owners of internet apps and software, actually care for people’s livelihoods. In fact, that’s exactly how this reads. The government will make it more dangerous for normal people to be on the internet, and real people in the real world are going to be hurt by this overreach. Something must be done about this!

Yet it pays to remember that no one cares about our digital privacy or security. Least of all the people who actually own the software. Internet security makes people want to be more private, and from the viewpoint of the business people in charge (i.e. not you) digital privacy of individuals is bad. People must be online for companies to make money. Governments are now creating a barrier to this new consumer system, so all the intel guys have to go.

Initially, it’s a bit difficult to understand how the report’s authors are thinking. After all, there already are backdoors in most software programs. US intelligence agencies worked closely with Microsoft on most operating systems to build in tailored backdoors for access. NSA contractor Edward Snowden’s stolen files also exposed almost every other major internet corporation was cooperating with governments to do exactly the same thing.

It’s now clear those companies didn’t appreciate having to cooperate with government, and they’ve always wanted out of that deal. Snowden’s leaks gave them all a chance to see how much power the internet industry has accrued over the government and they took it without hesitating. Good thing the media and the public was willing to channel this message without question. Hence reports like this.

Besides, “criminals and malicious nation states” already have access to most computer programs, and if they don’t, they’re working on getting through right now. And don’t kid yourself, there’s no such thing as a “malicious nation state”. Everybody spies, get used to it. Everyone in the cyber community loves it when people think a computer program is “unbreakable”. They just giggle as they gather all the vulnerabilities they can find. For every politician trying to curb cybercrime there's a cyber-pirate who’ll come up with a workaround, and only one of them knows how to code.

On top of this, telling people not to use end-to-end encryption is probably a funnelling tactic. I don’t need to have a complete picture for this to be true. After all, there's no power in abolishing cybercrime. The power is in giving everyone the pretence of security while secretly retaining the PGP keys to the kingdom. It’s first-grade stuff really.

The easy criticism is bashing the claim that cyber-crime is doing “extreme economic harm”. I’ve written elsewhere about the existence of cyber insurance. That alone seems to prove businesses are choosing to live with the problem of cyber-attacks rather than fix them. When insurance packages are introduced to cover a new risk, this is essentially an admission of a limit in power. Since no one can stop a hurricane, we create new insurance policy for storms instead. The same thing happened with the Somali pirates a few years ago: countries can dispatch a few destroyers to the Gulf of Aden, but just make sure the premiums don’t rise too much because businesses will still send the container ships anyway.

And despite what the MIT report claims, businesses aren’t losing money from cyber-attacks. Whenever an attack occurs, banks simply call their own insurers and someone in prints a few more notes or types in a few extra zeros on the right balance sheets and poof, everybody wins. Simple. Sure, that’s a little cartoonish, but it’s true nonetheless.

The business community has learned to live with cyber parasites, because it can’t stop them. In fact, it’s worse than that. The existence of cyber-pirates is integral to the new economic system. How else is the government expected to make money? People don’t pay enough taxes anymore and seigniorage is one of the best ways to increase the revenue of any government. That is, until they realise how Bitcoin opens the door for incredible wealth accumulation.

These kinds of reports always have a base argument which is never explicit: it assumes people will continue to use the internet, no matter what. Whenever you read/hear about internet security, understand that the dominant narrative assumes you have accepted the form of this argument. The default position, for everybody, in this modern age is to use the internet. You are not allowed to ask whether this is a good thing, it is simply expected.

These reports serve the purpose of distracting attention away from the incredibly worrying reality of internet domination by largely incompetent and amoral corporations. It forces the public to fight on exactly the wrong battlefield (against government intelligence agencies) while the real battlefield for power (corporates duelling over who controls cyberspace) is framed as either non-existent or without concern for your mortal eyes. The whole game is to exorcise the government from the internet so corporations can leverage greater control over the communications and privacy of individual internet users. Knowledge is power, and corporations are consolidating control over all knowledge. I’m not saying this is a bad thing, I’m just explaining what’s happening.

This is why we read these reports: if you’re seeing it, it’s for you. As an internet user, a click on this study (widely reported in international media) is a tick in the right box for greater corporate control over the internet. Whenever you hear the words “security” coupled with names of bad people, you must look for a power struggle in the margins. It’s there, believe me.

This is a direct quote from the report: “In the wake of the growing economic and social cost of the fundamental insecurity of today’s Internet environment, any proposals that alter the security dynamics online should be approached with caution.” Notice how the insecurity of the internet has arrived because of “changes” to the “environment”. Notice how this suggests a fall-from-grace mythos. It’s framed as if the internet was perfect until sin entered the world. And this, as written by the world’s leading technology experts!

