Bitcoin and the other “cryptocurrencies”, namely Ethereum and Litcoin- although there are 33 additional currencies arriving on the Internet – are a brand new phenomenon on the currency market.
Currently we are all in the so-called “fiat money” regime, namely any money declared by a government to be legal tender, which is a currency not backed by gold reserves – a currency which is always and anyway accepted by everyone.
Hence it is also fiat money, like the first “lire” of the Kingdom of Italy.
This means it is a State-issued currency that is not convertible by law to any equivalent value in gold or other hard currencies.
Fiat money is stable as it is controlled, almost on a daily basis, with the money demand from the economic system.
When there is an excess of money supply, we talk about inflation.
This is, indeed, the true meaning of the alltoowell-known concept of “inflation”, not the mere “price increase” which, at most, can be an indicator of excessive growth in money supply, not one of its causes.
Accepting the Dollar, the French or Swiss Franc, the Euro, the Ruble or any other currency (albeit, in fact, the situation would be somehow different for the Russian currency) is always mandatory by law.
Hence also seigniorage is mandatory, namely the act of legal magic with which each issuing bank decides that a small piece of paper is worth 100 nominal euro – although costing only 3 cents to the issuing bank for producing it.
The difference between the face value of money and the cost to produce it (plus fixed costs such as equipment, staff salaries and taxes) is, in fact, seigniorage.
The latter, however, should not be demonized, as done by some theorists who – by using a silly contemporary language dogma – are called “radicals”.
Reasonably, the possible alternative is the intrinsic value money, like the medieval coins – molten gold marked as shown on the coin front or back. Nevertheless the King often “reduced the value” of coins or melted gold and silver with non-monetary metals, such as copper (although the United States was to use it in the future) or even bronze.
Today we would say it was a form of “seigniorage” “with criminal relevance and implications”.
The primal scene – just to quote a concept by Sigmund Freud -stemmed from the 1971 “Smithsonian Agreement”.
It was the American agreement Nixon had wanted as from August 15, 1971, signed in the Smithsonian Museum of Washington. It was signed by what we would currently call the G7 and reestablished an international system of fixed exchange rates without the backing of gold. It certified the end of FED’s obligation to pay for gold up to the fixed rate of 35 US dollars per ounce.
It was the end of the gold-backed currency – the “fiat money” no longer pegged to intrinsic money – occurring after the Allies verifying that the American currency was severely overvalued.
The costs borne for the Vietnam War, the end of the Johnsonian cycle of Great Society and the crisis of US products on European markets, were all factors which led De Gaulle, at first, to ask – without further ado – the payment of the US debt in gold or in hard currencies. Later many other allies who were reluctant to put in place non-tariff barriers against US products followed suit.
To put it more brutally, Nixon shifted the burden of the US super-inflation onto his allies of the Bretton Woods Agreement, which Europeans were forced to pay since they had to buy highly overvalued dollars for their international trade.
As the US Treasury Secretary, John Connally, said at the time to his European colleagues: “The dollar is our currency but your problem”.
In other words, cryptocurrencies are the result of this long historical process.
The currency based on Nothing, the postmodern point of arrival point of the disembodied monetary instrument.
A currency that is believed to be good because everyone thinks so – a financial transposition of Andersen’s tale “The Emperor’s New Clothes”.
As you may remember, it is the tale about two weavers who promise an Emperor a new suit of clothes that they say is invisible to those who are unfit for their position, hopelessly stupid or incompetent – while in reality, they make no clothes at all, making everyone believe the clothes are invisible to them. When the Emperor parades before his subjects in his new “clothes”, no one, including his Ministers, dares to say they do not see any suit of clothes on him for fear that they will be seen as stupid. Finally, a child in the crowd, too young to understand the desirability of keeping up the pretense, blurts out that the Emperor “is not wearing anything at all” and the cry is taken up by others.
The same will happen to the contemporary monetary equilibrium, but it will certainly not be a child who will get bankers and the public at large to open their eyes.
Hence today banks create money, which is mandatory to consider valid, with a fiat -namely ex nihilo – from the Void of Value. Or from their debt or even from the State debt.
