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Governing the Internet

September 3, 2014
by Guest author
It's running on time, but is it running IPv6?

It’s running on time, but is it running IPv6? Source: Iljitsch van Beijnum

Today’s post is by Rudolf van der Berg of the OECD Science, Technology and Industry Directorate

“Internet”, it’s a word we use daily. “Look it up on the Internet”, “I have no Internet”, “Read it on the Internet”, “Connect it to the Internet”, “Meet him/her on the Internet”, “because of the Internet”. There are so many ways the Internet has changed our lives that many of us would be hard pressed to remember daily routines without it. Perhaps, there has never been a technology capable of pervading our activities so much, so quickly and on such a global scale.

A tram (like the one in Iljitsch van Beijnum’s photo above), a train or a bus may already be connected to the Internet with few of us being aware. The number of connected devices in our homes is increasing as are the range of connected devices that we wear or are all around us, from fitness trackers to light bulbs.   A new idea for a device or service developed in Shanghai, in Silicon Valley or in Stockholm can overnight be taken up by people around the world. Think of the games “Flappy Bird”, developed in Vietnam, or “Angry Birds”, from Finland, and extend that phenomenon to everyday activities across the world.

This has had an unprecedented effect on global governance. It is no longer enough to have your national governance of a sector. Unless you cut the cord, the governance of others is directly influencing yours. Whether it is access to undersea cables, satellites, harmful and illegal content, cybersecurity, health or trade, a country’s rules affect those of others.

And it is for this reason that each year the Internet Governance Forum (IGF2014) comes together. This week, 3000 representatives of business, civil society, the Internet technical community, Inter-governmental Organisations and governments come together in Istanbul to discuss the width and breadth of Internet governance. They’re primarily discussing the role of regulators, the deployment of local infrastructure, the creation of local content, the triangle of privacy-security-trust, the governance institutions, and what it all means for the Internet and future developments, such as the Internet of Things. Moreover, the topics are expanding, in parallel with the Internet’s influence, to encompass what it all means for areas such as employment, health, energy and transport.

The OECD is present at the IGF2014 since the Organisation is one of the principal forums where its 34 member countries and partners discuss issues relevant to Internet governance. The OECD publishes each year a number of reports on policies and good practices on how to preserve the open Internet, how it influences economic and social development and how to take advantage of opportunities and address challenges.

This year we are participating in a number of sessions and presenting our most recent work on the Internet economy. We will in particular have an Open Forum on Thursday at 14:30 in Workshop Room 03. The focus of this year’s forum is on the many economic layers and dimensions that make up the open Internet, in a holistic manner. The OECD will engage with policy experts, economists, the technical community and civil society to discuss the different possible approaches to assessing the economics of the open Internet. This session will provide an opportunity to update the IGF on OECD’s ongoing work in this area and to present the OECD Ministerial on the Digital Economy to be held in Mexico in 2016.

Useful links

OECD work on the Internet

How good is your job?

September 3, 2014
by Guest author

EMO 2014-IMAGEToday’s post is by Mark Keese of the OECD Directorate for Employment, Labour and Social Affairs

Six years after the start of the financial crisis, employment still hasn’t got back to pre-2007 levels in many countries, and for many people working conditions have got worse, according to the OECD’s Employment Outlook 2014, released today. Talk of ‘sovereign defaults’ and the whole system unravelling has faded, but – at a personal level – the conversation of the Great Recession has become one about job loss amongst family and friends, cutbacks at work, falling wages, under-employment, insecurity, and what this means for simply trying to make ends meet.

Although the average unemployment rate in the OECD countries finally fell from 8.5% at the peak in 2009 to 7.4% and is predicted to continue to drop slightly throughout 2015, almost 45 million people are still recorded as unemployed, plus an unknown number who’ve disappeared from the unemployment statistics because they have given up looking for work. And the number of people suffering from long-term unemployment (12 months or more) has nearly doubled since 2007, reaching 16.3 million across the OECD countries in total.

