Monday

The Zombie System: How Capitalism Has Gone Off the Rails

By Michael Sauga
 Source: Spiegel International

Six years after the Lehman disaster, the industrialized world is suffering from Japan Syndrome. Growth is minimal, another crash may be brewing and the gulf between rich and poor continues to widen. Can the global economy reinvent itself?

A new buzzword is circulating in the world's convention centers and auditoriums. It can be heard at the World Economic Forum in Davos, Switzerland, and at the annual meeting of the International Monetary Fund. Bankers sprinkle it into the presentations; politicians use it leave an impression on discussion panels.

The buzzword is "inclusion" and it refers to a trait that Western industrialized nations seem to be on the verge of losing: the ability to allow as many layers of society as possible to benefit from economic advancement and participate in political life.

The term is now even being used at meetings of a more exclusive character, as was the case in London in May. Some 250 wealthy and extremely wealthy individuals, from Google Chairman Eric Schmidt to Unilever CEO Paul Polman, gathered in a venerable castle on the Thames River to lament the fact that in today's capitalism, there is too little left over for the lower income classes. Former US President Bill Clinton found fault with the "uneven distribution of opportunity," while IMF Managing Director Christine Lagarde was critical of the numerous financial scandals. The hostess of the meeting, investor and bank heir Lynn Forester de Rothschild, said she was concerned about social cohesion, noting that citizens had "lost confidence in their governments."

It isn't necessary, of course, to attend the London conference on "inclusive capitalism" to realize that industrialized countries have a problem. When the Berlin Wall came down 25 years ago, the West's liberal economic and social order seemed on the verge of an unstoppable march of triumph. Communism had failed, politicians worldwide were singing the praises of deregulated markets and US political scientist Francis Fukuyama was invoking the "end of history."

Today, no one talks anymore about the beneficial effects of unimpeded capital movement. Today's issue is "secular stagnation," as former US Treasury Secretary Larry Summers puts it. The American economy isn't growing even half as quickly as did in the 1990s. Japan has become the sick man of Asia. And Europe is sinking into a recession that has begun to slow down the German export machine and threaten prosperity.

Capitalism in the 21st century is a capitalism of uncertainty, as became evident once again last week. All it took were a few disappointing US trade figures and suddenly markets plunged worldwide, from the American bond market to crude oil trading. It seemed only fitting that the turbulence also affected the bonds of the country that has long been seen as an indicator of jitters: Greece. The financial papers called it a "flash crash."

Running Out of Ammunition
 
Politicians and business leaders everywhere are now calling for new growth initiatives, but the governments' arsenals are empty. The billions spent on economic stimulus packages following the financial crisis have created mountains of debt in most industrialized countries and they now lack funds for new spending programs.

Central banks are also running out of ammunition. They have pushed interest rates close to zero and have spent hundreds of billions to buy government bonds. Yet the vast amounts of money they are pumping into the financial sector isn't making its way into the economy.

Be it in Japan, Europe or the United States, companies are hardly investing in new machinery or factories anymore. Instead, prices are exploding on the global stock, real estate and bond markets, a dangerous boom driven by cheap money, not by sustainable growth. Experts with the Bank for International Settlements have already identified "worrisome signs" of an impending crash in many areas. In addition to creating new risks, the West's crisis policy is also exacerbating conflicts in the industrialized nations themselves. While workers' wages are stagnating and traditional savings accounts are yielding almost nothing, the wealthier classes -- those that derive most of their income by allowing their money to work for them -- are profiting handsomely.

According to the latest Global Wealth Report by the Boston Consulting Group, worldwide private wealth grew by about 15 percent last year, almost twice as fast as in the 12 months previous.

The data expose a dangerous malfunction in capitalism's engine room. Banks, mutual funds and investment firms used to ensure that citizens' savings were transformed into technical advances, growth and new jobs. Today they organize the redistribution of social wealth from the bottom to the top. The middle class has also been negatively affected: For years, many average earners have seen their prosperity shrinking instead of growing.

Harvard economist Larry Katz rails that US society has come to resemble a deformed and unstable apartment building: The penthouse at the top is getting bigger and bigger, the lower levels are overcrowded, the middle levels are full of empty apartments and the elevator has stopped working.

'Wider and Wider'
 
It's no wonder, then, that people can no longer get much out of the system. According to polls by the Allensbach Institute, only one in five Germans believes economic conditions in Germany are "fair." Almost 90 percent feel that the gap between rich and poor is "getting wider and wider."

In this sense, the crisis of capitalism has turned into a crisis of democracy. Many feel that their countries are no longer being governed by parliaments and legislatures, but by bank lobbyists, which apply the logic of suicide bombers to secure their privileges: Either they are rescued or they drag the entire sector to its death.

It isn't surprising that this situation reinforces the arguments of leftist economists like distribution critic Thomas Piketty. But even market liberals have begun using terms like the "one-percent society" and "plutocracy." The chief commentator of the Financial Times, Martin Wolf, calls the unleashing of the capital markets a "pact with the devil."

They aren't alone. Even the system's insiders are filled with doubt. There is the bank analyst in New York who has become exasperated with banks; the business owner in Switzerland who is calling for higher taxes; the conservative Washington politician who has lost faith in the conservatives; and the private banker in Frankfurt who is at odds with Europe's supreme monetary authority.

They all convey a deep sense of unease, and some even show a touch of rebellion.


If there is a rock star among global bank analysts, it's Mike Mayo. The wiry financial expert loves loud ties and tightly cut suits, he can do 35 pull-ups at a time, and he likes it when people call him the "CEO killer."
The weapons Mayo takes into battle are neatly lined up in his small office on the 15th floor of a New York skyscraper: number-heavy studies about the US banking industry, some as thick as a shoebox and often so revealing that they have enraged industry giants like former Citigroup CEO Sandy Weill, or Stan O'Neal in his days as the head of Merrill Lynch. Words of praise from Mayo are met with cheers on the exchanges, but when he says sell, it can send prices tumbling.

Mayo isn't interested in a particular sector but rather the core of the Western economic system. Karl Marx called banks "the most artificial and most developed product turned out by the capitalist mode of production." For Austrian economist Joseph Schumpeter, they were guarantors of progress, which he described as "creative destruction."

But financial institutions haven't performed this function in a long time. Before the financial crisis, they were the drivers of the untenable expansion of debt that caused the crash. Now, focused as they are on repairing the damage done, they are inhibiting the recovery. The amount of credit ought to be "six times faster than it has been," says Mayo. "Banks now aren't the engines of growth anymore." Mayo's words reflect the experience of his 25 years in the industry, a career that sometimes sounds like a plot thought up by John Grisham: the young hero faces off against a mafia-like system.

He was in his late 20s when he arrived on Wall Street, a place he saw as symbolic of both the economic and the moral superiority of capitalism. "I always had this impression," says Mayo, "that the head of a bank would be the most ethical person and upstanding citizen possible."

