Friday, March 23, 2018

Internet, social media become weapons of war


America is at war.

You may not have noticed it, because the battlefields are almost invisible. But the signs are evident, and millions have been recruited to serve in that war.

The Internet was essentially an American invention. In a fit of idealism, the federal government decided it should be like the airwaves, open to all but entirely free of cost and regulation. It could be a means of communication, education and better understanding across the world.

Instead, it has been weaponized. Though it serves some of its original purposes, it has also become the prime battlefield in international conflict and a major tool to undermine the very open society it was meant to promote.

The federal government has just announced sanctions against Russian entities and individuals because of their efforts to tamper with elections and undermine electric and water systems.

Despite the focus on the 2016 elections, the real point of the Russian effort is intended to weaken the functioning of the democratic system of government. Chaos would result in the United States, which Russian President Putin sees as his prime adversary, rendering it increasingly incapable of challenging his expansionist plans.

Putin understands that Russia can derive economic and political control of other countries by use of the Internet and its wealth, derived from selling natural gas to Western Europe. Even more important, the Internet gives Putin a low-cost but powerful weapon against the United States.

Similarly, China seeks American business secrets and to undermine government operations to give itself the necessary breathing space to develop as a great power rival to the United States. It denies access to its Internet system and uses strict censorship while taking advantage of the openness of American participants.

Both Russia and China are clearly adversaries of the United States, determined to weaken it in world affairs. It is difficult to distinguish such policies from the goals of traditional warfare.

And it looks like they are winning. That’s because U.S. agencies frequently announce their successes in penetrating the walls designed to protect official secrets, corporate information or the functioning of the political system.

But they never announce any opposing actions by the U.S. Either this country is helpless or it believes that unveiling any successes will only help the Russians or Chinese. That’s unfortunate, because it fails to give Americans and U.S. allies any sense of the government’s ability to mount an adequate defense.

Few people know that there is a U.S. Cyber Command and even fewer know what it does. It should be strengthened and more centralized and its top general should be made a member of the military Joint Chiefs of Staff. After all, it is engaged in real warfare. Such a change could demonstrate that the U.S. is fully engaged.

The American weakness in the wars fought over the Internet is partly of our own making. Russia’s meddling in U.S. elections is greatly aided by the information and access that can be drawn from people’s obsession with revealing a raft of personal information on publicly available social media.

Who needs to be encouraged to demonstrate? Who should be lied to? Whose prejudices or religious beliefs should be exploited? Sitting in St. Petersburg or Beijing, a person set on sabotaging the U.S. plays with American social media without risk. That’s war today.

Social media users need to understand that their data, along with that of thousands of others can be harvested and analyzed by computers in a matter of hours. You cannot be anonymous.

A matter of the greatest concern is less about Russians messing with the political system than that Americans are. Through a phony outfit called Cambridge Analytica, wealthy American conservatives bought Facebook data on 50 million people to influence elections in favor of Republican candidates,

That firm was a shell for a British company that developed the analysis. In short, a foreign entity tried to influence American elections, a violation of federal law. And their American clients knew that.

The social media have abused the free access given to them by the Internet by allowing illegal misuse. They cannot police themselves. They act like there are no limits on free speech, even in supporting illegal activities.

They are much like radio and television stations that are regulated because they use the limited spectrum. Without limiting their usual free speech rights, the social media, using the Internet, should be subject to some regulation against their users performing or encouraging illegal activities.

Or they could be classified as publishers, making them responsible for what they allow on line.

Friday, March 16, 2018

Electric woes caused by industry restructuring, weak regulation


Note: While I mention CMP, Maine's largest electric utility, the subject is relevant across the U.S. 
 
The news is full of reports about skyrocketing electric bills across the country and numerous outages in the Northeast. Maine gets it share of both.

Something is wrong when the complaints occur as often and as loudly as they do now. Utilities and their friends have come up with ready responses that squarely place the blame on somebody else.

Customers are faulted for not recognizing their power consumption increases as they run electric heaters or oil burners. And frequent nor'easters get the blame for what seems to be an unusually high number of outages.

Of course, electric consumption increases in cold, dark winters. And, this year, the cost of fuel to run utility generation may also have increased. So it is not surprising that as usage increases, bills are higher. And some customers look only at the bottom line and ignore the number of kilowatt-hours.

But this is not the most severe winter ever, so some huge increases seem to be caused by more than usage. CMP, for example, has removed the prior year's monthly usage from the bill, making ready comparisons impossible. That deletion makes it more difficult to accept the explanation that it's all a matter of usage.

One obvious culprit is the meter. Utilities have installed so-called “smart” meters, supposedly because they will allow customers to manage their usage better, obtaining greater efficiency and lower costs. While that promise mostly goes unfulfilled, it has worked well for utilities that can eliminate meter reader jobs.

During a major, recent nor'easter, smart meters turned out to be dumb. They could not highlight outage locations very well, nor did they provide good data to the central office, which would help it efficiently assign repair crews. Despite their shortcomings, a big part of the meter’s cost is recovered in a customer's rates and will be for many years.

Given these known defects, it just might be possible that bills, way out of line with past experience, may be caused by defective meter information. To relieve customer worries while the cause is being investigated, the regulators should announce that their payment obligation will be limited to the previous year's level.

Without such action, customers bear all the risk when their bills shoot up. And when a utility falsely warns them they may be cut off if they don't pay the bill, they can rightly feel they are victims, not customers. CMP and others should not only withdraw such bills, but be fined for issuing them.

