Somali sea gangs lure investors at pirate lair
BY Mohamed Ahmed / Dec 1, 2009

In Somalia’s main pirate lair of Haradheere, the sea gangs have set up a cooperative to fund their hijackings offshore, a sort of stock exchange meets criminal syndicate. Heavily armed pirates from the lawless Horn of Africa nation have terrorized shipping lanes in the Indian Ocean and strategic Gulf of Aden, which links Europe to Asia through the Red Sea. The gangs have made tens of millions of dollars from ransoms and a deployment by foreign navies in the area has only appeared to drive the attackers to hunt further from shore. It is a lucrative business that has drawn financiers from the Somali diaspora and other nations — and now the gangs in Haradheere have set up an exchange to manage their investments.

One wealthy former pirate named Mohammed took Reuters around the small facility and said it had proved to be an important way for the pirates to win support from the local community for their operations, despite the dangers involved. “Four months ago, during the monsoon rains, we decided to set up this stock exchange. We started with 15 ‘maritime companies’ and now we are hosting 72. Ten of them have so far been successful at hijacking,” Mohammed said. “The shares are open to all and everybody can take part, whether personally at sea or on land by providing cash, weapons or useful materials … we’ve made piracy a community activity.”

Haradheere, 400 km (250 miles) northeast of Mogadishu, used to be a small fishing village. Now it is a bustling town where luxury 4×4 cars owned by the pirates and those who bankroll them create honking traffic jams along its pot-holed, dusty streets. Somalia’s Western-backed government of President Sheikh Sharif Ahmed is pinned down battling hard-line Islamist rebels, and controls little more than a few streets of the capital. The administration has no influence in Haradheere — where a senior local official said piracy paid for almost everything. “Piracy-related business has become the main profitable economic activity in our area and as locals we depend on their output,” said Mohamed Adam, the town’s deputy security officer. “The district gets a percentage of every ransom from ships that have been released, and that goes on public infrastructure, including our hospital and our public schools.”

In a drought-ravaged country that provides almost no employment opportunities for fit young men, many are been drawn to the allure of the riches they see being earned at sea. Abdirahman Ali was a secondary school student in Mogadishu until three months ago when his family fled the fighting there. Given the choice of moving with his parents to Lego, their ancestral home in Middle Shabelle where strict Islamist rebels have banned most entertainment including watching sport, or joining the pirates, he opted to head for Haradheere. Now he guards a Thai fishing boat held just offshore. “First I decided to leave the country and migrate, but then I remembered my late colleagues who died at sea while trying to migrate to Italy,” he told Reuters. “So I chose this option, instead of dying in the desert or from mortars in Mogadishu.”

Haradheere’s “stock exchange” is open 24 hours a day and serves as a bustling focal point for the town. As well as investors, sobbing wives and mothers often turn up there seeking news of male relatives missing in action. Every week, Mohammed said, gang members and equipment were lost to the sea. But he said the pirates were not deterred. “Ransoms have even increased in recent months from between $2-3 million to $4 million because of the increased number of shareholders and the risks,” he said. “Let the anti-piracy navies continue their search for us. We have no worries because our motto for the job is ‘do or die’.” Piracy investor Sahra Ibrahim, a 22-year-old divorcee, was lined up with others waiting for her cut of a ransom pay-out after one of the gangs freed a Spanish tuna fishing vessel. “I am waiting for my share after I contributed a rocket-propelled grenade for the operation,” she said, adding that she got the weapon from her ex-husband in alimony. “I am really happy and lucky. I have made $75,000 in only 38 days since I joined the ‘company’.”


A basic piracy operation requires a minimum eight to twelve militia prepared to stay at sea for extended periods of time, in the hopes of hijacking a passing vessel. Each team requires a minimum of two attack skiffs, weapons, equipment, provisions, fuel and preferably a supply boat. The costs of the operation are usually borne by investors, some of whom may also be pirates.

To be eligible for employment as a pirate, a volunteer should already possess a firearm for use in the operation. For this ‘contribution’, he receives a ‘class A’ share of any profit. Pirates who provide a skiff or a heavier firearm, like an RPG or a general purpose machine gun, may be entitled to an additional A-share. The first pirate to board a vessel may also be entitled to an extra A-share.

At least 12 other volunteers are recruited as militiamen to provide protection on land of a ship is hijacked, In addition, each member of the pirate team may bring a partner or relative to be part of this land-based force. Militiamen must possess their own weapon, and receive a ‘class B’ share — usually a fixed amount equivalent to approximately US$15,000.

If a ship is successfully hijacked and brought to anchor, the pirates and the militiamen require food, drink, qaad, fresh clothes, cell phones, air time, etc. The captured crew must also be cared for. In most cases, these services are provided by one or more suppliers, who advance the costs in anticipation of reimbursement, with a significant margin of profit, when ransom is eventually paid.

When ransom is received, fixed costs are the first to be paid out. These are typically:
• Reimbursement of supplier(s)
• Financier(s) and/or investor(s): 30% of the ransom
• Local elders: 5 to 10 %of the ransom (anchoring rights)
• Class B shares (approx. $15,000 each): militiamen, interpreters etc.

The remaining sum — the profit — is divided between class-A shareholders.


BY Ryan Hagen / April 20, 2009

The crew of the Maersk Alabama, having survived an attack by pirates in Somalia last week, has returned home for a much-deserved rest. But with tensions ratcheting up between the U.S. and the rag-tag confederation of Somali pirates, it’s worth looking to the past for clues on how to tame the outlaw seas. Peter Leeson, an economist at George Mason University (and an occasional Freakonomics guest blogger), offers a brisk and fascinating look at old-school piracy in his new book The Invisible Hook: The Hidden Economics of Pirates. Leeson agreed to sit down and answer some important piratical questions for us:

Q: The Invisible Hook is more than just a clever title. How is it different from Adam Smith’s invisible hand?
A: In Adam Smith, the idea is that each individual pursuing his own self-interest is led, as if by an invisible hand, to promote the interest of society. The idea of the invisible hook is that pirates, though they’re criminals, are still driven by their self-interest. So they were driven to build systems of government and social structures that allowed them to better pursue their criminal ends. They’re connected, but the big difference is that, for Adam Smith, self-interest results in cooperation that generates wealth and makes other people better off. For pirates, self-interest results in cooperation that destroys wealth by allowing pirates to plunder more effectively.

Q: In the book, you write that pirates had set up their own early versions of constitutional democracy, complete with separation of powers, decades before the American Revolution. Was that only possible because they were outlaws, operating entirely outside the control of any government?
A: That’s right. The pirates of the 18th century set up quite a thoroughgoing system of democracy. The reason that the criminality is driving these structures is because they can’t rely on the state to provide those structures for them. So pirates, more than anyone else, needed to figure out some system of law and order to make it possible for them to remain together long enough to be successful at stealing.

Q: So did these participatory, democratic systems give merchant sailors an incentive to join pirate crews, because it meant they were freer among pirates than on their own ships?
A: The sailors had more freedom and better pay as pirates than as merchantmen. But perhaps the most important thing was freedom from the arbitrariness of captains and the malicious abuses of power that merchant captains were known to inflict on their crews. In a pirate democracy, a crew could, and routinely did, depose their captain if he was abusing his power or was incompetent.

Q: You write that pirates weren’t necessarily the bloodthirsty fiends we imagine them to have been. How does the invisible hook explain their behavior?
A: The basic idea is, once we recognize pirates as economic actors, businessmen really, it becomes clear as to why they wouldn’t want to brutalize everyone they overtook. In order to encourage merchantmen to surrender, they needed to communicate the idea that, if you surrender to us, you’ll be treated well. That’s the incentive pirates give for sailors to surrender peacefully. If they wantonly abused their prisoners, as they’re often portrayed as having done, that would have actually undermined the incentive of merchant crews to surrender, which would have caused pirates to incur greater costs. They would have had to battle it out more often, because the merchants would have expected to be tortured indiscriminately if they were captured.

So instead, what we often see in the historical record is pirates displaying quite remarkable feats of generosity. The other side of that, of course, is that if you resisted, they had to unleash, you know, a hellish fury on you. That’s where most of the stories of pirate atrocities come from. That’s not to say that no pirate ever indulged his sadistic impulses. But I speculate that the pirate population had no higher proportion of sadists than legitimate society did. And those sadists among the pirates tended to reserve their sadistic actions for times when it would profit them.