Unemployment is not the only concern. Many of those who kept their jobs have also encountered more difficult times. For this reason, the Outlook investigates how the crisis has also influenced working conditions including earnings, security and job quality (measured along three dimensions: the level and distribution of earnings; employment security; and the quality of the work environment). Real wage growth has slowed, or even dropped, as a result of rising unemployment and policies that reduced or froze public sector earnings as a part of fiscal consolidation efforts. The downwards adjustment in wages has helped to improve competitiveness, rebalance current accounts and promote growth. But real wages have fallen harder than expected in some, mainly European, countries. With wages cut, people can’t purchase as much as they used to. With inflation close to zero in some countries, cutting wages further means cutting “nominal” wages: people will actually get less cash from one month to the next. The Outlook argues that wage moderation and even real wage cuts were probably needed in some countries, especially in the Eurozone, to restore competitiveness lost prior to the crisis, when wages grew more rapidly than productivity and countries accumulated large current account deficits. But there comes a point where further cuts don’t create any more jobs, but do create more hardship. What is more, wage cuts only make sense if they lead to lower prices as well. This hasn’t always happened, so policymakers need to make sure that firms don’t just hoard all the savings from lower wages, but pass them on to consumers.

A big concern is the loss of income low-paid workers and their families have suffered as a result of slower wage growth or wage cuts. The Outlook advises countries to look at who will be hit hardest, and who can least afford, wage adjustment in their future policies. Implementing or strengthening mandatory minimum wages, progressive taxation and in-work benefits would help protect those more vulnerable workers.

Non-regular employees, whose work contracts are not ‘permanent’ or ‘open-ended’ (so called “atypical” jobs), are at greater risk of under- or unemployment than regular employees. Yet unfortunately, these types of contracts are becoming more common. While there are some benefits to non-regular employment, such as increased flexibility, they don’t always outweigh the negative consequences. Contrary to belief, “atypical” jobs are not an automatic stepping stone to permanent work. In Europe, fewer than half of temporary workers actually moved into a permanent contract three years later and in countries like France, Italy or Spain the proportion is around 20%– too often, they either get pushed out of the workforce, or continue with a sequence of short-term contracts.

One reason for their lagging behind is that temporary employees of similar ages and with similar skills are 14% less likely to receive employer-sponsored training than their colleagues with permanent contracts. Countries are encouraged to reduce the large gap that exists in some countries between the employment protection of permanent and temporary workers which would help reduce the reliance by employers on temporary work. Continuing the current trends of increasing non-regular employment, with worse conditions, could lead to a decrease in human capital as skills are not developed. Some countries have already initiated reforms which effectively give non-regular employees greater protection relative to permanent workers or reduce use of such contracts, and other governments are urged to follow suit.

The crisis has also deepened the problem of poor job quality. The groups who accumulate the most disadvantages are youth, low-skilled workers and temporary employees. Of the three, low-skilled workers are the most likely to be pushed into unemployment. Almost one in four low-skilled workers reports experiencing too many challenges at work and too few resources to cope. The Outlook suggests several actions to improve job quality. Stronger training programmes, for example, would help employees to better handle their job demands, as well as prepare supervisors with better management practices. Countries should also implement labour market policies that facilitate mobility between sectors and foster job creation. Fortunately, policymakers don’t have to choose between job quality and the quantity of jobs: several countries have proven that it’s possible to succeed in increasing both.

With so many challenges in the labour market, what can today’s employees and future employees do to better their own chances? Various skills and factors influence a person’s employment status and salary. Early on in a career, the field-specific skills gained from studying matter more. But later on, more generic skills have a stronger impact on hourly wages. For young people, education is the biggest cause of differences in hourly earnings. Experience also plays an increasingly significant role in explaining wage variation among youth. And although the evidence suggests few young people seem to combine work and study, securing some work experience even before finishing studies is shown to help land that first job. The Outlook identifies a role for policymakers and employers here, and highlights how programmes that provide work-experience are essential to ensure economic recovery. Policymakers and employers should identify the benefits of work-study programmes and take note of best practices. After all, investments in youth can help secure the future prosperity and well-being of nations.

Useful links

Lessons in recovery

September 1, 2014
by Brian Keeley

wBalloons-EiffelEight giant balloons from Japan floated in the shadow of the Eiffel Tower this weekend, a reminder of one of the worst natural disasters of recent times – and of the determination of survivors to rebuild their region.

