Amnesty International Releases Tool To Combat Government Spyware

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Human rights charity Amnesty International has released Detekt, a tool that finds and removes known government spyware programs. Describing the free software as the first of its kind, Amnesty commissioned the tool from prominent German computer security researcher and open source advocate Claudio Guarnieri, aka ‘nex’. While acknowledging that the only sure way to prevent government surveillance of huge dragnets of individuals is legislation, Marek Marczynski of Amnesty nevertheless called the tool (downloadable here) a useful countermeasure versus spooks. According to the app’s instructions, it operates similarly to popular malware or virus removal suites, though systems must be disconnected from the Internet prior to it scanning.

DIGITAL MUSIC NEWS

Federal Judge Rejects Sirius XM’s Call

For Summary Judgment In Pre-1972 Case

 

     The Turtles keep on rolling to copyright victory, as a federal judge in New York has ruled against Sirius XM in the ongoing battle to collect royalties on recordings made before 1972. Last Friday (Nov. 14) Judge Colleen McMahon of United States District Court in Manhattan rejected Sirius XM’s motion for summary judgment, saying the Turtles have performing rights to their recordings under New York State law. She gave Sirius XM until Dec. 5 to dispute the remaining facts in the case; otherwise Sirius XM will be ruled liable for infringement.

“General principles of common copyright law dictate that public performance rights in pre-1972 sound recordings do exist,” Judge McMahon wrote in her decision. The ruling comes after a separate win for the Turtles in September, when a federal judge in California found Sirius XM liable for infringement under state laws there. According to The New York Times, that decision was viewed as a major victory for artists and record companies, although its wider impact was unclear because it applied only to that state.

Judge McMahon’s decision strengthened the music industry’s position that pre-1972 recordings are covered under state laws. Still, recording and broadcast industry executives say the potential for widespread confusion over music licensing – for example, it may mean that thousands of AM-FM radio stations, as well as restaurants or sports arenas where music is performed, may have been infringing on recording rights for decades - likely will require clarification from Congress. 

YouTube Launches Music Key In

Already-Crowded Streaming Field

 

     After years of false starts and seemingly endless label negotiations, YouTube’s Music Key launched earlier this week to the ultimate question: will users actually pay $9.99 for something  they previously received free of charge? That’s the monthly rate Google set for its ad-free service that also offers offline functionality, with a company spokesperson telling Billboard, “The goal is more ways to play music on YouTube, giving artists more ways to reach fans and make money.”

So why create a subscription service, especially given the competitive landscape? As Billboard notes, Apple is certain to grow its share of the streaming market, Amazon is going after middle-of-the-road listeners with Music Prime, and Spotify has a head start of 12.5 million U.S. subscribers (28 million worldwide in 2013, according to IFPI).

Still, many industry executives hope Music Key will help YouTube clean up the metadata that often gets lost in uploads of master recordings and drives users to the original composer and purchase links. This has been a core asset of YouTube’s Content ID system, which has disbursed more than $1 billion in revenue to labels and content creators since 2007. 

YouTube Refuses To Remove Songs

By Artists Represented By Azoff’s GMR

 

     YouTube apparently has refused to remove songs composed by artists represented by Irving Azoff’s Global Music Rights (GMR), forcing a showdown between the 42 artists the music icon represents and the Google-owned video site. The dispute stems from YouTube’s claim that it has licensing deals in place with the record labels, while Azoff contends that in order to publicly perform those 42 artists’ songs, the company also has to pay the songwriters, which Azoff says are “massively underpaid” when it comes to digital services.

According to The Hollywood Reporter, the primary question here is whether YouTube has a right to perform these songs until proven otherwise. GMR thinks the burden of proving a valid license is on YouTube, which reportedly says it has a multiyear license for the public performance of works represented by GMR. The licensors aren’t identified, but it’s possible that YouTube believes its covered by prior deals made with ASCAP, BMI, SESAC, or a foreign performing rights organization.

Howard King, an attorney representing GMR, says YouTube has failed to comply with demands to stop performing those 20,000 songs. “Obviously, if YouTube contends it has properly licensed any of the songs for public broadcast, a contention we believe to be untrue, demand is hereby made that we be furnished with documentation of such licenses,” he says.

By contrast, a spokesperson for YouTube told THR, “We’ve done deals with labels, publishers, collection societies, and more to bring artists’ music into YouTube Music Key. To achieve our goal of enabling this service’s features on all the music on YouTube, we’ll keep working with both the music community and with the music fans invited to our beta phase.” 

Music Key Could Thwart Apple’s Move

To Reduce Monthly Subscription Fee

 

     It’s no secret that Apple has been engaged in heated discussions with the major record labels to lower the price of on-demand music to $5 per month from the standard $9.99 currently charged by such subscription services as Spotify, Rhapsody, Google, Rdio, and its own Beats Music. According to Forbes, Apple is telling record labels that $5/month for all-you-can-hear on-demand music is the right price because the best iTunes customers spend about $60 per year on music downloads. The obvious thinking here is that this $60 annual revenue per user (ARPU) could be the best record companies can hope to get from those consumers who still actually pay for music.

This may be a convenient talking point for Apple’s negotiators, but – as Forbes points out – two important factors strongly counter that argument. First, for all the talk about monthly subscription fees (and Taylor Swift, below), the vast majority of users of on-demand music services don’t pay for them at all. Second, in 2011 Google introduced

a technology called Content ID that enables copyright owners to make money, if they choose, when users upload content to YouTube. The system detects users’ uploads of copyrighted works and gives copyright owners several options, including to block the uploads or monetize them through ad revenue sharing. By 2011, the major labels had opted to allow many user uploads of their content for monetization, and they also supply their own “official” music videos.

As a result, YouTube is a de facto on-demand music service and, as noted by Forbes, possibly is the biggest one in the game. Market research from Edison Research and Triton Digital suggests that, strictly as a music service, YouTube has about four times the U.S. user base of Spotify, Rhapsody, and Google Play Music All Access combined. No one pays for YouTube, although some may pay for its Music Key service, which will hit that same $10 monthly price point when it comes out of beta. 

Big Machine’s Scott Borchetta: Spotify

Paid Less Than $500,000 To TS Last Year

 

     The verbal fisticuffs between Spotify and Taylor Swift have not let up, with the streaming music service’s Daniel Ek insisting the pop music icon was on track to earn over $6 million in royalties this year. This claim came after a Spotify spokesperson said Swift had been paid a total of $2 million over the last 12 months for the global streaming of her songs. But Scott Borchetta (above left), CEO of Swift’s label Big Machine Records, says that’s nowhere near the truth, maintaining Swift earned less than $500,000 from Spotify streams over the last 12 months.

“The facts show that the music industry was much better off before Spotify hit these shores,” Borchetta told The New York Times. Noting that the amount Spotify paid out over the last year was “the equivalent of less than 50,000 albums sold, he said Swift actually earns more from her videos on Vevo than she did from having her music on Spotify.

While half a million dollars will cause few people to weep, it should be noted that Swift’s most recent album, 1989, became the first this year to sell more than a million copies in a week – a feat only equaled by 18 albums in history. Unlike most performers, she can make millions of dollars from traditional album sales, but by keeping her music away from Spotify even as it begs for her to come back, she and Borchetta say they’re trying to make the larger point that the service doesn’t pay its artists a reasonable fee. “[Taylor Swift] is the most successful artist in music today,” Borchetta says. “What about the rest of the artists out there struggling to make a career?” 

Sony Music Wary Of Ad-Supported

Streaming After Taylor Swift Move

 

     Taylor Swift’s claim that subscription streaming services hurt music sales has caused Sony Music to reconsider its own digital music plans. PC World reports that, during a recent company briefing, Sony Music CFO Kevin Kelleher questioned whether or not the free, ad-supported services are taking away from how quickly, and to what extent, the company can grow those paid services. “That’s something we’re paying attention to… It’s an area that’s gotten everyone’s attention,” he observed.

