Red Links, 6-03-10
A lot of opinion this week, and none of it pleasant. Even more depressing is the realization, that most of the solutions offered for stem rust, financial reform, or cyber warfare, start with solons ruling uncharacteristically wisely, like hitting a bulls eye.
If cyberarms-control is to America’s advantage, it would be wise to shape such accords while it still has the upper hand in cyberspace. General Keith Alexander, the four-star general who heads Cyber Command, is therefore right to welcome Russia’s longstanding calls for a treaty as a “starting point for international debate”. That said, a START-style treaty may prove impossible to negotiate. Nuclear warheads can be counted and missiles tracked. Cyber-weapons are more like biological agents; they can be made just about anywhere.
So in the meantime countries should agree on more modest accords, or even just informal “rules of the road” that would raise the political cost of cyber-attacks. Perhaps there could be a deal to prevent the crude “denial-of-service” assaults that brought down Estonian and Georgian websites with a mass of bogus requests for information; NATO and the European Union could make it clear that attacks in cyberspace, as in the real world, will provoke a response; the UN or signatories of the Geneva Conventions could declare that cyber-attacks on civilian facilities are, like physical attacks with bomb and bullet, out of bounds in war; rich countries could exert economic pressure on states that do not adopt measures to fight online criminals. Countries should be encouraged to spell out their military policies in cyberspace, as America does for nuclear weapons, missile defence and space. And there could be an international centre to monitor cyber-attacks, or an international “duty to assist” countries under cyber-attack, regardless of the nationality or motive of the attacker—akin to the duty of ships to help mariners in distress.
The internet is not a “commons”, but a network of networks that are mostly privately owned. A lot could also be achieved by greater co-operation between governments and the private sector. But in the end more of the burden for ensuring that ordinary people’s computer systems are not co-opted by criminals or cyber-warriors will end up with the latter—especially the internet-service providers that run the network. They could take more responsibility for identifying infected computers and spotting attacks as they happen.
In America Dodd-Frank’s actual impact will depend greatly on how regulators like the Fed and the new consumer agency enforce its provisions. The risks cut two ways. Banks and their lobbyists may persuade regulators to interpret the new rules in the friendliest possible way to Wall Street, as they did before the crunch: the treatment of the ratings agencies, which seem to live a charmed life, will be a good test. In the opposite direction, regulators may overreach—stifling innovation which, for all its recent excesses, has over time been a force for good.
China has always played a huge role in Taiwan’s politics. Better that it should play it the ECFA way, with trade and other benefits meant to entice and reward, and gain popularity, than the old one, with belligerent threats and diplomatic pressure designed to frighten and coerce.
In 1998, at a research station in south-west Uganda, William Wagoire, a plant breeder out checking his crops, came across something that everyone thought had been driven from the face of the Earth: the crimson cankers of stem rust, a disease that was once wheat’s deadliest scourge but had not been seen since the Green Revolution that transformed agriculture in the second half of the 20th century. Since then stem rust has spread from a corner of Africa’s Great Lakes to countries as distant as Iran and, recently, South Africa. Scientists now fear that the fungus cannot be kept out of Punjab, one of the world’s great bread baskets.
To Keynesian critics the switch to austerity is a colossal blunder. Paul Krugman, an economist who writes in the New York Times, frets that officials who “seem to be getting their talking points from the collected speeches of Herbert Hoover” will push the world economy into a depression. With unemployment high, output far below its potential, private spending still weak and interest rates close to zero, Mr Krugman and his allies argue that fiscal stimulus remains an essential prop to the economy and that deficit-cutting now will spell stagnation and deflation.
From the other side, supporters of the shift to austerity believe it is both essential and appropriate: deficit spending cannot go on for ever, and by boosting firms’ and households’ confidence and lowering the risk premium on government debt, well-designed fiscal consolidation can actually boost growth. Jean-Claude Trichet, president of the European Central Bank, argues that fiscal thrift will increase private spending by reducing uncertainty about government tax policy and debt.
Both sides of this debate oversimplify their cases. Mr Krugman’s crude Keynesianism underplays the link between firms’ and households’ behaviour and their expectations of future tax and spending policy. For example, firms across the rich world are hoarding cash. Their reluctance to invest may have more to do with regulatory, financial and fiscal uncertainty than weak consumer demand (see article). If governments address those worries, businesspeople may start spending.
The advocates of austerity exaggerate more dangerously still. They base their argument on cases in the 1990s, when countries such as Canada to Sweden cut their deficits and boomed. But in most of these instances interest rates fell sharply or the country’s currency weakened. Those remedies are not available now: interest rates are already low and rich-country currencies cannot all depreciate at once. Without those cushions, fiscal austerity is not likely to boost growth.
The austerity fad is also distorting politicians’ priorities. Many European governments, for instance, are fixated on cutting their deficits, when they should also be trying harder to shake up their labour and product markets. A new analysis by the IMF suggests that fiscal austerity coupled with structural reforms would yield far higher growth than austerity alone. In America the new deficit-focused climate is preventing politicians from passing a temporary (and sensible) fiscal stimulus package without inducing them to tackle the sources of the country’s huge medium-term deficit by, for instance, reforming social security. The result probably won’t be another Hooveresque Depression. But it could be a recovery that is weaker and slower than it should have been.
Fairness is fudge. This newspaper will have none of it. We reject the wide, woolly notion of fairness in favour of sharper, narrower words that mean what they say, like just or cruel. Sadly, British politicians are unlikely to follow our lead. They will continue to paper over their cracks with fairness. Which, given how handy the word is, is probably fair enough.
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Filed under: Business/Economy, East Asia, Europe, Military, Politics, Science, Subscriptions, USA Tagged: austerity, china, cyner warfare, fairness, financial reform, keynes, paul krugman, prc, roc, stem rust, taiwan, the economist
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