Could Blockchain Voting Fix Democracy? Today, It Gets a Test RunThere’s no shortage of debate about the role tech has played in politics. From misinformation being spread via WhatsApp in Brazil to Facebook becoming a tool for hate speech in Myanmar to the Cambridge Analytica scandal in the US, many would say tech has been a burden rather than a boon. Tech has certainly impacted the ease with which information—both true and false—is spread, and hence the way people perceive political candidates. But what about voting itself? Even as tech has affected how we decide who to vote for, the process of casting a ballot and tallying votes on election day has remained largely unchanged. ‘Modernizing’ voting by making it mobile and digital has been an ongoing conversation for years, but always comes back to the same conclusion: such a fundamental piece of democracy is too crucial to expose to cyber-risks. But long-time opponents of internet voting now have a new player to contend with, one that’s claiming to bring the security and immutability that’s been the missing link up until now: blockchain. The midterm elections today include a small blockchain voting experiment, which many are hoping will scale up in coming years.
An Experiment in Digital DemocracyFor this midterm election, overseas citizens and members of the military from twenty-four counties in West Virginia have the option to vote using an app called Voatz. The experiment is the result of collaboration between Tusk Montgomery Philanthropies and West Virginia’s secretary of state, Mac Warner. As a member of the military and the US State Department for 28 years, Warner was troubled by how difficult it was for overseas service members to participate in elections. Political strategist and venture capitalist Bradley Tusk is the founder of Tusk Montgomery, which aims to improve American democracy by making it easier to vote. “We’re completely polarized, and nothing gets done,” Tusk told The New Yorker. “I don’t see how democracy survives absent radically higher participation.” With funding from Tusk Montgomery, Voatz was piloted with overseas West Virginians in May. Participants’ votes are recorded on a private blockchain, and ballots are transmitted to multiple computers that verify the validity of votes before they’re counted. The app uses end-to-end encryption and biometric verification, such as through the fingerprint or eye-scan technology built into some smartphones.
Does Easier Voting = More Voting?As Tusk emphasized, a fundamental tenet of democracy is citizen participation and engagement. If no one’s voting—or just a select group of heavily partisan voters are—then elections aren’t serving the purpose the founding fathers intended. UCSB’s American Presidency Project shows voter turnout in US presidential elections consistently staying below 60 percent from 1968 to 2012, and below 55 percent in more than half those elections. A study by the Pew Research Center found that the US ranked 26th in voter turnout out of 32 developed democratic states. Many of the countries that outrank the US have compulsory voting laws—for example, Australians who don’t vote must pay a $20 fine. Voting isn’t all that hard; you register in advance, show up at a polling place on election day, and cast your ballot. You might have to wait in line, or be late to work, or face bad weather or traffic or any other number of minor annoyances—but it’s just one day every few years, and it’s a privilege millions around the world don’t have. Despite this, what if the minor annoyances of voting are actually barriers keeping people from voting at all? Would the convenience of voting straight from our phones make a measurable difference in participation? A study called the Cost of Voting Index found that factors like voter-registration deadlines, laws around early and absentee voting, voter ID requirements, and polling hours influenced voter participation in the 2016 presidential election, with a higher turnout in states where voting is easier.
Does Easier Voting = Better Voting?For every ardent supporter of blockchain voting, there’s an even more ardent detractor—or two. The staunchest criticism is, unsurprisingly, security. Blockchain is famed for its security and immutability. But, at least with the Voatz app, ballots don’t go straight from the voter to a blockchain, and there’s widespread concern about what could happen in the space between. Rather than a blockchain-based app, Voatz can more accurately be described as an app with a blockchain attached to it, according to Marian Schneider, president of elections NGO Verified Voting, an organization wholly opposed to any form of internet voting. A 2015 report by the U.S. Vote Foundation to assess the feasibility of end-to-end verifiable internet voting found that risks in voter authentication, client-side malware, network attacks, and DdoS (distributed denial of service) attacks were too high to outweigh the benefits of online voting, coming to the grim conclusion that “Unless and until those additional security problems are satisfactorily and simultaneously solved—and they may never be—we must not consider any Internet voting system for use in public elections.” A team of researchers from the Initiative for CryptoCurrencies and Contracts, firmly opposed to blockchain voting, raised many of the same concerns, including the threat of interference by malware and network attacks. They also believe voting on a blockchain could make vote buying easier, and point out that Voatz (along with other makers of voting machines and online voting systems), while assuring the public of the app’s security, has declined to provide public access to its cryptographic protocols.
A New and Nebulous Political EraBlockchain as a tool for internet voting is both imperfect in its current state and promising as a possibility. But proponents and opponents alike should keep in mind that it’s far from a mature technology. Five years into Facebook and other social media platforms, we didn’t imagine these sites would eventually be used to spread hate speech or targeted propaganda, and we didn’t realize they may have influenced our political choices until they’d already done so. Similarly, outside of the security hurdles blockchain must clear to become a viable voting tool, it may contain risks and challenges we’re not yet aware of. Tech has presented a slew of challenges to modern politics, and balancing the harm it can cause with the good it can do is no small task. It’s a problem that will be solved incrementally, and probably slowly at that. As for getting more people to vote, even Bradley Tusk acknowledges blockchain may not end up being the answer. “It’s not about voting on a blockchain,” he said. “If something emerges tomorrow that is better than blockchain voting, that’s totally fine with me.” The West Virginia experiment today will be, if nothing else, an indicator of where to go from here. Image Credit: Breaking The Walls / Shutterstock.com
How Blockchain Is Helping Democratize Access to CreditInclusive and sustainable economic growth is goal 8 on the UN’s list of 17 sustainable development goals to be accomplished by 2030. Goal 8’s description emphasizes job creation, but acknowledges the fact that there’s a lot more to escaping poverty than simply being employed. Lack of financial inclusiveness is a part of this—say you’re making just enough money to get by, but you’re not able to save much, accumulate interest, or get a loan. How will your quality of life improve? Access to credit is a major barrier for people in developing countries. As Ed Rodrigues, founder and CEO of Swapy Network put it, “Credit is a wonderful tool to unleash peoples’ potential. Be it to further one’s education, start a business, finance healthcare or a home improvement, credit is key for people at the bottom of the pyramid to have a better life.” Rodrigues’ motivation to create a business geared towards enabling universal access to credit stemmed from his experience as a student in Brazil. After completing his undergraduate work Rodrigues dreamed of doing an MBA in the US. His qualifications and enthusiasm weren’t lacking, but he found it impossible to get an affordable loan. “Ultimately, I couldn’t accomplish my dream because of the lack of access to credit,” he said. [caption id="attachment_120334" align="alignright" width="233"] Ed Rodrigues, CEO of Swapy Network[/caption] He decided to build a tool that would help prevent others from being held back by this same barrier. One look at the base interest rates of several of the world’s central banks makes it clear that interest rates vary considerably by country, and are influenced by many different factors. Currently, nations like Switzerland and Japan actually have negative interest rates, and the US, South Korea, and Australia hover around 1.5 percent. Meanwhile, borrowers in Indonesia, Brazil, and Mexico are paying over 6.5 percent in interest. These rates only get higher with each degree of separation from central bank rates. As the perceived risk of loans increases, lenders add interest to the central bank rate to compensate. By the time borrowing funnels down to people buying homes or starting businesses, loans in developing countries often aren’t affordable to average citizens, thus engendering a vicious cycle and perpetuating poverty. Rodrigues envisioned a way to overcome constraints like national borders; if a Brazilian citizen is as trustworthy as a Japanese citizen—and there’s a proven way to back up that claim—why shouldn’t, say, a student in Brazil be able to borrow money at a rate comparable to what a Japanese student pays? Enter blockchain, the technology Rodrigues believes can make this vision a reality. “Blockchain is changing both the technology and the power structure behind the credit industry,” Rodrigues said. “It’s shaking power structures that previously had to rely on banks, credit bureaus, and nation-states as middlemen.” Blockchain is increasingly being tested as a way to track that which was previously difficult to pin down, from securing virtual assets to giving refugees an immutable financial identity. Put simply, blockchain is a database of encrypted transactions stored across a network of computers. That network actively participates in the validation, upkeep, and accuracy of the database, and is paid for doing so in cryptocurrencies. Swapy Network will run on the Ethereum blockchain and issue its own cryptographic tokens, called Swapy Tokens, to be used to buy and sell various services across the company’s three products. Swapy Exchange: Connects lenders in countries with low interest rates to credit companies in countries with high interest rates. This allows credit companies to raise funds at lower rates and thus be able to lend at lower rates domestically. Swapy Financial ID: Lets users build a digital, globally-valid financial identity. Users can log financial information like bank statements or investments straight from their phones with a mobile app, and must designate an organization to validate all logged data. The app is open-source, and data is encrypted in decentralized storage (such as IPFS) and recorded in the Ethereum blockchain. Users can choose their preferred level of data privacy. Swapy DataMarket: Our personal data is valuable, and in many cases it’s constantly being collected, whether we want it to be or not. The Swapy Data Market gives users control over their financial data. Individuals can profit from making their data available, and companies can analyze data sets to more effectively grow their business. Importantly, this system means access to data isn’t limited to the biggest players in financial markets. Swapy Network’s software development started in July 2017, and after getting funding from well-known investors like Tim Draper and Don Tapscott, the team is currently in the final stages of preparing for its initial coin offering (ICO). ICOs are a fundraising method for new cryptocurrencies in which a portion of the currency—in this case, Swapy Tokens—is offered to early investors in exchange for legal tender or established cryptocurrencies like Bitcoin or Ether. The company hopes to raise the equivalent of $30 million in ethers (Ethereum cryptocurrency) to finance its protocol and app development over the next five years. Democratizing access to credit, giving people control of their data, and creating borderless, immutable financial identities are all worthwhile aims. If they’re ever achieved at scale, though, they’d not only have a huge impact on poverty alleviation, they’d also bring about a fundamental shift in the way the economy works, both at a national and international level. Whether blockchain, cryptocurrencies, and startups like Swapy will be able to upset lending in the same way that, say, ride-hailing apps upset transit or house-sharing apps upset hospitality remains to be seen. In the meantime, getting affordable loans to the people who need them most is a noble and important goal to work towards. Image Credit: terng99 / Shutterstock.com
Mobile platforms can give refugees access to vital information when they arrive in AustraliaWalter Daniel Fernandez, UNSW; Manuel Wiesche, Technical University of Munich, and Maximilian Schreieck, Technical University of Munich
Waves of asylum seekers emerging from conflict zones in Myanmar, Syria, Sudan, Iraq, Yemen and elsewhere are expected to add more than one million people to global resettlement needs this year.