But when Mayo, a lending expert, worked for well-known players like UBS and Prudential Securities, he quickly learned that the glittering facades of the American financial industry concealed an abyss of lies and corruption. Mayo met people who recommended buying shares in technology companies in which they themselves held stakes. He saw how top executives diverted funds into their own pockets during mergers. And he met a bank director who only merged his bank with a lender in Florida because he liked boating in the Keys.

What bothered Mayo most of all was that his employers penalized him for doing his job: writing critical analyses of banks. He lost his job at Lehman Brothers because he had downgraded a financial institution with which the Lehman investment department wanted to do business. Credit Suisse fired him because he recommended selling most US bank stocks.

Only when the real estate bubble burst did the industry remember the defiant banking analyst, who already saw the approaching disaster even as then-Deutsche Bank CEO Josef Ackermann issued a yield projection of 25 percent. Fortune called him "one of eight people who saw the crisis coming." The US Congress called on him to testify about the crisis.

Today Mayo writes his analyses for the Asian brokerage group CLSA and they still read like reports from a crisis zone. Central banks have kept lenders alive with low interest rates, and governments have forced them to take up additional capital and comply with thousands of pages of new regulations. Nevertheless, Mayo is convinced that "the incentives that drove the problems … are still in place today."

Top bank executives are once again making as much as they did before the crisis, even though the government had to bail out a large share of banks. The biggest major banks did not shrink, as was intended, but instead have become even larger.

Incalculable Risks
 
New accounting rules were passed, but financial managers can still hide the value of their receivables and collateral behind nebulous terms like "transaction" or "customer order." Bank balance sheets, British central banker Andrew Haldane said caustically, are still "the blackest of boxes."

Before the crash, investment banks gambled with derivatives known by acronyms like CDO and CDS. Today Wall Street institutions try to get the upper hand with high-frequency trading, with their Dark Pools and millisecond algorithms. Regulators fear that high-frequency trading, also known as flash trading, could create incalculable risks for the global financial system.

When analyst Mayo thinks about the modern banking world, he imagines a character in the Roman Polanski film "Chinatown," California detective Jake Gittes. The man solves one corruption case after another, and yet the crime level in Los Angeles doesn't go down. "Why is that?" he finally asks another character, who merely replies: "Forget it, Jake. It's Chinatown."

It's the same with the banking industry, says the analyst. Individual institutions aren't the problem, he explains. The problem is the system. "The banks are Chinatown," says Mayo, "and it is still the situation today."


The little village of Wimmis lies in an area of Switzerland that still looks quintessentially Swiss, the Bernese Oberland, or Highlands, where Swiss flags flutter in front yards. The local tanning salon is called the "Sunne Stübli" (little sun room) and under "item five" of the latest edition of the town's "Placard Ordinance," posted outside the town administration building, organizations must secure their public notices "with thumbtacks" and "not with staples." Everything has its place in Wimmis, as it does in Markus Wenger's window factory. The business owner, with his thinning hair and crafty eyes, is the embodiment of the old saying, "time is money." He walks briskly through his production building, the size of a football field, passing energy-saving transom windows, energy-saving patio doors and energy-saving skylights, which can be installed between solar panels, also to save energy, a system Wenger developed. "We constantly have to think of new things," he says, "otherwise the Czechs will overtake us."

Wenger could pass for a model businessman from the regional chamber of commerce were it not for his support for a political initiative that's about as un-Swiss as banning cheese production in the Emmental region. Wenger advocates raising the inheritance tax.

For decades, Switzerland was based on a unique form of popular capitalism, which promised small craftsmen as many benefits as those who worked in high finance. Switzerland was the discreet tax haven for the world's rich, while simultaneously laying claim to Europe's highest wage levels -- a Rolex model of the social welfare state.

But the country's established class consensus was shattered by the excesses of the financial crisis -- the $60 billion bailout of its biggest bank, UBS, and the millions in golden parachutes paid out to executives so that they wouldn't go to the competition after being jettisoned by their companies.

Since then, a hint of class struggle pervades Swiss Alpine valleys. A series of popular initiatives have been launched, initiatives the financial newspapers have labeled "anti-business." To begin with, the Swiss voted on and approved a cap on so-called "rip-off salaries." Another referendum sought to impose a ceiling on executive compensation, but it failed. A proposal by Social Democrats, Greens and the socially conservative EVP, to support government pensions with a new tax on large inheritances, will be put to a referendum soon.

'The Wealth of Medieval Princes'
 
Income isn't the problem in Switzerland, where the gap between rich and poor is no wider than in Germany or France. The problem is assets. No other country has as many major shareholders, financiers and investors, and in no country is as much capital concentrated in so few hands. The assets of the 100 wealthiest Swiss citizens have increased almost fivefold in the last 25 years. In the Canton of Zürich, the 10 richest residents own as much as the poorest 500,000. When a Swiss business owner died recently, his two heirs inherited an estate worth as much as all single-family homes and owner-occupied flats in the Canton of Appenzell Innerrhoden. Wealth has become so concentrated in Switzerland, says the former head of the Zürich statistics office, that it "rivals the wealth of medieval princes."

The government benefits hardly at all from this wealth. The Swiss tax authorities recently collected all of 864 million Swiss francs (€715 million) in inheritance tax, and this revenue source is unlikely to increase anytime soon. To attract wealthy individuals, the cantons have reduced their tax rates to such low levels that even estates worth billions can be left to the next generation without being subject to any taxation at all.

In the past, the Swiss were fond of their quirky high society, whose lives of luxury in places like Lugano were as spectacular as their bankruptcies. But now, a large share of the super-rich comes from the financial industry, and even an upright window manufacturer like Markus Wenger is often unsure what to make of the demands coming from his high-end customers.

A homeowner recently asked Wenger if he could gold-plate his window fittings. And when he was standing in an older couple's 500-square-meter (5,380-square-foot) apartment not long ago, he found himself wondering: How do they heat this?

A Dangerous Path
 
Wenger is no revolutionary. He likes the market economy and says: "Performance must be rewarded." His support for a higher inheritance tax is not as much the result of his sense of justice, but rather a cost calculation that he explains as soberly as the installation plan for his windows.

This is how Wenger's calculation works: Today he pays about €8,000 a year in social security contributions for a carpenter who makes 65,000 Swiss francs (€54,000). But the Swiss population is aging, so contributions to pension insurance threaten to increase drastically soon. Doesn't it make sense, he asks, to exact an additional, small contribution from those Swiss citizens who hardly pay any taxes at all today on their rapidly growing fortunes?

For Wenger, the answer is obvious. But he also knows that most of his fellow business owners see things differently. They are worried about an "attack by the left" and prefer to support their supposed champion, Christoph Blocher, the billionaire spiritual head of the Swiss People's Party. Only recently, Blocher convinced the Swiss to limit immigration by workers from other European countries. Now Wenger expects Blocher to launch a new campaign under the motto: "Are you trying to drive our business owners out of the country?"