This is important because, as CD sales and digital music downloads continue to shrink, streaming services offer a potential ray of sunshine for the recorded music industry. Such companies as Pandora and Spotify routinely lose money due to a combination of high royalty fees and low revenue, an imbalance that appears to be due to poor ROI on ad-supported tiers and not enough premium subscribers to sustain a business model.

While Sony says the move by Taylor Swift (not a Sony artist) to pull her music from Spotify made the company sit up and take notice, it isn’t enough to make anyone want to change the dynamics of the digital music business. In fact, Sony says it’s “very encouraged with the pay streaming model.” Approximately 27 million people worldwide pay for streaming subscriptions, Sony says, and the company is focused on helping that number grow.

 

A publication of Bunzel Media Resources © 2014

US Defense Department organizing covert operations against “the general public”

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By Thomas Gaist
19 November 2014

The US Defense Department (DOD) is developing domestic espionage and covert operations targeting “the general public” in coordination with the intelligence establishment and police agencies, according to a New York Times report.

“The Times analysis showed that the military and its investigative agencies have almost as many undercover agents working inside the United States as does the F.B.I,” the newspaper wrote.

“While most of them are involved in internal policing of service members and defense contractors, a growing number are focused, in part, on the general public as part of joint federal task forces that combine military, intelligence and law enforcement specialists,” the Times continued.

The report amounts to an acknowledgment by the leading media organ of the US ruling class that the American government is deploying a vast, forward-deployed counter-insurgency machine to target the US population at large.

Coming directly from the horse’s mouth, the Times report makes clear that espionage, deception, and covert operations are now primary instruments of the US government’s domestic policy. In preparation for a massive upsurge in the class struggle, the US ruling class is mobilizing the entire federal bureaucracy to carry out systematic and targeted political repression against the working class in the US and around the world.

These moves are in keeping with the latest US Army “Operating Concept” strategy document, published in October, which calls for “Army forces to extend efforts beyond the physical battleground to other contested spaces such as public perception, political subversion, and criminality.”

In addition to the DOD, at least 39 other federal security and civilian agencies, including the Drug Enforcement Agency (DEA), the Department of Homeland Security (DHS), the Department of Education and the Internal Revenue Service (IRS), have developed increasingly ambitious forms of covert operations involving the use of undercover agents, which now inhabit “virtually every corner of the federal government,” according to unnamed government officials and documents cited by the New York Times.

New training programs to prepare agents to conduct Internet-based undercover sting operations have been developed by the DOD, Homeland Security (DHS) and the FBI, according to the report.

DHS alone spends at least $100 million per year on the development of undercover operations, an unnamed DHS intelligence official told the Times. Total costs for operations involving undercover government agents likely total at least several hundred millions of dollars per year, the Times reported.

The US Supreme Court trains its own security force in “undercover tactics,” which officers use to infiltrate and spy on demonstrators outside the high court’s facilities, the Times reported.

IRS agents frequently pose as professionals, including as medical doctors, in order to gain access to privileged information, according to a former agent cited by the report. IRS internal regulations cited in the report state that “an undercover employee or cooperating private individual may pose as an attorney, physician, clergyman or member of the news media.”

Teams of undercover agents deployed by the IRS operate in the US and internationally in a variety of guises, including as drug money launderers and expensive luxury goods buyers.

The Department of Agriculture (DOA) employs at least 100 of its own covert agents, who often pretend to be food stamp users while investigating “suspicious vendors and fraud,” according to the Times .

Covert agents employed by the Department of Education (DOE) have embedded themselves in federally funded education programs, unnamed sources cited by the report say.

Numerous other federal bureaucracies are running their own in-house espionage programs, including the Smithsonian, the Small Business Administration, and the National Aeronautics and Space Administration (NASA), the report stated.

This sprawling apparatus of spying, disruption and manipulation implicates the state in a mind-boggling range of criminal and destructive activities. Covert operations using undercover agents are conducted entirely in secret, and are funded from secret budgets and slush funds that are replenished through the “churning” of funds seized during previous operations back into the agencies’ coffers to fund the further expansion of secret programs.

Secret operations orchestrated by the Bureau of Alcohol, Tobacco and Firearms (ATF) on this basis are increasingly indistinguishable from those of organized crime syndicates, and give a foretaste of what can be expected from the ongoing deployment of counter-revolutionary undercover agents by the military-intelligence apparatus throughout the US.

In 2010, the ATF launched a series of covert operations that used state-run front businesses to seize weapons, drugs, and cash, partly by manipulating mentally disabled and drug addicted individuals, many of them teenagers, according to investigations by the Milwaukee Journal Sentinel.

While posing as owners of pawnshops and drug paraphernalia retail outlets, ATF agents induced cash-desperate and psychologically vulnerable individuals to carry out illegal activities including the purchase and sale of stolen weapons and banned substances.

A number of the ATF-run fake stores exposed by the Sentinel were run in “drug free” and “safe” zones near churches and schools. Youths were encouraged to smoke marijuana and play video games at these locations by ATF agents. In one instance reported by the Sentinel, a female agent wore revealing attire and flirted with teenage targets while inciting them to acquire weapons and illegal substances to sell to an ATF-run front business, the Sentinel found.

The ATF was notorious for its operations in the 1980s where it used agents provocateurs to frame up and jail militant workers involved in industrial strikes. In one infamous case in Milburn, West Virginia an ATF informer was exposed after he tried unsuccessfully to convince striking coal miners to blow up an abandoned processing facility.

The US government has steadily escalated its domestic clandestine operations in the years since the September 11, 2001, attacks. The New York Police Department (NYPD) intelligence section deployed hundreds of covert agents throughout New York City, Massachusetts, Pennsylvania and New Jersey.

As part of operations coordinated with the CIA and spanning more than a decade, the NYPD paid informants to spy on and “bait” Muslim residents into manufactured terror plots. The security and intelligence agencies refer to this method as “create and capture,” according to a former NYPD asset cited by the Associated Press.

It is now obvious these surveillance and infiltration programs, initially focusing on Muslim neighborhoods, were only the first stage in the implementation of a comprehensive espionage and counter-insurgency system targeting the entire population.

Large numbers of informers and FBI agents infiltrated the Occupy Wall Street protests in 2011.

Historically, secret police groups targeted the political and class enemies of the capitalist state using the pretext of defending the nation from dangerous “foreign” elements.

Among the first covert police sections established by the imperialist powers were the British “Special Branch,” originally established as the “Special Irish Branch” in 1883 to target groups opposed to British domination of Ireland. “Special Branch” police intelligence forces were subsequently set up throughout the commonwealth to run cloak-and-dagger missions in service of British imperialism.

Similarly, in an early effort by the US ruling class to develop a secret police force, New York City police commissioner established “Italian Squad” in 1906 to carry out undercover activities against socialist-minded workers in the city’s immigrant and working class areas.

http://www.wsws.org/en/articles/2014/11/19/unde-n19.html

Stop calling the Keystone pipeline a job creator! It will create 35 jobs.

Keystone will not create tens of thousands of jobs. The actual number? 35

 

The Keystone myth that refuses to die: Stop calling the pipeline a job creator!

(Credit: MSNBC)

Of all the reasons one might have to support the construction of the Keystone XL pipeline (like, say, a last-minute gambit to save one’s Senate seat), arguing that it’s going to create jobs is the least sensical — because, as the State Department itself determined, it will create only 35 permanent jobs.

Even with the 15 other, temporary jobs the project will create, for inspections and maintenance, that’s still not enough even to employ the 60 senators Mary Landrieu, D-La., needs to pass through approval of the pipeline when it comes to a vote Tuesday evening.

And yet the argument that Keystone will lead to jobs upon jobs upon jobs is perhaps the most pervasive, and fundamentally incorrect, myth surrounding the pipeline controversy.