These refugees face a world of closing doors, but they also offer economic opportunities and cultural enrichment to countries that welcome them. While some refugees are integrating well in regional Australia, others still face significant challenges in the capital cities.
As concerned researchers, we are interested in how information technologies could help refugees resettle. Our work with organisations assisting refugees has shown that having access to timely information about Australian life is essential.
Read more: I teach refugees to map their world
We’re in the early stages of building an ecosystem of digital services that aggregates and delivers this kind of information to refugees – and to the organisations involved in supporting, employing, educating and caring for them. To guide our work, and avoid reinventing the wheel, we’ve looked at comparable experiences in Germany, which has a high intake of refugees.
In Germany, there are a number of national and international agencies that provide assistance for refugees, each with regulations and responsibilities that differ from region to region. Accessing basic services, such as the internet, money transfer, health care and schooling, presents a new challenge to already traumatised people.
The information refugees need is distributed among asylum counsellors, social assistance offices, youth welfare offices, local non-government organisations, volunteers and more. In some cases, this information is quickly outdated.
Getting access to the right information in a timely manner is difficult given the multitude of information sources, language barriers and geographical complications. This situation encourages new refugees to seek information from those who have arrived earlier, leading to the spread of outdated or misinterpreted information.
One difference between this refugee crisis compared to earlier ones is the ubiquity of information technology. Because the overwhelming majority of refugees have access to smartphones, a number of mobile initiatives have emerged to provide support.
Hackathon volunteers in Germany built a mobile guide for refugees called Moin, as well as a tool that helps refugees with administrative processes called bureaucrazy. Unfortunately, these apps required volunteers to keep the information up to date, which was challenging over an extended period.
Still, some initiatives have produced sustainable outcomes by eliminating the need for third-party updates. Instead, these apps allow information providers to update information themselves.
For example, the Integreat project is a mobile application for refugees living in a particular German municipality. It provides information on the asylum process, local points of contact and aspects of daily life. The municipality and local NGOs maintain Integreat’s information through a content management system accessible via web browsers.
The platform’s design means it can easily be extended to other municipalities, which can mirror existing content and reuse translations into different languages. This further reduces the effort required to gather and maintain relevant information, providing a helpful addition to asylum programs.
Housing and employment matchmaking
While applications such as Integreat can help refugees during their first few months in the host country, things get more complicated when refugees try to relocate to permanent housing.
In Germany, language barriers, high demand for apartments among locals and resistance from some property owners who don’t want to rent to refugees has made finding accommodation a significant problem. Some German municipalities invested a substantial effort to house refugees by contacting landlords directly.
In some cases property owners would like to support refugees, but they do not know how to approach them. A digital platform that connects property owners and refugees, such as the Berlin-based digital platform Flüchtlinge-Willkommen (Refugees Welcome), could help alleviate such problems.
Similar matchmaking services have been built to match German employers who have difficulty finding qualified employees with refugees who are looking for work. Workeer is available in Germany, and refugeetalent is a similar initiative operating in Australia.
But matchmaking is only one side of the story. German and Australian labour regulations limit the options for refugees, who might not be legally eligible to work straight away or hold qualifications that aren’t recognised in their new homeland. So digital platforms should also offer information for employers and refugees on labour regulations, vocational training and how to transfer qualifications.
What else can be done?
Everyone can help contribute to refugee resettlement solutions. Our work suggests the following actions would be helpful:
We take inspiration from stories like what happened in Eltham. In this Melbourne suburb, residents welcomed the arrival of Syrian refugees and supported them in settling into a different culture, getting a job and learning English.
In doing so, Eltham’s residents created a positive experience for both the refugees and the Eltham community. There is room for hope in our humanitarian responses and we believe we can and should do more.
Walter Daniel Fernandez, Professor of Information Systems, UNSW; Manuel Wiesche, Postdoctoral research associate, Technical University of Munich, and Maximilian Schreieck, PhD student, Technical University of Munich
Alternative currencies are the future: why it matters for developmentLorenzo Fioramonti, University of Pretoria
When I began to teach in 2012, I decided to start my course with an analysis of how money affects social order. What my students found particularly fascinating was the then-nascent world of cryptocurrencies, which I described at length as a crucial feature in the future of money.
Some colleagues criticised my approach. They accused me of indirectly encouraging students to invest in what they saw as a shady, crime-ridden financial underworld. But I was simply exposing young minds to a fast-evolving, complex phenomenon that in my view would have a major impact on power distribution in the global economy.
Behind most cryptocurrencies is a simple technology known as “blockchain”, a system residing in multiple computers that allows for peer-to-peer financial ledger recording of all transactions occurring in a network.
This results in a transparent open-access registry of monetary flows which makes the intermediation of banking authorities unnecessary. Thus it challenges the conventional belief that money can only work through central planning.
As I explain in my book, Wellbeing Economy: Success in a World Without Growth, money systems are undergoing an unprecedented transition from centralised authority to decentralised networks.
Conventional money is managed by states and banks, with users on the receiving end of monetary policy decisions. By contrast, most alternative currencies are peer-to-peer. That means they are managed by users themselves and do not require intermediaries. Some of them have global outreach thanks to digital technology, while others are locally based.
Take BitCoin, the most popular peer-to-peer currency in the world, with a market capitalisation above 40 billion US dollars. A person buying the equivalent of $1 in BitCoin in 2009 would now possess roughly $25 million. One BitCoin is currently equivalent in value to two ounces of gold. Other rising stars include Ethereum, Litecoin and Ripple.
Taking the world by storm
Many of these currencies remain quite volatile in the short term. Their upward and downward swings reach over 10% of the value on a weekly basis. But the long-term trend is impressive. States are warming up to them.
In April 2017, Japan accepted BitCoin as a legal payment method for retail markets. After threatening digital currencies last year, the Russian government took a U-turn. President Vladimir Putin met the developers of Ethereum and committed to recognising cryptocurrencies in 2018.
Following an initial freeze, the People’s Bank of China readmitted withdrawals in BitCoin in June 2017, catapulting the currency to new heights. In the US, cryptocurrencies are becoming increasingly accepted as both a method of payment and store of value.
The Australian government will soon make it easier for new innovative digital currency businesses to operate, exempting traders and investors from goods and services tax.
It’s clear that cryptocurrencies will in the near future become much more common as methods of payment for a wide range of purchases, from online shopping to the local supermarket.
Developing countries are leapfrogging
Developing economies, too, are opening up to cryptocurrencies. In Venezuela, BitCoin has become the leading parallel currency. It provides millions of citizens with an opportunity to perform transactions and generate livelihoods, including buying food and other basic necessities in a country where official money is worth almost zero. It also allows them to purchase goods from overseas, overcoming ever-stricter capital controls.
In East Africa, local innovators have introduced cryptocurrency systems to support cross-border transactions, as exemplified by initiatives like BitPesa.
In South Africa, cryptocurrencies are becoming particularly popular. In Nigeria, local traders and activists believe this new money presents an opportunity to democratise the economy. This is propelled by the fact that people in Nigeria have been failed by conventional money.
According to my colleague Verengai Mabika, founder of BitFinance in Zimbabwe, the collapse of his country’s formal financial system has made BitCoin an attractive alternative. This is especially the case for online payments, which are restricted by banks, and for remittances, which constitute the backbone of the economy.
A growing number of Zimbabweans are also using cryptocurrencies as a saving mechanism (37% of all Bitfinance customers use it for that purpose), Verengai tells me. This is after the massive loss of personal savings during the hyperinflation period of 2008, which led to the collapse of the country’s banks.
Decentralisation and local economic development
The decentralisation of money is indeed at the core of this new trend, with potential repercussions in other fields. For instance, Ethereum is designed as a smart contract platform, that is a trading system completely based on peer-to-peer property rights. FairCoin was developed as the preferential currency for cooperatives, social economies and fair trade networks around the world.
Cryptocurrencies are just the tip of an iceberg. According to recent estimates, there are over 6,000 complementary currencies in the world, over 50 times the number of conventional money systems. Most of these are user-controllled and are interest-free. One cannot make money by simply trading in them.
Hoarding makes no sense in this new world. This is because value is not in the accumulation but in the exchange.
The scope is often limited to certain territories or types of transactions (for example, personal care, sustainable mobility and local trade). This creates an incentive to support local economic development and forms of exchange that are valued by communities of users.
Regiogeld, a network of local currencies which I studied when I was a researcher in Germany, has proliferated throughout the country. It has become the world’s largest system of local currencies, supporting small businesses and empowering communities.
In the near future, we will have a variety of money with different qualities and different purposes. This will make economies more resilient against shocks and will support more equitable and sustainable development, by putting users in the driver seat and reinforcing local economic development.
As my research demonstrates, a combination of regional, national and local currencies could also be the best way forward for the European Union, engulfed by its monolithic and unsustainable euro, and for any other process of regional integration, from Africa to other continents.
Welcome to E-Estonia, the tiny nation that's leading Europe in digital innovationInnar Liiv, Tallinn University of Technology
Big Brother does “just want to help” – in Estonia, at least. In this small nation of 1.3 million people, citizens have overcome fears of an Orwellian dystopia with ubiquitous surveillance to become a highly digital society.
The government took nearly all its services online in 2003 with the e-Estonia State Portal. The country’s innovative digital governance was not the result of a carefully crafted master plan, it was a pragmatic and cost-efficient response to budget limitations.
It helped that citizens trusted their politicians after Estonia regained independence in 1991. And, in turn, politicians trusted the country’s engineers, who had no commitment to legacy hardware or software systems, to build something new.
This proved to be a winning formula that can now benefit all the European countries.
The once-only principle
With its digital governance, Estonia introduced the “once-only” principle, mandating that the state is not allowed to ask citizens for the same information twice.
In other words, if you give your address or a family member’s name to the census bureau, the health insurance provider will not later ask you for it again. No department of any government agency can make citizens repeat information already stored in their database or that of some other agency.