Q: So they never made anyone walk the plank?
A: There was no walking the plank. There’s no historical foundation for that in 17th- or 18th-century piracy.

Q: You write about piracy as a brand. It’s quite a successful one, having lasted for hundreds of years after the pirates themselves were exterminated. What was the key to that success?
A: There was a very particular type of reputation that pirates wanted to cultivate. It was a very delicate line to walk. They didn’t want to have a reputation for wanton brutality or complete madness. They wanted to be perceived as hair-trigger men, men on the edge, who if you pushed, if you resisted, they would snap and do something horrible to you. That way, the captives they took had an incentive to be very careful to comply with all of the pirates’ demands. At the same time, they wanted a reputation as being very brutal, as meting out these brutal, horrible tortures to captives who didn’t comply with their demands. Stories about those horrible tortures were relayed not only by word of mouth, but by early 18th-century newspapers. When a former prisoner was released, he would oftentimes go to the media and provide an account of his capture. So when colonials read these accounts in the media, that helped institutionalize the idea of pirates as these men on the edge. That worked marvelously for pirates. It was a form of advertising performed by legitimate members of society that again helped pirates reduce their costs.

Q: What kinds of lessons can we draw from The Invisible Hook in dealing with modern pirates?
A: We have to recognize that pirates are rational economic actors and that piracy is an occupational choice. If we think of them as irrational, or as pursuing other ends, we’re liable to come up with solutions to the pirate problem that are ineffective. Since we know that pirates respond to costs and benefits, we should think of solutions that alter those costs and benefits to shape the incentives for pirates and to deter them from going into a life of piracy.

Peter Leeson
email : pleeson [at] gmu [dot] edu






“We don’t consider ourselves sea bandits. We consider sea bandits
those who illegally fish in our seas and dump waste in our seas and
carry weapons in our seas. We are simply patrolling our seas. Think of
us like a coast guard.”

Somalia’s pirates flourish in a lawless nation
BY Jeffrey Gettleman / October 31, 2008

Boosaaso, Somalia: This may be one of the most dangerous towns in
Somalia, a place where you can get kidnapped faster than you can wipe
the sweat off your brow. But it is also one of the most prosperous.
Money changers walk around with thick wads of hundred-dollar bills.
Palatial new houses are rising up next to tin-roofed shanties. Men in
jail reminisce, with a twinkle in their eyes, about their days living
like kings. This is the story of Somalia’s booming, not-so-underground
pirate economy. The country is in chaos, countless children are
starving and people are killing one another in the streets of
Mogadishu, the capital, for a handful of grain. But one particular
line of work – piracy – seems to be benefiting quite openly from all
this lawlessness and desperation. This year, Somali officials say,
pirate profits are on track to reach a record $50 million, all of it
tax free.

“These guys are making a killing,” said Mohamud Muse Hirsi, the top
Somali official in Boosaaso, who himself is widely suspected of
working with the pirates, though he vigorously denies it. More than 75
vessels have been attacked this year, far more than any other year in
recent memory. About a dozen have been set upon in the past month
alone, including a Ukrainian freighter packed with tanks, antiaircraft
guns and other heavy weaponry, which was brazenly seized in September.
The pirates use fast-moving skiffs to pull alongside their prey and
scamper on board with ladders or sometimes even rusty grappling hooks.
Once on deck, they hold the crew at gunpoint until a ransom is paid,
usually $1 million to $2 million. Negotiations for the Ukrainian
freighter are still going on, and it is likely that because of all the
publicity, the price for the ship could top $5 million. In Somalia, it
seems, crime does pay. Actually, it is one of the few industries that

“All you need is three guys and a little boat, and the next day you’re
millionaires,” said Abdullahi Omar Qawden, a former captain in
Somalia’s long-defunct navy. People in Garoowe, a town south of
Boosaaso, describe a certain high-rolling pirate swagger. Flush with
cash, the pirates drive the biggest cars, run many of the town’s
businesses – like hotels – and throw the best parties, residents say.
Fatuma Abdul Kadir said she went to a pirate wedding in July that
lasted two days, with nonstop dancing and goat meat, and a band flown
in from neighboring Djibouti. “It was wonderful,” said Fatuma, 21.
“I’m now dating a pirate.”

This is too much for many Somali men to resist, and criminals from all
across this bullet-pocked land are now flocking to Boosaaso and other
notorious pirate dens along the craggy Somali shore. They have turned
these waters into the most dangerous shipping lanes in the world. With
the situation clearly out of control, warships from the United States,
Russia, NATO, the European Union and India are steaming into Somalia’s
waters as part of a reinvigorated, worldwide effort to crush the
pirates. But it will not be easy. The pirates are sea savvy. They are
fearless. They are rich and getting richer, with the latest high-tech
gadgetry like handheld GPS units. And they are united. The immutable
clan lines that have pitted Somalis against one another for decades
are not a problem here. Several captured pirates interviewed in
Boosaaso’s main jail said that they had recently crossed clan lines to
open new, lucrative, multiclan franchises. “We work together,” said
Jama Abdullahi, a jailed pirate. “Good for business, you know?”

The pirates are also sprinkled across thousands of square miles of
water, from the Gulf of Aden, at the narrow doorway to the Red Sea, to
the Kenyan border along the Indian Ocean. Even if the naval ships
manage to catch pirates in the act, it is not clear what they can do.
In September, a Danish warship captured 10 men suspected of being
pirates cruising around the Gulf of Aden with rocket-propelled
grenades and a long ladder. But after holding the suspects for nearly
a week, the Danes concluded that they did not have jurisdiction to
prosecute, so they dumped the pirates on a beach, minus their guns.
Nobody, it seems, has a clear plan for how to tame Somalia’s unruly
seas. Several fishermen along the Gulf of Aden talked about seeing
barrels of toxic waste bobbing in the middle of the ocean. They spoke
of clouds of dead fish floating nearby and rogue fishing trawlers
sucking up not just fish and lobsters but also the coral and the
plants that sustain them. It was abuses like these, several men said,
that turned them from fishermen into pirates. Nor is it even clear
whether Somali authorities universally want the piracy to stop. While
many pirates have been arrested, several fishermen, Western
researchers and more than a half-dozen pirates in jail spoke of
nefarious relationships among fishing companies, private security
contractors and Somali government officials, especially those working
for the semiautonomous regional government of Puntland.

“Believe me, a lot of our money has gone straight into the
government’s pockets,” said Farah Ismail Eid, a pirate who was
captured in nearby Berbera and sentenced to 15 years in jail. His
pirate team, he said, typically divided up the loot this way: 20
percent for their bosses, 20 percent for future missions (to cover
essentials like guns, fuel and cigarettes), 30 percent for the gunmen
on the ship and 30 percent for government officials. Abdi Waheed
Johar, the director general of the fisheries and ports ministry of
Puntland, openly acknowledged in an interview this spring that “there
are government people working with the pirates.” But, he was quick to
add, “It’s just not us.”

What is happening off Somalia’s shores is basically an extension of
the corrupt, violent free-for-all that has raged on land for 17 years
since the central government imploded in 1991. The vast majority of
Somalis lose out. Young thugs who are willing to serve as muscle get a
job, albeit a low-paying one, that significantly reduces their life
expectancy. And a select few warlords, who have sat down and figured
out how to profit off the anarchy, make a fortune. Take Boosaaso, once
a thriving port town on the Gulf of Aden. Piracy is killing off the
remains of the local fishing industry because export companies are
staying away. It has spawned a kidnapping business on shore, which in
turn has scared away many humanitarian agencies and the food, medicine
and other forms of desperately needed assistance they bring. Reporting
in Boosaaso two weeks ago required no fewer than 10 hired gunmen
provided by the Puntland government to discourage any would-be

Few large cargo ships come here anymore, depriving legitimate
government operations of much-needed port taxes. Just about the only
ships willing to risk the voyage are small, wooden, putt-putt
freighters from India, essentially floating jalopies from another era.
“We can’t survive off this,” said Bile Qabowsade, a Puntland official.
The shipping problems have contributed to food shortages, skyrocketing
inflation and less work for the sinewy stevedores who trudge out to
Boosaaso’s beach every morning and stare in vain at the bright
horizon, their bare feet planted in the hot sand, hoping a ship will
materialize so they will be able to make a few pennies hauling 100-
pound sacks of sugar on their backs.