The balloons were raised by students taking part in the OECD Tohoku School, an innovative educational project launched in northeast Japan following the devastating 2011 earthquake and tsunami. Over the past two-and-a-half years, around 100 young people from schools in Tohoku have been working together to plan an event in Paris to show off their region and to demonstrate its recovery.

“It’s not just adults who are working to help our region prosper, it’s students too,” explains Yurina Sato from Yanagawa Junior High School in Fukushima prefecture. “It’s a strong message to local people that we are moving forward.”

The results of the students’ work were on display this weekend. Over two days, the students staged an ambitious set of activities on the Champ de Mars in central Paris that reflected on the earthquake and tsunami on 11 March 2011, and the nuclear accident at the Fukushima Daiichi plant, and looked forward to Tohoku’s rebuilding.

Visitors also had a chance to sample the region’s culture, including an energetic “deer dance” – a traditional performance that’s taken on a new significance since the disaster. The elaborate costumes and drums used in the dance survived the disaster unscathed and are now presented as a symbol of the region’s resilience.

wDEER-DANCE

But it was the future that dominated many of the student projects. A team from the Yanagawa school has been working with a local producer to create a new line of fruit jellies, which they’ve started retailing in their area. “We’ve sold at least 8,000,” says Yurina Sato. “We want to help local industry in our region.”

wYurina-SATO

Unsurprisingly, the region’s energy needs were on many minds. Kaoro Kanno is one of a group of students from Adachi High School that worked on measuring radiation levels around the school and on exploring possibilities for renewable energy.

wKaoro-KANNO

“The disaster was a turning point,” Kaoro says. “We have to do something now. We thought that if we miss this chance, then who will do it?” Students at Kaoro’s school have been working on using hot springs in the area as an energy source, and are hoping their experiments will lead to the creation of a real source of sustainable energy.

wRenewable-energy-project

As well as teaching the students valuable new skills, the OECD Tohoku School may also have lessons for Japanese education. The project challenges traditional styles of teaching and learning by putting students in the driving seat. “In this project, it is students who are taking the initiative, not teachers, not the school,” explains Chikato Nakamura. “It’s a big difference.”

Chikato is on the team from Iwaki city that came up with the idea of raising the balloons above the Champ de Mars. Walking under them, he explained that the four blue balloons, hoisted to over 21 metres, represented the height of the tsunami surge in his area. Against them, the four red balloons represented the determination of Tohoku’s people to recover from the disaster.

wChikato-NAKAMURA

Chikato is hopeful not only about his region’s prospects, but also about the project’s impact on other Japanese schools: “I think Japanese education should do more project-based learning,” he says. “When you study just with a pen and paper, it’s not really learning. Doing actions outside the classroom is really important.”

Many thanks to Saki Kinnan of Osaka University for help with translation.

Useful links

OECD Tohoku School

The OECD educationtoday blog will have more coverage of the project later this week.

How to improve heaven

August 29, 2014
by Guest author
A binary praxis of antagonistic reciprocity

A binary praxis of antagonistic reciprocity

Today’s article is by Andy Martin, Lecturer in the Department of French at Cambridge University. His latest book is The Boxer and The Goal Keeper: Sartre versus Camus

I was once having a chat with a Great Writer. I was an ardent admirer of his work, so I was probably a little awe-struck (now I would probably tone down the awe, but I was in a phase of youthful enthusiasm). Naturally, I raved on about one of his earlier works. He was not just modest (in fact he wasn’t really a modest guy at all), he had genuine doubts about everything he had done. He wasn’t really sure that all those novels deserved the accolades. He thought they could have been better. “And what about your women characters,” I said. “It’s funny how you have two basic types: one is sensational, beautiful, funny; and the other is a monster, cruel, evil.” “It’s the same woman,” he said, “only after I’ve married her.”

Strangely enough, I think this conversation is quite instructive as regards the OECD Better Life Index. Specifically the mystery of the “French Paradox”: how does it come about that a nation which on the face of it appears to be pulling all (or nearly all) the right stops nevertheless complains about feeling significantly sub-optimal? The fact that the OECD HQ is in Paris is not irrelevant (it is now officially on my Index of Paris-based organisations publishing Indexes).