Tech-savvy former prime minister and current Vice President of the European Commission Andrus Ansip oversaw the transformation.
The once-only principle has been such a big success that, based on Estonia’s common-sense innovation, the EU enacted a digital Once Only Principle and Initiative early this year. It ensures that “citizens and businesses supply certain standard information only once, because public administration offices take action to internally share this data, so that no additional burden falls on citizens and businesses.”
But this by itself does not address the fact that merely asking for information can still be a bother to citizens and business. The once-only principle does not guarantee that the collected data was necessary to request, nor that it will be used to its full potential.
Governments should always be brainstorming, asking themselves, for example, if one government agency needs this information, who else might benefit from it? And beyond need, what insights could we glean from this data?
Financier Vernon Hill introduced an interesting “One to Say YES, Two to Say NO” rule when founding Metro Bank UK: “It takes only one person to make a yes decision, but it requires two people to say no. If you’re going to turn away business, you need a second check for that.”
Imagine how simple and powerful a policy it would be if governments learnt this lesson. What if every bit of information collected from citizens or businesses had to be used for two purposes (at least!) or by two agencies in order to merit requesting it?
The Estonian Tax and Customs Board is, perhaps unexpectedly given the reputation of tax offices, an example of the potential for such a paradigm shift. In 2014, it launched a new strategy to address tax fraud, requiring every business transaction of over €1,000 to be declared monthly by the entities involved.
To minimise the administrative burden of this, the government introduced an application-programming interface that allows information to be automatically exchanged between the company’s accounting software and the state’s tax system.
Though there was some negative push back in the media at the beginning by companies and former president Toomas Hendrik Ilves even vetoed the initial version of the act, the system was a spectacular success. Estonia surpassed its original estimate of €30 million in reduced tax fraud by more than twice.
Latvia, Spain, Belgium, Romania, Hungary and several others have taken a similar path for controlling and detecting tax fraud. But analysing this data beyond fraud is where the real potential is hidden.
Analytics and predictive models
Big data, analytics and predictive models will play the main role in the next wave of e-government innovation. For example, if single-transaction information puzzle pieces are put together to form a map of the broader national business context, it might be possible to understand the kind of complex interdependencies between companies visualised below.
But this also raises an interesting question: could a national government use this same digital tracking system to glean insights about the economy’s health and general economic trends?
The Estonian Tax and Customs Board seems to be moving in this direction. Its 2020 Strategic Plan (in Estonian here) demonstrates a shift in mindset, from tasking itself solely with controlling and punishing people to envisioning giving advice to taxpayers.
Might tax offices be transformed into management consultancy-type agencies that advise companies on how to capture growth in related sectors, mitigate risk from peers’ bankruptcies or improve profits – all based on analysis of the vast amount of data it has collected?
Currently, dozens of people collect, analyse and clean such data about the business sector, but it’s possible this job could be done automatically using tax data. In this scenario, taxes could be considered a service fee paid in exchange for valuable business insights.
The key problem with Estonia’s great idea is privacy. It’s easy to imagine that giving industry-specific advice (or advice spanning several industries) based on business-transaction data might break the trust of the companies being monitored.
Indeed, one of the core founding principles of OECD Guidelines on the Protection of Privacy is that data should only be used for the purpose stated and not for any other reasons. So-called “purpose limitation” has since made its way into most modern data protection acts, including to EU data protection rules.
But as the “ask information only once, but use at least twice” idea demonstrates, data not only can and should be used for more than its original purpose, it should never be processed solely for a single aim. Some legal experts agree, stipulating that “within carefully balanced limits” data may be used for purposes beyond its original intent.
An innovative, visionary tax office that serves, rather than controls, society’s business sector is a big ask. But if any country can do it, e-Estonia can.
Former ambassador Jeffrey Bleich speaks on Trump, disruptive technology, and the role of education in a changing economy
Former ambassador Jeffrey Bleich speaks on Trump, disruptive technology, and the role of education in a changing economyJeffrey Bleich, University of Sydney
An edited transcript of the keynote address delivered by Jeffrey Bleich at Universities Australia’s higher education conference in Canberra on 1 March, 2017.
You can also listen to the full speech here:
While I’ve spoken at many of your universities over the years, it has always been in a non-partisan role - as either ambassador or now as chair of the Fulbright board. So, whenever I’ve been asked questions about politics or elections before, I always did what diplomats have long done. I thought very carefully, before saying …nothing.
But these are not ordinary times. The recent US election has evoked a profound sense of uncertainty across the political spectrum.
The things we had counted on, suddenly and surprisingly proved incorrect. We are not sure what we can rely on anymore, and it has shaken many people’s confidence about the path forward. It is times like these, when good friends like the US and Australia put aside conventions and get real about what we need to do together.
No one saw this coming
Candidly, no one saw this coming - until it came. In the US, on the morning of November 8, 2016, no trustworthy polling organisation, no responsible media outlet, no respected political pundit, no one, thought that Donald Trump would be elected the President of the United States. Even Mr Trump did not expect it.
He won, in part, because many people in the US did not trust the political parties to address their concerns. They did not trust government. They did not trust the media. They did not trust experts. They did not trust the international liberal order. And the fact that neither party liked Mr Trump, that the media mocked him, that experts were appalled by him, and that he seemed to have no experience in government or diplomacy or any interest in it, did not discourage them. It gave them hope. They might not have agreed with him, but they believed that at least he would shake things up. And that is what they wanted.
This is not a fluke. Only a few months earlier, we witnessed something similar in Europe - the stunning decision by the people of the UK to reject the recommendation of their prime minister and virtually all leaders on both sides of politics, and exit the EU.
We’ve witnessed the Philippines elect President Duterte - a leader who attacks all politics as usual, belittles allies, and has authorised the vigilante killings of thousands of people.
Here in Australia, Pauline Hanson’s One Nation party won four seats in the last election, and you’ve had five prime ministers in the past seven years (if you count Prime Minister Rudd twice).
Virtually every other major Western democracy these days is led by a fragile coalition government. And the world is already bracing for the rise of new nationalist, populist, and authoritarian minority movements in Europe.
So this populist unrest is not unique to the US.
The question is why, and what are the consequences for Western Democracies around the world. In the time that I have been asked to speak, I’d like to suggest we are witnessing an historic moment that requires an historic response.
New technologies, and global trends, are principally driving the shock and uncertainty. I’ll share my thoughts about what these are and where they are leading us. I’ll then do something that we all need to do - suggest some ways that higher education can adapt to meet these global trends and restore our sense of order and common vision.
But first, how we got here.
The digital revolution
Every person in this room, grew up in a century defined by the Second Industrial Revolution. Today, that revolution is being eclipsed by a Digital Revolution.
The uncertainty that we are experiencing in every aspect of our society, including our politics, is the same disorientation that occurred between 1870 and 1910 when the first Industrial revolution ended and a second one began.
It eventually vaulted nations like America and Australia to the top of the world order. But it also produced a Gilded Age, labor unrest, mass migrations, a great depression, and two world wars. That era is closing, and we are now experiencing the new great disruption that Silicon Valley promised.
Digital technology - while solving crucial problems - is creating or compounding others.
3) It has undermined standards - of journalism, of altruism, and of civility - that are necessary for us to find common ground.
To appreciate this, we have to see where we’ve come from.
A hundred and fifty years ago, we went through the same thing. Changes in technology revolutionised media, global integration, and demographics. The changes were profound.
In 1879, during a three-month period, both the electric light and a workable internal combustion engine were invented.
Those two inventions alone produced over the next 40 years a dizzying number of new technologies. The telephone, phonograph, motion pictures, cars, airplanes, elevators, X-rays, electric machinery, consumer appliances, highways, suburbs, supermarkets, all created in a 40-year burst from 1875 to 1915. It fundamentally transformed how people live.
We’ve known for a while that the structures created by this Second Industrial Revolution were running their course, at least in advanced economies, and was being replaced by a new revolution, the digital revolution.
In retrospect, we should have seen all of the side effects coming. Recently the pace of these advances had started to build on each other exponentially, and the pressure has been mounting.
Everyone who has had to throw out their CD player for a DVD player for an iPod for an iPhone for Spotify, knows what I mean.
The pace at which our world is being changed just keeps accelerating. Every year there has been some massive new disruption. Every year a new massive theory of disruption: “the digital economy”, “the social network”, “the Internet of things”, “sharing economy”, “big data”. Last year “machine learning” - where machines teach themselves things we do not know - was the Buzzword.
The word in Silicon Valley this year is “singularity” - where our species itself is altered by technology - gene-editing, bionics, AI - creating a new hybrid species.
Three years ago as I was getting ready to depart Australia, I gave a talk about how driverless cars would soon transform our societies, but that this would be a hard transition and it would be several years before we saw driverless vehicles on the streets.
Well I was wrong about that. As I was going to the San Francisco airport to fly here, the car driving alongside me was a driverless Google car.
In Philadelphia driverless cars are operating as taxis. As the tech writer William Gibson wrote:
Now I love driverless cars. Self-driving cars can reduce accidents, save us from needless deaths, injuries, and property damage, reduce traffic, give us more leisure time, reduce stress, and improve our quality of life.
Believe me, as an ex-ambassador, life is better in the backseat of the car.
But that’s not how you look at it if you are a 47-year-old truck driver or bus driver or cab-driver or you drive a fork lift and have a high school education, are carrying a lot of debt, and have a family to take care of. All you see is some elites in San Francisco trying to kill your job and destroy your family.
And driverless cars are only one disruptive technology. If you work in a small hotel or motel, you see AirBnB as an existential threat. If you work in manufacturing, 3D printing and robotics are direct threats to your job. If you are a book-keeper, artificial intelligence is an immediate threat to your job.
Fear of losing control
Many of us feel that we’ve lost control over the pace of it all. The technology is driving itself.
Breakthroughs that once took decades to develop can now be developed in a matter of months. We can test the impact of a particular set of compounds on thousands of cells simultaneously.
We can take the data from every mobile phone, every laptop, every modern vehicle, every refrigerator and toaster and microwave and aggregate them and analyse them as fast as the speed of the internet.
I was with the director of Google’s cutting edge incubator, Google X, Astro Teller, and he was asked what he feared about technology. He said,
Archimedes said that if you gave him a long enough lever, he could move the earth. Today, the lever of technology has extended so long that it takes very little pressure to fundamentally move the earth.