And yet, suspiciously, there has been a lot of new construction in
Boosaaso. There is an emerging section of town called New Boosaaso
with huge homes rising above the bubble-shaped huts of refugees and
the iron-sided shacks that many fishermen call home. These new houses
cost several hundred thousand dollars. Many are painted in garish
colors and protected by high walls. Even so, Boosaaso is still a
crumbling, broke, rough-and-tumble place, decaying after years of
neglect like so much of war-ravaged Somalia. It is also dangerous in
countless ways. On Wednesday, suicide bombers blew up two government
offices, most likely the work of Islamist radicals trying to turn
Somalia into an Islamist state. Of course, no Somali government
official would openly admit that New Boosaaso’s minicastles were built
with pirate proceeds. But many people, including United Nations
officials and Western diplomats, suspect that is the case.

Several jailed pirates have accused Muse, a former warlord who is now
Puntland’s president, of being paid off. Officials in neighboring
Somaliland, a breakaway region of northwestern Somalia, said they
recently organized an antipiracy sting operation and arrested Muse’s
nephew, who was carrying $22,000 in cash. “Top Puntland officials
benefit from piracy, even if they might not be instigating it,” said
Roger Middleton, a researcher at the Royal Institute of International
Affairs in London. Actually, he added, “all significant political
actors in Somalia are likely benefiting from piracy.” But Muse said he
did not know anything about this. “We are the leaders of this
country,” he said. “Everybody we suspect, we fire from work.”

He said that Puntland was taking aggressive action against the
pirates. And Boosaaso’s main jail may be proof of that. The other day,
a dozen pirates were hanging out in the yard under a basketball hoop.
And that was just the beginning. “Pirates, pirates, pirates,” said
Gure Ahmed, a Canadian-Somali inmate of the jail, charged with murder.
“This jail is full of pirates. This whole city is pirates.” In other
well-known pirate dens, like Garoowe, Eyl, Hobyo and Xarardheere,
pirates have become local celebrities. Said Farah, 32, a shopkeeper in
Garoowe, said the pirates seemed to have money to burn. “If they see a
good car that a guy is driving,” he said, “they say, ‘How much? If
it’s 30 grand, take 40 and give me the key.’ ”

Every time a seized ship tosses its anchor, it means a pirate shopping
spree. Sheep, goats, water, fuel, rice, spaghetti, milk and cigarettes
– the pirates buy all of this, in large quantities, from small towns
up and down the Somali coast. Somalia’s seafaring thieves are not like
the Barbary pirates, who terrorized European coastal towns hundreds of
years ago and often turned their hostages into galley slaves chained
to the oars. Somali pirates are known as relatively decent hosts,
usually not beating their hostages and keeping them well-fed until
payday comes. “They are normal people,” said Said. “Just very, very

Somali Pirates Tell Their Side: They Want Only Money
BY Jeffrey Gettleman / October 1, 2008

Nairobi, Kenya — The Somali pirates who hijacked a Ukrainian freighter
loaded with tanks, artillery, grenade launchers and ammunition said in
an interview on Tuesday that they had no idea the ship was carrying
arms when they seized it on the high seas. “We just saw a big ship,”
the pirates’ spokesman, Sugule Ali, said in a telephone interview. “So
we stopped it.” The pirates quickly learned, though, that their booty
was an estimated $30 million worth of heavy weaponry, heading for
Kenya or Sudan, depending on whom you ask.

In a 45-minute interview, Mr. Sugule spoke on everything from what the
pirates wanted (“just money”) to why they were doing this (“to stop
illegal fishing and dumping in our waters”) to what they had to eat on
board (rice, meat, bread, spaghetti, “you know, normal human-being
food”). He said that so far, in the eyes of the world, the pirates had
been misunderstood. “We don’t consider ourselves sea bandits,” he
said. “We consider sea bandits those who illegally fish in our seas
and dump waste in our seas and carry weapons in our seas. We are
simply patrolling our seas. Think of us like a coast guard.”

The pirates who answered the phone call on Tuesday morning said they
were speaking by satellite phone from the bridge of the Faina, the
Ukrainian cargo ship that was hijacked about 200 miles off the coast
of Somalia on Thursday. Several pirates talked but said that only Mr.
Sugule was authorized to be quoted. Mr. Sugule acknowledged that they
were now surrounded by American warships, but he did not sound afraid.
“You only die once,” Mr. Sugule said.

He said that all was peaceful on the ship, despite unconfirmed reports
from maritime organizations in Kenya that three pirates were killed in
a shootout among themselves on Sunday or Monday night. He insisted
that the pirates were not interested in the weapons and had no plans
to sell them to Islamist insurgents battling Somalia’s weak
transitional government. “Somalia has suffered from many years of
destruction because of all these weapons,” he said. “We don’t want
that suffering and chaos to continue. We are not going to offload the
weapons. We just want the money.” He said the pirates were asking for
$20 million in cash; “we don’t use any other system than cash.” But he
added that they were willing to bargain. “That’s deal-making,” he

Piracy in Somalia is a highly organized, lucrative, ransom-driven
business. Just this year, pirates hijacked more than 25 ships, and in
many cases, they were paid million-dollar ransoms to release them. The
juicy payoffs have attracted gunmen from across Somalia, and the
pirates are thought to number in the thousands. The piracy industry
started about 10 to 15 years ago, Somali officials said, as a response
to illegal fishing. Somalia’s central government imploded in 1991,
casting the country into chaos. With no patrols along the shoreline,
Somalia’s tuna-rich waters were soon plundered by commercial fishing
fleets from around the world. Somali fishermen armed themselves and
turned into vigilantes by confronting illegal fishing boats and
demanding that they pay a tax. “From there, they got greedy,” said
Mohamed Osman Aden, a Somali diplomat in Kenya. “They starting
attacking everyone.”

By the early 2000s, many of the fishermen had traded in their nets for
machine guns and were hijacking any vessel they could catch: sailboat,
oil tanker, United Nations-chartered food ship. “It’s true that the
pirates started to defend the fishing business,” Mr. Mohamed said.
“And illegal fishing is a real problem for us. But this does not
justify these boys to now act like guardians. They are criminals. The
world must help us crack down on them.” The United States and several
European countries, in particular France, have been talking about ways
to patrol the waters together. The United Nations is even considering
something like a maritime peacekeeping force. Because of all the
hijackings, the waters off Somalia’s coast are considered the most
dangerous shipping lanes in the world.

On Tuesday, several American warships — around five, according to one
Western diplomat — had the hijacked freighter cornered along the
craggy Somali coastline. The American ships allowed the pirates to
bring food and water on board, but not to take weapons off. A Russian
frigate is also on its way to the area. Lt. Nathan Christensen, a Navy
spokesman, said on Tuesday that he had heard the unconfirmed reports
about the pirate-on-pirate shootout, but that the Navy had no more
information. “To be honest, we’re not seeing a whole lot of activity”
on the ship, he said.

In Washington, Geoff Morrell, the Pentagon press secretary, declined
to discuss any possible American military operations to capture the
ship. “Our concern is right now making sure that there’s a peaceful
resolution to this, that this cargo does not end up in the hands of
anyone who would use it in a way that would be destabilizing to the
region,” Mr. Morrell told reporters at the Pentagon. He said the
United States government was not involved in any negotiations with the
pirates. He also said he had no information about reports that the
pirates had exchanged gunfire among themselves.

Kenyan officials continued to maintain that the weapons aboard were
part of a legitimate arms deal for the Kenyan military, even though
several Western diplomats, Somali officials and the pirates themselves
said the arms were part of a secret deal to funnel weapons to southern
Sudan. Somali officials are urging the Western navies to storm the
ship and arrest the pirates because they say that paying ransoms only
fuels the problem. Western diplomats, however, have said that such a
commando operation would be very difficult because the ship is full of
explosives and the pirates could use the 20 crew members as human

Mr. Sugule said his men were treating the crew members well. (The
pirates would not let the crew members speak on the phone, saying it
was against their rules.) “Killing is not in our plans,” he said. “We
only want money so we can protect ourselves from hunger.” When asked
why the pirates needed $20 million to protect themselves from hunger,
Mr. Sugule laughed and said, “Because we have a lot of men.”