Just issue securities having another name.
Hence, what is currently money? It is what the Auctoritas decides to be so.
Or, to be precise, the money supply currently issued by the central banks or other banking institutions, which is not based on savers’ deposits or on debt repayment forecasts, but it is only the sign of a debt, the “promise of a settlement”which, however, is spent immediately.
And hence it is confirmed in its Value. The Value lies in theshift from a currency to another or from a currency to real goods or assets.
Obviously banks still earn interest on the money supply, regardless of its source.
Bitcoin, however, is not a currency like any other, guaranteed by internal law and interbank agreements.
The cryptocurrency is based on a mechanism like the one of online sales, namely the peer-to-peer one, which is gradually accepted by all those who now operate with Bitcoins.
Hence, while the final Bitcoin supply is defined – as always happens – our Internet currency is completely volatile.
Therefore it cannot certainly be a unit of account.
Hence Bitcoin varies- programmatically – as demand changes. In fact, last year its value increased by 47 times.
The reason is simple: it is a monetary supply that adapts to demand, but is also able to stop so as to create sufficiently long Bitcoin income and returns to attract average investors.
In January 2018,the cryptocurrency is worth approximately 900 dollars – a value that will probably increase when, in all likelihood, the Internet currency will be accepted by large commercial and distribution chains.
If it is a currency that influences markets by adapting to buyers’ requests (or artificially reducing supply in an instant), the only ones that can reap benefits are the Great States, the International Crime Organizations or the new networks of global Banks.
Never let them tell you that the small investor of Grand Rapids or Varese can determine the first “peer-to-peer” that, by repetition, triggers the chain off.
It is another fairy tale like the one of the movie Mary Poppins pointing to the magical growth of the penny deposited in a London bank, growing out of all proportion and turning into huge amounts of money.
The fairy tale is the expected automatic growth of funds denominated in Bitcoins, from 10 euro up to millions of millions, like the stars.
In fact, nothing is closer to the world of Andersen or the Brothers Grimm than some bad finance.
We can wonder whether the cryptocurrency is nothing more than a “Ponzi e-Scheme”.
You may recall the Ponzi Scheme or pyramid scheme, in which the high interest rates granted to capital providers -attracted precisely by the rates that are promised – are paid with new investors’ fresh capital.
In fact, what is striking is that the production of Bitcoins is sometimes artificially low because there are many people who want to buy them.
An issuing bank à la carte.
In fact, the many people who are waiting for buying Bitcoins hope that their value will increase, but only after they have managed to buy them.
A self-fulfilling prophecy.
A mechanism which is exactly the same as the Ponzi Scheme.
As the best US financial advisers say, do not follow the crowd.
Hence the Bitcoin is a “bubble”. A bubble probably bound to last, but still a bubble.
A bubble born in 2016. The primary year, while everybody makes reference to 2009, when the production of notes was no longer enough and the debt to be repaid was huge, while the West was entering its darkest crisis since the 1929one.
The trigger,i.e. the banking panic and the unaware laissez-faire approach of the US Presidency, were the same in both cases.
Two crises – the old and the new -broken out precisely in the United States, the burden of which was later shifted onto the rest of the West.
With a view to overcoming the first crisis, the huge costs borne for the Second World War were needed.The Rooseveltian stimulus had been to little avail.
The second crisis, much closer to us, which was triggered by the subprime crisis, has needed liquidity injections even greater than those needed during the 1929Great Depression – injections which have not ceased yet.
In the latter case, the exit from the crisis is ensured by the creation from nothing of the largest mass of money in human history, also through the Internet.
In fact, the Internet currencies have allowed to create exchange value, purely financial values that have strongly contributed to multiplying global liquidity in collaboration with standard currencies, which have been distributed indiscriminately to just any market – with helicopter money – by the US Governors and then by the ECB Governor, although certainly in much smaller proportions than his US counterparts.
On the other hand, when there is a liquidity crisis- a crisis caused by an excess of debt – every issuing bank prints money or rather creates money from debt securities. There is no other solution.
