Argument

Internet Freedom Starts at Home

The United States needs to practice what it preaches online.

"An electronic curtain has fallen around Iran," U.S. President Barack Obama warned in a recent video message marking the Persian New Year. Government censorship and surveillance, he said, make it more difficult for Iranians to "access the information that they want," denying "the rest of the world the benefit of interacting with the Iranian people."

Implied though not explicit in Obama's remarks was the idea that if Iran's Internet were freer and more open, Iran's relationship with the world generally -- and the United States in particular -- would be different. Cases like Iran are the main driver of Washington's bipartisan consensus around the idea that a free and open global Internet is in the United States' strategic interest.

Yet more than two years after Secretary of State Hillary Clinton gave her first speech declaring "Internet freedom" to be a major component of U.S. foreign policy, it turns out that many of the most sophisticated tools used to suppress online free speech and dissent around the world are actually Made in the USA. American corporations are major suppliers of software and hardware used by all sorts of governments to carry out censorship and surveillance -- and not just dictatorships. Inconveniently, governments around the democratic world are pushing to expand their own censorship and surveillance powers as they struggle to address genuine problems related to cybercrime, cyberwar, child protection, and intellectual property.

Even more inconveniently, the U.S. government is the biggest and most powerful customer of American-made surveillance technology, shaping the development of those technologies as well as the business practices and norms for public-private collaboration around them. As long as the U.S. government continues to support the development of a surveillance-technology industry that clearly lacks concern for the human rights and civil liberties implications of its business -- even rewarding secretive and publicly unaccountable behavior by these companies -- the world's dictators will remain well supplied by a robust global industry.

American-made technology has turned up around the Middle East and North Africa over the past year -- from Syria to Bahrain to Saudi Arabia, from pre-revolutionary Tunisia to Egypt -- in contexts that leave no doubt that the software and hardware in question were being used to censor dissenting speech and track activists. While much of this technology is considered "dual use" because it can be used to defend computer networks against cyberattack as well as to censor and monitor political speech, some members of Congress are seeking to prevent its use for political repression. To that end, the Global Online Freedom Act (GOFA), which passed through the House of Representatives Subcommittee on Africa, Global Health, and Human Rights last week, takes aim not only at U.S.-headquartered companies but also overseas companies funded by U.S. capital markets.

As GOFA's sponsor, Rep. Chris Smith of New Jersey, bluntly put it, repressive regimes in Iran, China, and Syria "are transforming the Internet into a 'weapon of mass surveillance.'" The bill has been kicking around Congress in various forms since 2006 after Yahoo handed over dissidents' email account information to the Chinese authorities and other companies including Cisco, Microsoft, and Google came under fire for aiding Chinese political censorship to varying degrees. While its specifics have changed over the years, the current version contains three main elements:

1. It requires the State Department to create a list of "Internet-restricting countries."

2. It requires that all companies listed on U.S. stock exchanges disclose to the Securities and Exchange Commission what procedures and practices they have put in place to protect the free expression and privacy rights of users in "Internet-restricting" countries.

3. It revises U.S. export control laws to forbid the export of censorship and surveillance technology to "Internet-restricting countries."

GOFA has received ringing endorsements from a number of human rights groups as well as from Yahoo -- which, after a few years of humiliation in Congress and the media over its mistakes in China, has made a public commitment to human rights. The second part of the bill, focused on corporate transparency, is modeled after sections 1502 and 1504 of the recently passed Dodd-Frank Act, which requires conflict-minerals and extractive-revenue disclosure. It is based on the premise that at least some investors care about the human rights responsibilities of U.S.-listed businesses. More broadly, the idea is that just as companies are expected to commit to basic environmental, labor, and human rights standards when it comes to their operations in the physical world, investors, consumers, and government regulators should expect similar commitments to users' and customers' rights to digital free expression and privacy when using the Internet and mobile devices.

Companies that join the Global Network Initiative (GNI), a multi-stakeholder organization through which Internet and telecommunications companies work with human rights groups, socially responsible investors, and academics to uphold core principles on free expression, privacy, and human rights, would receive "safe harbor" from this requirement. So far only five companies have joined the GNI: Google, Microsoft, Yahoo, Websense, and Evoca. (Full disclosure: I am on the GNI's board of directors.) It is possible that the bill will be an incentive for more companies to join the GNI even if it fails to pass.