“The pirates adopt names like the National Volunteer Coast Guard,
which is used by a group that intercepts small boats and fishing
vessels in southern Somalia. Another of the four main piracy groups
along the coast calls itself the Somali Marines. Organized like a
military unit, with admirals, vice admirals and the like, the group
operates around Mogadishu.”

Q. & A. With a Pirate: “We Just Want the Money”
BY Jeffrey Gettleman / September 30, 2008

Somali pirates in small boats hijacked the Faina, a Belize-flagged
cargo ship owned and operated by Kaalbye Shipping Ukraine, on Sept.
25. Sugule Ali, the spokesman for the Somali pirates holding hostage
the Faina, a Ukrainian freighter loaded with weapons, spoke to me by
satellite telephone today from the bridge of the seized ship. In the
holds of the Faina, which the pirates seized on Thursday, are 33
Russian-built battle tanks and crates of grenade launchers, anti-
aircraft guns, ammunition and other explosives. American officials
fear that the weapons could fall into the hands of radical Islamist
insurgents who are battling Somalia’s weak government. My questions
were translated into Somali, and Mr. Ali’s responses into English, by
a translator employed by The New York Times.

Q. Tell us how you discovered the weapons on board.
A. As soon as we get on a ship, we normally do what is called a
control. We search everything. That’s how we found the weapons. Tanks,
anti-aircraft, artillery. That’s all we will say right now.

Q. Were you surprised?
A. No, we weren’t surprised. We know everything goes through the sea.
We see people who dump waste in our waters. We see people who
illegally fish in our waters. We see people doing all sorts of things
in our waters.

Q. Are you going to sell the weapons to insurgents?
A. No. We don’t want these weapons to go to anyone in Somalia. Somalia
has suffered from many years of destruction because of all these
weapons. We don’t want that suffering and chaos to continue. We are
not going to offload the weapons. We just want the money.

Q. How much?
A. $20 million, in cash. We don’t use any other system than cash.

Q. Will you negotiate?
A. That’s deal making. Common sense says human beings can make deals.

Q. Right now, the American Navy has you surrounded. Are you scared?
A. No, we’re not scared. We are prepared. We are not afraid because we
know you only die once.

Q. Will you kill the hostages if attacked?
A. Killing is not in our plans. We don’t want to do anything more than
the hijacking.

Q. What will you do with the money?
A. We will protect ourselves from hunger.

Q. That’s a lot of money to protect yourselves from hunger.
A. Yes, because we have a lot of men and it will be divided amongst
all of us.

Q. [There are 20 crew members, most of them Ukrainian, being held
hostage.] How are you interacting with the hostages? Eating with them?
Playing cards?
A. We interact with each other in an honorable manner. We are all
human beings. We talk to one another, and because we are in the same
place, we eat together.

Q. What if you were told you could leave peacefully, without arrest,
though without any ransom money. Would you do it?
A. [With a laugh] We’re not afraid of arrest or death or any of these
things. For us, hunger is our enemy.

Q. Have the pirates been misunderstood?
A. We don’t consider ourselves sea bandits [”sea bandit” is one way
Somalis translate the English word pirate]. We consider sea bandits
those who illegally fish in our seas and dump waste in our seas and
carry weapons in our seas. We are simply patrolling our seas. Think of
us like a coast guard.

Q. Why did you want to become a pirate?
A. We are patrolling our seas. This is a normal thing for people to do
in their regions.

Q. Isn’t what you are doing a crime? Holding people at gunpoint?
A. If you hold hostage innocent people, that’s a crime. If you hold
hostage people who are doing illegal activities, like waste dumping or
fishing, that is not a crime.

Q. What has this Ukrainian ship done that was a crime?
A. To go through our waters carrying all these weapons without

Q. What is the name of your group? How many ships have you hijacked
A. I won’t say how many ships we have hijacked. I won’t talk about
that. Our name is the Central Region Coast Guard.

“Our crew, who had been well trained and prepared, used water cannon, self-made incendiary bombs [Molotov cocktails or petrol bombs], beer bottles and anything else that could be used to battle with them. Thirty minutes later, the pirates gestured to us for a ceasefire. Then the helicopter from the joint fleet came to help us.”

Somali pirates in stare-down with global powers
BY Elizabeth A. Kennedy / Oct 15, 2008

Nairobi, Kenya — With a Russian frigate closing in and a half-dozen
U.S. warships within shouting distance, the pirates holding a tanker
off Somalia’s coast might appear to have no other choice than to wave
the white flag. But that’s not how it works in Somalia, a failed state
where a quarter of children die before they turn 5, where anybody with
a gun controls the streets and where every public institution has
crumbled. The 11-day standoff aboard the Ukrainian MV Faina begs the
question: How can a bunch of criminals from one of the poorest and
most wretched countries on Earth face off with some of the world’s
richest and well-armed superpowers?

“They have enough guns to fight for another 20 years,” Ted Dagne, a
Somalia analyst in Washington, told The Associated Press. “And there
is no way to win a battle when the other side is in a suicidal mind
set.” In Somalia, pirates are better-funded, better-organized and
better-armed than one might imagine in a country that has been in
tatters for nearly two decades. They have the support of their
communities and rogue members of the government — some pirates even
promise to put ransom money toward building roads and schools. With
most attacks ending with million-dollar payouts, piracy is considered
the biggest economy in Somalia. Pirates rarely hurt their hostages,
instead holding out for a huge payday. The strategy works well: A
report Thursday by a London-based think tank said pirates have raked
in up to $30 million in ransoms this year alone. “If we are attacked
we will defend ourselves until every last one of us dies,” Sugule Ali,
a spokesman for the pirates aboard the Faina, said in an interview
over satellite telephone from the ship, which is carrying 33 battle
tanks, military weapons and 21 Ukrainian and Latvian and Russian
hostages. One Russian has reportedly died, apparently of illness. The
pirates are demanding $20 million ransom, and say they will not lower
the price. “We only need money and if we are paid, then everything
will be OK,” he said. “No one can tell us what to do.”

Ali’s bold words come even though his dozens of fighters are
surrounded by U.S. warships and American helicopters buzz overhead.
Moscow has sent a frigate, which should arrive within days. Jennifer
Cooke of the Center for Strategic and International Studies in
Washington said hostage-taking is the key to the pirates’ success
against any military muscle looming from the U.S. and Russia. “Once
you have a crew at gunpoint, you can hold six U.S. naval warships at
bay and they don’t have a whole lot of options except to wait it out,”
Cooke said. The pirates have specifically warned against the type of
raids carried out twice this year by French commandos to recover
hijacked vessels. The French used night vision goggles and helicopters
in operations that killed or captured several pirates, who are now
standing trial in Paris. But the hostages are not the bandits’ only
card to play. Often dressed in military fatigues, pirates travel in
open skiffs with outboard engines, working with larger mother ships
that tow them far out to sea. They use satellite navigational and
communications equipment and an intimate knowledge of local waters,
clambering aboard commercial vessels with ladders and grappling hooks.

They are typically armed with automatic weapons, anti-tank rocket
launchers and grenades — weaponry that is readily available throughout
Somalia, where a bustling arms market operates in the center of the
capital. They also have the support of their communities and some
members of local administrations, particularly in Puntland, a
semiautonomous region in northeast Somalia that is a hotbed for
piracy, officials and pirates have told the AP. Abdulqadir Muse Yusuf,
a deputy minister of ports in Puntland, acknowledged there were
widespread signs that Puntland officials, lawmakers and government
officials are “involved or benefiting from piracy” and said
investigations were ongoing. He would not elaborate. Piracy has
transformed the region around the town of Eyl, near where many
hijacked ships are anchored brought while pirates negotiate ransoms.
“Pirates buy new luxury cars and marry two, three, or even four
women,” said Mohamed, an Eyl resident who refused to give his full
name for fear of reprisals from the pirates. “They build new homes —
the demand for construction material is way up.” He said most of the
well-known pirates promise to build roads and schools in addition to
homes for themselves. But for now, Mohamed says he has only seen
inflation skyrocket as the money pours in. “One cup of tea is about
$1,” he said. Before the piracy skyrocketed, tea cost a few cents.