There is more at stake than a few million francs for the national pension fund. The real question is whether wealthy countries like Switzerland should become playthings for their elites. Wenger sees the industrialized countries embarking on a dangerous path, the path of greed and self-indulgence, and he believes Blocher's party is the most visible expression of that. Blocher is pursuing a "policy for high finance," says Wenger. "He is fighting on behalf of money."
The entrepreneur from the Bern Highlands has no illusions over his prospects in the upcoming conflict with the country's great scaremonger. The Swiss are likely to vote on the inheritance tax initiative next year. "In the end," Wenger predicts, "the vote will be 60 to 40 against us."


He was the face of the Reagan revolution, a young man with large, horn-rimmed glasses and thick hair, wearing a suit that was too big for him as he sat next to the hero of conservative America. As former President Ronald Reagan's budget director, David Stockman was the architect of the biggest tax cut in US history and the propagandist of the "trickle-down" theory, the Republican tenet whereby profits earned by the rich eventually benefit the poorer classes.
Thirty years later, Stockman is sitting on a Chesterfield sofa in his enormous mansion in Greenwich, Connecticut, an affluent suburb of New York, where the stars of the hedge fund industry conceal their tasteless mansions behind red brick walls and jeeps owned by private security companies are parked on every street corner.

Stockman is wearing a green baseball cap and a black T-shirt. It's a sunny early fall morning, but the mood in the brightly lit rooms is strangely somber. The rooms are empty, there are boxes stacked in the corners and a servant is wrapping the silverware in the dining room.

Stockman is moving to New York, into an apartment he has already rented in Manhattan. But it isn't entirely clear whether he is only moving to be closer to TV studios and newspaper editors, or if the move signifies a departure from his previous life. It was a life that took him through the executive suites of Washington politics and the US financial industry, a life that has placed Stockman in an almost unparalleled position to recount the aberrations of American capitalism in the last three decades. "We have a financialized, central-bank dominated casino," he says, "that is undermining the fundamentals of a healthy growing capitalist economy," he says.

Ironically, Stockman was the one who wanted to reshape that society, back in the 1980s, when Reagan made him the organizer of his shift to so-called supply-side economics. Like the actor-turned-president from California, Stockman believed in free markets, low taxes and reducing the role of government.

The First Mistake
 
But Stockman also believed in healthy finances, which placed him at odds with the California contingent on Reagan's team who saw themselves as lobbyists for industry and the military. When Reagan's chief of staff, Donald Regan, declared the phrase "tax increase" to be taboo after the 1984 election, Stockman knew that he had lost. But it was more than a personal defeat. It was a triumph of irrationality, one that led Stockman to permanently disassociate himself from his party's fiscal policies. "The Republican concept of starving the beast is the worst thing in terms of fiscal rectitude that you can imagine," Stockman says today. "It's even worse than the Keynesian models of the Democrats."

The debt policy of the Reagan years was the first mistake of America's conservative revolutionaries, but not the only one. There is another fallacy, one that Stockman also participated in when he went to work for the investment bank Salomon Brothers and later the private equity firm Blackstone after his ouster from the White House.

It was the time when it had become politically fashionable to unfetter the financial industry; a time when then-Fed Chairman Alan Greenspan, Stockman's old acquaintance from the Reagan team, was inventing a new monetary policy: Whenever the economy and the markets showed signs of weakness, he reduced interest rates, and when a large financial institution ran into trouble, it was bailed out with the help of the central bank.

Greenspan's policy of cheap money became a sweet poison for Wall Street, the chief ingredient of the dangerous debt cocktails brewed up by the wizards at London and New York investment banks, with Stockman front and center. The former politician became a virtuoso of the leveraged buyout, a complex financial deal in which in investor buys companies with borrowed money, restructures them or carves them up, and then sells them at a profit.

The deals made Stockman rich, but they also turned him into a junkie. His projects became increasingly risky and the towers of credit he constructed became taller and taller. "I was an addict," he says. "I got caught up in the process."

A Debt Republic
 
Disaster struck in 2007, when one of his highly leveraged companies went bankrupt. He was indicted on fraud charges, and the bankruptcy cost him millions and damaged his reputation. It became his "road to Damascus experience," as he calls it, when the financial crisis erupted a short time later. He concluded that the same mistakes that had destroyed his company also took the United States to the brink of an abyss: cheap credit, excessively high debt and a false sense of security that everything would ultimately work out for the best.
Stockman again became the rebel he had been at the beginning of his career. He gave up his position in the financial industry, started a blog in which he settled scores with both policymakers in Washington and the financial oligarchy on Wall Street and he wrote an almost 800-page analysis of the "Great Deformation" of US capitalism.

The conservative is furious over his country's transformation into a debt republic of the sort the Western world has never before seen in times of peace. A republic in which going to college is paid for with borrowed funds, as is the next military campaign. A country which hasn't actually dismantled its gigantic pile of debt since the crisis -- $60 trillion -- but has merely redistributed it. While the banks were allowed to pass on a large share of their bad loans to taxpayers, the government is in more debt than ever before.

The mountain of debt appears smaller than it is because the Fed keeps interest rates low. At the same time, though, all this cheap money is driving the United States into a risky race against time, one in which no one knows what will happen first: the hoped-for economic boom or the next crash. Experts, like former Treasury Secretary Robert Rubin, believe the current rally in the markets is in fact the precursor to the next crash.

The primary beneficiaries of the market rally seen in recent months are the 10 percent of top earners who own more than 90 percent of financial assets. But for average Americans, the policies instituted in response to the crisis have been poverty inducing. After the crash, millions of US citizens first lost their homes and then their jobs -- and now the social divide in the country is as big as it was in the 1920s. While wealth has grown at the top of the income scale, the median household, or the household that lies statistically at the exact middle of the scale, has become $50,000 poorer since 2007.

In the past, part of the promise of the American dream was that anyone who worked hard enough could eventually improve his or her situation. Today the wealthy enjoy most of the fruits of US capitalism and the most salient feature of the system is the fear of fear. No one knows what might happen if the Fed raises interest rates next year as planned. Will pressure from rising costs cause the government deficit to explode? Will the stock market bubble burst and will financial institutions collapse? Will the economy crash?

Only one thing is certain: In the seventh year of the financial crisis, the US economy is still addicted to debt and cheap money. Worst of all, the withdrawal phase hasn't even begun.

"There is no possibility of a soft landing (with the) markets as completely distorted and disabled as they are today," Stockman says in parting. "There will be some great conflagration. It's just the question of when."


Michael Klaus flips open his mobile phone, which he has been doing a lot of these days. He taps the screen with his finger to display the current yields on 10-year German government bonds. "Germany 10 Year: 0.80," the screen reads, using the abbreviated terminology of the Bloomberg market service. "You see," he says, "yields are down again. They were at 0.84 yesterday."