Some free speech groups, however, have stopped short of a full-on endorsement of the bill. The Center for Democracy and Technology, while supportive of its general aims, cautions that GOFA needs refining in order to prevent unintended restrictions on the sale of badly needed technology to activists and NGOs working in authoritarian countries. Existing laws already fail to get the balance right: The Electronic Frontier Foundation is campaigning to reform current trade sanctions that are preventing opposition activists in countries like Syria from accessing U.S. companies' software and communications tools. The digital freedom group Access shares these concerns and also worries that the State Department's list of "Internet-restricting countries" will become politicized, potentially absolving companies that assist U.S. allies in censoring and monitoring political dissent.

The bill's drafters have further created problems for themselves by combining export controls and transparency requirements in one piece of legislation that applies to the same list of "Internet-restricting" countries. Export controls by nature target a list of countries that, due to U.S. trade and diplomatic interests and political lobbying by companies, is inevitably a relatively short list focused on the worst offenders. Thus the export control section of the bill will create pressure on the State Department to keep the list of "Internet-restricting" countries as short as possible.

Yet the bill's transparency requirements will lose much of their force and meaning unless they target corporate-government collaboration in a much wider range of countries where governments attempt to abuse censorship and surveillance powers. Consider, for example, India, the world's largest democracy -- which is unlikely to be placed on a State Department "Internet-restricting countries" list making it subject to sanctions -- but where the government is making increasingly aggressive demands of Internet companies to censor content and hand over user information. Or Britain, where civil liberties groups are in an uproar over plans by Prime Minister David Cameron's government to introduce a law enabling the government to monitor calls, emails, texts, and website visits of everyone in the country without a court order or warrant. Under GOFA, companies are unlikely to be held responsible for assisting these democratically elected governments in abusing their censorship and surveillance powers.

In congressional testimony last December, I argued that the section of GOFA requiring companies to adopt and disclose measures to protect Internet users' free expression and privacy rights should be based on a universal standard, not just the State Department's whim. The Global Network Initiative, for example, applies a global standard to corporate-government interactions. Why? Because the initiative's members -- who include a range of civil liberties groups, human rights organizations, socially responsible investors, and academics -- cannot come up with a single country where the abuse of free expression and privacy by government and corporations is not a genuine concern.

All companies doing business everywhere -- including in the United States -- should commit to uphold and defend the free expression and privacy rights of their users for the same reasons we expect other types of companies agree to respect the health and safety of the people who purchase and consume their products. Companies should be required to demonstrate that commitment by reporting publicly not only on how they gather and retain user information, but also how and under what circumstances they share that information with governments as well as other companies. Only then can people have a clear sense of how power is being exercised over their digital lives and know whom to hold accountable when that power is abused.

But GOFA, by targeting corporate sales and government relationships in the worst-case countries while skirting the much more inconvenient question of how companies facilitate government abuse of surveillance and censorship powers in democracies and close U.S. allies, completely sidesteps the root of the problem: the main market drivers whose demand for surveillance technology is actually shaping and funding the development of these technologies.

Make no mistake: American tech companies are up to their eyeballs in bad behavior. Despite industry and government efforts to keep the media in the dark about a traveling trade show for surveillance technology known as the "Wiretappers' Ball," recent media reports have revealed the extent to which American corporate innovations in surveillance technology are driven by U.S. government demand. And the U.S. government is by far those companies' biggest customer.

According to the Washington Post, at last year's trade show just outside Washington in Northern Virginia, 35 federal agencies as well as representatives from state and local law enforcement mixed with representatives of 43 countries. Despite the Obama administration's proclaimed commitment to Internet freedom, the executive branch of the U.S. government makes no effort to be honest or transparent with the American public about the types of surveillance technologies it is sourcing and purchasing, what capabilities these technologies have, or which other governments are purchasing these technologies.

What this means for American democracy -- let alone for the democratic aspirations of people anywhere else -- became abundantly clear this past Sunday, April 1, when the New York Times reported on a detailed investigation by the American Civil Liberties Union that uncovered widespread use of cell-phone tracking technology by police departments around the country in non-emergency situations without court orders or warrants.

