Bailout opacity

November 11, 2008

This ain’t good:

The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

The Bloomberg story goes on to quote Barney Frank spouting a bunch of nonsense about it not being so bad if “the fed gets a haircut” on these loans, but that logic misses the forest for the trees.

Bad information about the state of the Fed’s credit offerings will only breed mistrust and doubts among the rest of the market’s participants. The Treasury is correct to assume that making this knowledge public will destabilize some firms. However, if the Treasury actually wants to improve things in the long run they will seek more transparent procedures since a market with grossly distorted information does not benefit anyone.

Brace yourselves for a flurry of promises and diplomatic hand-waving as the world prepares for this weekend’s global financial summit.

The NYT reports that the G20 wants a bigger say in the global economy. Problem is, the global financial summit is not designed to achieve far-reaching structural changes of the sort G20 leaders such as Brazilian President Luiz Inácio Lula da Silva are seeking.

The European Network on Debt and Development suggests that Europe will bring lofty ambitions to the table as well, but precious little in the way of concrete mechanisms or meaningful procedural reforms to affect change.

My sense? Prepare for disappointment. As Aldo Caliari points out, the timing and form of President Bush’s economic summit is designed to undermine ongoing negotiations at Doha and avoid the transparent and multilateral approach of the United Nations. As such, the whole affair is looking depressingly similar to the original Bretton Woods meetings of 1944. Until the U.S. and Europe show the political maturity to surrender some authority and embrace a truly multilateral process we will get a lot of fluffy proclamations but few substantive changes.

Don’t get me wrong, I suspect that there will be some impressive sounding stuff that comes out of this weekend’s meetings. I have no reason to believe, however, that it will be anything like the kind of democratic, equitable sorts of reforms to global trade and finance that the world so deeply needs.

My trusty RSS feeds have turned up two interesting recent posts on the subject of the Obama campaign and it’s implications for the future of governance in a networked society.

First, David Lazer, professor at Harvard’s Kennedy School and Director of the Program on Networked Governance, asks some big questions (emphasis added):

The lights are not going off on this operation. If Obama loses, the network provides him an instant infrastructure to run again. The more intriguing question to me, as a student of politics, is what happens if, as seems likely right now, he wins. There are inter-related political and strategic questions. On the political side, the question is how Obama might use the apparatus to help him govern. Does he directly appeal to his e-mail list to support his policy objectives? There are, on average, about four thousand politically active Obama supporters in each Congressional district–that could be a lot of letters to Members.

And a few lines down:

On the strategic side, the question is to what extent does the apparatus continue to evolve to allow grassroots involvement, and to what extent does stuff flow up as well as down? In the long run, the only way that there will be some stickiness to the structure is if the people who have been involved can mobilize for local action, can connect to each other, and feel that their voices matter.

network cables (photo by pascal.charest cc-by-nc-nd)

network cables (photo by pascal.charest cc-by-nc-nd)

Meanwhile, Joshua-Michele Ross at O’Reilly interviews Jascha Franklin-Hodge (founder and CTO of Blue State Digital, or BSD), who offers some partial answers to many of the same questions.

I recommend reading the whole post (and watching the videos, if you’re more of a visual person or whatever), but here’s the bullet-point version of Ross’s claims if you absolutely insist (emphasis removed from the original):

  1. Online U.S. political communities will morph from a campaign fundraising role to a governing role.
  2. Rather than one centrally governed behemoth, MyBO is enabling a thousand small campaigns to flourish…This kind of swarm politics has generated enormous amounts of energy (and money) from ordinary citizens.
  3. Technology (infrastructure and know-how) will become a necessary core competence in all U.S. political campaigns…Campaigns that maintain or are able to tap into a continuity of software, infrastructure and human capital will have serious advantage.
  4. When lobbyist data, earmark data etc. is available in standard formats it will be a great leap forward for more transparency in government.

Responses 1-3 are in varying stages of already being true. Number 4, on the other hand, has a long way to go (although the folks at the Sunlight Foundation are plugging away on that front).

Whether Franklin-Hodge’s vision of digital democracy comes to fruition, the devil will be in the details. An underlying concern voiced by Lazer is how the nodes (citizens and groups) at the edges of U.S. politics might use digital networks to enhance traditional mechanisms of representation (politicians and political parties). I would build off this insight to ask both authors whether they think the architecture of the network and the technologies that run it will also play an important role in determining the fate of netwoked democracy? If so, how do we design networks to facilitate democratic practice?