While customers, utilities and regulators scramble to figure out what went wrong, they will miss the big picture that can reveal underlying problems. It began with industry restructuring. Electric power supply was separated from wires. Many utilities ended up as wires companies.

The utilities’ monopoly position as wires companies was an opportunity to coin money. With a limited commitment to maintenance plus government incentives to build more transmission lines at customer expense, their outlook brightened. The cost of power was reduced by competition, but the cost of wires in the customers' bill zoomed up.

Federal utility regulators allow higher rates to encourage more transmission. State regulators mostly stay on the sidelines until problems arise.

Regulators depend on technical input from utilities rather than having staff capable of conducting continuous, independent review. While they may hire outside consultants when a problem arises, this approach does nothing to prevent problems.

To top this situation off, as Congress and state legislatures restructured the industry, they levied new burdens on ratepayers. They imposed public policy mandates on customers' bills, ranging from low-income assistance to promoting renewables. It was a lot easier to load these costs on electric customers than to increase taxes.

The failure of regulators to be more aggressive contributes to both the frequency of weather-caused outages and billing alarms such as are now occurring. Studies to find the causes of these problems are no substitute for continuing surveillance to prevent them.

Beefed-up regulation would undoubtedly cost more. But electric rates increase to cover utilities' costs of dealing with storm outages or fixing meter problems. Adequate regulation should reduce some of these cost increases.

The bills add up. Customers struggle with outages. Regulators belatedly investigate. Customers subsidize the very meters that may be causing their problems. Utilities maximize profits by cutting field personnel. Customers foot the bill for the utility lawyers who defend company practices.

Instead of viewing the current problems as likely to be soon forgotten, now is the time for legislators to take a new look at the electric industry and how it is regulated.

Friday, March 9, 2018

Trump’s trade policy isolates U.S., boosts prices


Imagine you are the commanding general of your nation’s armed forces and head the national government.

You decide that another country is getting “cute” and is harming your country. The only way to take on that country is to declare world war, even though your closest allies will be hit far harder than your intended target.

So you suddenly declare war, proclaiming that wars like this are “easy to win.” While there are always dead and wounded on both sides in any war, you think the other side will surrender immediately, and your country will suffer no casualties.

This is not fiction. It happened last week when President Trump announced high tariffs on imports of steel and aluminum. He ignored the negative reactions of many other countries and congressional leaders of his own party.

“Cut off imports,” he tweeted. “When we are down $100 billion with a certain country and they get cute, don’t trade any more. We win big. It’s easy.”

Trump attended Wharton, a top university for economic studies, but he must have missed a few classes. He failed to learn that if the U.S. cuts off some imports from another country, that country can retaliate by cutting imports of at least equal value from the U.S.

The country Trump wanted to hit was China. The country Trump did hit was Canada, the leading foreign supplier of steel. China doesn’t even make the top ten suppliers

Even worse, Trump justified the tariff hike on national security grounds, finding that steel was crucial to defense and the country could not become dependent on foreign suppliers, which account for about one-third of steel used in the U.S. Of the top four domestic steel producers, two are foreign owned.

Canada shares defense of the North American airspace with the U.S. and is one of the most trusted U.S. allies. It has fought at the side of the U.S. in major wars. It is hardly a security threat.

When Trump learned of the impact on Canada, his administration said the U.S. would temporarily suspend the tariff increase for Canada and Mexico as a way of forcing them to come to an agreement in the NAFTA negotiations.

In those talks, Canada says the Americans have adopted a my-way-or-the-highway approach. In short, only if Canada does what the U.S. wants can it avoid the steel tariffs. In war, that’s called unconditional surrender. But this isn’t really war, so it amounts to bullying your best friend.

Trump’s policy would hurt his own people in two ways. First, Canada has declared the tariff increases are “absolutely unacceptable” and has said it would retaliate. It would identify important imports from the U.S. and levy high tariffs on them to cut American sales.

Here’s how that could hurt. Some 45.5 percent of Maine exports abroad go to Canada. That amounts to about $1.2 billion in sales each year. If Canada chooses to hit some items Maine exports, some Mainers could lose their jobs.

Mainers and workers elsewhere would be unemployed so that steelworkers could keep their jobs. In effect, that’s a federal tax on Maine. But it’s not the only one.

The other effect on Americans will be higher retail prices. The reason imports displace domestic production is that they are cheaper. Everything made using imported steel costs less than it would if manufacturers had to use domestic steel. When you buy a car, its price will reflect higher cost steel.

Bath Iron Works, one of the nation’s two builders of Navy destroyers, will be forced to charge taxpayers more for the vessels. Even if BIW has always used American steel, if Canadian competitors were driven from the market, domestic prices might increase.

Trump seems to believe that the U.S. should have a favorable trade balance with every other country, even if that means higher prices for American goods. He sees all trade relationships as a form of war, which somehow the U.S. can easily win.

For about a century, the world has come to understand that greater efficiency and hence lower costs can come through international trade. National economies have become tied together.

Trump wants out of these relationships. The risk is that other countries will take him seriously and replace American imports with those from the rest of the world, especially China.

If the criticism gets to Trump, leading him to soften his policy, he may have learned the rest of Wharton’s lessons on trade.

Otherwise, Trump’s economic policy can turn the United States, a continental nation, into an island.