The Great Writer above had a habit (you will have guessed) of acquiring and then dumping wives. This is not a pretext for discussing the liaisons dangereuses of any number of well-known French men and women. Rather, the Great Writer argued that his personal vicissitudes were largely down to the zeitgeist he had lived through, with its utopian over-emphasis on Lennon/Oko peace and love, which no real relationship could ever quite live up to.

He reckoned it was a cultural problem; I want to argue it’s cognitive. There is clearly a link between creativity and melancholia. I don’t want to list here all the poets and artists who have ended up jumping off the bridge (John Berryman, Sylvia Plath, my old friend Nick etc). Self-destruction is only an extreme manifestation of self-deconstruction. Which can clearly be collective as well as individual (perhaps all emotions are really en masse and the notion of a purely personal experience makes no more sense than a private language).

In measuring well-being, the OECD rightly takes account of such external indicators as environment, education, employment, health, and so on. On a less quantitative and yet still empirical level, I want to draw attention to only two phenomena that give a sense of what the OECD is up against, especially in France: toe-sucking and déjà-vu.

The neuro-cognitive logic of foot-fetishism has to do with the brain carrying around a map of the body. But the map of course is not of the same structure as the body: in this rather more compact electro-chemical synaptic form, the feet are stored somewhere in the vicinity of the genitals, so that there is a “neural crossover” from one to the other. Hence a sexualized impression of toes. V. S. Ramachandran derives the whole phenomenon of the “phantom (yet amputated) limb” from this same mix-up, the inability of the brain to overcome its own archetypes.

Do you ever go into a house you know you have never been to before and yet have an eerie sense that it is all very familiar? Maybe you used to live here in a previous life. But more probably, you are experiencing something we generally don’t notice, which is that our information-processing is 2-phase. Haven’t I been here before? Ah yes, of course—just a few nanoseconds ago—when I (my brain) was making an initial reconnaissance and processing the sense data in a relatively unstructured spontaneous way. And now I am re-configuring my preliminary picture and, very briefly, slipping between images, interweaving the present and the recent past (in this sense Plato was right to argue that all knowledge is recollection).

It is this first-phase, a “primal”—preliminary, provisional, but enchanted—state of consciousness (before the more analytic, disenchanted phase kicks in) that I think Albert Camus is invoking when he speaks of flashbacks to a lost paradise and feeling himself at one with trees and seas and silence. It also explains why paradise is always a lost paradise. Happiness is the phantom limb of human consciousness.

Jean-Paul Sartre had a memorable phrase for it (one that I suspect will never catch on quite as much as “Hell is other people”, even though they must be closely related): “a binary praxis of antagonistic reciprocity.” The brain, like all decent computers, is binary. The difference is that it is more neurotic. We have to keep going back and obsessively checking the data against some previous formulation. In other words, we are inescapably indexical in our behavior (thus the OECD is only doing on a grander scale what we are doing all the time anyway: OECD contains OCD). But some (eg the French) are more indexical than others.

Out of the inevitable disjunction between before and after, the raw and the cooked, the savage and the symbolic, fly up creativity, philosophy, art, but also aching nostalgia and anxiety. Will anything ever “bring salvation back” (as Michael Jackson poignantly wondered)? A faster internet? I doubt it.

Freud blamed our being miserable on (among other things) the Christian concept of heaven. The trouble with heaven is it is fundamentally boring (like Dante’s Paradiso – the Inferno is way more fun). Nothing ever really happens in heaven. I defy even Hugh Hefner not to get tired of his non-stop playmates around the eternal pool. We need a new concept of bliss that is not naively single-phase. As Roland Barthes argued, the concept of jouissance should include pain as well as pleasure; perhaps he could have added that it has to be indexical (why else would the Kama Sutra index so many variations on well-being?).

I am reminded of something my son said to me recently, as we were passing beneath a leafy tree on a sunny day: “Why do we like dappled light so much?” And he had an answer: “It’s because the shadow dramatizes the light. We want light but not too much of it. The same with shade – we don’t want total darkness either.” Even heaven would need an Index on Light.