This is how you spot a lie. Because guess who’ll be there to save you in the end? God of course. But only in the form of benevolent internet corporations wishing simply to provide the average internet user with safe-harbour from the spread of evil government overreach. The internet security message is just a story, it is not the truth. It is the sublimated reality according to the dominant narrative which portrays government as bad and internet corporations as good.

“But I have my whole life on the internet. Why aren’t people worrying about this?” Good question, pity it’s irrelevant. The better question would be, why is this the narrative? Because when you ask it like that, it’s possible to see the scaffolding holding up the story. As the author Phillip Bobbitt explains in his book The Shield of Achilles: War, Peace and the Course of History (2002), the developed world is currently transitioning from a nation-state system into the early days of what might be called a “market-state” system. No one knows what this new system will look like until it’s at least partially mature. And it’ll take a few more decades to flesh this one out.

But some important pieces are already becoming clear. The internet is the vehicle to this new reality and whomever controls its gateways will be in command of potentially the last great power transition in human history. If you’re not involved in this transition right now, you will never have another chance. It’s actually kind of funny how we all thought this was about our personal security and privacy. Perhaps Shakespeare was right: in a false quarrel there is no true valour.

Tuesday, 7 July 2015

What makes SpaceX so special?

With familiar politics trudging on and the Wild West replaying in the cyber realm, it’s easy to forget the central importance for humanity of the infinities of space.

Aside from the implications for modern militaries – with thousands of GPS and telecommunications satellites hurtling around in low-earth orbit – and the temptations of exploration and scientific breakthroughs, the central importance of space in the 21st century will be energy collection.

Space used to be the expensive domain of two only superpowers – the United States and Soviet Russia. Now multiple countries spend precious resources funding their own space programmes in a new race for access to the final frontier.

Governments remain the primary players in China and Japan. Even in the United States where private companies lead the advance, NASA is incentivising space flight by awarding funding contracts to the most successful companies.

It would be slightly misleading to say privately-owned space companies are entirely new ventures. The cumulative costs of government-funded space programmes mean they are inherently commercial. The partnership between private contractors making all the pieces of the NASA space programme and the government makes the missions possible.

However, private space flight is not without its setbacks. One company, SpaceX, experienced a major malfunction on one of its heavy-lift Falcon 9 rockets last week leading to the complete loss of the launch vehicle. The still-unknown cause of the explosion offers a tantalising glimpse into the opportunities of private space flight.

SpaceX has conducted 18 successful launches since its inception, carrying supplies to the International Space Station (ISS) and other missions. The company is also experimenting with a partially reusable rocket system in an effort to lower the cost of sending material into orbit.

And since NASA shut its shuttle programme down in 2011, the United States now relies on Russian rockets almost entirely. If the US is to bring this capability back to its own soil, private companies will be integral.

Currently, NASA pays Russia more than $US60 million per astronaut for a single flight to the ISS in a modern Soyuz rocket. It also costs about $US10-12,000 per kilogram to lift material into orbit. Many companies grit their teeth, however the incentive to lower lift costs clearly exists.

Despite the comparatively high failure rate for Russian rocket systems, the Russian space industry still accounts for almost half of the world’s commercial payload launches. Moscow is aware of the rise of the private space industry and is adapting, but private companies are gaining advantages over government-run programmes.

SpaceX rocket explodes shortly after takeoff
Satellites are the most important payload currently to send into orbit. Commercial satellites can be worth their weight in gold (figuratively speaking), yet some businesses already have other plans for the vast reaches of space.

Space-based solar energy has the potential to create enormous scalable wealth, turning the country that succeeds into a new ‘Saudi Arabia’ of energy. After all, space is the only region which doesn’t have obscuring weather conditions and never experiences night-time.

The limit is not in the underlying idea – plenty of work in miniaturisation of solar panels and battery storage is already underway. Instead, what simultaneously holds back space programmes and whets their appetite is the prohibitive costs of lifting material into orbit and keeping it there.

This is why it will be important to watch the rapid development of SpaceX and other companies over the next few decades. Its recent failure proves this venture is an extremely difficult one, but it also highlights how many influential eyes are watching SpaceX’s progress for investment opportunities.

Should private companies or government programmes tear down the cost of lift, the final frontier could become one of the most important developments for human civilisation since the discovery of the New World. That’s the theory anyway.