Contemporary Value arises from the mastery of a Name and from the artificial dissociation between this Name and a New Name.
Furthermore,in any case, the presence of cryptocurrencies only on the Internet and with a system along the lines of the peer-to-peer mechanism of normal online sales has allowed hackers’ systematic theft of 14% of all cryptocurrencies existing on the worldmarket.
A theft worth 1.2 billion US dollars, with revenues equal to at least 200 million US dollars.
In less than ten years, however, the technology generatingBitcoins will be vulnerable to cyber-attacks launched by quantum computers, which will become more widespread than they are today.
The attacks on virtual currencies have already cost governments and private companies owning them asmany as 113 billion dollars of turnover.
Nevertheless, who is currently inflating the Bitcoin value, which has more than doubled compared to January 2017 – a value that is now around 125%?
The main reason for this is China. Beijing is now the first market for the exchange of cryptocurrencies in the world.
As early as 2015 China alone traded 80% of Bitcoins.
Today, the top 4 among the 32 major exchange platforms of these new currencies mainly trade yuan.
One of these platforms has opened a mining station for “creating” Bitcoins – an operation which is highly energy-intensive and consuming – on the slopes of Tibet, where there is abundant low-cost energy.
Every time the yuan depreciates, the Bitcoin appreciates, because there are so many Chinese who pocket their capital to avoid government’s control and hence buy Bitcoins.
The yuan is depreciating and the capital flight from China is ongoing. The tool is often the conversion of the yuan masses into Bitcoins.
We may wonder whether the e-currency is used as a tool of “indirect war” against China.
Moreover, the current growth on the US and on some other European Stock Exchanges has occurred with credit money, borrowed at zero interest rate, which has been provided to major investors by central banks.
Another possible reason justifying the Bitcoin growth.
Virtual money may havealso been created to avoid the investors’ traditional rush to gold – the “tribal residue”, as Keynes called it – and hence not to increase the dollar value, currently maneuvered downward?
On January 15, one of the most active US-listed banks on the Bitcoin market ceased to convert cryptocurrencies into “traditional” currencies, but especially into dollars.
The beginning of the fall in the Bitcoin value, but the preservation of market liquidity, so as to prevent it from converging towards gold, in particular, or European hard currencies or, even worse, towards the Chinese or Russian financial markets.
Hence the Bitcoin is a pseudo-currency that serves to control the volatility and trends of global financial markets, as well as to keep it artificially high and avoid some currencies becoming “full” or sovereign like the Swiss Franc.
In fact, in 2018 a referendum will be held throughout the Helvetic Confederation on the so-called “full” or sovereign currency, i.e. on a Swiss Franc created by the national central bank and not by international banks.
“True Francs on our accounts”. Only the Swiss National Bank can create e-money, where necessary.
These are the goals of those who have proposed the referendum.
Let us hope for the best. Those who almost invented modern finance – the Swiss merchants of the Middle Ages, the link between Italian ports and large Central European markets -now realize the dangers of creating value from nothing, the Faustian (and darkly malicious) mechanism currently governing the magical and alchemical transformation of banks’ and States’ debt into credit for individuals.
Let us hope that the financial world will come to its senses, just in time.
Creating Quality Jobs Crucial to Boost Productivity, Growth in Indonesia
Indonesia must create good and quality jobs to help increase the country’s productivity and competitiveness for sustained and inclusive growth, says a new Asian Development Bank (ADB) study.
The study, titled Indonesia: Enhancing Productivity through Quality Jobs, takes an in-depth look at the challenges in creating better jobs and raising the country’s labor productivity, as well as the necessary skills needed for a youthful and increasingly better educated workforce to meet the demands of the digital age. The publication was launched today at an event in Jakarta hosted by ADB and the Coordinating Ministry for Economic Affairs.
“Indonesia has a tremendous potential to capitalize on its youthful workforce by addressing the country’s long-term challenges to job creation and inclusive growth,” said Rudy Salahuddin, Deputy Minister for Creative Economy, Entrepreneurship, and SME Competitiveness, Coordinating Ministry for Economic Affairs.