Useful links

How’s life? 2013 – Measuring well-being

Freedom of choice, bitcoins and legal tender

August 27, 2014

bitcoinToday’s post is from Adrian Blundell-Wignall and builds on his OECD working paper The Bitcoin Question: Currency versus Trust-less Transfer Technology. The views expressed here are his own and do not necessarily reflect those of the OECD or of its member countries.

The working paper argues that some of the technologies associated with crypto-currencies are very interesting and may one day become a serious disruptive technology for financial intermediaries—but that these technologies should be thought about separately from the crypto-currencies like Bitcoin that have some very dubious uses. These coins, the paper argues, can never replace legal tender like dollars. However, some Bitcoin proponents seem to be very confused about the place crypto-currencies occupy versus legal tender. Referring to the working paper, one such author [Why the OECD Needs to do its Homework on Bitcoin] states:

“The author fundamentally views bitcoin as something that must replace legal tender in order to be successful, so he is dismissive of bitcoin the monetary unit. Moreover, the author fears bitcoin more as a competitive alternative within a freedom-of-choice scenario and thus outlines policy behavior that attempts to extinguish any interface with established institutions.”

This is pretty close to the opposite of what the working paper says. Neither Bitcoin nor any other crypto-currency can ever replace legal tender no matter how successful it is on any other criteria. Bitcoins are a parallel currency; i.e. adjacent to and not intersecting with legal tender. The author doesn’t “fear Bitcoin as a competitive alternative” to legal tender. It is impossible for Bitcoins to compete with legal tender as an alternative monetary system because the central bank has a very special monopoly that is impossible to attack – in the limit because people have to pay their taxes. The policy conclusions with respect to the crypto-currency have nothing whatever to do with fear of Bitcoin replacing legal tender—that can’t happen—and have everything to do with money transmission that bypasses surveillance for certain purposes before coming happily back into the legal tender system afterwards (with neither tax, criminal or regulatory authorities able to follow the money trail in between).

Some Bitcoin proponents are very frightened of the idea of bans on the interface of crypto-currencies with exchangers whose banks participate in the central bank’s clearing system. The author of the above quote talks combatively about the free world taking on the monopoly of legal tender and how they just might jolly-well have to create alternative clearing systems to win the battle. This completely misunderstands the basics of the clearing system that the central bank participates in—i.e. the central bank that creates the currency in which Bitcoin prices are quoted and that the traders of crypto-currencies want wisely to be able to get back into when done trading.

Let’s explain it in simple terms. Banks must settle between themselves and the central bank in what is deemed by the authorities to be ‘cash’—and that cash is always the central bank’s own liabilities (currency and bank reserves with the central bank). Mr. Smith writes a cheque on his ABC bank to Mr. Jones who banks with XYZ bank. ABC bank can transfer $1000 to XYZ which accepts ABC liabilities. Now suppose Mr. Smith writes a cheque to the government to pay his taxes. The government’s bank is the central bank and the essence of the monopoly is this—the central bank doesn’t accept ABC bank liabilities to settle—it will only accept its own liabilities. So if ABC bank has excess reserves at the central bank, then it can run them down. If it doesn’t have excess reserves it can borrow another bank’s excess reserves at the overnight interest rate. If it can’t do that it must borrow from the central bank itself at the overnight cash rate (like the Fed Funds rate).

The same issue arises if ABC bank wants to buy from or sell government bonds to the central bank—it is dealing with the central bank that only accepts its own liabilities. With this monopoly the central bank can make interest rates whatever it likes—for example, by buying and selling government bonds to increase or decrease the amount of cash in the system (offsetting the impact of tax payments and any other unwanted influences on cash). If the central bank wishes to change the stance of monetary policy, it changes the cash base of the system: if it creates more cash compared to the demand for it, interest rates can be induced to fall and vice versa. Bitcoins don’t and can’t matter.