It's Wednesday of last week. The Frankfurt banker is walking down Friedrichstrasse in Berlin on his way to a meeting with fellow members of the Confederation of German Employers' Associations. The latest labor agreement is on the agenda, but Klaus is still thinking about the number on the screen of his mobile phone, yet another reaction to the most recent plans of Mario Draghi, the president of the European Central Bank (ECB).

Such rates are almost always a reaction to Draghi, at least they have been since the euro crisis got going. According to economics textbooks, security prices are determined by supply and demand. But in the reality of the monetary union, they usually follow the rates set by the top monetary watchdog in Frankfurt. In Klaus's assessment of the situation, "to put it in somewhat exaggerated terms, we live in a central-bank-administration economy."

For the last quarter of a century, Klaus, a management expert, has been working for Metzler, a traditional, private bank based in Frankfurt. He is now a partner and exudes the self-confident nonchalance of a man who knows that his customers need to show up with at least €3 million to become his clients. His biggest asset is reliability. Unlike the large, powerful banks, his bank would be unable to count on government assistance in a crisis. It is not big enough to be too big to fail.

Partly for that reason, Klaus is particularly bothered by the ECB's development in recent years. He sees it as a kind of hedge fund a kind of ministerial administration. Because Europe's major banks are ailing and national governments are at odds, the ECB has developed into the most powerful bureaucracy on the Continent. It controls interest rates and the money supply, drives prices on the exchanges and financial markets, supervises financial institutions and audits governments. According to Klaus, the European Central Bank has all but "replaced" the European bond market.

It made sense at the time, because it protected the monetary union from breaking apart. But now emergency aid has turned into long-term assistance. The effects of ECB measures are subsiding, and financial experts aren't the only ones to notice that their programs have recently done more harm than good.

That was the case with Draghi's latest package last month. To stimulate lending to small and mid-sized companies, the ECB announced its intention to begin large-scale buying of special debt instruments known as asset-backed securities, or ABS. The only problem is that far too few of these securities exist in Europe.
This leads many experts to worry that lenders will simply fill the gap by transforming bad debt from their portfolios into ABSs and pass them on to the ECB. The investment effect would be next to nothing.

Draghi's plan to provide long-term funds to banks if they can demonstrate that they passed it on in the form of loans to companies or households could also prove harmful. They must only offer proof in 2016, meaning they could first invest the money in government bonds, a surer bet these days than corporate bonds.

Achieving the Opposite
 
Another recent Draghi measure is particularly dangerous: the "negative deposit interest rate." It means that banks no longer earn anything when they park their money with the ECB. On the contrary, they are required to pay for the privilege.
This too is meant to encourage banks to lend. In reality, however, the measure makes the situation even more difficult for financial institutions like savings banks and cooperative banks, which are dependent on customer deposits. Because of the current low interest rates, these banks already earn almost nothing from the spread between savings and lending rates. If interest rates are pushed down even further, profits will continue to decline. "Ironically, this torpedoes the business model of savings banks and cooperative banks, which have thus far managed to survive the crisis in relatively good shape," says Klaus.
Many experts are worried that with measures like these, the ECB is achieving precisely the opposite of what it wants to achieve. Instead of being strengthened, the credit sector is weakened. Instead of reducing risks, new ones are being created. Instead of liquidating ailing banks, they are kept alive artificially.

The economy has had little experience thus far with the new crisis capitalism, with its miniature growth, miniature inflation and miniature interest rates. But economists learned one thing after large credit bubbles burst in recent years, in Japan and Scandinavia, for example: After a financial and banking crisis, the first order of business is to clean up the banks, and to do it quickly and radically. Institutions that are not viable need to be shut down while the others should be provided with capital.

'Substantial Turbulence'
 
In Europe, however, this process has dragged on for years, under pressure from the financial lobby. The condition of the industry is now so dismal that experts are using metaphors from the world of horror films to describe it. "Zombie banks" are those that are being kept alive artificially with government bailouts and, like the zombies in Hollywood films, are wreaking havoc throughout Europe. They are too sick to lend money to the real economy but healthy enough to speculate with financial investments. Many banks today, says Bonn economist Martin Hellwig, can only "survive in the market by speculating."
What distinguishes the current situation from the wild years before the financial crisis is that speculators were once driven by greed but have since turned into speculators motivated by need.
Private banker Klaus has seen enough on his market app. He closes the phone with a worried look on his face, and then he utters a sentence in the typically convoluted idiom of the financial industry: "If Europe slips into a recession, it could lead to substantial turbulence in the financial markets."


The man who introduced
the concept of "inclusion" into the political debate is sitting in his office in Boston. There are mountains of papers on the round conference table: academic papers, pages of statistics from the International Monetary Fund, and the latest issue of the Anarcho-Syndicalist Review.
 
Daron Acemoglu is currently considered one of the 10 most influential economists in the world, but the native of Istanbul doesn't think much of titles and formalities. He prefers the relaxed look of the web community: a plaid shirt and jeans, and a Starbucks cup in his hand.

He became famous two years ago when he and colleague James Robinson published a deeply researched study on the rise of Western industrial societies. Their central thesis was that the key to their success was not climate or religion, but the development of social institutions that included as many citizens as possible: a market economy that encourages progress and entrepreneurship, and a parliamentary democracy that serves to balance interests.

The only problem is that such institutions do not arise automatically. They have to be promoted and defended, especially against those social classes and interest groups that use power to seal themselves off from competitors, secure their own benefits and seek to influence lawmakers accordingly.

Extremely well read, Acemoglu can cite dozens of such cases. One is 14th century Venice, where a small patrician caste monopolized maritime trade. Another is Egypt under former President Hosni Mubarak, whose officer friends divided up key economic posts among themselves but were complete failures as businessmen. These are what Acemoglu calls "extractive processes," which lead to economic and social decline.

A Process of Extraction?
 
The question today is: Are Western industrial societies currently undergoing a similar process of extraction?
Acemoglu leans back in his chair. He isn't one to make snap judgments, and he understands the contradictions of social trends, in the United States, for example. On the one hand, the US is more inclusive today than in the 1960s, because it has abolished racial segregation. On the other hand, says Acemoglu, he has noticed the growing influence of powerful interest groups: the pharmaceutical industry, insurance companies and, most of all, Wall Street. "The problem of money in politics," says Acemoglu, "is particularly acute in the case of the financial industry."

US politicians spend up to 70 percent of their time raising money for their campaigns, and Wall Street is one of their most important sources. Experts have calculated that Bill and Hillary Clinton alone have garnered at least $300 million in donations from the financial industry since the early 1990s.