Only an extremely skewed reading of the job projections could lead Fox News Host Anna Kooiman, for example, to claim that “there would be tens of thousands of jobs created” if the president approved of the pipeline, a claim that Politifact rounded down to “mostly false.” While it’s true that the State Department estimates that 42,100 jobs — many only tangentially related to the pipeline — will be created during its two years of construction, they’re almost all temporary, and include 10,400 seasonal positions that will only last for four to eight months. When you look at that over the course of two years, Politifact explains, that only comes out to 3,900 “average annual” jobs. Most of the construction jobs in Montana, South Dakota, Nebraska and Kansas, through which the pipeline will pass, will rely on specialists brought in from out of state.

TransCanada’s CEO, Russ Girling, further stretched the truth into an outright lie on ABC’s “This Week” Sunday morning, claiming that the State Department called those 42,000 jobs “ongoing” and “enduring.” Again, Politifact corrects the record, explaining that, for the reasons above, those adjectives only apply if you have an incredibly short-sighted definition of “ongoing and enduring” (read: two years or less).



But if you really want to get an idea of how hard the jobs myth is to squash, look no further than lefty news channel MSNBC, where host Joe Scarborough propagated that same false narrative. Questioning a potential decision to delay the pipeline, he laughed: “Their own State Department says it’s going to create 50,000 new jobs.”

Again: not.

You know what already did create tens of thousands of jobs, in nearly every state? Renewable energy, which according to a report from Environmental Entrepreneurs created almost 80,000 of them in 2013 alone. The main thing holding back future growth, that same report found, is “ongoing regulatory uncertainty,” most notably with wind energy tax credits. It’s worth checking out, especially if you happen to be a politician who’s legitimately looking for a way to grow the economy.

Those other persuasive arguments for approving the pipeline, for the record, don’t hold up much better: The part of the State Department review finding that Keystone would have a negligible impact on the environment, for one, is made extremely suspect by the multiple conflicts of interest surrounding it. The local impacts of leaks and the global impacts of emitting any more greenhouse gases into the atmosphere would suggest otherwise; another study evaluating the State Department’s analysis concluded that the report downplays the pipeline’s environmental significance.

Studies have established that the pipeline isn’t going to reduce the United States’ dependence on foreign oil. And over at the Washington Post, Philip Bump has the ultimate explainer for why it isn’t going to lower gas prices in any straightforward way — it some regions, in fact, it could even raise them. What he boils it all down to: “The most direct beneficiaries of Keystone XL won’t be consumers.”

Here’s Sen. Bernie Sanders, I-Vt., on CNN, trying to wrap his mind around the idea that approving the pipeline would make any kind of sense whatsoever:

Oh, and one other job pushing the pipeline won’t be able to ensure? Sen. Landrieu’s, as voters don’t seem to have been swayed by her pro-Keystone rhetoric. Although, as Salon writers Luke Brinker and Joan Walsh have both pointed out, we can expect to see a brand-new position with the oil lobby created just for her once this is all over.

Lindsay Abrams is a staff writer at Salon, reporting on all things sustainable. Follow her on Twitter @readingirl, email labrams@salon.com.

Google’s secret NSA alliance: The terrifying deals between Silicon Valley and the security state

Inside the high-level, complicated deals — and the rise of a virtually unchecked surveillance power

Google's secret NSA alliance: The terrifying deals between Silicon Valley and the security state
Cover detail of “@War” by Shane Harris

In mid-December 2009, engineers at Google’s headquarters in Mountain View, California, began to suspect that hackers in China had obtained access to private Gmail accounts, including those used by Chinese human rights activists opposed to the government in Beijing.

 Like a lot of large, well-known Internet companies, Google and its users were frequently targeted by cyber spies and criminals. But when the engineers looked more closely, they discovered that this was no ordinary hacking campaign.

In what Google would later describe as “a highly sophisticated and targeted attack on our corporate infrastructure originating from China,” the thieves were able to get access to the password system that allowed Google’s users to sign in to many Google applications at once. This was some of the company’s most important intellectual property, considered among the “crown jewels” of its source code by its engineers. Google wanted concrete evidence of the break-in that it could share with U.S. law enforcement and intelligence authorities. So they traced the intrusion back to what they believed was its source — a server in Taiwan where data was sent after it was siphoned off Google’s systems, and that was presumably under the control of hackers in mainland China.

“Google broke in to the server,” says a former senior intelligence official who’s familiar with the company’s response. The decision wasn’t without legal risk, according to the official. Was this a case of hacking back? Just as there’s no law against a homeowner following a robber back to where he lives, Google didn’t violate any laws by tracing the source of the intrusion into its systems. It’s still unclear how the company’s investigators gained access to the server, but once inside, if they had removed or deleted data, that would cross a legal line. But Google didn’t destroy what it found. In fact, the company did something unexpected and unprecedented — it shared the information.

Google uncovered evidence of one of the most extensive and far-reaching campaigns of cyber espionage in U.S. history. Evidence suggested that Chinese hackers had penetrated the systems of nearly three dozen other companies, including technology mainstays such as Symantec, Yahoo, and Adobe, the defense contractor Northrop Grumman, and the equipment maker Juniper Networks. The breadth of the campaign made it hard to discern a single motive. Was this industrial espionage? Spying on human rights activists? Was China trying to gain espionage footholds in key sectors of the U.S. economy or, worse, implant malware in equipment used to regulate critical infrastructure?



The only things Google seemed certain of was that the campaign was massive and persistent, and that China was behind it. And not just individual hackers, but the Chinese government, which had the means and the motive to launch such a broad assault.

Google shared what it found with the other targeted companies, as well as U.S. law enforcement and intelligence agencies. For the past four years, corporate executives had been quietly pressing government officials to go public with information about Chinese spying, to shame the country into stopping its campaign. But for President Obama or Secretary of State Hillary Clinton to give a speech pointing the finger at China, they needed indisputable evidence that attributed the attacks to sources in China. And looking at what Google had provided it, government analysts were not sure they had it. American officials decided the relationship between the two economic superpowers was too fragile and the risk of conflict too high to go public with what Google knew.

Google disagreed.

Deputy Secretary of State James Steinberg was at a cocktail party in Washington when an aide delivered an urgent message: Google was going to issue a public statement about the Chinese spying campaign. Steinberg, the second-highest-ranking official in U.S. foreign policy, immediately grasped the significance of the company’s decision. Up to that moment, American corporations had been unwilling to publicly accuse the Chinese of spying on their networks or stealing their intellectual property. The companies feared losing the confidence of investors and customers, inviting other hackers to target their obviously weak defenses, and igniting the fury of Chinese government officials, who could easily revoke access to one of the biggest and fastest-growing markets for U.S. goods and services. For any company to come out against China would be momentous. But for Google, the most influential company of the Internet age, it was historic.

The next day, January 12, 2010, Google’s chief legal officer, David Drummond, posted a lengthy statement to the company’s blog, accusing hackers in China of attacking Google’s infrastructure and criticizing the government for censoring Internet content and suppressing human rights activists. “We have taken the unusual step of sharing information about these attacks with a broad audience not just because of the security and human rights implications of what we have unearthed, but also because this information goes to the heart of a much bigger global debate about freedom of speech,” said Drummond.

Back at the State Department, officials saw a rare opportunity to put pressure on China for spying. That night Hillary Clinton issued her own statement. “We have been briefed by Google on these allegations, which raise very serious concerns and questions. We look to the Chinese government for an explanation,” she said. “The ability to operate with confidence in cyberspace is critical in a modern society and economy.”

As diplomatic maneuvers go, this was pivotal. Google had just given the Obama administration an opening to accuse China of espionage without having to make the case itself. Officials could simply point to what Google had discovered as a result of its own investigation.