This dramatic acceleration of technology affects not only the workers who see their jobs disappearing and fear these new technologies. It inspires fear in retirees and dependents just as much.
Gene therapies may make it typical for people to live healthy active lives past the age of 100. That should be a cause for celebration. People getting to know their great grand-children, maybe even their great-great grandchildren.
But it’s also frightening. How will society support a generation that lives 20 years longer than they’d planned, that runs out of retirement savings? And if they live healthy lives to age 100, they will need to fill more of those years with work - their work lives may need to last 60-70 years.
But as technology accelerates, their training may barely be sufficient to last them 10 years. How will that work? How do we educate and re-train people for six careers over a lifetime? And what sorts of jobs will those be? How will we give people purpose when machines can do everything that is dull, dangerous, or determinable?
Even if you could find work for people and retrain them every 10 years, what sort of economic model can sustain this?
If you aren’t feeling anxious and uncertain yet, then you are in denial. If you are a 47-year-old bus driver, or coal miner, or assembly line worker, or cashier, or toll booth operator, you might want a leader who promises to shut this all down.
Build a wall, bring back the old jobs; let me keep my iPhone and Facebook (I like those), but otherwise, just go back to the way it was.
This could have been predicted.
The Industrial Revolution in the last Century caused the same great anxieties, and caused politics around the world to go haywire. There were massive disruptions in labor markets, unprecedented levels of migration, and other effects of industrialisation.
The result may sound familiar. Popular unrest especially in Europe and East Asia, xenophobia, isolationism, violent protests, and the emergence of authoritarians and demagogues around the world.
In the US, William Jennings Bryan was nominated three times for president during this Gilded Age - offering a bizarre mix of populist messages. He was anti-Darwinism, pro-Isolationism, proposed a Silver Standard, favored Prohibition, and stunned the political establishment with the way he campaigned - defying all conventional logic.
Demagogues flourish when large sections of society feel overwhelmed and fear they will be left behind. They offer simple solutions to complex problems and play on people’s fears and prejudices.
But technology does not do this alone. At the turn of the last century, the US did not elect William Jennings Bryan. It elected leaders who embraced technology. It chose people who felt government had an important role in fostering technology and dealing with its unwanted effects. Healthy democracies resisted demagogues and authoritarians and fascists. But less healthy ones didn’t.
The 1920s and 1930s saw the rise of this throughout Europe. So this is not about technology alone. Three other trends already existed that fed public anxiety, and drew people to an authoritarian figure.
The gaming of democracy
The first trend is a 30-year campaign to diminish the importance of democratically elected governments.
For 30 years, political leaders on both sides of the aisle in the US ran for government by running against it. They secured votes by campaigning on the notion that government is a mess and couldn’t do anything right.
President Reagan had demonstrated the power of running for election on the claim that government was too big and bloated and ineffective. He ran on a campaign of cutting taxes and red-tape.
His successor George H.W. Bush did the same, to win, and then lost when he failed to keep his promise not to raise taxes. The next president, Bill Clinton, followed the same playbook, leading the charge that the era of big government was over. In all cases, the message was that we needed less and less government. George W. Bush ran almost entirely on promises to continue shrinking wasteful government.
Tom Friedman, the New York Times writer, had an insight about this. It came from his days when he covered the advertising war between Hungry Jacks and McDonalds.
He was interviewing the head of marketing for Hungry Jacks and asked him why - with the hundreds of millions of dollars Hungry Jacks was spending to win market share from McDonalds - it hadn’t actually gone after McDonalds burgers. Why didn’t they run an ad saying that McDonalds burgers were nasty frozen patties? The marketing head looked at him and said:
Loss of confidence in governments
Well, to win elections, both sides had been killing the category of government. And then in 2008, the US government seemed to vindicate their worst fears.
In September 2008, the country was already mired in an unpopular war in Iraq that was costing us our bravest troops and billions of dollars, and then we were hit by a recession that was directly due to the federal government easing its bank regulations. The two things that we counted on our government to do most - keep us secure, and protect our economy - it had failed to do. And both parties had supported both decisions.
If anyone was looking for proof that government couldn’t do anything right, that was the moment.
I think the Brexit vote shows that US voters aren’t the only ones losing confidence in government.
All of the indicators are moving in the wrong direction.
Voting rates have been falling in the US and many other Western democracies. Polls show that young people’s faith in democracy is plummeting. Tax protests movements have risen. America’s wealthiest people are looking for ways to avoid paying taxes through elaborate tax avoidance schemes. Recall that then-candidate Trump said that if he hadn’t paid taxes in 20 years, it was because he was “smart”.
Technology has exaggerated these effects.
For the average American, polling, data-analytics, micro-targeting voters, have turned politics into a game, and left them feeling manipulated. The political parties seemed more intent on using these tools to play the system and block each other than to deal with the real issues that we were facing.
While businesses were expected to innovate and do things faster, cheaper, better, governments now had less money, and were hamstrung with older technologies, and had more difficulty keeping pace. Government seemed to make the case for its detractors - moving slower or sometimes not at all. In the face of runaway technology, we have often seen walk-away government.
Millennials have the least patience with democratic government.
Having grown up at the pace of the internet, millennials aren’t afraid of technology. They love the new technologies; they trust technology to transform the workplace for the better.
To them, tech companies will solve their problems more than government, and so government seems irrelevant. To some, not all, government is entertainment or worse. And if you think government is entertainment, then why not elect a reality show star; and if it’s a joke, then why bother showing up to vote at all?
Disrupting demographic expectations
The second major trend in the US relates to demographics. Demographic effects have emerged in the past 25 years that have had a particularly pronounced effect on white males.
Your former countryman, Rupert Murdoch, built a news empire on the simple insight 25 years ago, that white males in America were getting angrier, and wanted someone to vindicate their anger. Even Fox & friends cannot keep up with the appetite for anger. Now they face competition from the even angrier Breitbart.
So where does that anger come from?
If you were a straight white male in the US in the first half of the last century with a high school education or less, you might lose out on jobs or opportunities to college educated white males, but that was it. You had an advantage over anyone else. You did not have to compete against women, people of colour, or people who were openly gay or lesbian. And you did not have much in the way of international competition.
Industries were largely protected among those countries with which we actually traded. But about half of the world’s economy was locked up in a failed economic system - Soviet-style communism - which did not compete with American jobs at all.
During the 1980s and 1990s, the US economy changed dramatically. Programs to enforce civil rights laws profoundly changed the workforce, introducing opportunities for women, racial and ethnic minorities, and other previously disadvantaged groups to compete for jobs.
At the same time, the fall of the Berlin wall was effectively a starting gun for global competition. Suddenly a talented workforce around the world that had been denied the chance to compete was unleashed.
Western nations saw great opportunity in trading with these countries and working them into their supply chains. And now, suddenly, a white male worker who had a built-in advantage was forced to compete with women, people of colour, and people around the globe, who were hungrier and potentially more competitive than they were.
Now white males may never have been entitled to that advantage, but the feeling of loss, and resentment, and unfairness that they felt is a very real emotion that most of us would probably feel in similar circumstances. Even if an advantage we have isn’t fair, we still feel pain and possibly anger when it is taken away.
Especially if it affects your livelihood and your place in society.
The truth is, that the benefits of globalisation and modernisation have not been evenly distributed. While women and minorities and people who had been subject to crippling poverty in former communist countries are better off today, the white working class in America doesn’t feel that way.
Unlike minorities, they didn’t grow up expecting to have to work twice as hard to get half as far, or to live in poverty. They expected that their lives would be better than their parents lives, and that their kids’ lives would be even better than theirs.
But that is becoming less true now.
Statistically, about half of the middle class is not more successful than their parents. Their fathers supported a family, had a nice house, two car garage, vacation, health care, the ability to send their kids to college, and enough for a decent retirement, working a 40 hour a week.
Today, wages haven’t kept up with the cost of living. To have those same things, both parents work, they work longer hours - nights and weekends - and they go deep into debt. They feel like they are working harder and not getting as far. And they are worried that their kids will do even worse.
So they don’t want to just turn back the clock on technology, they want to turn back the clock on civil rights and globalisation, too. Because they don’t see how it is helping them.
So it is no surprise that some of President Trump’s strongest supporters want him to build a wall to keep out Mexicans, or ban all refugees, or deport immigrants, or roll back the reproductive rights of women, or reduce civil rights enforcement.
There is some bigotry here, but about 80% of Republicans currently support Donald Trump, and the vast majority of them are not bigots. If you don’t believe the heartbreak in this group is real, consider this.
If you are a white male with no college education in the US you are the only demographic in the OECD, the developed countries, whose life expectancy is going down. The main reasons for this are all forms of self-harm: suicide, drug and alcohol abuse, or morbid obesity.
We miss the point if we think this is just prejudice or intolerance. For many, they voted for Donald Trump because he gave them hope. Everyone needs hope.
All of us want to believe that our lives will improve, or at least that our children’s lives will be better than ours. But for people who have lost their advantage in the market, and have to compete harder than ever just to have the same job, and who worry that their kids will have it even harder, they’ve lost hope in the current system.
Nearly two thirds of the counties that voted for Donald Trump in swing states voted for Barack Obama. For them, Donald Trump was the hope candidate.
One last thing. I have no tolerance for bigots and racists, but I also cannot abide ignoring the fundamental humanity of others, particularly people who are heartbroken.
Now imagine how the people who depend on these men feel, their wives and their daughters and their mothers, and you can understand how many women, too, would not really care what Donald Trump has said about women.
The degrading of journalism
Finally, the third global trend that we need to address is the dramatic change in how we get and interpret information.
This shift isn’t new either. Before the printing press was invented, written documents were drafted by scribes.
Those documents were trusted because - frankly - they are hard to produce. Only those with some standing in the community and reputation had the resources to produce them. It was too expensive and time-consuming for a scoundrel with a crazy idea to publish a book. And so people got used to generally trusting things that were written.
When the printing press dramatically reduced the cost of the printed word, all sorts of things could be published that wouldn’t have been before.
While this actually improved the flow of information, it also confused people who were used to trusting the things they read, and it disrupted society and politics for many years.
Here, we had two media revolutions at once. Until about 30 years ago, news was generally obtained from one or two newspapers, and the small number of network channels available in each country - which usually devoted up to an hour for news.
