Category Archives: Economic

Arts, Business, Consumer Affairs, Economic, Government, Society, Technology

Internet privacy and the need for firms to profit…

BIG DATA

The next phase of the internet revolution will concern Big Data. Coupled with that will be a ‘Big Debate’ about privacy.

Big Data, a Californian gold rush for the internet age, is all about the potential of the vast quantities of data generated online. It is only now that the brainboxes of Silicon Valley are beginning to harvest, store, transfer and analyse in ways that could prove extremely valuable to companies and governments among others.

Silicon Valley is well known for its liberal sprinkling of fledging firms whose business models are built around Big Data. AdParlour, for instance, set up in 2008 by young entrepreneur Hussain Fazal, is designed to build an advertising network for Facebook.

Whereas traditional advertising is transmitted to those who are not remotely interested as well as to prime potential customers, the new generation and streams of ads can be targeted at people based on personal data gleaned from their online activities.

As Fazal says: ‘Almost everywhere you go on the web, you are being tracked.’

The difficulty for companies such as Facebook, which styles itself as a trendy firm in tune with users, is that increasing numbers of people are uncomfortable with having their every online move observed and used for commercial gain.

Last week, the Wall Street Journal ran a prominent article headlined ‘Give Me Back My Online Privacy’, which highlighted findings by the Pew Research Centre suggesting more than half of Americans are concerned about the amount of personal data online. Potentially there is big money in all that minutiae about our lifestyles and shopping habits.

The anecdotal evidence is important to note. The annual value to Facebook of an American woman who is a light user of the site is just over $12. This doesn’t sound a lot until you multiply this by the millions of users and factor in those online advertising techniques – many of which are still in their infancy – and are likely to become more sophisticated and effective over time.

The public mood among Americans about being watched online is more sensitive than it is in the UK following the revelations about the National Security Agency. Many Britons, though, do feel a sense of unease at the snooping of their personal data, and how the information may be exploited.

From the corporate point of view, probing into customer lifestyles and behaviours is not a novelty. Firms have always, and quite legitimately, wanted to know as much as they can about consumers, so they can target their products and prices to best advantage.

Loyalty cards have been tracking people’s purchases and giving stores information on shopping habits for years. Credit scoring for loans and plastic cards, which monitors behaviour in terms of how, when and whether people repay their debts, has also been a feature of the commercial landscape for some time.

At the moment, the use of Big Data to target ads is relatively crude, which is why those spawned by your previous purchases often miss the mark.

At this point in time, however, it is only scratching the surface. Once the so-called ‘internet of things’, where everyday objects are connected to the internet, takes hold, even your fridge will be tracking your habits, making known all about your clandestine food intake. Privacy is not an absolute, but a concept that changes according to time and place.

The internet is redefining some existing social norms: the generation that grew up with the internet and those that come after may be comfortable sharing information their parents and grandparents would have considered wholly personal.

At the moment, it would seem that many users either do not know or do not care that they might be giving away valuable information about themselves online. The online economy has unarguably brought significant consumer benefits.

Shoppers can easily compare prices and obtain the best deals, and can buy goods from anywhere in the world. Users value their experiences on Facebook and Twitter and may feel the surrender of some personal data is a price worth paying.

Set against that is the reality that the details of our day to day lives, hobbies, friendships, work and interests, is being mined by companies as if it were just another commodity.

Yet, it is an exchange in which the terms of the deal are not clear – we have no way of knowing how valuable our personal information might be to companies, and whether the benefits we receive in return are a fair deal.

The debate about privacy and commercial profit will become more pressing as the online world becomes smarter.

Standard
Economic, Europe, Government, History, NATO, Politics, Russia, Society, United States

America has a role in supporting Europe. It isn’t about to turn its back…

AMERICA & EUROPE IN COUNTERING THE THREAT FROM RUSSIA

A European crisis has, once again, brought the ambitions of a second-term American president into the sharp light of day. Mr Obama could never have wished that he would land in Europe with the sole task of rallying some of his country’s oldest allies against the expansionist threats posed by Vladimir Putin of Russia. And yet, this is precisely the situation Barack Obama finds himself in.

Mr Obama arrived in The Hague and described Europe’s idiosyncratic collection of comatose economies as the ‘cornerstone of America’s engagement with the world’. His presence was enough to underline the realities of a new and emerging Cold War message: one to which America remains the ultimate guarantor of European security.

Whatever the intrinsic American wishes are, America cannot abdicate from that role. While history may reflect back the words of Franklin Roosevelt who pledged that America would never send US troops to fight in Europe, or even during Mr Obama’s own reign in office when he pronounced America’s ‘pivot’ and orientation towards Asia, Putin’s provocative stance and actions in Crimea has made such a profound difference to how the US reflects upon Europe. The United States accepts that the threats posed by Russia are serious and interconnected, and is turning away from the Pacific to behave in a way that every president from Truman to Reagan would have recognised.