Piracy in Somalia is nothing new, as bandits have stalked the seas for
years. But this year’s surge in attacks — nearly 30 so far — has
prompted an unprecedented international response. The Faina has been
the highest-profile attack because of its dangerous cargo. The U.S.
fears the arms could end up in the hands of al-Qaida-linked militants
in a country seen as a key battleground on terror. The United States
has been leading international patrols to combat piracy along
Somalia’s unruly 1,880-mile coast, the longest in Africa and near key
shipping routes. In June, the U.N. Security Council passed a
resolution that would allow countries to chase and arrest pirates
after attacks increased this year. But still, the attacks continue.
Dagne, an analyst in Washington, said that unless the roots of the
problem are solved — poverty, disease, violence — piracy will only
flourish. “You have a population that is frustrated, alienated, angry
and hopeless,” Dagne said. “This generation of Somalis grew up
surrounded by abject poverty and violence.”

Pirates die strangely after taking Iranian ship
BY Andrew Donaldson / Sep 28, 2008

A tense standoff has developed in waters off Somalia over an Iranian
merchant ship laden with a mysterious cargo that was hijacked by
pirates. Somali pirates suffered skin burns, lost hair and fell
gravely ill “within days” of boarding the MV Iran Deyanat. Some of
them died. Andrew Mwangura, the director of the East African
Seafarers’ Assistance Programme, told the Sunday Times: “We don’t
know exactly how many, but the information that I am getting is that
some of them had died. There is something very wrong about that ship.”

The vessel’s declared cargo consists of “minerals” and “industrial
products”. But officials involved in negotiations over the ship are
convinced that it was sailing for Eritrea to deliver small arms and
chemical weapons to Somalia’s Islamist rebels. The drama over the Iran
Deyanat comes as speculation grew this week about whether the South
African Navy would send a vessel to join the growing multinational
force in the region. A naval spokesman, Lieutenant-Commander Greyling
van den Berg, told the Sunday Times that the navy had not been ordered
by the government to become involved in “the Somali pirate issue”.

About 22000 ships a year pass through the Suez Canal and the Gulf of
Aden, where regional instability and “no-questions-asked” ransom
payments have led to a dramatic rise in attacks on vessels by heavily
armed Somali raiders in speedboats. The Iran Deyanat was sailing in
those waters on August 21, past the Horn of Africa and about 80
nautical miles southeast of Yemen, when it was boarded by about 40
pirates armed with AK-47s and rocket-propelled grenades. They were
alleged members of a crime syndicate said to be based at Eyl, a small
fishing village in northern Somalia.

The ship is owned and operated by the Islamic Republic of Iran
Shipping Lines, or IRISL, a state-owned company run by the Iranian
military. According to the US Treasury Department, the IRISL regularly
falsifies shipping documents to hide the identity of end users, uses
generic terms to describe shipments and operates under various covers
to circumvent United Nations sanctions. The ship set sail from
Nanjing, China, at the end of July. According to its manifest, it was
heading for Rotterdam where it would unload 42500 tons of iron ore and
“industrial products” purchased by a German client. At Eyl, the ship
was secured by more pirates — about 50 on board, and another 50 on

But within days those who had boarded the ship developed mysterious
health trouble. This was also confirmed by Hassan Allore Osman,
minister of minerals and oil in Puntland, an autonomous region of
Somalia. He headed a delegation sent to Eyl when news of the toxic
cargo and illnesses surfaced. He told one news publication, The Long
War Journal, that during the six days he had negotiated with the
pirates, a number of them had become sick and died. “That ship is
unusual,” he was quoted as saying. “It is not carrying a normal

The pirates did reveal that they had tried to inspect the ship’s cargo
containers when some of them fell sick — but the containers were
locked. Osman’s delegation spoke to the ship’s captain and its
engineer by cellphone, demanding to know more about the cargo.
Initially it was claimed the cargo contained “crude oil”; later it was
said to be “minerals”. And Mwangura has added: “Our sources say it
contains chemicals, dangerous chemicals.” But IRISL has denied that —
and threatened legal action against Mwangura. The company has
reportedly paid the pirates 200000 — the first of several “ransom
instalments”, but that, too, has been denied.

‘Toxic waste’ behind Somali piracy
BY Najad Abdullahi / October 11, 2008 / 12:21 Mecca time

Somali pirates have accused European firms of dumping toxic waste off
the Somali coast and are demanding an $8m ransom for the return of a
Ukranian ship they captured, saying the money will go towards cleaning
up the waste. The ransom demand is a means of “reacting to the toxic
waste that has been continually dumped on the shores of our country
for nearly 20 years”, Januna Ali Jama, a spokesman for the pirates,
based in the semi-autonomous region of Puntland, said. “The Somali
coastline has been destroyed, and we believe this money is nothing
compared to the devastation that we have seen on the seas.”

The pirates are holding the MV Faina, a Ukrainian ship carrying tanks
and military hardware, off Somalia’s northern coast. According to the
International Maritime Bureau, 61 attacks by pirates have been
reported since the start of the year. While money is the primary
objective of the hijackings, claims of the continued environmental
destruction off Somalia’s coast have been largely ignored by the
regions’s maritime authorities.

Dumping allegations
Ahmedou Ould-Abdallah, the UN envoy for Somalia confirmed to Al
Jazeera the world body has “reliable information” that European and
Asian companies are dumping toxic waste, including nuclear waste, off
the Somali coastline. “I must stress however, that no government has
endorsed this act, and that private companies and individuals acting
alone are responsible,” he said. Allegations of the dumping of toxic
waste, as well as illegal fishing, have circulated since the early
1990s. But evidence of such practices literally appeared on the
beaches of northern Somalia when the tsunami of 2004 hit the country.

The UN Environment Programme (UNEP) reported the tsunami had
washed up rusting containers of toxic waste on the shores of Puntland.
Nick Nuttall, a UNEP spokesman, told Al Jazeera that when the barrels
were smashed open by the force of the waves, the containers exposed
a “frightening activity” that has been going on for more than decade.
“Somalia has been used as a dumping ground for hazardous waste
starting in the early 1990s, and continuing through the civil war
there,” he said. “European companies found it to be very cheap to get
rid of the waste, costing as little as $2.50 a tonne, where waste
disposal costs in Europe are something like $1000 a tonne. “And the
waste is many different kinds. There is uranium radioactive waste.
There is lead, and heavy metals like cadmium and mercury. There is
also industrial waste, and there are hospital wastes, chemical wastes
– you name it.”

Nuttall also said that since the containers came ashore, hundreds of
residents have fallen ill, suffering from mouth and abdominal
bleeding, skin infections and other ailments. “We [the UNEP] had
planned to do a proper, in-depth scientific assessment on the
magnitude of the problem. But because of the high levels of insecurity
onshore and off the Somali coast, we are unable to carry out an
accurate assessment of the extent of the problem,” he said. However,
Ould-Abdallah claims the practice still continues. “What is most
alarming here is that nuclear waste is being dumped. Radioactive
uranium waste that is potentially killing Somalis and completely
destroying the ocean,” he said.

Toxic waste
Ould-Abdallah declined to name which companies are involved in waste
dumping, citing legal reasons. But he did say the practice helps fuel
the 18-year-old civil war in Somalia as companies are paying Somali
government ministers to dump their waste, or to secure licences and
contracts. “There is no government control … and there are few
people with high moral ground … [and] yes, people in high positions
are being paid off, but because of the fragility of the TFG
[Transitional Federal Government], some of these companies now no
longer ask the authorities – they simply dump their waste and leave.”

Ould-Abdallah said there are ethical questions to be considered
because the companies are negotiating contracts with a government that
is largely divided along tribal lines. “How can you negotiate these
dealings with a country at war and with a government struggling to
remain relevant?” In 1992, a contract to secure the dumping of toxic
waste was made by Swiss and Italian shipping firms Achair Partners and
Progresso, with Nur Elmi Osman, a former official appointed to the
government of Ali Mahdi Mohamed, one of many militia leaders involved
in the ousting of Mohamed Siad Barre, Somalia’s former president. At
the request of the Swiss and Italian governments, UNEP investigated
the matter. Both firms had denied entering into any agreement with
militia leaders at the beginning of the Somali civil war. Osman also
denied signing any contract.