As a number of folks have argued, the choice of particular platforms and standards will enable certain forms of civic engagement while foreclosing or devaluing others. Furthermore, just because voters could gain access to the same kinds of technologies doesn’t mean they’ll use them equally effectively or even in the same ways (check out Eszter Hargittai’s research on skillful Internet use if you want some really sobering examples).

All of this is to say that the prospect of a networked polis (like a networked public sphere) presents a number of problems and challenges that few (if any) societies have been able to resolve with earlier communications technologies or institutional formations. In the ancient Greek version of the polis, a narrow class of citizens (land-owning men of means) had the ability and the right to participate. While contemporary democracies have become more populist and inclusive, the reality is that the playing field remains wildly uneven in favor of the wealthy, the well-educated, and the well-connected.

If the future imagined by Franklin-Hodge, Lazer, and others indeed comes to pass, all the fiber optic cable in the world will not make the democratization of effective citizenship any less of an uphill battle.

From Sunday’s FT opinion pages:

The current global policy debate is a cacophony. It is all very well to advocate increased US saving and a cut in the US current account deficit but the process for bringing it about will mean less US demand for foreign products. That will put pressure on jobs and output growth in other countries if no countervailing measures are put in place. Conversely, the return of a stronger dollar without other policy changes will raise US demand for exports but at the price of cutting demand for domestically produced goods and compounding the recession.

These problems will be with us for some time. They may not be at the top of anyone’s agenda right now. But the success of the next administration could depend on its ability to engage with a wider range of global economic stakeholders, on a broader agenda, at a time when disagreements are increasing not just about means but also about ultimate ends.

Are the governmental institutions of the United States up to this challenge? Europe? China?

The collapse of consensus at the global level appears more imminent than ever these days – Doha’s failure and the appearance of ACTA (a proposed trade agreement that would effectively undermine WIPO and the TRIPS agreement) are part of a broader current that may sweep the Bretton Woods institutions into the dustbin of history.

Intentionally or not, the Bush administration has furthered this process quite effectively.

In the midst of a (likely) recession and the ongoing erosion of its diplomatic and military authority, what steps will the next U.S. administration take?

Once again, the Internet confounds legal regimes based on pure territorial jurisdiction…

and this despite whatever Jack Goldsmith and Tim Wu might have told you in the past.

James Boyle has an excellent editorial in the Financial Times today criticizing the efforts of members of the U.S. Congress to create an “IP Czar” through the so-called “PRO-IP” Act.

The bill, sponsored by representative John Conyers (D-MI) passed the house and is awaiting the creation of companion legislation in the senate. Sentors Orrin Hatch (R-UT) and Patrick Leahy (D-VT) have expressed interest.

Here’s my favorite quote from Boyle:

We create a czar when we think that something is so important that other values must be subordinated to it, other goals ignored, power centralised, restraints discarded.The great thing about czars is that they can act alone, maximizing a single set of values, without worrying about the troubling demands of bureaucracy but also sometimes without worrying about the demands of the separation of powers and the rule of law. That latter feature is worrying.

Earlier, I wrote about Conyers and H.R. 4279; the EFF’s response to the bill; and (more recently) about Senator Hatch’s efforts to get the PRO-IP Act efforts rolling in the senate.

Hat tip: Manon Ress

As of July 1, Spain’s controversial “digital canon” law will impose a tax on any gizmo that can record, copy, or store digital media.

In theory, this is a tax on “piracy” that goes towards supporting artists.

In reality, the cash goes straight to the “collecting societies” that represent artists and collect royalty payments on their behalf. The law apparently makes no provision as to how these societies must distribute this revenue.

The collecting societies’ survival depends on the preservation of restrictive IP regimes and royalty-based business models in creative industries. As a result, they have historically acted to constrain artists’ and users’ ability to opt out of IP-based remuneration schemes.

With the passage of this law they have successfully imposed the cost of their existence on consumers and producers in an entirely separate industry. Not surprisingly, the electronics equipment manufacturers and re-sale firms (not to mention consumer advocacy groups) are furious.

Declining sales across many of the content industries will continue to lead increasingly desperate firms (and their lawyers) to seek ridiculous regulatory interventions like this one. The results are expensive, inefficient legal instruments that will prove even more costly to overhaul as the digital economy continues to evolve.

Instead of more laws like this one, regulators should seek to incentivize alternative business models that capitalize on the network effects of costless digital reproduction. In the case of music, I’m thinking of something along the lines of VODO and other schemes that capitalize on what Doc Searls has called “the volunteer economy“.

If I were a Spanish citizen, investor, or entrepreneur I’d wonder why my elected officials weren’t willing to make a more far-sighted investment in the future of my culture, my technologies, and my economy.