With the advent of cable news programs, this changed. We created a vehicle for virtually limitless news. Instead of news organisations being forced to decide what were the most important events that happened each day, they could report on many things that were not necessarily relevant to people’s lives but would boost ratings.
News organisations could make news a form of entertainment and compete for viewers in ways that didn’t exist before. And, before long, news balkanized so that every viewer could pick a news service that reinforced their prejudices.
In this way, conservatives who did not trust liberals, could find a channel that reassured them that liberals were untrustworthy, and capable of the most irrational and diabolical acts. And vise-versa. Social media only compounded this, because its algorithms ensured that you’d be fed advertising that reinforced your biases and beliefs.
If this was not enough to bring down trust in government, a second wave of media disruption emerged close on its heels.
With the arrival of cellphones and the world-wide web, suddenly every person with an internet connection could become a journalist and publisher.
Before the traditional media had even heard about a story, people were blogging it, uploading images to YouTube, Facebook and Twitter, and effectively getting their story out faster than cable could.
In order to stay relevant, traditional media simply followed suit and began running with whatever came in across the internet - right, wrong, or horrifyingly wrong.
The notion was that you wouldn’t be wrong for long, but that you needed to publish quickly or risk being irrelevant.
And so we have the phenomenon that at one point over 40% of Americans believed that Barack Obama was born in Kenya. It did not matter that President Obama was born in Hawaii, and that his birth had been duly recorded and reported in the newspaper for all to see. Bloggers created this lie, sent it around at the speed of the internet, and news channels covered the “phenomenon” as if it were actual news.
If anyone on earth recognised the power of this phenomenon, it was the chief evangelist of this claim, Donald Trump; the person who would be the next president.
Today some substantial portion of Americans believe Michelle Obama is a man dressed as a woman. Even more believe that climate change is a hoax, that airplane vapor trails are a government conspiracy to spread chemicals to humans, that vaccinations cause autism, and that toilets in Australia flush backwards.
In this environment, where facts are ignored, and people choose the stories that support their world view, is it any wonder that a substantial number of voters believe even the most outlandish claims.
That the president can claim that it wasn’t raining when it was. That his crowds broke records when they didn’t. That millions of people cast illegal votes when they did not?
Over the past 30 years a perfect storm has formed to produce an election in which a large enough portion of the American public has backed ideas that have been heretofore unthinkable.
Our nation elected a president that was prepared to call into question not only a stunningly broad set of policies that had served the US well, but he was also prepared to question basic facts, science, and principles of our democracy.
And that is why the challenge for our nations, and our nations’ universities is both great and urgent.
Role of universities
So what is the way forward? We should not lose heart. During the Gilded Age, when a similar rapid change in technology, media, and demographics all converged to short-circuit our politics, our nations endured. In fact, our nations preserved and strengthened the values that have made America and Australia great.
We remained nations that ensured religious tolerance, the rule of law, free press, free minds, freedom of travel, free markets, and the free movement of capital.
Despite missteps along the way, over time we became fairer nations, more prosperous nations, and more secure nations not by abandoning our values, but by fighting for them.
So this is the challenge facing our universities as they confront their own disruption. Whatever is happening in the US will challenge every democracy and every pillar of democracy. The future is here, it just is not evenly distributed. Yet.
The only antidote to the impulse to divide and exclude, to isolate, to create barriers, and to resist the future is this.
We need to rethink education to help address the things that ail our democracies. And we must put our best minds to work to offer a vision of the future in this new economy that works for everyone.
The forces I’ve described challenge many assumptions about how we should learn, the lives and careers we should be prepared to perform, and how our economies should operate.
To successfully navigate this turn, educational institutions need to refocus on solutions that reboot our democracy, and prepare our citizens for this new economy.
Australia is already ahead of the US in many actions needed to restore and refresh democracy. Australia’s universal voting offers a model that the US should consider.
Universal voting reduces the influence of extremism and money in elections, it keeps the debate more on the issues that matter, and it forces citizens to stay more informed and engaged.
Australia already has a head start on educating citizens. In the US, free public education is guaranteed only until year 12, and civics education has been dropped from most curricula.
Today, every study shows that to be economically competitive and an effective citizen in a Western economy, you need at least 14 years of education including civics. So again, the system here in Australia is one that Western democracies need to study and adopt.
There are things that no one has solved where we all need to pioneer together. Both of our Second Industrial Revolution economies were originally designed to train people to work from ages 25 to 55 (after doing military service) in one career and generally not live past 65. The training they received prepared them for a single career that would last their full working life. This no longer works.
We need to rethink our educational model.
We will need to increasingly train young people not just in a skill, but in how to learn, and for skills that cut across multiple disciplines. Universities may become less a way station for youth, than a life-long subscription service, with frequent retrainings.
We need to restructure information systems so that facts matter, false statements are exposed, and making false claims has real consequences. The irony of the information age is that increasingly we seem to know more, but understand less. But this can be fixed.
Imagine a world where every article is immediately fact-checked by libraries, and reviewed for accuracy and relevance by a trusted board of editors drawing on high speed computers. Where every article has the equivalent of a yelp-rating, or is crowd-corrected wikipedia style. Where every false and digitally altered image can be exposed through blockchain technology. Universities can do this.
After a while, just as we know which restaurants to avoid, we would know which writers and journals and articles and politicians we can’t trust.
And finally, we need to devote our best minds to answering the greatest question of the digital age.
How will we give people purpose when machines can do everything that is dull, dangerous, or determinable? What economic model works where most of the things in life can be produced sustainably at low cost through robotics? How do we develop a bright vision of the future and give them hope.
Australia and America and Europe faced a similar set of questions 100 years ago. Then the vast majority of our citizens worked agriculture jobs in family owned businesses in rural communities. Over 80% of jobs were in family farms then. What would happen when all of the kids moved to the cities? How could there possibly be enough jobs for them all, and how would America feed itself?
Today, more people are employed than ever, they have more opportunity than ever, and America has more food to export than ever. The question for our universities is to help us see the future and prepare future generations to succeed in it.
No one can say for certain yet what the future holds. But the two things we know about the new economy are that people need a purpose, and that the most prized roles for human beings will be things that only human beings can do.
So as you begin this important work, consider this as a model for the university of the future.
The greatest limits on human civilisation have always been access to water, arable land for food, a source of energy, protection from the elements, and protection from each other.
A vast portion of our economy has been focused on producing those things. But now we have ways to turn salt water and brackish water into usable water.
We have the ability to produce foods that are more nutritious and last longer requiring less land.
We have created clean and renewable sources of energy that could make any place on earth energy self-sufficient.
We can create machines that do the back-breaking monotonous work involved in most jobs.
And, for the first time in human history, we can actually visualise a world that is liberated from dull, dangerous, and determinable work, from activities that cause us stress without producing much value, and from lives extinguished before they achieved their potential.
We have the potential to liberate the workforce to do the one thing that machines can’t do – improve ourselves and the emotional lives of others.
To date, our economic models have ignored many forms of high value work. Here’s one example that I think we can all relate to.
Ultimately, every family and community depends on people who raise our children, look after ageing parents, bring food and comfort to ailing neighbour. And in most cases we don’t compensate them, or reward them, or even give them a title.
They are untrained, unsupported, and yet they are entrusted with our most challenging problem - the human condition - a son who is an addict, a brother who is abusive, a daughter who is depressed, a mother who has lost her memory.
So many people need help with the emotional and mental parts of their lives. Yet, human history has been dominated by one era after another of people simply inflicting more misery on other people, while other work is rewarded.
Massive violence, incarceration, alienation, institutionalisation are ultimately products of emotional failings. Our economies have been driven by scarcity, and our actions by irrational fear, and prejudice, and other products of our own emotional and mental limitations.
So imagine this…
Imagine a world in which our technologists work to meet the most basic human needs sustainably, and our economies are freed up to do the things that society has always neglected – resolve disputes, restore mental health, nurse, teach, imagine, explore, imagine, design, create art, and provide the human touch.
Imagine paying people as much to do this, as we currently pay for them to mine coal, or guard a prison.
Done right, the moment of doubt we face today may be the beginning of something even more profound.
We could move from an impulse to exclude and brand people to just the opposite: an economy based on human outreach and improving the human condition.
We stand together at a great human inflection point. Society will be very different in the next 100 years than it has been over the past 100 years.
Either we need to offer a vision for something better, or we cling to the past and will be left behind.
I am confident that we will rise to the occasion.
While we struggle with the impulses and politics and challenges of today, we have to keep our eye on the future.
As President John F. Kennedy said,
I believe our best minds and universities can forge a new vision. One in which we produce an economy that is less violent, less wasteful, less stressful, and in which we live longer and better lives. The world as we have created it is merely a reflection of our thinking.
Change our minds, and we can change the world.
A New Democratic Enlightenment?John Keane, University of Sydney
This is the slightly rewritten text of my address to the opening plenary session, ‘New Enlightenment Neue Aufklärung’, at the European Forum Alpbach, Alpbach, Austria, 28 August 2016.
Ladies and Gentlemen, Citizens and Citizenesses:
The disintegration of Europe that the world is witnessing, and in some quarters beginning to fear, no doubt has multiple causes and causers. One cause whose power to shape ultimate outcomes should not be underestimated is the felt decadence of democratic institutions. Many observers speak of a developing crisis of European democracy. While the headline phrase triggers my discomfort about unwarranted exaggeration, it plausibly captures a basic fact of contemporary European politics: the fact that the present-day paralysis of the spirit and institutions of democracy in the European region is bound up with the slow death of social democracy.
In the Austrian context, in the run-up to a bitterly contested presidential election, I’m aware that talk of the death of social democracy sounds straightforwardly a political statement. Understandably so, for once upon a time the Social Democratic Workers’ Party of Austria (SDAPÖ) was among the most powerful, dynamic and forward-thinking party machines of the modern world. In striking contrast, today’s Social Democratic Party of Austria (SPÖ) is a sickly pale shadow of its former robust self. The decline of social democracy in Austria is palpable. Yet what I have to offer to you this afternoon is an analysis that aims to be less local and more far-reaching, an audit of social democracy that is at the same time conceptual and historical and concerned with global trends, a probe that equally pays attention to language, through which (I remind you in the village of Erwin Schrödinger) people form pictures of ‘reality’ and move through their world.