“Not only does the country need to create a more skilled workforce, but it also needs to adjust to new global patterns of technology and the demand for new skills,” said Bambang Susantono, ADB Vice-President for Knowledge Management and Sustainable Development.
The study provides three key messages on how to create good and quality jobs for Indonesia’s large workforce. First, improved education and skills development are necessary to create enough quality jobs to raise productivity. Second, as urban jobs are expanding faster, supportive public policies for sustainable cities are fundamental in generating quality jobs. Lastly, there should be continued efforts to improve labor market institutions and regulations that promote a wider range of employment options and better income security for workers.
The study identifies policy initiatives focused on creating better jobs in the labor market, raising labor productivity, and facilitating worker adjustment to the challenges of the digital age. These issues are addressed both from the supply side and from the demand side of the labor market. Policymakers should ensure that initiatives aimed at increasing productivity also target the poor, women, older people, and other disadvantaged groups.
Labor market institutions like private businesses, small-scale enterprises, and community groups also play a critical role in helping improve the employability of Indonesians. Combining new work opportunities with new technology, ideas, and organization will raise productivity and contribute to improved living standards.
Agriculture Is Creating Higher Income Jobs in Half of EU Member States but Others Are Struggling
Half of EU member states have leveraged the Common Agricultural Policy (CAP) to significantly reduce poverty and drive higher incomes in farming, while other countries are still lagging, according to the latest World Bank study.
The ‘Thinking CAP’ report details how new investments and services in farming, reinforced by the EU’s flagship agriculture policy, can drive down poverty and transform agriculture into a sector which can provide higher paying jobs for those who farm.
Hungary, Slovakia, Estonia, Denmark and the Netherlands are all examples of member states that have successfully modernized their agricultural sectors by providing advisory services, roads, secure property rights and access to education and health services in rural areas. Others, such as Bulgaria, Portugal, Romania, Slovenia and Greece, still have some way to go in reducing poverty and ensuring that agricultural work pays. They can do so by improving the basic conditions for a successful agricultural sector, which would improve the results of the financial investments available under the CAP. Other remaining member states fall in between these two categories – achieving a successful transformation or lagging behind.
“Agriculture and poverty in half of the member states of the EU no longer go hand-in-hand. It’s clear that the income gap between agriculture and other sectors is narrowing and in some countries, such as the Netherlands, agricultural work can pay more than jobs in other sectors,” says Arup Banerji, Regional Director for the European Union Countries at the World Bank. “Today, about half of EU member states recognize that farming can boost shared prosperity, while the other half still has some work to do to provide the basic conditions to bring about necessary structural changes.”
The World Bank report shows that the EU CAP is associated with improving employment conditions in farming. Decoupled payments – annual payments based on how much land a farmer uses – and the co-financing of on-farm investments do show clear links with improvements in agriculture. For instance, in the newer member states agricultural labor productivity growth increases from 3.1 percent to 4.7 percent per year with a 10 percent increase in this type of CAP spending. However, there are certain categories of subsidy – known as coupled payments, which reward farmers for producing a particular crop or livestock— for which the report could find no such association. In the past, these coupled payments also led to extreme overproduction and price distortion on global markets.
“Some countries are running before they can walk by issuing payments to farmers who don’t have the necessary infrastructure to effectively bring their products to market or to make the best use of their investment,” said Rogier van den Brink, Lead Economist at the World Bank. “However, the processes the CAP has put in place are impressive. The CAP casts a very wide net and reaches farmers in every far-flung corner of the EU. Because of this, improvements in the CAP along the lines of the recommendations outlined in our report will further strengthen its role as a powerful instrument of structural transformation.”
Going forward, the report says the monitoring of CAP funds should focus on delivering tangible results rather than confusing bureaucratic processes. This would also encourage the co-financing of private investment into CAP-supported projects which are in the public interest such as environmentally sound practices, organic farming and animal welfare.