Meanwhile, as GOFA moves forward, Congress is considering several cybersecurity bills that would authorize Internet service providers and other companies not only to monitor private communications passing over their networks, but also to share private communications with the National Security Agency and other federal entities or with any other agency of the federal government designated by the Department of Homeland Security -- and with less due process and judicial oversight than ever before. While acknowledging that cybersecurity is a legitimate goal, groups focused on the defense and protection of Internet users' rights, including the Center for Democracy and Technology and the Electronic Frontier Foundation, have expressed deep-seated concerns about the extent to which these bills open the door even wider for civil liberties violations.

GOFA's supporters argue that one has to start somewhere and that focusing on the relationship between U.S. companies and authoritarian dictatorships is the best way to obtain bipartisan consensus to pass legislation. That is no doubt true. But if the American people continue to allow the U.S. government and American industry to forge increasingly unaccountable and opaque relationships around the exchange and use of citizens' private information, the damage will extend well beyond American democracy and civil liberties. The business norms and technological innovations born of such opaque and unaccountable relationships will keep dictators supplied with handy tools for decades to come.

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Argument

The Zero Man

Obama’s greatest obstacle to re-election isn’t Mitt Romney, or rising gas prices: It’s Ben Bernanke.

It's the sort of news that strikes fear in the hearts of incumbent politicians everywhere: the cost of living is rising. And if people really do vote with their wallets, less money in their pockets is a death knell. With the U.S. consumer price index rising 0.4 percent in February -- the largest jump in 10 months, largely due to rising gasoline prices -- the trend doesn't look good. On March 23, the International Energy Agency warned that soaring oil prices risk a recession. And in a testament to the issue's political resonance, GOP candidate Newt Gingrich even pledged (however utopian this may be) to lower the price of gas to $2.50 per gallon in an effort to revive his flagging presidential hopes.

But while rising gas prices may dim President Barack Obama's reelection prospects, Federal Reserve chairman Ben Bernanke is not likely to lose much sleep over it. Bernanke's own research, dating back to 1995, has convinced him that it is central banks' decision to tighten the money supply by raising interest rates that triggers economic downturns -- not the spike in oil prices itself. And so long as the Fed doesn't raise interest rates in the face of rising oil prices, Bernanke's thinking goes, the spikes should be harmless. Even if oil prices were to jump through the roof, it is highly unlikely that the Federal Reserve would raise interest rates in an effort to combat inflation.

How can we be so sure of that? Under Bernanke's stewardship, the veil of secrecy over the Fed's actions that existed under his predecessor, Alan Greenspan, has been lifted. Back in those days, being a Fed-watcher was an actual profession -- trying to decipher what Greenspan himself dubbed Fed-speak: mumbling with great incoherence. Bernanke, on the other hand, vowed during his confirmation hearing in 2005 to make the Fed's policies more transparent. When financial markets can predict the factors that affect the Fed's monetary policy, his academic research had convinced him, it is easier for him to keep interest rates where he wants them.

When Bernanke sent his second monetary policy report to Congress in June 2006, he told lawmakers that the decision on a possible rate hike would depend on incoming economic data. No crystal ball -- simply data-driven decision-making. But this announcement didn't have the stabilizing effect that he probably had hoped for: Financial markets fell in disarray, as some data pointed to a rate hike while others suggested that the Fed would keep the rate steady. As one banker at Lehman Brothers mused at the time, "Bernanke is treating us like adults, only to find out we are behaving like children."

When credit markets choked up and international trade plunged after the collapse of Lehman Brothers in September 2008, Bernanke not only flooded the banks with money to keep them afloat, he also quickly cut interest rates. Since then, he has acted to keep rates at historic lows in an attempt to spur economic growth -- a step, however, that also appears to contribute to rising oil prices, and hence rising inflation.

With the federal funds rate -- the most important short-term rate that the Fed has to influence the economy -- at almost zero percent since December 2009, Bernanke has been forced to look for unconventional ways to stimulate the economy and combat high unemployment. He embarked on a strategy of buying trillions of dollars of bonds known as quantitative easing, which aimed to unfreeze the market for asset-backed securities and drive down longer-term interest rates.

