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Free markets, cyber security and the secret state

By Bill Calcutt - posted Thursday, 30 May 2013

Few now doubt that the exponential growth of global free trade over the last three decades has changed the economic circumstances of billions of people. While the post-war Bretton Woods institutions initially entrenched an economic advantage for developed Western countries, international economic liberalisation in the 1980s and the end of the cold war opened up global free markets. Championed by Margaret Thatcher and Ronald Reagan, neo-liberalism asserted that competitive global markets, free of state intervention, are the most efficient way to allocate and exploit scarce resources. While not all countries have benefited equally from global free trade (many of the least developed countries have gone backwards), globalisation has facilitated pervasive economic interdependence and billions of people in emerging economies have seen their standard of living rise.

Technology has been at the heart of both global and social transformation. For many years after the war the developed countries fiercely defended their technological superiority (and their competitive advantage), some of which had its origins in defence and national security. As this technology has been progressively commercialised and made publicly available the West's clear technological and knowledge advantage has been eroded, leading to the rapid development of economies with a competitive advantage in a global free market. Technology has enabled the virtually instantaneous sharing of information, often making physical location irrelevant. From the West's perspective, the technology genie has escaped from the bottle.

Despite the connotations of an open and competitive free market a great deal of commercial activity continues to operate in the shadows. Markets in illicit goods and services have flourished at the same time as international trade in legal commodities. Economies of scale and the mobility of capital have taken precedence over the social, cultural and economic needs of particular nations. Huge state-owned enterprises have exploited their market power. Transnational corporations have abrogated their social and environmental responsibilities and their taxation obligations in particular locations. And despite the rhetoric of an open free market where competitive advantage prevails, many governments have continued to be intimately involved in advancing their national economic interests through extensive covert information collection activities.


The current controversy over cyber security needs to be seen in this context. (Remarkably, the sensational media reports about cyber attacks coincide with an annual information technology and security conference called CeBIT at Darling Harbour in Sydney.) For many years developed countries enjoyed a virtual monopoly on advanced technology, including the capacity to progress their national economic interests through extensive covert means. Cyber security has now emerged as an issue of significance because a number of developing countries have evolved their own advanced technical capabilities, with developed countries losing their clear technological advantage.

Publicly discussing cyber security issues poses a terrible dilemma for governments because it threatens to expose a secret "shadow world", potentially revealing highly sensitive technical capabilities, and perhaps more damaging, highly embarrassing covert activities. This can be particularly awkward where there is a contradiction between overt Government policy and covert state action, and where the state uses its covert cyber capabilities to support private commercial ventures that are competing in a global marketplace.

If we accept that sensitive diplomatic and trade negotiations between the representatives of sovereign states are undertaken "in good faith" based on mutual respect, then the disclosure of covert actions by one party to secure advantage over (or exploit the vulnerability of) another may erode trust and undermine moral authority. In some respects the disclosure of the motives and attitudes of diplomatic representatives was the most enduring outcome from the Wikileaks documents. Many people would feel that the establishment and maintenance of strong and enduring relationships between nations is vital to securing a peaceful resolution of conflicts, with cynicism and mistrust threatening to undermine such relations. Apparently duplicitous actions may also conflict with the state's ethical responsibilities to uphold core national values such honesty, transparency and accountability.

Arguably it is the state's use of its covert cyber capabilities to provide competitive advantage to private enterprises operating in a global free market that potentially poses the greatest ethical ambiguity. This is because the developed countries have been the most vociferous proponents of allowing global market forces to prevail, including the removal of national barriers intended to protect local industries and employment. If it is revealed that "free" trade is not determined fairly on the basis of genuine competitive advantage then the social and economic costs for individual communities and nations may be more difficult to justify.

The difficulty for the community in making sense of the confusing (and potentially alarming) situation in respect to cyber security is that the discussion of all of these issues (including the national values that govern covert state action) is not undertaken in public. By treating as secret what are actually quite profound and ubiquitous changes in technological capabilities with implications for international relations (and for traditional conceptions of national security, by portraying cyber activities by other states through a traditional espionage prism), the community is excluded from a thoughtful and balanced consideration of an appropriate national response. Fortunately there are a growing number in the cyber security industry who recognise the need for a paradigm shift in respect to this important national issue.

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About the Author

Bill Calcutt worked in a range of intelligence roles in the Australian Security Intelligence Organization and the National Crime Authority from the early 1970s till the mid 1990s.

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