‘Mafia involvement’
However, Mustafa Tolba, the former UNEP executive director, told Al
Jazeera that he discovered the firms were set up as fictitious
companies by larger industrial firms to dispose of hazardous waste.
“At the time, it felt like we were dealing with the Mafia, or some
sort of organised crime group, possibly working with these industrial
firms,” he said. “It was very shady, and quite underground, and I
would agree with Ould-Abdallah’s claims that it is still going on…
Unfortunately the war has not allowed environmental groups to
investigate this fully.”

The Italian mafia controls an estimated 30 per cent of Italy’s waste
disposal companies, including those that deal with toxic waste. In
1998, Famiglia Cristiana, an Italian weekly magazine, claimed that
although most of the waste-dumping took place after the start of the
civil war in 1991, the activity actually began as early as 1989 under
the Barre government. Beyond the ethical question of trying to secure
a hazardous waste agreement in an unstable country like Somalia, the
alleged attempt by Swiss and Italian firms to dump waste in Somalia
would violate international treaties to which both countries are

Legal ramifications
Switzerland and Italy signed and ratified the Basel Convention on the
Control of Transboundary Movements of Hazardous Wastes and their
Disposal, which came into force in 1992. EU member states, as well as
168 other countries have also signed the agreement. The convention
prohibits waste trade between countries that have signed the
convention, as well as countries that have not signed the accord
unless a bilateral agreement had been negotiated. It is also prohibits
the shipping of hazardous waste to a war zone. Abdi Ismail Samatar,
professor of Geography at the University of Minnesota, told Al Jazeera
that because an international coalition of warships has been deployed
to the Gulf of Aden, the alleged dumping of waste must have been

Environmental damage
“If these acts are continuing, then surely they must have been seen by
someone involved in maritime operations,” he said. “Is the cargo aimed
at a certain destination more important than monitoring illegal
activities in the region? Piracy is not the only problem for Somalia,
and I think it’s irresponsible on the part of the authorities to
overlook this issue.” Mohammed Gure, chairman of the Somalia Concern
Group, said that the social and environmental consequences will be
felt for decades. “The Somali coastline used to sustain hundreds of
thousands of people, as a source of food and livelihoods. Now much of
it is almost destroyed, primarily at the hands of these so-called
ministers that have sold their nation to fill their own pockets.” Ould-
Abdallah said piracy will not prevent waste dumping. “The intentions
of these pirates are not concerned with protecting their environment,”
he said. “What is ultimately needed is a functioning, effective
government that will get its act together and take control of its

‘We consider ourselves heroes’ – a Somali pirate speaks
Asad ‘Booyah’ Abdulahi, 42, describes himself as a pirate boss,
capturing ships in the Gulf of Aden and Indian Ocean.
Interview by Xan Rice and Abdiqani Hassan / November 22 2008

“I am 42 years old and have nine children. I am a boss with boats
operating in the Gulf of Aden and the Indian Ocean. I finished high
school and wanted to go to university but there was no money. So I
became a fisherman in Eyl in Puntland like my father, even though I
still dreamed of working for a company. That never happened as the
Somali government was destroyed [in 1991] and the country became

At sea foreign fishing vessels often confronted us. Some had no
licence, others had permission from the Puntland authorities but did
not want us there to compete. They would destroy our boats and force
us to flee for our lives. I started to hijack these fishing boats in
1998. I did not have any special training but was not afraid. For our
first captured ship we got $300,000. With the money we bought AK-47s
and small speedboats. I don’t know exactly how many ships I have
captured since then but I think it is about 60. Sometimes when we are
going to hijack a ship we face rough winds, and some of us get sick
and some die.

We give priority to ships from Europe because we get bigger ransoms.
To get their attention we shoot near the ship. If it does not stop we
use a rope ladder to get on board. We count the crew and find out
their nationalities. After checking the cargo we ask the captain to
phone the owner and say that have seized the ship and will keep it
until the ransom is paid. We make friends with the hostages, telling
them that we only want money, not to kill them. Sometimes we even eat
rice, fish, pasta with them. When the money is delivered to our ship
we count the dollars and let the hostages go.

Then our friends come to welcome us back in Eyl and we go to Garowe in
Land Cruisers. We split the money. For example, if we get $1.8m, we
would send $380,000 to the investment man who gives us cash to fund
the missions, and then divide the rest between us. Our community
thinks we are pirates getting illegal money. But we consider ourselves
heroes running away from poverty. We don’t see the hijacking as a
criminal act but as a road tax because we have no central government
to control our sea. With foreign warships now on patrol we have
difficulties. But we are getting new boats and weapons. We will not
stop until we have a central government that can control our sea.”

Somali pirates strike again / November 19, 2008 / 09:02 Mecca time

Somali pirates have struck again in the Gulf of Aden, hijacking
another ship a day after seizing a Saudi oil supertanker with a cargo
worth $100m. The Delight, a Hong Kong-registered vessel carrying
33,000 tonnes of wheat, was sailing to Iran with 25 crew members when
it was seized, Chinese state news agency Xinhua said. A spokesman for
the US Navy’s Fifth Fleet in the Gulf confirmed on Tuesday that the
Delight had been hijacked. A Hong Kong government spokesman said
“this could be a serious matter for us. We will deal with it”.

Saudi tanker anchored
News of the latest hijack came as the hijackers of the Saudi Sirius
Star – the biggest vessel ever hijacked – anchored the vessel off
Somalia. The vessel was seized in the Indian ocean off East Africa on
Sunday in the boldest attack by pirates operating from lawless
Somalia. “We can confirm the ship is anchoring off the Somali coast at
Haradheere,” Lieutenant Nathan Christensen, a spokesman for the US
Fifth Fleet, said on Tuesday. Haradheere is situated roughly in the
centre of Somalia’s coastline.

The supertanker had been heading for the US via the Cape of Good Hope
at the southern tip of Africa, instead of heading through the Gulf of
Aden and the Suez Canal. The hijacking occurred despite an
international naval response, including from the Nato alliance and
European Union, to protect one of the world’s busiest shipping areas.
US, French and Russian warships are also off the Somali coast. The
pirates have driven up insurance costs, forced some ships to go round
South Africa instead of through the Suez Canal and secured millions of
dollars in ransoms. Last week, the European Union, in its first-ever
naval mission, launched a security operation off the coast of Somalia
to combat growing piracy and protect ships carrying aid agency

Outrageous act
Prince Saud al-Faisal, Saudi Arabia’s foreign minister called the
hijacking of the Sirius Star an outrageous act and promised to back an
EU-led initiative to step up security in shipping lanes off Africa’s
east coast. “This outrageous act by the pirates, I think, will only
reinforce the resolve of the countries of the Red Sea and
internationally to fight piracy,” he told reporters in Athens. The
vessel owned by Saudi oil giant Aramco was fully loaded when it was
attacked on Sunday more than 450 nautical miles southeast of Mombasa.
The standoff comes as another ship is seized off the coast of Somalia.
According to the International Maritime Bureau (IMB), a Thai fishing
boat with 16 crew members has been hijacked. Noel Choong, head of the
IMB piracy reporting centre, based in Kuala Lumpur, said the ship was
seized in the Gulf of Aden on Monday. Eight ships have now been
hijacked in the past two weeks.

‘Hitting the jackpot’
Andrew Mwangura, co-ordinator of the East African Seafarers’
Association, said: “The world has never seen anything like this …
The Somali pirates have hit the jackpot.” The association, based in
the Kenyan port city of Mombasa, has been monitoring piracy for years.
Mwangura said he thought a hijacked Nigerian tug was a “mother-ship”
for the November 15 seizure. “The supertanker was fully loaded, so it
was probably low in the water and not that difficult to board,” he
said, adding that the pirates probably used a ladder or hooked a rope
to the side.

Pirates are well organised in the Horn of Africa, where Somalia’s
northeastern tip juts into the Indian Ocean. Somalia has had no
effective government since the 1991 overthrow of Mohamed Siad Barre,
the former president, touched off a bloody power struggle that has
defied numerous attempts to restore stability. This year, Somali
pirates have attacked 90 ships, more than double the number in 2007,
according to the International Maritime Bureau, and are still holding
16 ships and more than 250 sailors.