In a bid to enhance the Fed's predictability, Bernanke also launched a policy of holding press conferences immediately after the meetings of the Federal Open Market Committee, which determines short-term interest rates. The pressers are intended to "further enhance the clarity and timeliness of the Federal Reserve's monetary policy communication," according to a press release at the time.

In the past year, Bernanke has only doubled down on his efforts to use the Fed's communications policy to drive down interest rates by giving investors still more guidance on the future path of the Fed funds rate. On Aug. 9, 2011, the FOMC released a statement saying that it anticipated economic conditions would likely warrant exceptionally low levels at least through mid-2013. This sent shockwaves through financial markets -- the volume of stocks traded rose to almost twice the daily average. The FOMC succeeded in its mission to lower bond yields, but it also effectively limited Bernanke's flexibility to alter course in the face of changing market conditions.

These steps have been successful at keeping interest rates low, but they have also limited Bernanke's flexibility to raise interest rates if market conditions change. Indeed, in January 2012, the FOMC pontificated that it anticipated exceptionally low levels for the federal funds rate at least through late 2014 -- it even included a table that provided a picture of individual committee members' rate expectations, the first central bank ever to do so. The fact that FOMC members' expectations about the future Fed funds rate is now down on paper virtually ensures that the Fed will keep the rate near zero until the end of 2014 -- no matter how the economic situation develops.

Even if inflation rises even higher and unemployment continues to falls, Bernanke will likely argue that the Fed's credibility is sufficient reason to keep rates low. That's what happened at the FOMC meeting in June 2003, when the economy was growing at a healthy clip, but the Fed nonetheless decided to cut the Fed funds rate from 1.25 to 1 percent, since markets were anticipating it. And as we all know now, the Fed's ultra-loose monetary policy lay the groundwork for the subsequent housing boom, which wrecked the U.S. economy.

Once again, the Fed is at risk of letting financial markets, rather than economic fundamentals, dictate its rate decision. Bernanke's obsession with predictability aside, recent economic news has given the Fed reason to reconsider its policy of historically low interest rates. Since the January meeting of the FOMC, the unemployment rate has dropped like a brick -- albeit to a still unsatisfactory 8.3 percent -- and inflation has spiked due to rising oil prices. Given the Fed's dual mandate (maintaining price stability and promoting maximum employment) these data points suggest that a rate hike, bringing interest rates to more conventional levels, may be nearer than the committee initially predicted.

However, there is no sign so far that Bernanke is preparing to change course. The Fed chief has reiterated his expectation time and again that the Fed funds rate will remain at an exceptionally low level until the end of 2014. Asked during congressional hearings by lawmakers on February 29 and March 1 about the impact of higher oil prices on the economy, Bernanke likened the oil price hikes to a tax on income and was only willing to concede that it would temporarily lead to higher inflation. He painted rising oil prices as a temporary phenomenon, suggesting that they will at some point stabilize (at which point inflation will indeed be close to the Fed's target of 2 percent), while making the case that the Fed is only concerned with "longer-term" inflation.

Bernanke's background as an eminent economics scholar is often considered an advantage, but it may just as well be his Achilles heel. Much of his research concentrates on the Great Depression, and his central conclusion was that much of the pain during that period could have been avoided if monetary policy had been loosened, rather than tightened. In a speech on Milton Friedman's 90th birthday, Bernanke told the eminent economic theorist that the Federal Reserve was indeed responsible for deepening the Great Depression: "You're right, we did it," he said. "We're very sorry. But thanks to you, we won't do it again."

"Moderation is fatal. Nothing succeeds like excess," Oscar Wilde once said. Unfortunately, this aphorism does not apply to monetary policy. Keeping the interest rate low may look good in an election year, but it comes at the expense of higher oil prices. Excessively low interest rates create bubbles and can lead to runaway inflation -- not only ruining candidates' election hopes, but entire economies. Although Alan Greenspan has taken the fall for the 2008 financial crisis, Bernanke was the ideologue who provided the intellectual backing for the aggressive rate cuts in the early 2000s that set us up for the Great Recession. Obama may be focused on high gas prices these days, but the larger problem is that Bernanke's policies may be undermining his economic stewardship.

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