In addition, money is no longer the only factor shaping the connections between Wall Street and Washington, as Acemoglu demonstrated in a recent study about former US Treasury Secretary Timothy Geithner. The stock prices of financial firms, with which he maintained close relationships, climbed significantly after his nomination. "The fact that some companies had the ear of the Secretary of the Treasury," Acemoglu concludes, "was, at least by the market view, very valuable."
It has nothing to do with bribery, Acemoglu clarifies. Still, the process highlights the dangerous closeness between the financial industry and the political world, a phenomenon which can be seen elsewhere in the world as well. In Germany, for example, Chancellor Angela Merkel took steps to prevent a Greek insolvency at least partly out of consideration for German banks invested there. The London financial industry, to cite another example, was instrumental in blocking EU plans for the introduction of a financial transaction tax. In Switzerland, billionaire Blocher finances referendum campaigns via his political party. "The rich are extremely powerful," Acemoglu says, "and that is a concern."

Not Enough
 
Limiting that influence is of the utmost importance, Acemoglu believes, so that today's upper-class, high-finance capitalism can once again revert to being a capitalism of the real economy and the societal center. The necessary economic reforms are not Acemoglu's primary focus, even if the relevant proposals have existed for a long time: a fiscal policy that doesn't just benefit the rich; a monetary policy that knows its limits; a reform of the financial and banking industry that separates the traditional savings and lending business from risky investment banking.

That won't be enough, Acemoglu believes. What is needed, he argues, is a new political alliance that takes a stand against the power of the financial industry and its lobby. He sees the anti-trust movement from the beginning of the last century in the United States as a model. It was a broad coalition from the center of society and finally achieved its great victory after decades of struggle: the breakup of major corporations like Standard Oil.

Will something comparable happen with the big international banks? Acemoglu doesn't know, but he is convinced of one thing: Elitist conferences, at which bankers and fiscal policy experts hold sophisticated conversations about "inclusion," will not bring about change.

The organizers of the World Economic Forum once again sent him an invitation to Davos recently. But Acemoglu declined, as he has done several times in the past. "Solutions to the world's problems are not produced in a meeting between Bill Gates and George Soros," he says. "Renewal has to come from below."

Translated from the German by Christopher Sultan

Power shifts to outsiders in U.S. Senate fight

Candidates routinely outspent by super PACs, political nonprofits in pivotal contests

By

The days of candidates dominating their own political campaigns are over.
In the most competitive U.S. Senate races this year, big-money special interests that proliferated after the U.S. Supreme Court’s Citizens United v. Federal Election Commission decision are routinely out-muscling and out-messaging the candidates themselves.

This power shift is most prominent on television, where super PACs and politically active nonprofits — both may accept unlimited contributions — routinely account for nearly one out of every two ads run in a U.S. Senate race. Most of the ads are decidedly negative, and they’ve collectively cost hundreds of millions of dollars with Election Day still 10 days away.

Wealthy liberals and conservatives alike are complicit, pumping money into these groups that, by law, may not operate “in concert or cooperation with” the candidates or parties they seek to boost.

This stands in stark contrast to the 2010 midterm election, when the GOP embraced super PACs while Democrats shunned them. Now, big-dollar liberal groups sometimes trump their conservative counterparts as both seek to support candidates who will help their preferred party win control of the U.S. Senate during the final two years of Barack Obama’s presidency.

The Democratic Party is defending more than a half-dozen seats on Republican-friendly turf. The GOP will seize power if it picks up six seats. These stakes have created a financial arms race that will almost certainly make this election historically expensive.

“Everybody wants to have one more nuke than the other guy does,” says Kathy Kiely, managing editor of the nonpartisan Sunlight Foundation, which tracks money in politics.

Democratic super PACs on top
When it comes to money, two Democratic super PACs reigned supreme through mid-October, according to a Center for Public Integrity review of filings submitted to the Federal Election Commission Thursday.

NextGen Climate Action — a super PAC primarily funded by billionaire environmentalist Tom Steyer that aims to “prevent climate disaster and preserve American prosperity” — has raised more than $76 million since it was launched in 2013. No other super PAC has raised more.

Earning the No. 2 spot was Democratic-aligned Senate Majority PAC, a group run by allies of Senate Majority Leader Harry Reid, D-Nev. It had raised more than $53 million as of Oct. 15, including $5.5 million from Steyer and his NextGen Climate Action super PAC.

The top three Republican super PACs, meanwhile, raised nearly $68 million combined through mid-October, according to recent FEC reports.

That includes $28 million raised by American Crossroads, a super PAC launched after the Citizens United ruling in 2010 with assistance from GOP strategist Karl Rove.

The Freedom Partners Action Fund, the super PAC backed by conservative billionaire industrialists Charles and David Koch and their donor network, raised more than $20 million.

And nearly $19 million was raised by the Ending Spending Action Fund, a group founded by longtime Republican donor Joe Ricketts, the former head of online brokerage firm TD Ameritrade whose family owns the Chicago Cubs baseball team.

Nonprofits — which aren’t required to disclose the same financial details to the FEC and may generally keep their funders’ names secret — have also played a major role during the 2014 battle for the Senate, especially on the conservative side.

Most notably, groups within the Koch brothers’ political network reportedly plan to spend as much as $290 million.

On the television airwaves, though, where voters still consume most of their political information, arms race metaphors are particularly apropos: In the 12 most-competitive U.S. Senate races, liberals and conservatives have nearly fought to a draw.

Republicans and their allies were responsible for 50 percent of the roughly 633,000 Senate-focused TV ads that have so far aired in Alaska, Arkansas, Colorado, Georgia, Iowa, Kansas, Kentucky, Louisiana, Michigan, North Carolina, New Hampshire and South Dakota, according to a Center for Public Integrity review of data provided by Kantar Media/CMAG, an advertising tracking service.

Democrats and their allies were responsible for 48 percent. And independents — namely Greg Orman in Kansas and Larry Pressler in South Dakota — were responsible for the rest.

GOP candidates generally relied more heavily on support from super PACs and nonprofits than Democrats did.

In these 12 U.S. Senate races, about 52 percent of all Republican-aligned TV ads were sponsored by outside groups, according to Kantar Media/CMAG. Only about 37 percent of all Democratic-aligned ads were produced by such groups.

Other ads were aired by candidates, parties or parties working jointly with candidates.

The official arm of the Democratic Party focused on Senate elections — the Democratic Senatorial Campaign Committee — raised nearly $129 million through the end of September, according to federal campaign finance filings.
That was some $30 million more than the $98 million raised by its rival, the National Republican Senatorial Committee.

Even as many candidates also raised millions of dollars, if not tens of millions — as many incumbent senators have done — they have, nevertheless, regularly been out-spent by super PACs and politically active nonprofits that are unfettered by contribution limits.

A definitive tally of precisely how much has been raised and spent in the key U.S. Senate races this election is difficult because not all groups report numbers the same way or at the same time. Further complicating the issue, as of Friday morning, some Senate candidates’ recent contribution reports were still being processed by the government.

Nevertheless, some races stand out.

Take North Carolina, for instance, where incumbent Democratic Sen. Kay Hagan and Republican challenger Thom Tillis have raised a combined $30 million through the end of September.

