As the implications of the Heartbleed bug continue to be revealed, it becomes clear that while a digital society, including a digital economy and digital government, delivers many benefits, many of these are exceedingly fragile. Two items from the press last month further illustrate the point.
The first is from Metro, which reported on the launch of the London regime’s Computer Emergency Response Team (CERT-UK), tasked with fighting cyber attacks of national significance. Cyber-security doesn’t come cheap and is never 100% guaranteed. Scenario-writers are increasingly highlighting the threat that hackers pose to the operation of vital infrastructure, particularly where manual back-up has been scaled-down for reasons of cost-cutting.
On the same day as the Metrostory, the London Evening Standard ran with a report on HFT – high-frequency trading – in short, the use of computer algorithms to drive stock markets. So intense is the competition that even the use of microwave radio rather than cables to send the signal can shave off the crucial nanoseconds needed to close a deal. Machines don’t think, so while the alternating euphoria and panic of the market are self-correcting with human intervention, they can easily get out of control in its absence.
The article was written by James Rickards, author of The Death of Money – The Coming Collapse of the International Monetary System. It takes the form of a review of work by another financial journalist, Michael Lewis, author of Flash Boys. Rickards is no optimist:
“The gross notional value of derivatives of all kinds owed by banks is already greater than 100 per cent of global GDP. Complexity theory tells us that the worst catastrophe that can occur in a system is an exponential function of the scale of the system. This means that when you double the system scale, you increase systemic risk by a factor of 10 or more… The collapse is already on its way but HFT will make it bigger, faster and impossible to stop. The solution is to ban HFT and most other derivatives. Don’t expect that to happen. Instead, get ready for the avalanche.”
So, what does this mean for Wessex?
Firstly, that the free market is about to eat itself. All that deregulation, explained away as promoting beneficial economies of scale, is revealed as the piling-up of system instability through removing barriers to growth. Barriers to growth are an essential part of a sane, self-governing society that is not at the mercy of unaccountable forces. They are unfair only in the sense that having a skin is unfair to diseases.
Secondly, that, since the UK is, politically-speaking, owned by the City of London and regularly robbed by it, reform driven from above is impossible. Only the building of a resilient regional alternative makes any sense.
Thirdly, that progress towards building such an alternative needs to be stepped up. That includes demanding, ceaselessly, the return of our taxes from London, to be spent in future on local and regional priorities. In Sweden, 36% of the tax take is raised and spent locally and regionally. In federal Germany, the figure is 29%. The OECD average is 26%. The UK figure? 5%. Our paranoid Norman rulers still don’t allow us even to have a regional tier in the first place.