CURRENTLY HELD FOR RANSOM,2933,454124,00.html
Somali Pirates Keep Hundreds of Hostages in Pirate City of Eyl
Heres a list of ten of the biggest vessels still in pirates’ hands.

1. Sirius Star / Hijacked November 17
Cargo: 2 million barrels of oil, value $100 million
Crew: 25 men

2. MV Karagol / Hijacked November 12
Cargo: 4,000 tons of chemicals
Crew: 14 Turks

3. MV Stolt Strength / Hijacked November 10
Cargo: Phosphoric acid
Crew: 23 Filipinos

4. CEC Future / Hijacked November 7
Cargo: Unknown
Crew: 11 Russians, one Georgian, one Lithuanian

5. MV Yasa Neslihan / Hijacked October 29
Cargo: Iron ore
Crew: 20 Turks

6. MT African Sanderling / Hijacked October 15
Cargo: Unknown
Crew: 21 Filipinos

7. MV Faina / Hijacked September 25
Cargo: 33 T-72 Russian battle tanks
Crew: 17 Ukrainians, 2 Latvians, one Russian

8. MV Captain Stefanos / Hijacked September 21
Cargo: Unknown
Crew: 17 Filipinos, two other nationals

9. Centauri / Hijacked September 18
Cargo: 17,000 tons of salt
Crew: 25 Filipinos

10. MV Great Creation / Hijacked September 17
Cargo: Chemical fertilizer
Crew: 24 Chinese, one Sri Lankan

Somali pirates transform villages into boomtowns
BY Mohamed Olad Hassan and Elizabeth Kennedy / 11.19.08

MOGADISHU, Somalia (AP) — Somalia’s increasingly brazen pirates are
building sprawling stone houses, cruising in luxury cars, marrying
beautiful women — even hiring caterers to prepare Western-style food
for their hostages. And in an impoverished country where every public
institution has crumbled, they have become heroes in the steamy
coastal dens they operate from because they are the only real business
in town. “The pirates depend on us, and we benefit from them,” said
Sahra Sheik Dahir, a shop owner in Harardhere, the nearest village to
where a hijacked Saudi Arabian supertanker carrying $100 million in
crude was anchored Wednesday.

These boomtowns are all the more shocking in light of Somalia’s
violence and poverty: Radical Islamists control most of the country’s
south, meting out lashings and stonings for accused criminals. There
has been no effective central government in nearly 20 years, plunging
this arid African country into chaos. Life expectancy is just 46
years; a quarter of children die before they reach 5. But in northern
coastal towns like Harardhere, Eyl and Bossaso, the pirate economy is
thriving thanks to the money pouring in from pirate ransoms that have
reached $30 million this year alone. “There are more shops and
business is booming because of the piracy,” said Sugule Dahir, who
runs a clothing shop in Eyl. “Internet cafes and telephone shops have
opened, and people are just happier than before.”

In Harardhere, residents came out in droves to celebrate as the
looming oil ship came into focus this week off the country’s lawless
coast. Businessmen gathered cigarettes, food and cold bottles of
orange soda, setting up kiosks for the pirates who come to shore to
resupply almost daily. Dahir said she even started a layaway plan for
them. “They always take things without paying and we put them into the
book of debts,” she told The Associated Press in a telephone
interview. “Later, when they get the ransom money, they pay us a lot.”
Residents make sure the pirates are well-stocked in khat, a popular
narcotic leaf, and aren’t afraid to gouge a bit when it comes to the
pirates’ deep pockets. “I can buy a packet of cigarettes for about $1
but I will charge the pirate $1.30,” said Abdulqadir Omar, an Eyl
resident. While pirate villages used to have houses made of corrugated
iron sheets, now, there are stately looking homes made of sturdy,
white stones. “Regardless of how the money is coming in, legally or
illegally, I can say it has started a life in our town,” said Shamso
Moalim, a 36-year-old mother of five in Harardhere. “Our children are
not worrying about food now, and they go to Islamic schools in the
morning and play soccer in the afternoon. They are happy.”

The attackers generally treat their hostages well in anticipation of a
big payday, hiring caterers on shore to cook spaghetti, grilled fish
and roasted meat that will appeal to Western palates. And when the
payday comes, the money sometimes literally falls from the sky.
Pirates say the ransom arrives in burlap sacks, sometimes dropped from
buzzing helicopters, or in waterproof suitcases loaded onto skiffs in
the roiling, shark-infested sea. “The oldest man on the ship always
takes the responsibility of collecting the money, because we see it as
very risky, and he gets some extra payment for his service later,”
Aden Yusuf, a pirate in Eyl, told AP over VHF radio.

The pirates use money-counting machines — the same technology seen
at foreign exchange bureaus worldwide — to ensure the cash is real. All
payments are done in cash because Somalia has no functioning banking
system. “Getting this equipment is easy for us, we have business
connections with people in Dubai, Nairobi, Djibouti and other areas,”
Yusuf said. “So we send them money and they send us what we want.”

Despite a beefed-up international presence, the pirates continue to
seize ships, moving further out to sea and demanding ever-larger
ransoms. The pirates operate mostly from the semiautonomous Puntland
region, where local lawmakers have been accused of helping them and
taking a cut of the ransoms. For the most part, however, the regional
officials say they have no power to stop piracy. Meanwhile, towns that
once were eroded by years of poverty and chaos are now bustling with
restaurants, Land Cruisers and Internet cafes. Residents also use
their gains to buy generators — allowing full days of electricity,
once an unimaginable luxury in Somalia.

“Pirate Jama Shino in the Somali town of Garowe, threw the most lavish
wedding party for his second marriage and invited hundreds of people
from the local authorities and among citizens,” Hussameddin wrote.
“The bride and the young women who attended the party, said: “Marrying
a pirate is every Somali girl’s dream. He has power, money, immunity,
the weapons to defend the tribe and funds to give to the militias in
civil war,” – from an op-ed in the Egyptian paper, Al Ahram.

Somali pirates living the high life
BY Robyn Hunter / 2008/10/28

“No information today. No comment,” a Somali pirate shouts over the
sound of breaking waves, before abruptly ending the satellite
telephone call. He sounds uptight – anxious to see if a multi-million
dollar ransom demand will be met. He is on board the hijacked
Ukrainian vessel, MV Faina – the ship laden with 33 Russian battle
tanks that has highlighted the problem of piracy off the Somali coast
since it was captured almost a month ago. But who are these modern-day
pirates? According to residents in the Somali region of Puntland where
most of the pirates come from, they live a lavish life.

“They have money; they have power and they are getting stronger by the
day,” says Abdi Farah Juha who lives in the regional capital, Garowe.
“They wed the most beautiful girls; they are building big houses; they
have new cars; new guns,” he says. “Piracy in many ways is socially
acceptable. They have become fashionable.” Most of them are aged
between 20 and 35 years – in it for the money. And the rewards they
receive are rich in a country where almost half the population need
food aid after 17 years of non-stop conflict.

Most vessels captured in the busy shipping lanes of the Gulf of Aden
fetch on average a ransom of $2m. This is why their hostages are well
looked after. The BBC’s reporter in Puntland, Ahmed Mohamed Ali, says
it also explains the tight operation the pirates run. They are never
seen fighting because the promise of money keeps them together.
Wounded pirates are seldom seen and our reporter says he has never
heard of residents along Puntland’s coast finding a body washed
ashore. Given Somalia’s history of clan warfare, this is quite a feat.
It probably explains why a report of a deadly shoot-out amongst the
pirates onboard the MV Faina was denied by the vessel’s hijackers.
Pirate spokesman Sugule Ali told the BBC Somali Service at the time:
“Everybody is happy. We were firing guns to celebrate Eid.”

Brains, muscle and geeks
The MV Faina was initially attacked by a gang of 62 men. BBC Somalia
analyst Mohamed Mohamed says such pirate gangs are usually made up
of three different types:
* Ex-fishermen, who are considered the brains of the operation
because they know the sea
* Ex-militiamen, who are considered the muscle – having fought for
various Somali clan warlords
* The technical experts, who are the computer geeks and know how
to operate the hi-tech equipment needed to operate as a pirate –
satellite phones, GPS and military hardware.