“It gave us an opportunity to discuss the issues without having to rely on classified sources or sensitive methods” of intelligence gathering, Steinberg says. The administration had had little warning about Google’s decision, and it was at odds with some officials’ reluctance to take the espionage debate public. But now that it was, no one complained.

“It was their decision. I certainly had no objection,” Steinberg says.

The Obama administration began to take a harsher tone with China, starting with a major address Clinton gave about her Internet Freedom initiative nine days later. She called on China to stop censoring Internet searches and blocking access to websites that printed criticism about the country’s leaders. Clinton likened such virtual barriers to the Berlin Wall.

For its part, Google said it would stop filtering search results for words and subjects banned by government censors. And if Beijing objected, Google was prepared to pull up stakes and leave the Chinese market entirely, losing out on billions of dollars in potential revenues. That put other U.S. technology companies in the hot seat. Were they willing to put up with government interference and suppression of free speech in order to keep doing business in China?

After Google’s declaration, it was easier for other companies to admit they’d been infiltrated by hackers. After all, if it happened to Google, it could happen to anyone. Being spied on by the Chinese might even be a mark of distinction, insofar as it showed that a company was important enough to merit the close attention of a superpower. With one blog post, Google had changed the global conversation about cyber defense.

The company had also shown that it knew a lot about Chinese spies. The NSA wanted to know how much.

Google had also alerted the NSA and the FBI that its networks were breached by hackers in China. As a law enforcement agency, the FBI could investigate the intrusion as a criminal matter. But the NSA needed Google’s permission to come in and help assess the breach.

On the day that Google’s lawyer wrote the blog post, the NSA’s general counsel began drafting a “cooperative research and development agreement,” a legal pact that was originally devised under a 1980 law to speed up the commercial development of new technologies that are of mutual interest to companies and the government. The agreement’s purpose is to build something — a device or a technique, for instance. The participating company isn’t paid, but it can rely on the government to front the research and development costs, and it can use government personnel and facilities for the research. Each side gets to keep the products of the collaboration private until they choose to disclose them. In the end, the company has the exclusive patent rights to build whatever was designed, and the government can use any information that was generated during the collaboration.

It’s not clear what the NSA and Google built after the China hack. But a spokeswoman at the agency gave hints at the time the agreement was written. “As a general matter, as part of its information-assurance mission, NSA works with a broad range of commercial partners and research associates to ensure the availability of secure tailored solutions for Department of Defense and national security systems customers,” she said. It was the phrase “tailored solutions” that was so intriguing. That implied something custom built for the agency, so that it could perform its intelligence-gathering mission. According to officials who were privy to the details of Google’s arrangements with the NSA, the company agreed to provide information about traffic on its networks in exchange for intelligence from the NSA about what it knew of foreign hackers. It was a quid pro quo, information for information.

And from the NSA’s perspective, information in exchange for protection.

The cooperative agreement and reference to a “tailored solution” strongly suggest that Google and the NSA built a device or a technique for monitoring intrusions into the company’s networks. That would give the NSA valuable information for its so-called active defense system, which uses a combination of automated sensors and algorithms to detect malware or signs of an imminent attack and take action against them. One system, called Turmoil, detects traffic that might pose a threat. Then, another automated system called Turbine decides whether to allow the traffic to pass or to block it. Turbine can also select from a number of offensive software programs and hacking techniques that a human operator can use to disable the source of the malicious traffic. He might reset the source’s Internet connection or redirect the traffic to a server under the NSA’s control. There the source can be injected with a virus or spyware, so the NSA can continue to monitor it.

For Turbine and Turmoil to work, the NSA needs information, particularly about the data flowing over a network. With its millions of customers around the world, Google is effectively a directory of people using the Internet. It has their e-mail addresses. It knows where they’re physically located when they log in. It knows what they search for on the web. The government could command the company to turn over that information, and it does as part of the NSA’s Prism program, which Google had been participating in for a year by the time it signed the cooperative agreement with the NSA. But that tool is used for investigating people whom the government suspects of terrorism or espionage.

The NSA’s cyber defense mission takes a broader view across networks for potential threats, sometimes before it knows who those threats are. Under Google’s terms of service, the company advises its users that it may share their “personal information” with outside organizations, including government agencies, in order to “detect, prevent, or otherwise address fraud, security or technical issues” and to “protect against harm to the rights, property or safety of Google.” According to people familiar with the NSA and Google’s arrangement, it does not give the government permission to read Google users’ e-mails.

They can do that under Prism. Rather, it lets the NSA evaluate Google hardware and software for vulnerabilities that hackers might exploit. Considering that the NSA is the single biggest collector of zero day vulnerabilities, that information would help make Google more secure than others that don’t get access to such prized secrets. The agreement also lets the agency analyze intrusions that have already occurred, so it can help trace them back to their source.

Google took a risk forming an alliance with the NSA. The company’s corporate motto, “Don’t be evil,” would seem at odds with the work of a covert surveillance and cyber warfare agency. But Google got useful information in return for its cooperation. Shortly after the China revelation, the government gave Sergey Brin, Google’s cofounder, a temporary security clearance that allowed him to attend a classified briefing about the campaign against his company. Government analysts had concluded that the intrusion was directed by a unit of the People’s Liberation Army. This was the most specific information Google could obtain about the source of the intrusion. It could help Google fortify its systems, block traffic from certain Internet addresses, and make a more informed decision about whether it wanted to do business in China at all. Google’s executives might pooh-pooh the NSA’s “secret sauce.” But when the company found itself under attack, it turned to Fort Meade for help.

In its blog post, Google said that more than twenty companies had been hit by the China hackers, in a campaign that was later dubbed Aurora after a file name on the attackers’ computer. A security research firm soon put the number of targets at around three dozen. Actually, the scope of Chinese spying was, and is, much larger.

Security experts in and outside of government have a name for the hackers behind campaigns such as Aurora and others targeting thousands of other companies in practically every sector of the U.S. economy: the advanced persistent threat. It’s an ominous-sounding title, and a euphemistic one. When government officials mention “APT” today, what they often mean is China, and more specifically, hackers working at the direction of Chinese military and intelligence officials or on their behalf.

The “advanced” part of the description refers in part to the hackers’ techniques, which are as effective as any the NSA employs. The Chinese cyber spies can use an infected computer’s own chat and instant-messenger applications to communicate with a command-and-control server. They can implant a piece of malware and then remotely customize it, adding new information-harvesting features. The government apparatus supporting all this espionage is also advanced, more so than the loose-knit groups of cyber vandals or activists such as Anonymous that spy on companies for political purposes, or even the sophisticated Russian criminal groups, who are more interested in stealing bank account and credit card data. China plays a longer game. Its leaders want the country to become a first-tier economic and industrial power in a single generation, and they are prepared to steal the knowledge they need to do it, U.S. officials say.

That’s where the “persistent” part comes into play. Gathering that much information, from so many sources, requires a relentless effort, and the will and financial resources to try many different kinds of intrusion techniques, including expensive zero day exploits. Once the spies find a foothold inside an organization’s networks, they don’t let go unless they’re forced out. And even then they quickly return. The “threat” such spying poses to the U.S. economy takes the form of lost revenue and strategic position. But also the risk that the Chinese military will gain hidden entry points into critical-infrastructure control systems in the United States. U.S. intelligence officials believe that the Chinese military has mapped out infrastructure control networks so that if the two nations ever went to war, the Chinese could hit American targets such as electrical grids or gas pipelines without having to launch a missile or send a fleet of bombers.