Economic Warfare and Cognitive Warfare
Until not long ago, the Western world lived in the conviction that Liberalism was an end in itself, however, the new context of globalization suggests that political economics once again makes more sense, given that power relations in the economic sphere can no longer be ignored and the idea that world trade is structured on supply and demand appears obsolete.
The world is changing. Situations change, and events and the ways of understanding politics change with them. Instruments change as well: if the aphorism of Clausewitz that war is politics conducted by other means once seemed valid, today we might say that politics (and economics) is war conducted by the means of information.
The threat is no longer limited to what we once thought and conceived in the geographical terms of one superpower attacking another. The threat today is asymmetrical, different, and changes continuously. It travels through the Internet, it is immediate, and above all, it threatens the entire system. It is not aimed at military or political targets but commercial, industrial, scientific, technological, and financial interests instead. This requires intelligence to structure itself around new duties: protect not only the entire system but also the weakest links in the chain of production.
All this requires changes in mentality and in operational processes, as well as continuous updating, especially at a business culture level. Most of all, it requires close interaction between intelligence and the private sector, despite the difficulties this entails.
The crisis we are currently undergoing, together with the industrial and commercial physiognomy characteristic of our era, requires us to consider the idea of “economic warfare” very closely.
It is essentially since the end of the Cold War that the balance of powers has been developed around economic issues: most governments today are no longer interested in occupying territory or dominating other peoples but rather building up technological, industrial and commercial power capable of bringing money and jobs to their own land.
Globalization has transformed competition from “gentle” and “limited” into authentic “economic warfare”.
Although this economic challenge reduces the areas available for military warfare, its ultimate goal of accumulating power and well-being is the same.
The national economic intelligence strategies recently adopted by numerous governments assign their private operatives central roles in maintaining security by providing them with information technology infrastructure and the primary asset in the digital age: data.
The step between protecting private economic activities and protecting national economic interests is a short one indeed.
Economic intelligence consists in coordinating a series of activities: collecting and processing information, monitoring competitors, keeping strategic information secret, and capitalizing knowledge for the purpose of controlling and influencing world economic environment. All this makes it a powerful weapon at the nation’s disposal.
The main players in economic warfare are:
First and foremost, the world’s nations, which remain the most influential regulators on the economic chessboard despite their relative decline in the life of nations and the various restrictions placed over them, such as those imposed by international organizations like the European Union. One important recent change is that now nations must take numerous stakeholders (NGO, international bodies, companies, mass media) into account. At any rate, they uphold the role of arbiter that all the other players only continue to emphasize by regularly imploring their intervention.
The world’s companies, which address the new hyper-competitive geo-economic scenario by using strategic information control as a weapon of competitiveness and economic security.
Civil society: the expansion of discussions on social issues regarding company activities (nutrition and well-being, technological progress and risks to public health industry, and the environment, transport and passenger safety, information technology and individual freedom), the mass use and democratization of Internet, and the growing involvement of the legal system in monitoring business operations, all increase the risks of hacking attacks against companies by hackers from civil society. Including in the public discussion topics such as risks to the environment, sustainable development, socially responsible investment, and corporate social responsibility brings greater importance to the legitimacy of social questions.
The infosphere, which is not a category of physical persons or legal entities but instead a dynamic, that is the aggregate of interventions and messages spread through media and the worldwide web. The infosphere is a particularly insidious instrument similar to an amplifier that continuously jumbles and blends ideas, emotions, and impulses emitted by an infinite number of people without any real dominant subject and exerts a determinant influence – positive or negative as occurs – on individuals and organizations. When launched in the infosphere, a simple statement has the power to trigger ferocious argument, harsh political reaction, media crises, and damage to company reputations. The infosphere can become a particularly effective weapon of destabilization. We must never forget that a brand’s image and reputation are strategic components of the capital of a company that can affect its commercial and financial activities.
Which forms does economic warfare take?
Economic warfare is often confused with economic espionage, which despite being used as one of economic warfare’s weapons is hard to define both because the companies victimized are reluctant to publicize its incursion and because it is hard to circumscribe in juridical terms and therefore difficult to report.
