Octobre 2, 2012

"The welfare state is one Ponzi scheme worth backing", proclaims the title of John Kay's latest column (*). It is undeniable that the scale of Madoff's scandal has imprinted Ponzi back both on readers' minds and in writers' headlines, an endless game of mirrors. I used the ploy myself.

Yet the lure of editing devices should never impair the rigor of scientific discourse. John Kay does a disservice to his cause when he admits "the consequences of [intergenerational solidarity] do have the character of a Ponzi scheme".

"One day, the world will end and the last generation of workers will have been cheated of their expectation of a peaceful retirement". In fact the last will truly be the lost generation, ultimately left holding a bagful of promises, as wonderful as they are unredeemable. But so will be at that time of wrath all debts outstanding, except our sins, we hope. Make every financial instrument a potential Ponzi and the word loses its meaning.

What makes a Ponzi is intrinsic, not extrinsic unredeemability. It is the reliance, in order to fulfill promises contractual in character, even if implicit, on a perpetual source of growth above and beyond one's control. Facebook is not a Ponzi because it made no hard promises, only electoral ones, those with no redeemable value. A welfare state is Ponzi like only if it depends on a level of economic growth which has proven unsustainable.

Words may fail John Kay, his real point remains relevant. Social calamities, old age to begin with, are best met with intergenerational solidarity. To call this a "world-straddling engine of theft, degradation, manipulation and social control" would be a risible rant indeed if it did not "threaten[] the fragile arrangements on which economic security depends", the right mix between solidarity and greed which powers society's two-stroke engine.

So whether in China, Europe or the United States, the issue faced by the State is not whether to make promises but how to design sustainable ones. Elected representatives are too often tempted by turning the duties of the current generation into rights over the next one. Does the latter vote? Not now and before it does, the end will have come, if not for the world, at least for those individuals responsible for blowing up the bubble.

I claim our lack of personal data rights is intimately linked to our lack of democracy. I claim the resulting lack of concern about eprivacy creates a kind of data bubble, whose explosion will kill the trust necessary to the economy of our Information Age. I claim it is impossible to focus on this topic outside the full context of our digital world. And so I justify my writing on many subjects on which I readily confess I am no expert.

For independent support, let me turn to Fernand Braudel's analysis of the Industrial Revolution (1), which fathered the Age we are presently leaving.

Taunting those who pick some aspect of it as "a separate stage", if not its first, he asks "railways? cotton? coal? metals? gaslighting? white bread? [...] The list is if anything too short. [...] The industrial revolution means everything - society, economy, political structures, public opinion, and the rest." He sees it "not moving towards any goal" but "propelled along by that multitude of different currents", in a blind, evolutionary way.

According to his vision then, eprivacy is worth studying as long as it is done in relation with all other synchronous developments, be they cause or effect, favorable or not. And the limitations of my knowledge are secondary. Of a witness, one demands that he observes, not that he understands.

Naturally I still strive to understand and, so doing, observe Fernand Braudel comes up with a very familiar trio of forces to describe economic activity. He speaks of "capitalism", "the market economy" and "a sort of bargain basement [...] made up of all the activities outside the market and state controls - fraud, barter of goods and services, moonlighting, housework". It is in this basement that individual pirates and hackers reside.

Again vocabulary disputes threaten to hide a fundamental agreement. What I call capitalism is Fernand Braudel's market economy. What he calls capitalism, I describe as the systematic distortions engineered by real life capitalists to satisfy their unlimited greed. While I attack for instance how capitalists buy laws favorable to their interests, he warns "we should not let ourselves be deceived", "both state and capital - [...] monopolies and big corporations - coexist very comfortably". Comfortable coexistence! Such a nice Newspeak for the corruption of democracy into pronaocracy.

With this in mind, read again his statement that "the chief privilege of capitalism [...] remains the ability to choose" (2).

It goes some way to explain Apple today. Timothy D. Cook came up last week with "the remarkable suggestion that [iPhone 5 buyers] try alternative map services from rivals like Microsoft and Google while Apple improves its own maps", Nick Wingfield and Brian X. Chen reports (**). The fact is Apple chooses what to offer its captivated consumers and decided against integrating Google maps in its latest release.

That Apple now encourages smuggling Google maps by a back door should be a wake up call. Should we rely on its keeping some back doors available, or on the exploits of hackers? Given Apple's scale, shouldn't society compel it to break open its Palantír model as a barrier to trade?

Aren't Apple users free to choose too? Yes but, in negotiations, the ability to choose is relative. Bundling by major corporations decisively lower users' power. By tying map services to smartphones, Apple cripples the independent map market and forces users into resigned acquiescence.

Apple suppliers have even less of a choice. Take Foxconn. "Apple is its largest customer, and the iPhone could make up a third of [its] profits", write Sarah Mishkin and Maija Palmer (***). Isn't its dependency reflected in an operating profit margin of "2.4 per cent in 2011" compared to Apple's, in excess of 30%? As for states and local communities, Apple can choose where to locate its profits out of reach of their taxes.

Whereas Apple enjoys a triple capacity to choose, consumers face a triple lack of choice as far as eprivacy is concerned.

First and despite public and mutual recriminations between capitalists and western states, both comfortably coexist as they engage in surveillance. Second consumers face a few de facto monopolies which have chosen not to compete on privacy. Apple is said to have been reluctant to concede its users' whereabouts to Google, but do sheep care which wolf feasts on their carcasses? Third what choice is there absent transparency?

Apropos Facebook's recent deal with Datalogix, Emily Steel quotes this realistic remark from Jeff Chester of the Center for Digital Democracy (****). "They know everything about us, but we know nothing about them". This is how non-state powers levy eprivacy taxes on consumers.

ePrio's eprivacy technology promises to bring choice to consumers. It's no Ponzi but "the mills of history grind exceedingly slow", it seems.

Philippe Coueignoux

• (*) ....... The welfare state is one Ponzi scheme worth backing, by John Kay (Financial Times) - September 26, 2012
• (**) ..... Apple Apologies for Misstep on Maps, by Nick Wingfield and Brian X. Chen (New York Times) - September 29, 2012
• (***) ... Apple keeps its lure to component suppliers, by Sarah Mishkin and Maija Palmer (Financial Times) - September 25, 2012
• (****) . Facebook's data partner joins the dots but privacy questions linger, by Emily Steel (Financial Times) - September 24, 2012
• (1) in chapter 6 of Le Temps du Monde, translated in English as The Perspective of the World (1979)
• (2) the italics are from the author