Non-party, outside groups there have already reported spending about $50 million on political ads to the FEC — and millions more have been spent on issue ads that need not be reported to the nation’s top elections regulator.
Similarly in Colorado, incumbent Sen. Mark Udall, a Democrat, and Republican challenger Cory Gardner, have raised $29 million through mid-October. Super PACs and nonprofits have so far spent more than $40 million.

The new normal
Political observers agree that the outsized role of outside groups like super PACs and politically active nonprofits has become the new normal for hotly contested elections.

“Barring any changes to the current regulations, it’s likely that outside group involvement in competitive contests is here to stay,” says political science professor Erika Franklin Fowler, director of the Wesleyan Media Project, which monitors political advertising.

No U.S. Senate election has seen more ads from groups that are neither candidate committees nor parties than North Carolina.

Of the 90,000-plus Senate-focused TV ads that have aired in the Tar Heel State, these so-called outside groups have aired more than 51,000 TV ads, according to a Center for Public Integrity review of data provided by Kantar Media/CMAG. That’s nearly three of every five.

Meanwhile, super PACs and politically active nonprofits account for more than half of all ads aired in the U.S. Senate races in both Michigan and Arkansas.
That ratio is more than 40 percent in the U.S. Senate races in Colorado, Alaska and Kentucky.

And in New Hampshire, where Democratic incumbent Sen. Jeanne Shaheen is facing a stiff challenge from former GOP Sen. Scott Brown — and a multimillion-dollar assault from conservative groups supported by the billionaire Koch brothers and Republican strategist Rove — outside groups account for more than one of every three ads, according to Kantar Media/CMAG.

In all these races, super PACs and nonprofits are also combining to spend tens of millions of dollars on other kinds of communications, from radio spots and glossy mailers to Facebook ads and sponsored tweets.

David Keating, the president of the Center for Competitive Politics, which favors increased deregulation in elections, sees this as a positive development.
“Whenever there’s more speech that means there’s more information for voters,” says Keating, adding that such information helps “drive” voters to the polls.
Challengers, in particular, he continued, are generally helped “when there’s more money spent informing people about the incumbent’s record.”

But Michael Malbin, co-founder and executive director of the Campaign Finance Institute, a think tank based in Washington, D.C., doesn’t agree the proliferation of new groups has been a welcome change.

“Non-party groups are unaccountable,” Malbin says. “It’s better to have a system in which the voters can hold the candidates and their parties accountable for what they do.”

Dave Levinthal contributed to this report.

Sunday

President Barack Obama Weekly Address October 25, 2014 (Video/Trascript )

President Barack Obama
Weekly Address
The White House
October 25, 2014
Hi everybody, this week, we remained focused on our fight against Ebola.  In Dallas, dozens of family, friends and others who had been in close contact with the first patient, Mr. Duncan, were declared free of Ebola—a reminder that this disease is actually very hard to catch.  Across Dallas, others being monitored—including health care workers who were most at risk—were also declared Ebola-free.

Two Americans—patients in Georgia and Nebraska who contracted the disease in West Africa—recovered and were released from the hospital.  The first of the two Dallas nurses who were diagnosed—Nina Pham—was declared Ebola free, and yesterday I was proud to welcome her to the Oval Office and give her a big hug.  The other nurse—Amber Vinson—continues to improve as well.  And in Africa, the countries of Senegal and Nigeria were declared free of Ebola—a reminder that this disease can be contained and defeated.

In New York City, medical personnel moved quickly to isolate and care for the patient there—a doctor who recently returned from West Africa.  The city and state of New York have strong public health systems, and they’ve been preparing for this possibility.  Because of the steps we’ve taken in recent weeks, our CDC experts were already at the hospital, helping staff prepare for this kind of situation.  Before the patient was even diagnosed, we deployed one of our new CDC rapid response teams. And I’ve assured Governor Cuomo and Mayor de Blasio that they’ll have all the federal support they need as they go forward. 
More broadly, this week we continued to step up our efforts across the country.  New CDC guidelines and outreach is helping hospitals improve training and protect their health care workers.  The Defense Department’s new team of doctors, nurses and trainers will respond quickly if called upon to help. 

New travel measures are now directing all travelers from the three affected countries in West Africa into five U.S. airports where we’re conducting additional screening.  Starting this week, these travelers will be required to report their temperatures and any symptoms on a daily basis—for 21 days until we’re confident they don’t have Ebola.  Here at the White House, my new Ebola response coordinator is working to ensure a seamless response across the federal government.  And we have been examining the protocols for protecting our brave health care workers, and, guided by the science, we’ll continue to work with state and local officials to take the necessary steps to ensure the safety and health of the American people.

In closing, I want to leave you with some basic facts.  First, you cannot get Ebola easily.  You can’t get it through casual contact with someone.  Remember, down in Dallas, even Mr. Duncan’s family—who lived with him and helped care for him—even they did not get Ebola.  The only way you can get this disease is by coming into direct contact with the bodily fluids of someone with symptoms.  That’s the science.  Those are the facts.

Sadly, Mr. Duncan did not survive, and we continue to keep his family in our prayers.  At the same time, it’s important to remember that of the seven Americans treated so far for Ebola—the five who contracted it in West Africa, plus the two nurses from Dallas—all seven have survived.  Let me say that again—seven Americans treated; all seven survived.  I’ve had two of them in the Oval Office.  And now we’re focused on making sure the patient in New York receives the best care as well. 

Here’s the bottom line.  Patients can beat this disease.  And we can beat this disease.  But we have to stay vigilant.  We have to work together at every level—federal, state and local.  And we have to keep leading the global response, because the best way to stop this disease, the best way to keep Americans safe, is to stop it at its source—in West Africa.

And we have to be guided by the science—we have to be guided by the facts, not fear.  Yesterday, New Yorkers showed us the way. They did what they do every day—jumping on buses, riding the subway, crowding into elevators, heading into work, gathering in parks.  That spirit—that determination to carry on—is part of what makes New York one of the great cities in the world.  And that’s the spirit all of us can draw upon, as Americans, as we meet this challenge together.

Monday

China will not dominate the world



Original posted by Aarhus University
China is an a roll. But what will happen when some day economic growth slows down?
Professor Francis Fukuyama discusses the influence and aspirations of China.

Glenn Greenwald: Why privacy matters (Video/Transcript)

 
There is an entire genre of YouTube videos devoted to an experience which I am certain that everyone in this room has had. It entails an individual who, thinking they're alone, engages in some expressive behavior — wild singing, gyrating dancing, some mild sexual activity — only to discover that, in fact, they are not alone, that there is a person watching and lurking, the discovery of which causes them to immediately cease what they were doing in horror. The sense of shame and humiliation in their face is palpable. It's the sense of, "This is something I'm willing to do only if no one else is watching."
 
This is the crux of the work on which I have been singularly focused for the last 16 months, the question of why privacy matters, a question that has arisen in the context of a global debate, enabled by the revelations of Edward Snowden that the United States and its partners, unbeknownst to the entire world, has converted the Internet, once heralded as an unprecedented tool of liberation and democratization, into an unprecedented zone of mass, indiscriminate surveillance.
 