Operation Aurora was the first glimpse into the breadth of the ATP’s exploits. It was the first time that names of companies had been attached to Chinese espionage. “The scope of this is much larger than anybody has ever conveyed,” Kevin Mandia, CEO and president of Mandiant, a computer security and forensics company located outside Washington, said at the time of Operation Aurora. The APT represented hacking on a national, strategic level. “There [are] not 50 companies compromised. There are thousands of companies compromised. Actively, right now,” said Mandia, a veteran cyber investigator who began his career as a computer security officer in the air force and worked there on cybercrime cases. Mandiant was becoming a goto outfit that companies called whenever they discovered spies had penetrated their networks. Shortly after the Google breach, Mandiant disclosed the details of its investigations in a private meeting with Defense Department officials a few days before speaking publicly about it.

The APT is not one body but a collection of hacker groups that include teams working for the People’s Liberation Army, as well as so-called patriotic hackers, young, enterprising geeks who are willing to ply their trade in service of their country. Chinese universities are also stocked with computer science students who work for the military after graduation. The APT hackers put a premium on stealth and patience. They use zero days and install backdoors. They take time to identify employees in a targeted organization, and send them carefully crafted spear-phishing e-mails laden with spyware. They burrow into an organization, and they often stay there for months or years before anyone finds them, all the while siphoning off plans and designs, reading e-mails and their attachments, and keeping tabs on the comings and goings of employees — the hackers’ future targets. The Chinese spies behave, in other words, like their American counterparts.

No intelligence organization can survive if it doesn’t know its enemy. As expansive as the NSA’s network of sensors is, it’s sometimes easier to get precise intelligence about hacking campaigns from the targets themselves. That’s why the NSA partnered with Google. It’s why when Mandiant came calling with intelligence on the APT, officials listened to what the private sleuths had to say. Defending cyberspace is too big a job even for the world’s elite spy agency. Whether they like it or not, the NSA and corporations must fight this foe together.

Google’s Sergey Brin is just one of hundreds of CEOs who have been brought into the NSA’s circle of secrecy. Starting in 2008, the agency began offering executives temporary security clearances, some good for only one day, so they could sit in on classified threat briefings.

“They indoctrinate someone for a day, and show them lots of juicy intelligence about threats facing businesses in the United States,” says a telecommunications company executive who has attended several of the briefings, which are held about three times a year. The CEOs are required to sign an agreement pledging not to disclose anything they learn in the briefings. “They tell them, in so many words, if you violate this agreement, you will be tried, convicted, and spend the rest of your life in prison,” says the executive.

Why would anyone agree to such severe terms? “For one day, they get to be special and see things few others do,” says the telecom executive, who, thanks to having worked regularly on classified projects, holds high-level clearances and has been given access to some of the NSA’s most sensitive operations, including the warrantless surveillance program that began after the 9/11 attacks. “Alexander became personal friends with many CEOs” through these closed-door sessions, the executive adds. “I’ve sat through some of these and said, ‘General, you tell these guys things that could put our country in danger if they leak out.’ And he said, ‘I know. But that’s the risk we take. And if it does leak out, they know what the consequences will be.’ ”

But the NSA doesn’t have to threaten the executives to get their attention. The agency’s revelations about stolen data and hostile intrusions are frightening in their own right, and deliberately so. “We scare the bejeezus out of them,” a government official told National Public Radio in 2012. Some of those executives have stepped out of their threat briefings meeting feeling like the defense contractor CEOs who, back in the summer of 2007, left the Pentagon with “white hair.”

Unsure how to protect themselves, some CEOs will call private security companies such as Mandiant. “I personally know of one CEO for whom [a private NSA threat briefing] was a life-changing experience,” Richard Bejtlich, Mandiant’s chief security officer, told NPR. “General Alexander sat him down and told him what was going on. This particular CEO, in my opinion, should have known about [threats to his company] but did not, and now it has colored everything about the way he thinks about this problem.”

The NSA and private security companies have a symbiotic relationship. The government scares the CEOs and they run for help to experts such as Mandiant. Those companies, in turn, share what they learn during their investigations with the government, as Mandiant did after the Google breach in 2010. The NSA has also used the classified threat briefings to spur companies to strengthen their defenses.

In one 2010 session, agency officials said they’d discovered a flaw in personal computer firmware — the onboard memory and codes that tell the machine how to work — that could allow a hacker to turn the computer “into a brick,” rendering it useless. The CEOs of computer manufacturers who attended the meeting, and who were previously aware of the design flaw, ordered it fixed.

Private high-level meetings are just one way the NSA has forged alliances with corporations. Several classified programs allow companies to share the designs of their products with the agency so it can inspect them for flaws and, in some instances, install backdoors or other forms of privileged access. The types of companies that have shown the NSA their products include computer, server, and router manufacturers; makers of popular software products, including Microsoft; Internet and e-mail service providers; telecommunications companies; satellite manufacturers; antivirus and Internet security companies; and makers of encryption algorithms.

The NSA helps the companies find weaknesses in their products. But it also pays the companies not to fix some of them. Those weak spots give the agency an entry point for spying or attacking foreign governments that install the products in their intelligence agencies, their militaries, and their critical infrastructure. Microsoft, for instance, shares zero day vulnerabilities in its products with the NSA before releasing a public alert or a software patch, according to the company and U.S. officials. Cisco, one of the world’s top network equipment makers, leaves backdoors in its routers so they can be monitored by U.S. agencies, according to a cyber security professional who trains NSA employees in defensive techniques. And McAfee, the Internet security company, provides the NSA, the CIA, and the FBI with network traffic flows, analysis of malware, and information about hacking trends.

Companies that promise to disclose holes in their products only to the spy agencies are paid for their silence, say experts and officials who are familiar with the arrangements. To an extent, these openings for government surveillance are required by law. Telecommunications companies in particular must build their equipment in such a way that it can be tapped by a law enforcement agency presenting a court order, like for a wiretap. But when the NSA is gathering intelligence abroad, it is not bound by the same laws. Indeed, the surveillance it conducts via backdoors and secret flaws in hardware and software would be illegal in most of the countries where it occurs.

Of course, backdoors and unpatched flaws could also be used by hackers. In 2010 a researcher at IBM publicly revealed a flaw in a Cisco operating system that allows a hacker to use a backdoor that was supposed to be available only to law enforcement agencies. The intruder could hijack the Cisco device and use it to spy on all communications passing through it, including the content of e-mails. Leaving products vulnerable to attack, particularly ubiquitous software programs like those produced by Microsoft, puts millions of customers and their private information at risk and jeopardizes the security of electrical power facilities, public utilities, and transportation systems.

Under U.S. law, a company’s CEO is required to be notified whenever the government uses its products, services, or facilities for intelligence-gathering purposes. Some of these information-sharing arrangements are brokered by the CEOs themselves and may be reviewed only by a few lawyers. The benefits of such cooperation can be profound. John Chambers, the CEO of Cisco, became friends with George W. Bush when he was in office. In April 2006, Chambers and the president ate lunch together at the White House with Chinese president Hu Jintao, and the next day Bush gave Chambers a lift on Air Force One to San Jose, where the president joined the CEO at Cisco headquarters for a panel discussion on American business competitiveness. California governor Arnold Schwarzenegger also joined the conversation. Proximity to political power is its own reward. But preferred companies also sometimes receive early warnings from the government about threats against them.

The Homeland Security Department also conducts meetings with companies through its “cross sector working groups” initiative. These sessions are a chance for representatives from the universe of companies with which the government shares intelligence to meet with one another and hear from U.S. officials. The attendees at these meetings often have security clearances and have undergone background checks and interviews. The department has made the schedule and agendas of some of these meetings public, but it doesn’t disclose the names of companies that participated or many details about what they discussed.

Between January 2010 and October 2013, the period for which public records are available, the government held at least 168 meetings with companies just in the cross sector working group. There have been hundreds more meetings broken out by specific industry categories, such as energy, telecommunications, and transportation.