A more commonly practiced form of economic warfare is the purchasing of companies. This may lead to authentic forms of surrounding the industries in any given territory through operations that reflect motivations of financial, economic and technological nature all at the same time.
Yet another form of economic warfare, which is both particularly widespread and insidious, is lobbying; in other words, an influencing strategy aimed directly at public decision-makers assigned to the drafting of regulations. Our nations are particularly plagued by the proliferation of regulations and one strategically important aspect of lobbying is attending and altering the process of creating, interpreting and/or applying regulations and legislative measures and directly or indirectly influencing public powers in every intervention or decision. International trade is largely based on influence, and therefore gaining closer access to decision-making centers has become an obligatory part of commercial competition.
All the practices above are included in influence strategy: influential communication is also the hardest to identify and oppose because it is perfectly legal. “Information war” is based on the following few simple principles that can wreck havoc when marshaled together:
- moral argument, that is the possibility to induce a crisis on the basis of an ethical reasoning;
- offending political correctness by disrupting the day’s cultural and psychological patterns;
- choosing targets, in the sense that the weaker the legitimacy of the adversary’s capital, the more the information attack will provoke escalation in the media;
- the degree of celebrity of the players;
- the criterion of appropriateness or resonance of the environment.
The upheaval of the Western economies’ competitive system is not just a passing thing. A growing number of powers (China, India, Brazil, Turkey, Iran, Russia) is conditioning the rapid shift in international competition. More often than not, the choice of winning dominance in foreign markets prevails over restructuring the nation’s own domestic markets. This demonstrates the extent to which a power strategy can make a decisive difference in the context of economic competition. These new players in international competition hold a different view of the dialectic between power and market, the latter being seen as the primary means to the increment of power. This vision revives the basic principles of political economics, according to which the market is the only path to power and not the other way around that has been demonstrated in numerous cases (such as Russia’s Vladimir Putin’s use of energy resources for coercive bargaining and blackmail in 2009) and illustrates the limits of the interpretative models of liberal economists whose analyses were focused on the effects of deregulation, mergers, or financial speculation involving gas prices, but fell short of the possible use of gas trade as a weapon.
The process of globalization is irreversible and fairly independent of what governments do. Globalization is one thing, but the ideology of a global free market that may produce a higher growth rate than any other system but gives no importance to how such growth is distributed is another. The argument that the highest capitalistic growth distributes resources in the best possible way, in fact, was never very convincing. Even Adam Smith thought that there were certain things the market could not do and should not do.
Historically speaking, the balanced evolution of world industry was created not by liberalism but by its opposite. The United States and Germany both became industrial powers in the 19th century because they protected their industries until they were able to compete against the dominant economy of the day: Great Britain. Neo-classical economic theories are now in disfavor because the system has come to be disrupted by scarce control over international financial flows and investment procedures.
Now more than ever, we are witnessing a struggle between the forces of capitalism, which tend to overcome every obstacle, and political forces that operate through nation states and are obliged to regulate these procedures. The laws of capitalist development are simple: maximize expansion, profit, and increase in capital. Governments by nature have different priorities instead, and this generates conflict. Furthermore, the dynamic of the global economy is one that does not ensure the stability of its protagonists.
The nation-state system and the economy system coexist in constant tension and must adapt, but if there were no relative stability among states, the instability of a world organized along the lines of transnational economy would only increase. The real problem is not whether governments can control the international corporations operating inside their borders, but whether they are able to exert global control: when companies and governments clash, the latter must negotiate as if there were another nation seated before them.
Like religions and cultures, globalization is only a simplified answer to today’s conflicts and the challenges to security. Globalization has most certainly reduced the importance of military power since the end of the 20th century, whereas security – internal security in particular – has become a global public asset. In the age of information technology, interdependence, and ”smart goods over heavy goods”, the military force offers less and costs more. Economic, technological, and especially communicative competition is more important and determinant than military strength.
The globalization of information has contributed to changing the nature of warfare by making public opinion decisive. In the short term, geo-information has become more important than geo-economy because its effects are immediate and not always governable. This is also a post-Cold War phenomenon.