The theme of our European Forum Alpbach symposium on politics is the New Enlightenment (Neue Aufklärung) so here’s my opening conjecture: the language and ideal of social democracy has its roots in the 18th-century Enlightenment. Enlightenment: when people encounter the word, they think immediately of reason and rationality, a black swan moment when new mental energies flowed, when the early modern 18th-century world began to be turned upside down by fearless criticism of prejudice, pride and power.
The interpretation is unfortunately too simple. Truth is that the intellectual upheaval that came to be called the Enlightenment (the phrase was largely a 19th-century neologism, typically circulated by its enemies) was a much messier affair. Historians, philosophers and political thinkers have taught us to see this 18th-century upheaval in less Whiggish and sanguine ways. Most analysts of the so-called Enlightenment today prefer to view it as multiple enlightenments, as various intellectual and literary tendencies centred on many different themes, with positive and negative effects.
Consider, for example, how Theodor Adorno, Max Horkheimer and Michel Foucault long ago challenged us to see that the 18th-century fetish of ‘reason’, its will to know everything and to measure and master the world, fed the spirit of bureaucratic ‘unreason’, incarceration and totalitarian rule. Or think of Isaiah Berlin’s reminder that the opponents of Enlightenment, dubbed the ‘Counter-Enlightenment’, included thinkers, poets, painters and writers who plausibly championed pluralism and attacked the blind belief in scientific progress, in effect because they viewed the world as shaped not by the ‘laws of nature’, but by the contingencies of history.
My research on Thomas Paine and the eighteenth century (published as Tom Paine: A Political Life) tried to complicate matters by making the point that the Enlightenment also included champions of civil rights, social justice and democratic representation, rebels and radicals who were sharply aware of the miseries suffered by people ground down by modern institutions not of their own choosing. These dissenting rebels despised misery. Thanks to them, we could say, misery was given its proper name. Starvation and indignity, violence and powerlessness, were denounced as unnecessary blights on the face of the world. Misery was no longer regarded as God-given, or as part of the natural order of things (natura naturans). It was seen to be contingent, remediable, if necessary by means of revolutionary upheavals.
Social democracy was the offspring of this bold way of imagining a world freed from misery. Its fortunes were tied to the rise and expansion of modern industrial capitalism. Coined during the 1840s, the neologism Sozialdemokratie first circulated among disaffected German-speaking skilled craftsmen, farm and factory workers, whose support for social democracy made possible the conversion of isolated pockets of social resistance into powerful mass movements protected by trade unions, political parties and governments committed to widening the franchise and building welfare state institutions.
Market inequalities fuelled resentments among the supporters of social democracy. Their powerful charge was that ‘free market’ competition produces chronic gaps between winners and losers and, eventually, a society defined by private splendour and public squalor. If Eduard Bernstein, Karl Renner, Rosa Luxemburg, Clement Attlee, Jawaharlal Nehru or Bruno Kreisky were suddenly to reappear in our midst, they would not be surprised by the way practically all market-driven democracies are today coming to resemble hour glass-shaped societies. In these societies, as Thomas Piketty and other political economists explain, the wealth of small numbers of extremely rich people has multiplied, the shrinking middle classes feel insecure and the ranks of the permanently poor and the precariat are swelling – as in the United States, the richest capitalist market economy on the face of the earth, where 1% of households now own 38% of the national wealth; or in Britain, where at the end of three decades of deregulated growth, 30 per cent of children live in poverty; or in Austria, where at least 20% of citizens are now suffering money and dignity problems.
Social democrats of the 19th- and early-20th centuries found obnoxious, and actively resisted, social inequality on this scale. They railed against the general dehumanising effects of treating people as commodities. Social democrats acknowledged the technical prowess, productivity and dynamism of markets. But they were sure that love and friendship, family life, public freedoms and the vote could not be bought with money, or somehow be manufactured by commodity production, exchange and consumption. That was the whole point of their radical demands for a living wage, the abolition of child labour and Eight Hours Work, Eight Hours Recreation and Eight Hours Rest. In the dark year of 1944, the Hungarian social democrat Karl Polanyi put the point in defiant words: ‘To allow the market mechanism to be the sole director of the fate of human beings and their natural environment’, he wrote, ‘would result in the demolition of society’. His reasoning, traceable to the 18th-century Enlightenment, was that human beings are ‘fictitious commodities’. His conclusion: dignity through democracy had to be fought for politically, which at a minimum meant the weakening of market forces and strengthening the hand of the commonweal against private profits, money and selfishness.
More than a few social democrats went further, by pointing out, in opposition to Jean-Baptiste Say, Friedrich von Hayek and other liberal political economists, the reasons why unregulated markets are prone to collapse. Economists of recent decades have regularly described these failures as ‘externalities’, but their jargon is misleading. Something more fundamental is at stake. Free markets periodically cripple themselves, sometimes to the point of total breakdown, for instance because (a) they whip up socially disruptive storms of technical innovation (Joseph Schumpeter’s point) or because (b) as we know from recent bitter experience, unregulated markets generate bubbles whose inevitable bursting bring whole economies to their knees.
The social democratic critique of free market capitalism proved compelling for millions of people. But what exactly did social democracy mean to its champions and sympathisers? Winning parliamentary elections and controlling the levers of state power, certainly. Yet there was always some muddle over the meaning of the ‘social’ in social democracy; and there were frequent brawls about whether and how the taming of markets, which many called ‘democracy’ and ‘socialism’, could be achieved.
There is no time for me to recall the great moments of high drama, conceptual strife and contradictions, dark sides and luscious ironies that form part of a recorded history that includes courageous struggles of the downtrodden to form co-operatives, friendly societies, free trade unions, and to spread literacy and win the struggle for the universal franchise through social democratic parties. There were fractious splits that gave birth to anarchism and Bolshevism; and outbursts of nationalism and xenophobia and (in Sweden) experiments with eugenics. The history also includes the re-launch of social democratic parties at the Frankfurt Declaration of the Socialist International (1951), as well as efforts to nationalise railways and heavy industry, to socialise the provision of health care and formal education for all citizens. And the history of social democracy also embraces big and bold thinking, romantic talk of the need to abolish alienation, respect for what Paul Lafargue called the right to be lazy (le droit à la paresse), even the vision of a future communist society projected by his father-in-law Karl Marx, a society in which women and men, freed from the shackles of the market, went hunting in the morning, fished in the afternoon and, after a good dinner, engaged others in frank political discussion.
A Slow Death
A strange but striking feature of the history of social democracy is just how distant and worn out this language now feels. The slow death of social democracy during the past several decades has the quality of an unfolding political tragedy; it certainly signals the decline and disappearance of the spirit and substance of the old Enlightenment. Yes, there is a Grosse Koalition in Germany, and a red-green government led by Stefan Löfven in Sweden. But almost everywhere social democratic political parties and organisations have run out of steam; their loss of organising energy and political imagination is palpable. Collaborators with financial capitalism (Jürgen Kocka) then double-speak apologists of austerity, their Third Way has turned out to be a dead end.
Gone are the flags, historic speeches and bouquets of red roses. Party leader intellectuals of the calibre of Eduard Bernstein (1850–1932), Rudolf Hilferding (1877-1941) and C.A.R. Crosland (1918-1977) are figures of a distant past. Today’s party leaders who still dare to call themselves social democrats are by comparison intellectual pygmies. Loud calls for greater equality, social justice and public service have faded, often into choking silence. Positive references to the Keynesian welfare state have disappeared. As if to prove that social democracy was just an intermezzo between capitalism and more capitalism, these leaders speak of budgetary restraint, triple ‘A’ ratings, ‘renewed growth’ and ‘competition’, public-private partnerships, ‘stakeholders’ and ‘business partners’.
Sometimes the duplicity induces pain. I once witnessed the fabulist Tony Blair reassure a gathering of trade unionists that he was against free market forces before moving on, two hours later, after a light lunch together, to tell a group of business executives exactly the opposite. The crisis of Atlantic-region capitalism since 2008 seems to have amplified the duplicity. Within the dwindling ranks of committed social democrats, few now call themselves socialists (Alexis Tsipras and Jeremy Corbyn are exceptions), or even social democrats. Most leaders are party faithful, machine men and women surrounded by media advisers, connoisseurs of governmental power geared to free markets. Few make noise about tax avoidance by big business and the rich, the decay of public services, the weakening of trade unions, or rising inequality. All of them, usually without knowing it, are blind apologists of the drift towards a new form of financial capitalism protected by what I have elsewhere called ‘banking states’ that have lost control over money supply, so that in most democratic countries over 95% of the ‘broad money’ supply is now in the hands of private banks and credit institutions.
Ladies and gentlemen: social democracy failed to understand, let alone regulate, this new historical type of capitalism, whose near-breakdown in 2007/2008 has damaged the lives of millions of people in Europe and elsewhere. But the disintegration of social democracy has been overdetermined by other, multiple forces. Among the most important are these entangled trends, here summarised in the briefest form:
● Membership of social democratic parties has dipped dramatically. Although accurate figures are hard to obtain – these parties are notoriously secretive about their active membership lists - we know that in 1950 the Norwegian Labour Party, one of the most successful in the world, had over 200,000 paid-up members; and that today its membership is barely one-quarter that figure. Much the same trend is evident within the British Labour Party, whose membership peaked in the early 1950s at over 1 million and is today less than half that figure. Helped by the recent £3 special offer registration, total membership of the Labour Party is now around 370,000 – less than the 400,000 figure recorded at the 1997 general election. During Blair’s years of leadership alone, membership declined steadily every year from 405,000 to 166,000. When it is considered that during the post-1945 period, the size of the electorate in most countries has been steadily increasing (by 20% between 1964 and 2005 in Britain alone) the proportion of people who are no longer members of social democratic parties is far more substantial than even the raw numbers suggest. The figures imply a profound waning of enthusiasm for social democracy in party form. Satirists might even say that its parties are waging a new political struggle: the struggle for self-effacement.