A typical meeting may include a “threat briefing” by a U.S. government official, usually from the NSA, the FBI, or the Homeland Security Department; updates on specific initiatives, such as enhancing bank website security, improving information sharing among utility companies, or countering malware; and discussion of security “tools” that have been developed by the government and industry, such as those used to detect intruders on a network. One meeting in April 2012 addressed “use cases for enabling information sharing for active cyber defense,” the NSA-pioneered process of disabling cyber threats before they can do damage. The information sharing in this case was not among government agencies but among corporations.

Most meetings have dealt with protecting industrial control systems, the Internet-connected devices that regulate electrical power equipment, nuclear reactors, banks, and other vital facilities. That’s the weakness in U.S. cyberspace that most worries intelligence officials. It was the subject that so animated George W. Bush in 2007 and that Barack Obama addressed publicly two years later. The declassified agendas for these meetings offer a glimpse at what companies and the government are building for domestic cyber defense.

On September 23, 2013, the Cross Sector Enduring Security Framework Operations Working Group discussed an update to an initiative described as “Connect Tier 1 and USG Operations Center.” “Tier 1” usually refers to a major Internet service provider or network operator. Some of the best-known Tier 1 companies in the United States are AT&T, Verizon, and CenturyLink. “USG” refers to the U.S. government. The initiative likely refers to a physical connection running from an NSA facility to those companies, as part of an expansion of the DIB pilot program. The expansion was authorized by a presidential executive order in February 2013 aimed at increasing security of critical-infrastructure sites around the country. The government, mainly through the NSA, gives threat intelligence to two Internet service providers, AT&T and CenturyLink. They, in turn, can sell “enhanced cybersecurity services,” as the program is known, to companies that the government deems vital to national and economic security. The program is nominally run by the Homeland Security Department, but the NSA provides the intelligence and the technical expertise.

Through this exchange of intelligence, the government has created a cyber security business. AT&T and CenturyLink are in effect its private sentries, selling protection to select corporations and industries. AT&T has one of the longest histories of any company participating in government surveillance. It was among the first firms that voluntarily handed over call records of its customers to the NSA following the 9/11 attacks, so the agency could mine them for potential connections to terrorists — a program that continues to this day. Most phone calls in the United States pass through AT&T equipment at some point, regardless of which carrier initiates them. The company’s infrastructure is one of the most important and frequently tapped repositories of electronic intelligence for the NSA and U.S. law enforcement agencies.

CenturyLink, which has its headquarters in Monroe, Louisiana, has been a less familiar name in intelligence circles over the years. But in 2011 the company acquired Qwest Communications, a telecommunications firm that is well known to the NSA. Before the 9/11 attacks, NSA officials approached Qwest executives and asked for access to its high-speed fiber-optic networks, in order to monitor them for potential cyber attacks. The company rebuffed the agency’s requests because officials hadn’t obtained a court order to get access to the company’s equipment. After the terrorist attacks, NSA officials again came calling, asking Qwest to hand over its customers’ phone records without a court-approved warrant, as AT&T had done. Again, the company refused. It took another ten years and the sale of the company, but Qwest’s networks are now a part of the NSA’s extended security apparatus.

The potential customer base for government-supplied cyber intelligence, sold through corporations, is as diverse as the U.S. economy itself. To obtain the information, a company must meet the government’s definition of a critical infrastructure: “assets, systems, and networks, whether physical or virtual, so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof.” That may seem like a narrow definition, but the categories of critical infrastructure are numerous and vast, encompassing thousands of businesses. Officially, there are sixteen sectors: chemical; commercial facilities, to include shopping centers, sports venues, casinos, and theme parks; communications; critical manufacturing; dams; the defense industrial base; emergency services, such as first responders and search and rescue; energy; financial services; food and agriculture; government facilities; health care and public health; information technology; nuclear reactors, materials, and waste; transportation systems; and water and wastewater systems.

It’s inconceivable that every company on such a list could be considered “so vital to the United States” that its damage or loss would harm national security and public safety. And yet, in the years since the 9/11 attacks, the government has cast such a wide protective net that practically any company could claim to be a critical infrastructure. The government doesn’t disclose which companies are receiving cyber threat intelligence. And as of now the program is voluntary. But lawmakers and some intelligence officials, including Keith Alexander and others at the NSA, have pressed Congress to regulate the cyber security standards of critical-infrastructure owners and operators. If that were to happen, then the government could require that any company, from Pacific Gas and Electric to Harrah’s Hotels and Casinos, take the government’s assistance, share information about its customers with the intelligence agencies, and build its cyber defenses according to government specifications.

In a speech in 2013 the Pentagon’s chief cyber security adviser, Major General John Davis, announced that Homeland Security and the Defense Department were working together on a plan to expand the original DIB program to more sectors. They would start with energy, transportation, and oil and natural gas, “things that are critical to DOD’s mission and the nation’s economic and national security that we do not directly control,” Davis said. The general called foreign hackers’ mapping of these systems and potential attacks “an imminent threat.” The government will never be able to manage such an extensive security regime on its own. It can’t now, which is why it relies on AT&T and CenturyLink. More companies will flock to this new mission as the government expands the cyber perimeter. The potential market for cyber security services is practically limitless.

Excerpted from “@WAR: The Rise of the Military-Internet Complex” by Shane Harris. Copyright © 2014 by Shane Harris. Used by permission of Houghton Mifflin Harcourt Publishing Company. All rights reserved.

Shane Harris is the author of The Watchers: The Rise of America’s Surveillance State, which won the New York Public Library’s Helen Bernstein Book Award for Excellence in Journalism and was named one of the best books of 2010 by the Economist. Harris won the 2010 Gerald R. Ford Prize for Distinguished Reporting on National Defense. He is currently senior writer at Foreign Policy magazine and an ASU fellow at the New America Foundation, where he researches the future of war.

http://www.salon.com/2014/11/16/googles_secret_nsa_alliance_the_terrifying_deals_between_silicon_valley_and_the_security_state/?source=newsletter

The Interregnum: Why the Future is so chaotic

The Interregnum:

Why the Future is so chaotic

“The old is dying,and the new cannot be born; in this interregnum there arises a diversity of morbid symptoms”-Antonio Gramsci

The morbid symptoms began to appear in the spring of 2003. The Department of Homeland Security was officially formed and despite the street protests of millions around the world, the United States invaded Iraq on the pretext of capturing Saddam’s “weapons of mass destruction”. By summer it was obvious that there were no such weapons and that we had been tricked into a war from which there was no easy exit. Pollsters began to notice that a majority of American’s felt we were “on the wrong track” and the distrust of our leadership has gotten worse every year.

So while the citizens exhibit historical levels of anger with the country’s drift, neither the political nor the economic leaders have put forth an alternative vision of our future. We are in an Interregnum: the often painful uprooting of old traditions and the hard-fought emergence of the new. The traditional notion of an interregnum refers to the time when a king died and a new king had not been coronated. But for our purposes, the notion of interregnum refers to those hinges in time when the old order is dead, but the new direction has not been determined. Quite often, the general populace does not understand that the transition is taking place and so a great deal of tumult arises as the birth pangs of a new social and political order. We are in such a time in America.

For those of us who work in the field of media and communications the signs of the Interregnum are everywhere. Internet services decimate the traditional businesses of music and journalism. For individual journalists or musicians, the old order is clearly dying, but a new way to make a living cannot seem to be birthed. Those who work in the fields of film and television can only hope a similar fate does not await their careers. In the world of politics a similar dynamic is destroying traditional political parties and the insurgent bottom up, networked campaigns pioneered by Barack Obama now become the standard. And yet we realize that for all it’s insurgency, the Obama campaign really did not usher in a new era. It is clear that there is an American Establishment that seems to stay in power no matter which party controls The White House. And the recent election only makes this more obvious. But this top-down establishment order is clearly dying, but it clings to it privileges and the networked, bottom-up society is not yet empowered.