There is a very common sentiment that arises in this debate, even among people who are uncomfortable with mass surveillance, which says that there is no real harm that comes from this large-scale invasion because only people who are engaged in bad acts have a reason to want to hide and to care about their privacy. This worldview is implicitly grounded in the proposition that there are two kinds of people in the world, good people and bad people. Bad people are those who plot terrorist attacks or who engage in violent criminality and therefore have reasons to want to hide what they're doing, have reasons to care about their privacy. But by contrast, good people are people who go to work, come home, raise their children, watch television. They use the Internet not to plot bombing attacks but to read the news or exchange recipes or to plan their kids' Little League games, and those people are doing nothing wrong and therefore have nothing to hide and no reason to fear the government monitoring them.
 
The people who are actually saying that are engaged in a very extreme act of self-deprecation. What they're really saying is, "I have agreed to make myself such a harmless and unthreatening and uninteresting person that I actually don't fear having the government know what it is that I'm doing." This mindset has found what I think is its purest expression in a 2009 interview with the longtime CEO of Google, Eric Schmidt, who, when asked about all the different ways his company is causing invasions of privacy for hundreds of millions of people around the world, said this: He said, "If you're doing something that you don't want other people to know, maybe you shouldn't be doing it in the first place."
 
Now, there's all kinds of things to say about that mentality, the first of which is that the people who say that, who say that privacy isn't really important, they don't actually believe it, and the way you know that they don't actually believe it is that while they say with their words that privacy doesn't matter, with their actions, they take all kinds of steps to safeguard their privacy. They put passwords on their email and their social media accounts, they put locks on their bedroom and bathroom doors, all steps designed to prevent other people from entering what they consider their private realm and knowing what it is that they don't want other people to know. The very same Eric Schmidt, the CEO of Google, ordered his employees at Google to cease speaking with the online Internet magazine CNET after CNET published an article full of personal, private information about Eric Schmidt, which it obtained exclusively through Google searches and using other Google products. (Laughter) This same division can be seen with the CEO of Facebook, Mark Zuckerberg, who in an infamous interview in 2010 pronounced that privacy is no longer a "social norm." Last year, Mark Zuckerberg and his new wife purchased not only their own house but also all four adjacent houses in Palo Alto for a total of 30 million dollars in order to ensure that they enjoyed a zone of privacy that prevented other people from monitoring what they do in their personal lives.
 
Over the last 16 months, as I've debated this issue around the world, every single time somebody has said to me, "I don't really worry about invasions of privacy because I don't have anything to hide." I always say the same thing to them. I get out a pen, I write down my email address. I say, "Here's my email address. What I want you to do when you get home is email me the passwords to all of your email accounts, not just the nice, respectable work one in your name, but all of them, because I want to be able to just troll through what it is you're doing online, read what I want to read and publish whatever I find interesting. After all, if you're not a bad person, if you're doing nothing wrong, you should have nothing to hide."
 
 Not a single person has taken me up on that offer. I check and — (Applause) I check that email account religiously all the time. It's a very desolate place. And there's a reason for that, which is that we as human beings, even those of us who in words disclaim the importance of our own privacy, instinctively understand the profound importance of it. It is true that as human beings, we're social animals, which means we have a need for other people to know what we're doing and saying and thinking, which is why we voluntarily publish information about ourselves online. But equally essential to what it means to be a free and fulfilled human being is to have a place that we can go and be free of the judgmental eyes of other people. There's a reason why we seek that out, and our reason is that all of us — not just terrorists and criminals, all of us — have things to hide. There are all sorts of things that we do and think that we're willing to tell our physician or our lawyer or our psychologist or our spouse or our best friend that we would be mortified for the rest of the world to learn. We make judgments every single day about the kinds of things that we say and think and do that we're willing to have other people know, and the kinds of things that we say and think and do that we don't want anyone else to know about. People can very easily in words claim that they don't value their privacy, but their actions negate the authenticity of that belief.
 
 Now, there's a reason why privacy is so craved universally and instinctively. It isn't just a reflexive movement like breathing air or drinking water. The reason is that when we're in a state where we can be monitored, where we can be watched, our behavior changes dramatically. The range of behavioral options that we consider when we think we're being watched severely reduce. This is just a fact of human nature that has been recognized in social science and in literature and in religion and in virtually every field of discipline. There are dozens of psychological studies that prove that when somebody knows that they might be watched, the behavior they engage in is vastly more conformist and compliant. Human shame is a very powerful motivator, as is the desire to avoid it, and that's the reason why people, when they're in a state of being watched, make decisions not that are the byproduct of their own agency but that are about the expectations that others have of them or the mandates of societal orthodoxy.
 
This realization was exploited most powerfully for pragmatic ends by the 18th- century philosopher Jeremy Bentham, who set out to resolve an important problem ushered in by the industrial age, where, for the first time, institutions had become so large and centralized that they were no longer able to monitor and therefore control each one of their individual members, and the solution that he devised was an architectural design originally intended to be implemented in prisons that he called the panopticon, the primary attribute of which was the construction of an enormous tower in the center of the institution where whoever controlled the institution could at any moment watch any of the inmates, although they couldn't watch all of them at all times. And crucial to this design was that the inmates could not actually see into the panopticon, into the tower, and so they never knew if they were being watched or even when. And what made him so excited about this discovery was that that would mean that the prisoners would have to assume that they were being watched at any given moment, which would be the ultimate enforcer for obedience and compliance.

  The 20th-century French philosopher Michel Foucault realized that that model could be used not just for prisons but for every institution that seeks to control human behavior: schools, hospitals, factories, workplaces. And what he said was that this mindset, this framework discovered by Bentham, was the key means of societal control for modern, Western societies, which no longer need the overt weapons of tyranny — punishing or imprisoning or killing dissidents, or legally compelling loyalty to a particular party — because mass surveillance creates a prison in the mind that is a much more subtle though much more effective means of fostering compliance with social norms or with social orthodoxy, much more effective than brute force could ever be.
 
 The most iconic work of literature about surveillance and privacy is the George Orwell novel "1984," which we all learn in school, and therefore it's almost become a cliche. In fact, whenever you bring it up in a debate about surveillance, people instantaneously dismiss it as inapplicable, and what they say is, "Oh, well in '1984,' there were monitors in people's homes, they were being watched at every given moment, and that has nothing to do with the surveillance state that we face." That is an actual fundamental misapprehension of the warnings that Orwell issued in "1984." The warning that he was issuing was about a surveillance state not that monitored everybody at all times, but where people were aware that they could be monitored at any given moment. Here is how Orwell's narrator, Winston Smith, described the surveillance system that they faced: "There was, of course, no way of knowing whether you were being watched at any given moment." He went on to say, "At any rate, they could plug in your wire whenever they wanted to. You had to live, did live, from habit that became instinct, in the assumption that every sound you made was overheard and except in darkness every movement scrutinized."
 