● Social democratic parties were among the slowest to react to the upheavals effected by the digital, globally networked communications revolution that began during the 1960s. The harnessing of big data through networked campaigning techniques by these parties has often been resisted, or ignored. Striking is the contrast with the powerful social democratic parties of the late 19th century. They stood for universal public literacy and published influential newspapers, books, pamphlets and best-selling utopian novels and literary fantasies such as Edward Bellamy’s Looking Backward, 2000–1887 (1888). Social democracy was once a powerful symbol of democratic openness and communicative empowerment. Today it symbolises sound bites and media grabs, the avoidance of bad news. The old class struggles have been replaced by phrase struggles;
● Social democratic parties have shown limited awareness of the emergence, since the 1940s, of monitory democracy. This is a new historical form of democracy in which free and fair elections and parliaments are of declining importance, certainly when compared with the rising importance of the public monitoring and restraint - humbling – of arbitrary power by means of a multitude of newly-invented watchdog institutions such as citizens’ assemblies, teach-ins, public forums, activist courts, environmental networks and WikiLeaks, to name just a few innovations;
● Gripped by a territorial state mentality and confined to nation state barracks, social democratic parties have underestimated the agenda-setting and blackmail and veto effects of cross-border chains of organised corporate and governmental power. Operating within the boundaries of territorial states, social democratic parties and governments have consequently been weakened and victimised by what Albert Einstein dubbed ‘spooky action at a distance’: cross-border butterfly effects, arbitrage pressures and quantum tunnels, all of which have greatly complicated the politics of wealth and income redistribution;
● The rise of the People’s Republic of China as an economic great power on the global power stage has had two ironic effects: it has weakened an important part of the social support base of social democracy (industrial manufacturing, trade unions, workers) and established a viable ‘socialist’ alternative to capitalism in social democratic form: one party state capitalism legitimated by locally-made forms of democratic rule; and
● The long-term silence of social democrats about environmental degradation has accelerated the death of social democracy. We have entered an age of gradually rising public awareness of the destructive effects of the modern human will to dominate our biosphere, of the bad habit of treating nature, just as Africans or indigenous peoples were once treated, as commodities, as objects of production, profit and other selfishly human ends.
This last-mentioned development needs some elaboration. For more than half a generation, beginning with works such as Rachel Carson’s _Silent Spring _(1962), green thinkers, scientists, journalists, politicians and social movement activists have been pointing out that the whole social democratic tradition is implicated deeply in the spoliation of our planet. They note that social democracy was the Janus face of free-market capitalism: both stood for the human domination of nature. Hence they call for a new politics with green qualities, a new democratic enlightenment that poses a fundamental challenge to both the style and substance of the old social democracy, or what remains of it.
The New Democratic Enlightenment
What is this new democratic enlightenment? It has multiple features, especially a strong sense of the complexity and indeterminacy of things and processes in our world. It displays resistance to wilful simplification, and opposition to all ideologies, including populism. There is preference for extra-parliamentary civic action and monitory democracy against the old model of electoral democracy in territorial state form. The Neue Aufklärung features sympathy for a rich repertoire of new political tactics practised in a variety of local and cross-border settings: citizen science networks, Barcelona-style municipalismo, bio-regional assemblies, green political parties (the first in the world was the United Tasmania Group), earth watch summits and the skilful staging of non-violent media events (Greenpeace originally called them ‘mind bombs’).
The new democratic enlightenment is marked by an earthy cosmopolitanism. It displays a deep sensitivity to the global interdependence of peoples and their ecosystems. There is support for new post-carbon energy regimes and opposition to fossil-fuelled growth and habitat destruction. There is also acute awareness of the opportunities and dangers posed by marketisation of the most intimate areas of everyday life, for instance fertility outsourcing, data harvesting, nanotechnologies, stem cell research and humanoid robots. The new enlightenment has a clear understanding of the golden rule that whoever has the gold rules. It displays strong awareness that market control of daily life, civil society and political institutions has negative social and political consequences, unless checked by open public debate, political resistance, public regulation and the positive redistribution of wealth, for instance through a basic citizens’ income. Especially striking is the new enlightenment’s call for the ‘de-commodification’ (Claus Offe) of the biosphere, in effect, the replacement of social democracy’s will to dominate nature and its innocent attachment to History with a more prudent sense of ‘deep time’ aware of the fragile complexity of the biosphere and its multiple rhythms.
The new democratic enlightenment is opposed to the old social democratic metaphysics of economic progress, and the machismo of its favoured imagery of warrior male bodies gathered at the gates of pits, docks and factories, singing hymns to industrial growth, under smoke-stained skies. The new enlightenment issues a warning: that unless we human beings change our ways with the world in which we dwell things may turn out badly – very badly indeed. Its overall attitude to the world is precautionary: whether we know it or not, it is said, we humans are now deciding which evolutionary pathway awaits us, including the possibility that we are trapped in an extinction event of our own making.
It is worth asking whether these themes of the new enlightenment are evidence of a black swan moment in global affairs? Are they proof that we are living through the beginning of a large phase transformation analogous to the last decades of the 18th century, when the rough-and-tumble resistance to the miseries produced by market-driven industrial capitalism slowly but surely morphed into a highly disciplined workers’ movement receptive to the siren calls of social democracy?
It is impossible to know with utter certainty whether these are the right questions, or whether our times are like that. Only the historians of the future will be able to tell us, yet it should be noted that many champions of the new enlightenment are now convinced that a tipping point has indeed been reached. Their sense of alternative possibilities (Robert Musil’s Möglichkeitsinne) is strong. In effect, the new enlightenment is an exercise in democracy ‘dreaming itself’. It demands that democracy be taken seriously and self-reflexively redefined as monitory democracy. It insists that the point is not only to change the world, but also to interpret it in new ways, through new languages, to grasp that so many things of our times are too strange to be thought, to see that although democracy is never fully realisable, that it is always the ‘democracy to come’ (Jacques Derrida), it is nevertheless still the most powerful earthly weapon available for humbling the powerful and taming their arrogant and foolish will to power.
But where does this new enlightenment leave social democracy? What is the relationship between the first and second enlightenments? Thinking social democrats will reply to such questions by emphasising the flexibility of their creed, the capacity of their originally 19th-century standpoint to adapt to 21st-century circumstances. I have friends and colleagues who are adamant that it’s much too early to bid farewell to social democracy. They reject the charge that it is a worn-out ideology whose moments of triumph belong to the past, or that it is a mournful lament for the achievements of bygone days (Tony Judt).
These social democrats admit that the goal of re-building social solidarity among citizens through civil society and government action has been damaged by market-produced inequality and fudged agendas designed to win votes from business, the rich and right-wing political competitors. These thinking social democrats know that the old slogans and sense of time of social democracy are exhausted. They admit to being impressed by the media-savvy initiatives and staged détournement of civic networks such as M-15, Amnesty International and the International Consortium of Investigative Journalists, whose actions aim to put a stop to the violence of states, armies and gangs, but also to corporate misconduct and market injustices and miseries in cross-border settings. These thinking social democrats then play the ace card in their pack: they reiterate the importance of ‘complex equality’ (Michael Walzer) as the core value of their creed. These social democrats aim to retrieve its most fruitful old ‘wish image’ (Wunschbild) to deal politically with the new problems of our time. They are sure that the old topic of misery, inequality, capitalism and democracy deserves to be revived. In a recent lecture in Firenze, along these lines, Jürgen Kocka, one of Germany’s most influential social democratic intellectuals, expressed this point well. The new ‘financialised’ capitalism, he noted, is ‘becoming more and more market radical, more mobile, unsteady and breathless’. His conclusion is defiant: ‘capitalism is not democratic and democracy not capitalistic’.
Ladies and gentlemen: you will no doubt be asking after the chances of practical success of the new enlightenment, this new dreaming of democracy. In Europe and elsewhere, how viable is the hope that red and green can be mixed, you will ask? Can the result be more than bland shades of neutral brown? Might the old and new be combined into a powerful force for an enlightened politics of democratic equality against the power of money and markets and their ruination of our biosphere? Time will tell whether the proposed metamorphosis I’ve sketched can happen successfully. As things stand, only one thing can safely be said. If the new enlightenment happened then it would confirm an old political axiom famously outlined by the English designer, poet and socialist William Morris (1834 - 1896): when enlightened people fight for liberty, equality and democracy, he noted, the battles and wars they lose typically inspire others to carry on their fight. When they do that, in much-changed circumstances, he noted, they need to experiment with new languages, and use new and improved means, fuelled by new hopes and new sensibilities. Shouldn’t a new enlightenment, a second enlightenment that is less intellectually arrogant and more democratically powerful than its predecessor, heed this wise advice?
People don't trust blockchain systems – is regulation a way to help?Kevin Werbach, University of Pennsylvania
Blockchain technology isn’t as widely used as it could be, largely because blockchain users don’t trust each other, as research shows. Business leaders and regular people are also slow to adopt blockchain-based systems because they fear potential government regulations might require them to make expensive or difficult changes in the future.
Mistrust and regulatory uncertainty are strange problems for blockchain technology to have, though. The first widely adopted blockchain, bitcoin, was expressly created to allow financial transactions “without relying on trust” or on governments overseeing the currency. Users who don’t trust a bank or other intermediary to accurately track transactions can instead rely on unchangeable mathematical algorithms. Further, the system is decentralized, with data stored on thousands – or more – of internet-connected computers around the world, preventing regulators from shutting down the network as a whole.
As I discuss in my recent book, “The Blockchain and the New Architecture of Trust,” the contradiction between blockchain’s allegedly trust-less technology and its trust-needing users arises from a misunderstanding about human nature. Economists often view trust as a cost, because it takes effort to establish. But people actually want to use systems they can trust. They intuitively understand that cultures and companies with strong trust avoid the hidden costs that stem from everyone constantly trying to both cheat the system and avoid being cheated by others.
Blockchain, as it turns out, doesn’t herald the end of the need for trust. Most people will want laws and regulations to help make blockchain-based systems trustworthy.
Problems arise without trust
Bitcoin’s creator wrote in 2009 that “The root problem with conventional currency is all the trust that’s required to make it work.” With government-issued money, the public must trust central bankers and commercial banks to preserve economic stability and protect users’ privacy. The blockchain framework that bitcoin introduced was supposed to be a “trustless” alternative. Sometimes, though, it shouldn’t be trusted.
In 2016, for instance, someone exploited a flaw in the DAO, a decentralized application using the Ethereum blockchain, to withdraw about US$60 million worth of cryptocurrency. Fortunately, members of the Ethereum community trusted each other enough to adopt a radical solution: They created a new copy of the entire blockchain to reverse the theft. The process was slow and awkward, though, and almost failed.