In this context, the economy is no longer the mechanism of security as it was during Cold War, but on the contrary, security now serves the economy in creating better conditions for the expansion and protection of globalization. The nature of security depends on the situation prevailing in each nation and varies from one region to another, according to the respective level of globalization.
Consequently, it is the process of globalization that has restored political economics to importance and re-sparked a discussion formerly considered closed, according to which the market is the path to power and not the other way around, as it becomes an instrument of power politics in the globalization of exchange. The accumulation of power through economic expansion is the driving force behind the new emerging nations.
Yet today’s economic context must come to terms with new offensive strategies that undermine the industrial basis of the market economy and draw attention to the predatory policies of what may be defined as authentic economic warfare.
It is in this context that all companies, regardless of size, can be said to suffer damage from the absence of an economic security culture that only the use of intelligence, as a tool in analyzing predatory completion, can provide.
Interpreting the notion of national security including also the safeguarding of national interests requires information and security services to be ready to protect big companies or those of strategic significance, which the French refer to as “companies of national strategic importance” or “national champions”. These companies often – but not always – have their own information or security organizations that help them survive fiercer and fiercer competition.
In any case, in the field of economic intelligence the rules between the services of the various nations are more flexible, and it is easier to refer to others merely as competitors, neither friend nor enemy. This field is currently in the process of development, and European economic intelligence is still in embryonic phase.
The evolution of the information society has profoundly modified the frame of conflict. In the opinion of American analysts like John Arquilla and David Runfeldt, experts in netwar at Rand Corporation, the nation that wins tomorrow’s conflicts will not be the one with the biggest bomb, but the one that tells the best story.
In this sense, Americans have been referring to the key concept of information dominance since 1997. Defined as the control of anything that may be deemed information, this doctrine aspires at the moulding of the world by standardizing international practices and regulations to the American model, with the objective of placing decision-making bodies under control.
These experts note that it is sufficient to observe how American public opinion was mobilized during the invasion of Kuwait by a disinformation process planned at military level, or more precisely, at the level of psychological warfare. Information manipulation processes allow certain facts to be marginalized, and for this reason the domination of information has become a top priority in defining American strategy.
We may consider how the war in Iraq demonstrated the importance that manipulating information has assumed in international relations. The accusations made by G. W. Bush against Saddam Hussein regarding the existence of weapons of mass destruction represent a textbook case in the history of disinformation.
On the other hand, we must be careful of jumping to conclusions about how cognitive warfare is waged: disinformation, or even worse, the manipulation and authentic distortion of information for the purpose of deceiving your adversary or ally is often mistakenly confused with the production of knowledge conceived to orient the rules of conduct.
In this regard, Harbulot emphasized the profoundly innovative role of information war in terms of strategy and its implications for companies.
It was naturally Harbulot’s intention to use cognitive warfare to protect the economic interests of French companies against their American competitors. If, in fact, conflicts ranging from the Gulf War to the War in Kosovo have demonstrated the overwhelming superiority of American military intelligence overseas, what room for maneuver remains open today for the managers of the intelligence service in Western Europe, who are responsible for defending the geo-economic interests of their nations against American interests? Harbulot’s answer is clear: this room for maneuver is constantly eroding, and a situation of near total paralysis has been reached in certain cases.
Closing this gap means modernizing the thought of Sun-Tzu, the Comintern, and Mao Zedong, and especially that of Winston Churchill, the first Western statesman to have orchestrated a plan for information warfare against Nazi Germany (Plan Jaël). In terms of disinformation, he represents British genius in deceiving the enemy on the dates and locations of invasion landings.
Naturally, the lack of legal provisions regarding the manipulation of knowledge raises serious concern for the economic security of European companies, which must consequently arm themselves with techniques capable of strategically managing economic information.
It is precisely in light of American political-military choices that French strategy discerned the need to define just what information war really is in the strictest terms. The expression used in French strategic context is “cognitive warfare”, which is defined as the capacity to utilize knowledge in circumstances of conflict.