Since 1953 when two senior partners of a Wall Street law firm, the brothers John Foster and Allen Dulles began running American foreign (and often domestic) policy, an establishment view, through Democratic and Republican presidencies alike, has been the norm. As Stephen Kinzer (in his book The Brothers)has written about the Dulles brothers, “Their life’s work was turning American money and power into global money and power. They deeply believed, or made themselves believe, that what benefited them and their clients would benefit everyone.” They created a world in which the Wall Street elites at first set our foreign policy and eventually (under Ronald Reagan) came to dominate domestic and tax policy — all to the benefit of themselves and their clients.

In 1969 the median salary for a male worker was $35,567 (in 2012 dollars). Today it is $33,904. So for 44 years, while wages for the top 10% have continued to climb, most Americans have been caught in a ”Great Stagnation”, bringing into question the whole purpose of the American capitalist economy. The notion that what benefited the establishment would benefit everyone, had been thoroughly discredited.

Seen through this lens, the savage partisanship of the current moment makes an odd kind of sense. What were the establishment priorities that moved inexorably forward in both Republican and Democratic administrations? The first was a robust and aggressive foreign policy. As Kinzer writes of the Dulles brothers, “Exceptionalism — the view that the United States has a right to impose its will because it knows more, sees farther, and lives on a higher moral plane than other nations — was to them not a platitude, but the organizing principle of daily life and global politics.” From Eisenhower to Obama, this principle has been the guiding light of our foreign policy, bringing with it annual defense expenditures that dwarf those of all the world’s major powers combined and drive us deeper in debt. The second principle of the establishment was, “what is good for Wall Street is good for America.” Despite Democrats efforts to paint the GOP as the party of Wall Street, one would only have to look at the efforts of Clinton’s Treasury secretaries Rubin and Summers to kill the Glass-Steagal Act and deregulate the big banks, to see that the establishment rules no matter who is in power. Was it any surprise that Obama then appointed the architects of bank deregulation, Summers and Geithner, to clean up the mess their policies had caused?

So when we observe politicians as diverse as Elizabeth Warren and Rand Paul railing against the twin poles of establishment orthodoxy, can we really be surprised? Is there not a new consensus that the era of America as global policeman is over? Is there not agreement from the Tea Party to Occupy Wall Street that the domination of domestic policy by financial elites is over? But here is our Interregnum dilemma. It is one thing to forecast a kind of liberal-libertarian coalition around the issues of defense spending, corporate welfare and even the privacy rights of citizens in a national security state. It is a much more intractable problem to find consensus on the causes and cures of the Great Stagnation. It does seem like we need to understand the nature of the current stagnation by looking back to the late sixties when the economy was very different than it is today. In 1966, net investment as a percentage of GDP peaked at 14% and it has been on a steady decline ever since, despite the computer revolution which was only getting started in the early 1970’s.

Economic growth only comes from three sources: consumption, investment or foreign earnings from trade (the Current Account). We have been living so long with a negative current account balance and falling investment that economic growth is almost totally dependent on the third leg of the stool, consumer spending. But with the average worker unable to get a raise since 1969, consumption can only come from loosened credit standards. As long as the average family could use their home equity as an ATM, the party could continue, driven by the increasing sophistication of advertising and “branded entertainment” to induce mall fever to a strapped consumer. And by the late 1990’s consumer preferences began to drive a winner take all digital economy where one to three firms dominated each sector: Apple and Google; Verizon and AT&T, Comcast and Time Warner Cable; Disney, Fox, Viacom and NBC Universal; Facebook and Twitter. All of this was unloosed by the establishment meme of deregulation — a world in which anti-trust regulators had little influence and laissez-faire ruled. These oligopolies began making so much money they didn’t have enough places to invest so corporate cash as a percentage of assets rose to an all time high.

Here is my fear. That our current version of capitalism is not working. Apple holds on to $158 billion in cash because it can’t find a profitable investment. And because U.S. worker participation rates are only 64%, a huge number of people can never afford an I Phone and so domestic demand is flat (though very profitable) and the real growth in the digital economy will be in Asia, Africa and South America. There is not much the Fed lowering interest rates can do to alter this picture. What is needed is not more easy money loans; it more decent jobs.

But unlike our left-right consensus on military spending, there is a fierce debate raging between economists about the causes and solutions to this stagnation. Though both left and right agree the economy has stagnated, there are huge differences in the prospects for emerging from this condition. On the right, the political economist Tyler Cowen’s new book is called Average is Over: Powering America Beyond the Age of the Great Stagnation. Here is how Cowen sees the next twenty years.

The rise of intelligent machines will spawn new ideologies along with the new economy it is creating. Think of it as a kind of digital social Darwinism, with clear winners and losers: Those with the talent and skills to work seamlessly with technology and compete in the global marketplace are increasingly rewarded, while those whose jobs can just as easily be done by foreigners, robots or a few thousand lines of code suffer accordingly. This split is already evident in the data: The median male salary in the United States was higher in 1969 than it is today. Middle-class manufacturing jobs have been going away due to a mix of automation and trade, and they are not being replaced. The most lucrative college majors are in the technical fields, such as engineering. The winners are doing much better than ever before, but many others are standing still or even seeing wage declines.

On the left, Paul Krugman is not so sure we can emerge from this stagnation.

But what if the world we’ve been living in for the past five years is the new normal? What if depression-like conditions are on track to persist, not for another year or two, but for decades?…In fact, the case for “secular stagnation” — a persistent state in which a depressed economy is the norm, with episodes of full employment few and far between — was made forcefully recently at the most ultrarespectable of venues, the I.M.F.’s big annual research conference. And the person making that case was none other than Larry Summers. Yes, that Larry Summers.

Cowen forecasts a dystopian world where 10% of the population do very well and “the rest of the country will have stagnant or maybe even falling wages in dollar terms, but they will also have a lot more opportunities for cheap fun and cheap education.” That’s real comforting. He predicts the 90% will put up with this inequality for two reasons. First, the country is aging: “remember that riots and protests are typically the endeavors of young hotheads, not sage (or tired) senior citizens.” And second, because of the proliferation of social networks, “envy is local…Right now, the biggest medium for envy in the United States is probably Facebook, not the big yachts or other trophies of the rich and famous.”

Although Cowen cites statistics about the fall in street crime to back up the notion that the majority of citizens are passively accepting gross inequality, I think he completely misunderstands the nature of anti-social pathologies in the Internet Age of Stagnation. Take the example of the Web Site Silk Road.

Silk Road already stands as a tabloid monument to old-fashioned vice and new-fashioned technology. Until the website was shut down last month, it was the place to score, say, a brick of cocaine with a few anonymous strokes on a computer keyboard. According to the authorities, it greased $1.2 billion in drug deals and other crimes, including murder for hire.

From Lulzsec to Pirate Bay to Silk Road, the coming anarchy of a Bladerunner like society are far more vicious than a few street thugs in our major cities. The rise of virtual currencies that can’t be traced like Bitcoin only make the possibilities for a huge crime wave on the Dark Net more imminent—one which IBM estimates already costs the economy $400 billion annually.

So while both Cowen and Krugman agree that stagnation is causing the labor force participation rate to fall, they disagree as to whether anything can be done to remedy the problem.

In the early 1970’s the participation rate began to climb as more and more women entered the workforce. It peaked when George Bush entered office and has been on the decline ever since. As the Time’s David Leonhardt has pointed out, this has very little to do with Baby Boomer retirement. The economist Daniel Alpert has argued in his new book, The Age of Oversupply, that “the central challenge facing the global economy is an oversupply of labor, productive capacity and capital relative to the demand for all three.”

Viewed through this lens, neither the policy prescriptions of Republicans nor Democrats are capable of changing the dynamic brought about by the entrance of three billion new workers into the global economy in the last 20 years. Republican fears that U.S. deficits will lead to Weimar-like hyper-inflation ring hollow in a country where only 63% of the able bodied are working. Democrats hectoring for The Fed and the banks to loan more to business to stimulate the economy are equally nonsensical when American corporations are sitting on $2.4 trillion in cash.

