Ransomware - Reducing Returns to Physical Violence
As we enter 2022, I find myself posing the following question more and more:
When in your life, and historically, have you ever heard of anyone holding the Police for ransom? And getting away with it…
What about holding for ransom American critical infrastructure that is securely within the geographic boundaries of the homeland, from outside the homeland and not provoking war?
And that’s when it’s done on purpose. Even more destructive are State-backed cyberweapons that become victims of their own success and escape their original in-theatre deployments (NSA, GRU, PLA Special Units, etc.) - NotPetya holding global shipping company (Maersk)*, State oil companies (Rosneft), etc. for ransom and even destroying data regardless of if a ransom is paid or not.
*This is an interesting side note, and an argument for decentralized protocols as a matter of practice, not just accident - when global shipping conglomerate A.P. Moller-Maersk was hit by the spiraling NotPetya virus; only a single server that had lost power in Africa saved the entire corporate logs and global shipping from an unimaginable potential crisis. Someone should make a movie about recovering that server. (Read a great take in this full article here at wired.com.)
Ransomware gives even individual actors the ability to affect large portions of a population for a fraction of the cost of traditional methods of suppression, causing chaos, and/or destruction. This means in the not so distant future, a private protection agreement with Kaspersky Lab may be able to virtually protect citizens better and in more ways than today’s publicly funded geographically local police forces with little or no IT skills.
Capital Flight May Slow, but Won’t Stop
Infantry and gunpowder mean less than the reliability of your electricity and the speed of your fiber optic connection. FTX Arena in Miami and Crypto.com Arena in Los Angeles are both in the United States (21% corporate tax rate), yet FTX is a Bahamas (0% corporate tax rate) based company and Crypto.com is based in Singapore (0% - 17% corporate tax rate).
As this balance of power shifts, the benefits provided by traditional industrial nations for the wealthiest citizens, of property rights and military protection in exchange for high tax rates, will be virtually eliminated.
With the mass adoption of cryptocurrency and the existence of numerous sovereign zero tax jurisdictions, the world’s wealthiest citizens have already begun fleeing high tax jurisdictions with their capital. (See here and here.)
Various factors may slow this outflow of capital from high tax developed economies, although they are unlikely to eliminate it.
The most obvious attempt to stem the tide was the June 2021 decision of the G-7 group of industrialized nations agreeing on a 15% global minimum corporate tax rate. The idea of this agreement is to prevent companies from avoiding taxes at home by parking corporate profits overseas. This of course only works if ALL nations agree, we have yet to see the Bahamas, Cayman Islands, etc. sign on to a global minimum over 0%.
Another step to stem this tide has been to outright ban cryptocurrency as China and 8 other countries have done.
The final major factor that could slow the speed of capital flight is the Coronavirus and other future warfare/nature introduced pandemics. COVID-19 has greatly reduced the appeal of travel generally and has had the added effect of giving many jurisdictions globally an excuse to more tightly seal their borders and restrict immigration.
Inequality and Discontent Increases, Drugs & Games
If this is all a bit disconcerting, the best advice for the coming years is to learn and practice a tolerance for adversity. Expect these trends to disorient the vast majority of citizens and further destabilize known norms in historically rich, stable nations. Rewards for production in today’s cyber economy will be increasingly unequal.
Discontent with this emerging reality is only amplified by social network technologies that also enable mass organization on unprecedented levels. Occasionally we celebrate the network power of these technologies in specific examples like the Arab Spring (which resulted in what is largely considered a net negative for countries like Egypt), or discount their power in enticing 7 million+ Middle Eastern migrants to uproot their lives and walk themselves into the Schengen, or even for a sizable mob of American Citizens to ransack their own capital*.
*Proving again and again it is easy to destroy in a moment of passion but actually quite difficult to create and build a viable long-functioning social agreement. Rioters have much to say about grievance but little to offer as guidance about Artificial Intelligence, Nuclear Weapons, Automation, Planetary Defense, or next-generation energy production technologies.
For the advantages cyber-technology has given to some, it is likely that there is a bleak future facing the rest of the world and especially the poorest populations. As automation takes over the vast majority of hourly manual job opportunities there will be a growing unemployed or underemployed class of workers. Some of the more productive in this group may continue to perform gig based labor and pay taxes the wealthy avoid while others may find no meaningful labor or will be refugees of climate and will turn to recreational (such as the widespread legalization of Marijuana in the United States) or hard drug use* and virtual worlds/games**.
*For the 12-month period ending April 2021 America reached its highest annual opioid overdose deaths (a.k.a. “deaths of despair”) ever, a staggering 100,306 overdose deaths. Like individuals, Nations of limited means are also turning to drugs to become known Narco-States as an answer to flagging revenues (Syria, Honduras, Venezuela, Mexico, Netherlands, etc.).
**Online streaming, games, NFTs, and the Metaverse