A new type of investment, called initial coin offerings, further illustrates why blockchain-based activity still requires trust. Since 2017, blockchain-based startups have raised more than $20 billion by selling cryptocurrency tokens to supporters around the world. However, a substantial percentage of those companies were out-and-out frauds. In other cases, investors simply had no idea what they were investing in. The blockchain itself doesn’t provide the kind of disclosure that regulators require for traditional securities.
The initial coin offering faucet slowed to a trickle in the second half of 2018 as the predictable abuses of a “wild west” environment became clear. As regulators stepped in, the market shifted toward selling digital tokens under the same rules as stocks or other securities, despite the limits those rules impose.
The myth of decentralization
The other reason that regulators have a role to play is security. Blockchain networks themselves are typically very secure, and they eliminate the vulnerability of a single company controlling transactions. However, blockchains identify the owner of an account based on its cryptographic private key, a random-seeming string of numbers and letters. Steal the key, and you’ve got the money. Ten percent of initial coin offerings proceeds has already been stolen.
Most users acquire their cryptocurrency through an exchange such as Coinbase, which trades it for dollars or other traditional currencies. They also let the exchanges hold their private keys, because that makes transactions easier and more efficient. However, it also creates a point of vulnerability: If the exchange’s records are breached, the private keys aren’t secret anymore.
Some users hold their own keys, and there are new exchanges being developed that don’t require users to give them up. These will never be as convenient, though, because the burden of managing keys and keeping them safe falls on users. Regulation will be needed to protect consumers.
Government authorities will also have a role in restricting money laundering, terrorist financing and other criminal uses of cryptocurrencies. The more decentralized a system is, the harder it will be to identify a responsible party to police illicit conduct. Some users may not care, or may see that as a necessary cost of freedom. But networks optimized for criminals won’t ever achieve mainstream success among law-abiding citizens. Ordinary users will be scared off, regulated banks and financial services firms will be prohibited from interacting with them, and law enforcement will find ways to disrupt their activities.
Regulators around the world are working to balance the flexibility to transact in new ways through cryptocurrencies with appropriate safeguards. They aren’t all taking the same route, but that’s good. When the state of New York adopted rigid registration requirements called the BitLicense that few companies could meet, other jurisdictions saw the implementation problems and took different paths. Wyoming, for example, adopted a series of bills that clarify the legal status of cryptocurrencies while imposing reasonable protections. New York is now reevaluating the BitLicense, to avoid losing business activity.
If people trust blockchain systems, they’ll use them. That’s the only way they’ll see mass-market adoption. The jurisdictions with the best regulation – not the ones with the least – will attract activity. Like any technological system, blockchains combine software code and human activity. It’s not enough to trust the computers – which, after all, are built and programmed by people. For the technology to be used widely and wisely, there must be mechanisms to hold the humans accountable, too.
The energy industry is being disrupted – and traditional firms can't keep upAntony Froggatt, University of Exeter
The electricity sector is experiencing a profound disruptive shock. This is due to technological innovation including the falling costs of renewables and energy storage, along with tougher environmental policies and regulatory reform.
These changes are most apparent in Australia, the EU and parts of North America, where once-powerful utility companies are struggling or restructuring to survive. But, as I’ve looked at in a recent report, decision-makers elsewhere are asking whether these power markets are outliers or if they herald a global shift.
Global investment in renewable energy – excluding large hydropower – was just under US$279 billion in 2017, a rise of 2% on the previous year. Wind and solar account for most of this. In fact, as technology and installation becomes cheaper, non-hydro renewables accounted for 61% of all the new installed power capacity (that’s including all fossil fuel, nuclear and hydro) across the world in 2017.
If we are to address climate change, such changes must continue. While the construction of wind and solar was initially stimulated by decarbonisation policy, now it is driven by economics. As renewables continue to be deployed, they become ever cheaper to build and install. Solar is already at least as cheap as coal in Germany, Australia, the US, Spain and Italy. By 2021, it is also expected to be cheaper than coal in China.
Integrating all this new power may become costly. National power systems have been designed for centralised coal or gas power stations, after all, which can more easily be switched on and off to ensure supply meets demand. Things are much more challenging when renewables are involved, as the sun doesn’t always shine, and the wind doesn’t always blow.
A new energy system is emerging
Innovations in energy storage and digital technology promise to keep these costs down, but the big traditional utilities are failing to keep pace. This has left new actors free to provide new technologies and business models.
Storage is a key technological element of the new system. Fortunately, the development of electric vehicles (EV), to address climate change and localised pollution, is being seen as a key driver of change for transport and power sectors. EV sales are set to increase dramatically, stimulated by recent government targets and policy support, while the prices of lithium-ion batteries decline sharply.
A plethora of large and powerful car manufacturers are getting into electric vehicles, prompted by government sales targets and the speed at which the total cost of owning an EV is approaching that of a traditional petrol car. Honda wants two-thirds of its sales to be electric or hybrid by 2030, BMW is aiming for 15–25% by 2025, while both Volvo and Jaguar Land Rover are targeting 100% by 2020.
Many of these companies are now making use of their manufacturing capabilities and moving into selling home storage units for electricity, which aren’t too different from an electric car’s battery. These storage units mean that people with solar panels will be able to consume more of their own electricity. This is further reducing the market for traditional firms and creating new competitors as some of the world’s largest manufacturing companies enter the power sector for the first time.
As in many other sectors, digitalisation is another disruptive change. Smart meters in particular mean energy firms can better monitor and understand their customers, which enables even more flexibility – imagine energy supplies tailored to individual households and times of day.
These increasingly complex electricity systems will rely on machine learning algorithms to know when and where energy will be needed. Internet giants like Google and Amazon are already piloting and exploring the opportunities. Who would bet against Amazon becoming a major power supplier in the next decade? Blockchain technology could also enable a peer to peer energy market, allowing neighbours to sell excess power to one another and potentially further reducing the role of traditional firms.
Over the past few years, there have been significant changes in the power sector, resulting in declining profits and the restructuring of traditional utilities. However, looking forward, the electrification of the transport and eventually heat sectors, and increasing digitalisation is likely to lead to far more significant disruption than we have seen to date. This will bring in a whole new set of companies and potentially engage consumers like never before.
Bitcoin's wild ride and what's ahead for the cryptocurrencyThanasis Stengos, University of Guelph
Bitcoin has been on a volatile ride in recent times, its value rising and falling like a kite caught in variable winds.
Its future will likely be as unpredictable as its past given that it’s a currency propped up by risk-takers, a target of lawmakers and tied to nothing more substantial than an algorithm.
But there are certain variables and concurrent conditions that are signals worth watching when considering Bitcoin’s future.
An international research team comprised of me, Theodore Panagiotidis at the University of Macedonia in Greece and Orestis Vravosinos at the Barcelona Graduate School of Economics in Spain recently analyzed a broad spectrum of data representing several years in the life of Bitcoin.
It was our attempt to reach a deeper understanding of what drives the cryptocurrency’s value.
Can you really predict how investors will behave around something with so many layers of complexity — around what is essentially a black box system and the subject of so much hype?
It’s not an easy task. We set out to bring a measure of predictability to the path the cryptocurrency will take.
Online buzz, gold impact Bitcoin
We looked closely at 21 variables that could potentially affect Bitcoin returns. Vital market determinants like gold and oil prices, various currency exchange rates and stock market indexes from around the world were part of the mix.
Government policy-related economic uncertainty, along with the internet search intensity of Bitcoin, were crucial areas of our research.
We took more than 2,500 observations of variables spanning a seven-year period and filtered it through what’s known as a LASSO — a “least absolute shrinkage and selection operator.” It’s an analytical model to determine what the possible predictors, or covariates, might be.
We found that of all the many variables, the amount of online chatter about Bitcoin, along with gold returns, and uncertainty over government policy stand out as possible predictors.
Having said that, Bitcoin is a moving target that appears not to conform to any logical patterns.
In relationship to gold, Bitcoin’s value tends to rise as gold rises. But will that remain consistent if the economy stumbles? In those circumstances, investors seek the safer haven of gold, American dollars and euros, entities they know to have value supported by governments and central banks. The riskier currencies, like the crypto ones, might be abandoned.
There are many cryptocurrencies in circulation, but Bitcoin has outstripped them all in popularity, mostly because it is cloaked in mystery and because of the media attention surrounding its dramatic value fluxes.
There is a fascination with something that is new, that is technologically created and that’s hard to hack. The idea of having a Bitcoin network that can evade governments is alluring to people.
We found that the general chatter and interest surrounding Bitcoin, positive and negative alike, is a main determinant of its value. We used Google and Wikipedia analytics to measure the hype.
Bitcoin as a means of exchange has been running under the radar of regulation over the entirety of its nine-year lifespan. But we cannot see that scenario continuing for long. And it seems that investors are also mindful of the looming possibility of regulatory oversight since Bitcoin’s value tends to respond negatively when there is speculation about government action.
With Bitcoin and other cryptocurrencies, transactions are conducted free of taxation. We can’t be sure what the nature of those transactions are, but often cryptocurrencies are used to avoid taxes or duties, or to engage in illicit commerce, which makes them even more shadowy, darkly appealing currencies.
Governments will want in on the action
It’s not clear how governments will ultimately respond to this tax-free commerce, but we can be certain that they’ll eventually act. Wherever there are goods and services changing hands and money is being made, government is eager to get a piece of the action.
If cryptocurrencies continue to grow and position themselves as systems that are beyond the influence of banks and the reach of government regulation, we can be sure that governments will enact national laws and take their share of the proceeds.
Many people believe that Bitcoin is going to replace the money we currently use, but we doubt it.
That’s because big government will never allow it. Governments want the tax revenues, and they want control.
Once governments begin to demand access to Bitcoin transaction records, especially those carried out with mainstream businesses, it is likely that regulations will follow. Once that happens, the black box will be opened and Bitcoin’s appeal as an underground tax avoidance scheme will be lost.
Bitcoin’s fate is therefore highly unpredictable and dependent on what governments will do in the future. Once the crytocurrency was taken seriously by gamblers and techies, it became volatile, and that volatility is showing no signs of abating.
What our research has shown is that with something as erratic as Bitcoin, with online chatter its main driving force rather than economic fundamentals, it would be best for investors to fasten their seatbelts and hold on tight.