The insecurity of computer systems

After the American Century

The insecurity of computer systems, discussed previously in this space, is once again in the news. The American Pentagon has admitted that back in March 24,000 files were stolen from its supposedly secure systems. The perpetrator was presumably a foreign coountry or a very large player in the defense industry, but then again it might have been another hacker incident. There have been several examples of hackers getting into the Pentagon in the past, hardly a reassuring pattern.

Why admit this now,  more than three months afterwards? The simplest explanation is that the security breach has to be acknowledged eventually. But in the world of espionage, disinformation is also a possibility, and several scenarios come to mind.

Perhaps the 24,000 files are bogus, and they were put there in a relatively insecure place, like bait in a trap.  Or perhaps there was no security breach at all, but the Pentagon wants to create the impression that there was one, as part of some larger scheme, like selling disinformation to the Chinese. If you begin to think about such matters, there is no reason to take anything at face value.

Meanwhile, Wikileaks has distributed worldwide thousands of US military files, and at least once a week there is a news story about stolen identities, security breaches, and the market in stolen credit card numbers.

Do we need a neo-Luddite movement? It might be nice to have no money or personal records out there in cyberspace. It might even be an idea for the military to take its most important secrets off-line. But how many would be willing to give up Facebook, email, and all the rest of it? From what I can see, no one under 30, and few under 65. It seems we will have to live with this new and pervasive form of insecurity.

Wake Up Republicans: Government is not a Business

After the American Century

The idea that the US government could choose to default is a fundamental misconception. Government is not a business that can decide to fail. Default is not a valid government strategy. Government is the foundation of society. It is a contract between the citizens that cannot be broken, not a corporation that can be allowed to go broke because people do not want to pay taxes. Talk of letting government fail financially cannot be separated from a more general failure of trust between the citizens. Government is about mutual obligation. It is not an investment that one pulls out of. Government is a contract between the generations, ensuring that pensions are paid, that opportunities such as education remain available, that the infrastructure is maintained, that services such as hospitals and fire departments do not deteriorate. Republicans really do not seem to understand this. They have long argued that government is an evil that should be pared down to a minimum. But the idea that elected legislators are willing intentionally to let the government default goes far beyond that doctrine. Dangerously far.

Americans have lived with a stable system so long that they have no historical experience of the disasters that come with fiscal irresponsibility. Undermine the state government, and you undermine the dollar itself. I am not talking about the dollar losing a few percentage points against the Euro. I am talking about the Japanese and the Chinese deciding not to buy dollar debt anymore, because it is too risky. I am talking about interest rates above 10% that cripple the US economy. For a small inkling, a mere taste of what that might mean, look at Greece right now, with the difference that the EU can bail out Greece. But no economy is big enough to bail out the United States.The US taxpayers have to honor their own obligations.

The dollar has been the world currency for so long that Americans take it for granted. But its hegemony is hardly assured. Other economies look stronger right now. Even to flirt with default will scare away future investments. Should the Republicans get back into power. international investors may head for the exits. Even now, China and Japan will almost certainly plan to dis-invest in US government bonds in order to spread their risk.

The Republican Party once again is showing that it is not fit to rule. It is a reckless party with no fiscal policy, a deluded party that does not understand the dangers of this historical moment when US economic and political power are challenged. The Republicans are a dangerous party that threatens to do lasting damage to US financial security and its standing in the world.

On the Line: Reading Harvey Swados

After the American Century

As part of my research on the history of the assembly line in the United States, I have been reading Harvey Swados for the first time. The name I knew, but not the work, which remains interesting after half a century. His short story cycle, On the Line, describes the lives and aspirations of eight men who work together in a new automobile factory in New Jersey, c. 1956, the year when Swados himself was on the assembly line in such a plant.

On the Line first presents LeRoy, an African American who aspires to be an opera singer, but needs money for more voice lessons, and so goes on the assembly line. An injury cuts off his chance for a musical career, and he remains mired in the job. His partner in the factory is a young Irish immigrant, Kevin, who is at first stunned by the size, the noise, and the bustle of the factory, and saves money to buy himself a car. But then having tasted the material dream and its price, he goes back to Ireland. 

The other characters are a reformed alcoholic, a aging widower, a failed businessman in his 50s who needs the money, a high-school graduate who saves his paycheck for college, a foreman who has worked his way up from the shop floor, and finally Joe, the closest thing to a stand-in for the author - an older man who seems well read. He refuses to get psychologically trapped by any job and drifts from one factory to another. 

Swados is effective precisely because the characters are each revealed in their private as well as their work lives.  We learn of their marriages, children, homes, and problems, as well as see them at work. His goal was to get away from any romantic notion of a unified, rather homogeneous working class. At the same time, however, Swados was writing against the Cold War-inspired notion that the US was fast becoming a society with minimal class differences. This was the sociological orthodoxy for a brief time, but no one reading this book could come away believing it was true then, any more than one could believe it now.

These are excellent stories that can be read separately but gain in power when taken as a whole.
 I found Swados insightful and useful in researching America's Assembly Line (MIT Press, 2013).

Different Default Situations: US vs. EU

After the American Century

Both the EU and the US are struggling with massive public indebtedness, and in each case the problems emerge from bad decisions made during the last decade. The problems are quite different, however.

First, consider The United States. It seems hard to believe now but the US had balanced its budget and was rapidly paying off its national debt in 2000. The current fiscal woes are due to an excessive tax cut that overstimulated the economy, combined with massive military expenditures and a failure to regulate the banks. These problems all came from the White House, which dismally failed to protect the strong economy created in the 1990s. Bush overspent, undertaxed, and virtually abandoned regulation. The country needs years to get out of the mess he created, during which it needs to raise taxes back to where they were in 2000, particularly on wealthy people. But the Republicans, once a party of fiscal rsponsibility, have no intelligible economic program and they seem willing to let the nation go into default rather than compromise with the White House. In short, the American problem is firmly lodged in Washington, rooted in the failures of the Bush years. The problem is not impossible to solve from an economic point of view, but it is hard to resolve politically. The stupidity is, if you will, ideological.

Second, consider Europe. Here the problem is much different. The problem has emerged at the regional level - Greece, Italy, Spain, Portugal, and Ireland, all have weak economies and huge deficits. In contrast, some other members of the EU, notably Germany and Sweden, have strongly rebounding economies and do not have unbalanced national budgets. The problem here is that no single banking policy is appropriate for both the strong nations and those tottering on the brink of default. The stupidity in the EU is, if you will, a regional matter.

The US has a problem that could be easily solved by reverting to the tax code of the Clinton years. Possibly, something approaching this will occur, probably at the last minute. As Winston Churchill once said, the Americans always do the right thing in the end, but not before they exhaust all the other possibilities.

In contrast, it is much harder to see what the EU can do to solve its fiscal problems. The failure of Greece to pay its debts could set off a financial tsunami. Even the controlled default now being contemplated (or rather orchestrated in Brussels)  could have dire effects. The unity of the EU will be sorely tested if the fiscally responsible economies have to bail out those, like Italy, that are rife with tax cheating and black market labor. Why should Germans or French tax payers have to endure higher taxes when many wealthy in Greece continue to lie about their assets and pay less than they should?

History is not logical, of course, and it might be that the US will stumble into a completely unnecessary default, while the Europeans stumble through to a somewhat undeserved equilibrium. But the fascinating thing is to see how these wealthy countries have made such a mess of fiscal policy.  In a worse case scenario, default on either side of the Atlantic could trigger a larger world crisis, from which Asia would almost certainly emerge the stronger.

We are in for a perilous three months.