In particular, the French School of Economic Warfare acknowledges in cognitive warfare the conflict between different capacities of obtaining, producing, and/or obstructing determined types of knowledge implicit in power relations that can be defined “weak against weak” or inversely, “weak against strong”.
Numerous examples that come from the world of industry testify that innovation in this field is not always necessarily made by the strongest. Naturally, the United States is the primary artifice of “strong against weak” cognitive thinking, such as, for example, in defense of its position as superpower at both military and informational level. This nation’s way of orienting its own and the other nation’s conduct implies its complete acquisition of the importance of cognitive warfare as the ability to have the images of single powers perceived by the world public opinion, a strong argument in the search for legitimacy that every democracy must acquire in national and international context. The United States has always – but especially after September 11 – stoked the legitimacy of its policies by emphasizing the defense of democracy and the need for global security as reasons to combat anti-democratic forces.
In today’s context of intense competition, destabilization plays a fundamental role. Harbulot suggests considering the example, that has become common practice in economic warfare, of a multinational company that decides to stop a competitor from developing a project in an emerging nation.
A cognitive warfare operation might take the following form:
Identification of the competitor’s weak points in the area in question (weaknesses may vary in nature: bribes paid to authorities, environmental pollution, failures to respect human rights). All the information collected must be verifiable and not give rise to fallacious interpretation.
The choice of the information attack procedure: if the cognitive aspect is considered, the following scenario may be imagined. The director assigned orders funds to be paid into a private foundation supported by the company. A trusted person at such foundation then channels this money to a NGO that has posed itself the objective of protecting the environment. The maneuver consists in then making the NGO aware of this dossier by indirectly providing it with verifiable (and therefore non-manipulated) information on the misdeeds of the competitor multinational. Through its Internet site, the NGO then sends negative messages against the competitor’s project. This is how the chain of knowledge is created. The next step required is knowing how to consciously activate it for the purpose of destabilizing the target.
The chief strength of the information attack lies not in deceiving or misinforming but instead in fomenting a pertinent dispute that has been demonstrated by objective facts. The level of conspiracy is limited to setting up and activating the information chain. The more “grounded” the diatribe is, the harder it will be for the adversary to demonstrate conspiracy, even if only in theory.
It is clear that the spread of new information technologies has brought competition exasperated levels and facilitated cognitive warfare, in such way triggering an unprecedented conflict that, in the opinion of the French analysts, exceeds even that of the Cold War.
Information has become another weapon in the art of war capable of making the difference between winning and losing, regardless of whether the conflict is military or economic.
Changes of such degree impose cultural revolution.
Then there is psychological warfare, one of the principal forms of information war. It is the most sophisticated because it relies essentially on human intelligence, in its capacity to understand possible actions for success by controlling the means of communication.
Little known and scarcely practiced in France, psychological warfare has never received much attention from the military establishment, which has often succumbed to the pressure of events or adversaries, as happened in Indochina and Algeria.
Psychological warfare employs every means available, from disinformation to deceit, from propaganda to interdiction, in clashes of various nature (from the battle against terrorism to conventional warfare and the subsidization of peace) and is moreover directed to public opinion for the purpose of conditioning or manipulating it.
The use of psychological weapons cannot be improvised and is based on an organized operative structure and conducted by specialized personnel and organizations.
Civil communication systems have by now reached levels of performance previously attained only by armed forces and governments. This has led to the accumulation of a critical mass such to enable a lowering of costs. For this reason, even if the conservation of certain autonomous military capacities is foreseen, the development of information systems for defense and intervention depends more and more on civil systems. This creates a vulnerability that might be underestimated in times of crisis or conflict.
The infosphere’s framework has become highly conflictual; information war has become inevitable and is waged with the function of appropriation (intelligence), interdiction (limitation of access to information) and manipulation (intoxication).
Economic intelligence provides a necessary response to a world with no more borders of time or space, where information is immediate and reaction time is zero. A re-organization of structures around the new dimension assumed by the relationship between information and intelligence leads to changes in both the decision-making system and the management of human resources. First and foremost of all, the revolution must be cultural in nature: perceiving information as a weapon to be incorporated into national defense strategy.
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