Now let’s suppose Mr. Smith wishes to go into the Bitcoin world. He might debit his dollar bank account in favour of an exchanger who provides Bitcoins at the going exchange rate. He then begins transmitting Bitcoins in a series of transactions to do whatever it is he does in that anonymous parallel currency world. But then comes the day that Mr. Jones has to pay his taxes to the government or deal with other transactions involving the banking system with its pesky need to clear with other banks including the central bank. But the central bank doesn’t accept Bitcoins. It accepts its own liabilities. So the erstwhile crypto-currency adherent has to come back to the exchanger, cross the fee/spread, and get back into the banking system. Buying and selling Bitcoins affects only the exchange rate of dollars for Bitcoins with the exchangers, in the same way that dealing in bottles of wine on an internet wine exchange drives the price via supply and demand. The prices of bottles of wine and Bitcoins go up and down, but the dollar price fluctuations in Bitcoins and bottles of wine can never affect the determination of interest rates, where the central bank with its monopoly over cash runs the show. But rest assured, every Bitcoin user down to the last one will very much want to be able to get back into dollars at some point. Little wonder that some people in the industry want to fend off regulations: all in the name of freedom of choice of course.

But what are some of these in-and-out Bitcoin activities in the name of freedom? The original working paper notes that there is a speculative and transactions demand for Bitcoins. On the speculative demand there are the founders who need to be able to extract value at some advantageous point, and others who participate in the ‘greater fool’ trading strategy believing they will get out ahead of the other ‘fools’ in the market if prices tumble.

With regard to the transactions demand, it seems unlikely that the crypto-currencies are in general use to buy the weekly groceries because their use might be cheaper than credit and debit cards. This is because the transactions fee/spreads with exchangers must be high to compensate for all the volatility and regulatory risk, and holding the crypto-currency carries the risk of capital loss.

There is a clear demand on the part of some individuals, however, who are happy to cross the spreads with exchangers and those offering ‘darkening services’ as a price to pay for anonymity (darknets and mixers expressly designed to further enhance the anonymity features of Bitcoin). Who might some of these people be who operate in complex cross-border structures, often in countries with little or no surveillance of or laws concerning Bitcoins? Businesses using virtual coins that pass through complex structures and ‘darkening’ procedures, trade on the Internet and from mobile phones anonymously are impossible to trace. Such businesses do this presumably because they need to be anonymous. Then, when their untraceable business dealings are all done, the crypto-coins can then re-emerge in a new ‘legitimate’ transaction. For example, a real estate company decides to accept Bitcoins in Australia. The name of a ‘clean’ individual or company appears on the deed of a beautiful property overlooking Sydney harbor.

It is very unclear in the global digital world as to who should or can be responsible for monitoring crypto-currencies and in which jurisdictions—but someone should; and if the technology is such that all users can’t be registered and identified, then more serious policy action should presumably follow. Dealing with things like terrorism, drugs, arms trading, and people smuggling, as well as preventing the evasion of taxes, are all very essential in a civil society. Were ‘freedom of choice’ to facilitate such activities then that ‘freedom’ moves into direct conflict with the notion of a civil society.

What is true of the so-called coin is not so for the technology to which crypto-currencies have given rise. The technology of ‘trust-less transfer’ is very interesting and it is quite possible (or even likely) that it will become a disruptive technology for many financial intermediaries in the future. The idea of eliminating the need for a trusted third party in finance is revolutionary—the world of finance has never faced such a technological innovation that questions the need for intermediaries and the huge share of earnings in the economy that they appropriate for this role. Given that the trust-less transfer of financial quantities is already a proven technology, it is only a matter of time before it encroaches on business models of banks, credit card businesses, monetary transfers and the trading of assets.

For the policy maker the lesson is clear: permit the development of the trust-less transfer technology with appropriate oversight, but shine sunlight on the dark aspects of the virtual coins. In this respect the working paper noted that the Ripple protocol, which works via a network of servers, is an example or a system that facilitates regulation and improved efficiency. All Ripple transactions appear to be verified by a decentralised computer network, using Ripple’s open source protocol, and recorded in a shared ledger that is a constantly updated database of Ripple accounts and transactions. This sort of approach is quite suitable for regulatory perusal.

Useful links

OECD work on financial markets

 

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