The Abrahamic religions similarly posit that there's an invisible, all-knowing authority who, because of its omniscience, always watches whatever you're doing, which means you never have a private moment, the ultimate enforcer for obedience to its dictates.
 
 What all of these seemingly disparate works recognize, the conclusion that they all reach, is that a society in which people can be monitored at all times is a society that breeds conformity and obedience and submission, which is why every tyrant, the most overt to the most subtle, craves that system. Conversely, even more importantly, it is a realm of privacy, the ability to go somewhere where we can think and reason and interact and speak without the judgmental eyes of others being cast upon us, in which creativity and exploration and dissent exclusively reside, and that is the reason why, when we allow a society to exist in which we're subject to constant monitoring, we allow the essence of human freedom to be severely crippled.
 
The last point I want to observe about this mindset, the idea that only people who are doing something wrong have things to hide and therefore reasons to care about privacy, is that it entrenches two very destructive messages, two destructive lessons, the first of which is that the only people who care about privacy, the only people who will seek out privacy, are by definition bad people. This is a conclusion that we should have all kinds of reasons for avoiding, the most important of which is that when you say, "somebody who is doing bad things," you probably mean things like plotting a terrorist attack or engaging in violent criminality, a much narrower conception of what people who wield power mean when they say, "doing bad things." For them, "doing bad things" typically means doing something that poses meaningful challenges to the exercise of our own power.
 
 The other really destructive and, I think, even more insidious lesson that comes from accepting this mindset is there's an implicit bargain that people who accept this mindset have accepted, and that bargain is this: If you're willing to render yourself sufficiently harmless, sufficiently unthreatening to those who wield political power, then and only then can you be free of the dangers of surveillance. It's only those who are dissidents, who challenge power, who have something to worry about. There are all kinds of reasons why we should want to avoid that lesson as well. You may be a person who, right now, doesn't want to engage in that behavior, but at some point in the future you might. Even if you're somebody who decides that you never want to, the fact that there are other people who are willing to and able to resist and be adversarial to those in power — dissidents and journalists and activists and a whole range of others — is something that brings us all collective good that we should want to preserve. Equally critical is that the measure of how free a society is is not how it treats its good, obedient, compliant citizens, but how it treats its dissidents and those who resist orthodoxy. But the most important reason is that a system of mass surveillance suppresses our own freedom in all sorts of ways. It renders off-limits all kinds of behavioral choices without our even knowing that it's happened. The renowned socialist activist Rosa Luxemburg once said, "He who does not move does not notice his chains." We can try and render the chains of mass surveillance invisible or undetectable, but the constraints that it imposes on us do not become any less potent.
 
Thank you very much.
 
 (Applause)
 
 Thank you.
 
 (Applause)
 
 Thank you.
 
 (Applause)
 
 Bruno Giussani: Glenn, thank you. The case is rather convincing, I have to say, but I want to bring you back to the last 16 months and to Edward Snowden for a few questions, if you don't mind. The first one is personal to you. We have all read about the arrest of your partner, David Miranda in London, and other difficulties, but I assume that in terms of personal engagement and risk, that the pressure on you is not that easy to take on the biggest sovereign organizations in the world. Tell us a little bit about that.
 
Glenn Greenwald: You know, I think one of the things that happens is that people's courage in this regard gets contagious, and so although I and the other journalists with whom I was working were certainly aware of the risk — the United States continues to be the most powerful country in the world and doesn't appreciate it when you disclose thousands of their secrets on the Internet at will — seeing somebody who is a 29-year-old ordinary person who grew up in a very ordinary environment exercise the degree of principled courage that Edward Snowden risked, knowing that he was going to go to prison for the rest of his life or that his life would unravel, inspired me and inspired other journalists and inspired, I think, people around the world, including future whistleblowers, to realize that they can engage in that kind of behavior as well.
 
 BG: I'm curious about your relationship with Ed Snowden, because you have spoken with him a lot, and you certainly continue doing so, but in your book, you never call him Edward, nor Ed, you say "Snowden." How come?
 
 GG: You know, I'm sure that's something for a team of psychologists to examine. (Laughter) I don't really know. The reason I think that, one of the important objectives that he actually had, one of his, I think, most important tactics, was that he knew that one of the ways to distract attention from the substance of the revelations would be to try and personalize the focus on him, and for that reason, he stayed out of the media. He tried not to ever have his personal life subject to examination, and so I think calling him Snowden is a way of just identifying him as this important historical actor rather than trying to personalize him in a way that might distract attention from the substance.
 
 Moderator: So his revelations, your analysis, the work of other journalists, have really developed the debate, and many governments, for example, have reacted, including in Brazil, with projects and programs to reshape a little bit the design of the Internet, etc. There are a lot of things going on in that sense. But I'm wondering, for you personally, what is the endgame? At what point will you think, well, actually, we've succeeded in moving the dial?
 
 GG: Well, I mean, the endgame for me as a journalist is very simple, which is to make sure that every single document that's newsworthy and that ought to be disclosed ends up being disclosed, and that secrets that should never have been kept in the first place end up uncovered. To me, that's the essence of journalism and that's what I'm committed to doing. As somebody who finds mass surveillance odious for all the reasons I just talked about and a lot more, I mean, I look at this as work that will never end until governments around the world are no longer able to subject entire populations to monitoring and surveillance unless they convince some court or some entity that the person they've targeted has actually done something wrong. To me, that's the way that privacy can be rejuvenated.
 
 BG: So Snowden is very, as we've seen at TED, is very articulate in presenting and portraying himself as a defender of democratic values and democratic principles. But then, many people really find it difficult to believe that those are his only motivations. They find it difficult to believe that there was no money involved, that he didn't sell some of those secrets, even to China and to Russia, which are clearly not the best friends of the United States right now. And I'm sure many people in the room are wondering the same question. Do you consider it possible there is that part of Snowden we've not seen yet?
 
 GG: No, I consider that absurd and idiotic. (Laughter) If you wanted to, and I know you're just playing devil's advocate, but if you wanted to sell secrets to another country, which he could have done and become extremely rich doing so, the last thing you would do is take those secrets and give them to journalists and ask journalists to publish them, because it makes those secrets worthless. People who want to enrich themselves do it secretly by selling secrets to the government, but I think there's one important point worth making, which is, that accusation comes from people in the U.S. government, from people in the media who are loyalists to these various governments, and I think a lot of times when people make accusations like that about other people — "Oh, he can't really be doing this for principled reasons, he must have some corrupt, nefarious reason" — they're saying a lot more about themselves than they are the target of their accusations, because — (Applause) — those people, the ones who make that accusation, they themselves never act for any reason other than corrupt reasons, so they assume that everybody else is plagued by the same disease of soullessness as they are, and so that's the assumption. (Applause)
 
 BG: Glenn, thank you very much. GG: Thank you very much.
 
 BG: Glenn Greenwald. (Applause)