But there is a way out of this deflationary trap we are in. First the Republicans have got to acknowledge the obvious: America’s corporations are not going to invest in vast amounts of new capacity when there is a glut in almost every sector worldwide. Secondly, that overcapacity is not going to get absorbed until more people go back to work and start buying the goods from the factories. This was the same problem our country faced in the great depression and the way we got out of it was by putting people to work rebuilding the infrastructure of this country. Did it ever occur to the politicians in Washington that the reason so many bridges, water and electrical systems are failing is because most of them were built 80 years ago, during the great depression? For Republicans to insist that more austerity will bring back the “confidence fairy”is exactly the wrong policy prescription for an age of oversupply. But equally destructive, as Paul Krugman points out are Democratic voices like Erskine Bowles, shouting from any venue that will pay him, that the debt apocalypse is upon us.

But the Democrats are also going to have to give up some long held beliefs that all good solutions come from Washington. If the Healthcare.gov website debacle has taught us anything, it is that devolving power from Washington to the states is the answer to the complexity of modern governance. While California’s healthcare website performed admirably, the notion of trying to create a centralized system to service 50 different state systems was a fool’s errand. So what is needed is a federalist solution for investment in the infrastructure of the next economy. This is the way out of The Interregnum. Investors buying tax-free municipal bonds to rebuild ancient water systems and bridges as well as solar and wind plants will finance much of it. But just as President Eisenhower understood that a national interstate highway system built in the 1950’s would lead to huge productivity gains in the 1960’s and 1970’s, Federal tax dollars will have to play a large part in rebuilding America. As we wind down our trillion dollar commitments to wars in the Middle East, we must engage in an Economic Conversion Strategy from permanent war to peaceful innovation that both liberals and libertarians could embrace.

The way to overcome the partisan gridlock on infrastructure spending would be for Obama to commit to a totally federalist solution to us getting out of our problems. The Federal Government would use every dollar saved from getting out of Iraq, Afghanistan and all the other defense commitments in block innovation grants to the states. Lets say the first grant is for $100 Billion. It will be given directly to the states on a per capita basis to be used to foster local economic growth. No strings or Federal Bureaucracy attached to the grants except that the states have to publish a yearly accounting of the money in an easily readable form. And then let the press follow the money and see which states come up with the most imaginative solutions. Some states might use the grants to lower the cost of state university tuition. Others might spend the money on high-speed rail lines or municipal fiber broadband and wifi. As we have found in the corporate sector, pushing power to the edges of an organization helps foster innovation. As former IBM CEO Sam Palmisano told his colleagues, “we have to lower the center of gravity of this organization”.

If it worked, then slowly more money could be transferred to the states in these bureaucracy free block grants. Gradually the bureaucracies of the Federal government would shrink as more and more responsibility was shifted to local supervision of education, health, welfare and infrastructure.

In the midst of our current Washington quagmire this vision of a growing American middle class may seem like a distant mirage. But it is clear that the establishment consensus on foreign policy, defense spending, domestic spying and corporate welfare has died in the last 12 months. The old top-down establishment order is clearly dying, but just how we build the new order based on a bottom-up, networked society that works for the 90%, not just the establishment is the question of our age.

Controlling the Surveillance State

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A new report from the ACLU shows that local law enforcement agencies have been spending big bucks on surveillance technology — and offers recommendations on how to rein in the spending.

California cities and counties have spent more than $65 million on surveillance technologies in the past decade while conducting little public debate about the expenditures, according to a new report published this week by three American Civil Liberties Union chapters in the state. Public records reviewed by the ACLU also indicate that though cities and counties in California bought surveillance technologies 180 instances, they only held public discussions about the proposals just 26 times.

The technologies examined in the report included automated license plate readers, closed-circuit video cameras, facial recognition software, drones, data mining tools, and cellphone interception devices known as ISMI catchers or stingrays. The report analyzed purchases by 59 cities and by 58 county governments in California. In many instances, city and county officials used federal grant money to make the purchases, and then asked local legislative bodies to rubber-stamp their decisions. “We long suspected California law enforcement was taking advantage of federal grant money to skirt official oversight and keep communities in the dark about surveillance systems,” said Nicole Ozer, the technology and civil liberties director for the ACLU of California.

The report also found that only one-third of the cities and counties surveyed had privacy policies to prevent law enforcement abuse.

The ACLU report also includes a model ordinance that would require a public process and official legislative approval by local governments before law enforcement could purchase or use surveillance technologies that could impact the privacy of community members. Santa Clara County Supervisor Joe Simitian and San Francisco Supervisor John Avalos planned to announce on Wednesday their intention to introduce versions of the ACLU’s ordinance to their respective legislative bodies. In an interview, Avalos said he believes the proposed ordinance is a long overdue response to an alarming trend. “The level of surveillance in our society has increased dramatically over the past fifteen years and has gotten notably worse under the Obama administration,” Avalos said. “There’s technology out there that is available for cops to pick up … and it’s not clear to me how the technology will be used or useful.”

Avalos also stated that the purchase and use of such equipment is an alarming example of mission creep. “SFPD [San Francisco Police Department] and other police departments are developing an intelligence-gathering capacity beyond what their mission should be,” he said, adding that he is concerned that city policing policy is being driven by technology and equipment purchases that are not currently under the control or oversight of elected officials.

This is not the first effort to regulate the use of surveillance technology by Northern California law enforcement. An ad-hoc advisory committee formed in Oakland to oversee the drafting of the city’s privacy policy for the Domain Awareness Center has recommended similar legislation to city councilmembers (see “Oakland’s Surveillance Fight Continues,” 7/22/14). Oakland’s proposed ordinance would carry a $5,000 penalty or result in a misdemeanor for anyone found to have violated the city’s guidelines. In October, the City of San Carlos rejected a proposal to buy license plate readers on the grounds that the threat to civil liberties and privacy posed by the tracking technology outweighed any potential public safety benefits.

The ACLU’s model ordinance would establish a process for public debate and a consideration of the types of technologies being considered for purchase. The ordinance also would cover the use of surveillance technologies shared between law enforcement agencies, including those employed by fusion centers, such as the Northern California Regional Intelligence Center, which coordinates the sharing of Stingrays owned by police in Oakland and San Francisco and maintains a centralized database of license-plate-reader data from dozens of Northern California agencies. Equipment obtained through private charities such as police foundations would also be covered under the model ordinance. Last month, ProPublica revealed the role of police foundations in New York City and Los Angeles in purchasing surveillance technology that was outside the oversight of local elected officials.

The ACLU report noted that many surveillance tools are being purchased and deployed without consideration of long-term costs associated with maintaining and using such equipment. “The fiscal impact of surveillance can far exceed initial purchase prices for equipment,” the report stated. “Modifying current infrastructure, operating and maintaining systems, and training staff can consume limited time and money even if federal or state grants fund initial costs. Surveillance technologies may also fail or be misused, resulting in costly lawsuits. Looking beyond the sticker price is essential.”

Many communities have purchased costly systems that are intrusive and don’t address the issues that residents believe are important. “The federal funding streaming down from Washington has sidestepped thoughtful considerations of what makes sense for communities,” Ozer said, noting that Oakland received millions of dollars for its Domain Awareness Center, yet received much smaller grants for its successful Operation Ceasefire program.

Avalos said he is in discussions with SFPD Chief Greg Suhr over the proposed ordinance, and is looking forward to hearing the input of his colleagues. “We want a public process around this issue before we enter into the legislative work,” Avalos said.

He is particularly disturbed by the SFPD’s use of devices that capture information from cellphones, like stingrays, and is looking forward to a full accounting of the police department’s technology and policies. Surveillance, Avalos said, “is a broad way of controlling behavior, [and] that is not an American or San Francisco value.”