Predicting what Putin will do next to enhance and strengthen his Russian Federation is difficult to determine. As a former KGB officer, he knows the high value placed on keeping his intentions as mysterious and covert as possible.

Psychology is also at play. The flint-eyed incumbent of the Kremlin strongly believes that Mr Obama is a president motivated far more by what is happening in the Pacific. To Mr Putin’s eye Barack Obama is a leader that is fundamentally uninterested in Europe and viscerally reluctant to use force of any kind. The Russian leader observed how Mr Obama steered clear of intervening in Libya by allowing Britain and France to claim the credit for toppling the Gaddafi regime. America’s role in that campaign was leadership from the back, rather than the front dynamism many would otherwise have expected.

And no-doubt the Kremlin hardliner would have taken special note when Bashar al-Assad made a mockery over Mr Obama’s ‘red lines’ and gassed hundreds of innocent Syrian civilians without paying a military price.

Mr Putin may even have thought this was an American president who could be pushed around. The disarmament treaty with Moscow, signed in 2010, for example, imposed far greater cuts on the US arsenal than was made to the Russian inventory.

Russia has remained committed in driving a wedge between Europe and America. Along with its actions in Ukraine, Russia has demonstrated the compelling necessity of NATO and the Atlantic Alliance. Such miscalculations may even impel Europe to realise the mistakes of continuously running down its defences.

America and Europe seem certain to respond with skill and resolve. Such a partnership can only make the world a safer place.

Standard
Britain, Economic, European Union, Financial Markets, Government, Politics, Russia, Society, Ukraine, United States

What will happen next following the crisis in Ukraine?

ECONOMIC REALITIES

Intro: Economic havoc and a global slump could materialise from the crisis in the Crimea

So far, financial markets in the West have remained remarkably undisturbed in the face of the crisis unfolding in Ukraine. Following Crimea’s referendum at the weekend, which effectively sealed Vladimir Putin’s grip of the Ukrainian peninsula, sanctions were always likely to follow. Whilst, then, we may anticipate just how long the sanguine calm will continue, Western leaders should also be careful of supplanting diplomacy with threats to Russia that they are unwilling or unable to back up. The decision by the European Union and United States to impose sanctions on several Russian officials is a limited response to the breach of international law that has taken place in Crimea. The measures include travel bans and the freezing of assets against individuals who were deemed to have played a major role in the referendum – a vote, officials say, in which 97 per cent of voters backed a breakaway from Ukraine and, instead, opted to join the Russian Federation.

In the years since the dissolution of the Soviet Union, Russia has steadily become more integrated into the global economy. We know that many rich Russians have shifted their gains (ill-gotten or otherwise) into more stable and secure environments, such as investing on the London Stock Exchange or by diversifying their stocks in the UK property market. In actual fact, more money has flowed into Russia than out. According to data from the Bank for International Settlements, foreign owned banks have lent the country at least $260 billion. That is nearly double the value of its estimated assets in the West. As a consequence, Russia’s bilateral trade has risen to more than $100 billion annually. Almost a third of Europe’s gas, coal and oil imports come from Russia, and there has been a huge upsurge in direct investment by foreign firms.

Rhetoric used by the international community implied that there would be consequences if the referendum went ahead while the peninsula was still occupied by Russian troops. No doubt, Mr Putin will have considered the penalty a price worth paying. The question now, though, is what will happen next. Washington insists the screw will be tightened if the situation were to escalate in Ukraine – a distinct possibility that could happen fairly swiftly since the aim of the Crimean separatists is to secede from Ukraine within a month. They also aspire to adopt the rouble and by joining the Russian time-zone.

Whilst a military response to Russian aggression has already been ruled out by Western leaders, meaningful sanctions are not really much of an option, either. A full-blown trade-war would inflict serious damage on both sides. However, capital flows between Russia and the West are already in a parlous state in anticipation of lesser action, including assets freezes and travel restrictions already imposed. In order to defend the rouble, Russians are withdrawing billions from Western banks and selling off US Treasury Bonds. Mr Putin also raised interest rates to 7 per cent; a move that will discourage capital outflights from Russia to the West, a rate of interest that will be far more attractive for Russians to invest at home. The West seems certain to reciprocate by dumping Russian assets.

Yet, this all comes at a particularly delicate time for the world economy. Emerging markets, including China, have rapidly slowed down; the Eurozone is expecting a period of deflation to start anytime soon; and, America’s economy has started to inflict severe withdrawal symptoms to many countries around the world following its tapering of quantitative easing. The global economy may be just one sharp shock away from lurching into another recession.

A standoff with Russia over Crimea’s breakaway is the last thing the world needs. Economic considerations cannot surpass the higher purpose of defending international law, and as such must be secondary to it. Nonetheless, the interplay between politics and economics is what is making this situation so dangerous and destabilising. All concerned should be aware of just how very much more disruptive this crisis could yet become.

Standard