The three groups share the ever-increasing illicit profits – ransoms
paid in cash by the shipping companies. A report by UK think-tank
Chatham House says piracy off the coast of Somalia has cost up to $30m
(£17m) in ransoms so far this year. The study also notes that the
pirates are becoming more aggressive and assertive – something the
initial $22m ransom demanded for MV Faina proves. The asking price has
apparently since fallen to $8m.

Calling the shots
Yemen, across the Gulf of Aden, is reportedly where the pirates get
most of their weapons from. A significant number are also bought
directly from the Somali capital, Mogadishu. Observers say Mogadishu
weapon dealers receive deposits for orders via a “hawala” company – an
informal money transfer system based on honour. Militiamen then drive
the arms north to the pirates in Puntland, where they are paid the
balance on delivery. It has been reported in the past that wealthy
businessmen in Dubai were financing the pirates. But the BBC’s Somali
Service says these days it is the businessmen asking the pirates for

Such success is a great attraction for Puntland’s youngsters, who have
little hope of alternative careers in the war-torn country. Once a
pirate makes his fortune, he tends to take on a second and third wife
– often very young women from poor nomadic clans, who are renowned
for their beauty. But not everyone is smitten by Somalia’s new elite.
“This piracy has a negative impact on several aspects of our life in
Garowe,” resident Mohamed Hassan laments.

He cites an escalating lack of security because “hundreds of armed
men” are coming to join the pirates. They have made life more
expensive for ordinary people because they “pump huge amounts of US
dollars” into the local economy which results in fluctuations in the
exchange rate, he says. Their lifestyle also makes some unhappy. “They
promote the use of drugs – chewing khat [a stimulant which keeps one
alert] and smoking hashish – and alcohol,” Mr Hassan says.

The trappings of success may be new, but piracy has been a problem in
Somali waters for at least 10 years – when Somali fishermen began
losing their livelihoods. Their traditional fishing methods were no
match for the illegal trawlers that were raiding their waters. Piracy
initially started along Somalia’s southern coast but began shifting
north in 2007 – and as a result, the pirate gangs in the Gulf of Aden
are now multi-clan operations. But Garowe resident Abdulkadil Mohamed
says, they do not see themselves as pirates. “Illegal fishing is the
root cause of the piracy problem,” he says. “They call themselves

‘Pirates Are Stronger Than Us’ – Eyl Mayor / 23 August 2008
“The mayor of a small coastal town in northeastern Somalia has
declared that local authorities are unable to stop pirates. Abdullahi
Said O’Yusuf, the mayor of Eyl in Puntland region, confirmed Radio
Garowe during a Saturday interview that four hijacked ships are being
held hostage near the town’s shores. “They are stronger than us,”
Mayor O’Yusuf said, while speaking of the pirates. He condemned
continued attacks on foreign ships traveling across the Indian Ocean,
while underlining that local authorities “cannot do anything” to stop
piracy. The Associated Press has reported that four ships – with
owners in Malaysia, Iran, Japan and Germany – and a total crew of 96
people are being held hostage by Somali pirates. Mayor O’Yusuf said
the pirates who hijacked the ships “are the same ones who received
ransom payments before,” referring to previous pirate attacks in the
region. According to the Mayor, pirates use ransom payments to “buy
houses in big cities” in different parts of the country.”

“Eyl is a town in the northern Puntland region of Somalia. The
prominent clans in the Eyl district are the Majeerteen and Leelkase
sub-clans of the Darod. Eyl is near the Hafun peninsula, the location
of most of Somalia’s casualties from the 2004 Indian Ocean Tsunami. As
of 2008 Eyl has become a pirate haven, with more than a dozen ships
being held captive by pirate crews. The Puntland government has
acknowledged that they are relatively powerless to stop pirate
activities. French commandos decided a hostage rescue in Eyl was too
dangerous, and carried out a rescue of two French sailors before they
could be taken there.”

Life in Somalia’s pirate town
BY Mary Harper / 18 September 2008

Whenever word comes out that pirates have taken yet another ship in
the Somali region of Puntland, extraordinary things start to happen.
There is a great rush to the port of Eyl, where most of the hijacked
vessels are kept by the well-armed pirate gangs. People put on ties
and smart clothes. They arrive in land cruisers with their laptops,
one saying he is the pirates’ accountant, another that he is their
chief negotiator.

With yet more foreign vessels seized off the coast of Somalia this
week, it could be said that hijackings in the region have become
epidemic. Insurance premiums for ships sailing through the busy Gulf
of Aden have increased tenfold over the past year because of the
pirates, most of whom come from the semi-autonomous region of
Puntland. In Eyl, there is a lot of money to be made, and everybody is
anxious for a cut.

Entire industry
The going rate for ransom payments is between $300,000 and $1.5m
(£168,000-£838,000). A recent visitor to the town explained how, even
though the number of pirates who actually take part in a hijacking is
relatively small, the whole modern industry of piracy involves many
more people. “The number of people who make the first attack is small,
normally from seven to 10,” he said. “They go out in powerful
speedboats armed with heavy weapons. But once they seize the ship,
about 50 pirates stay on board the vessel. And about 50 more wait on
shore in case anything goes wrong.”

Given all the other people involved in the piracy industry, including
those who feed the hostages, it has become a mainstay of the Puntland
economy. Eyl has become a town tailor-made for pirates – and their
hostages. Special restaurants have even been set up to prepare food
for the crews of the hijacked ships. As the pirates want ransom
payments, they try to look after their hostages. When commandos from
France freed two French sailors seized by pirates off the Somali coast
in September, President Nicolas Sarkozy said he had given the go-ahead
for the operation when it was clear the pirates were headed for Eyl –
it would have been too dangerous to try to free them from there.

The town is a safe-haven where very little is done to stop the pirates
– leading to the suggestion that some, at least, in the Puntland
administration and beyond have links with them. Many of them come
from the same clan – the Majarteen clan of the president of Somalia’s
transitional federal government, Abdullahi Yusuf.

Money to spend
The coastal region of Puntland is booming. Fancy houses are being
built, expensive cars are being bought – all of this in a country that
has not had a functioning central government for nearly 20 years.
Observers say pirates made about $30m from ransom payments last
year – far more than the annual budget of Puntland, which is about
$20m. When the president of Puntland, Adde Musa, was asked about
the reported wealth of pirates and their associates, he said: “It’s more
than true”.

Now that they are making so much money, these 21st Century pirates
can afford increasingly sophisticated weapons and speedboats. This
means that unless more is done to stop them, they will continue to
plunder the busy shipping lanes through the Gulf of Aden. They even
target ships carrying aid to feed their compatriots – up to a third of the
population. Warships from France, Canada and Malaysia, among others,
now patrol the Somali coast to try and fend off pirate attacks.

An official at the International Maritime Organisation explained how
the well-armed pirates are becoming increasingly bold. More than 30%
of the world’s oil is transported through the Gulf of Aden. “It is
only a matter of time before something horrible happens,” said the
official. “If the pirates strike a hole in the tanker, and there’s an
oil spill, there could be a huge environmental disaster”.

It is likely that piracy will continue to be a problem off the coast
of Somalia as long as the violence and chaos continues on land.
Conflict can be very good for certain types of business, and piracy is
certainly one of them. Weapons are easy to obtain and there is no
functioning authority to stop them, either on land or at sea.


“We want pre-emptive action against the mother ships before the
pirates carry out a hijacking,” said Captain Pottengal Mukundan,
director of the London-based International Maritime Bureau, which
monitors international piracy, referring to the ships pirates use as
bases from which to launch attacks. “The positions of the mother ships
are generally known. What we would like to see is the naval vessels
going to interdict them, searching them and removing any arms on
board. That would at least force the pirates to go back to Somalia to
pick up more arms before they could come back again,” he told Reuters
in an interview.

But the laws governing what navies can do to take on the pirates are
complex. Only if pirates are caught in the act of piracy — actually
boarding a ship and seizing it — can a naval ship intervene with the
full force of international law. Arriving 30 minutes after a vessel
has been boarded, when there is a degree of uncertainty over whether
those on board are pirates or not, is often too late, experts say.
Denmark recently had to return some suspected pirates to Somalia
because it couldn’t prove they were pirates after they were seized.

Mr. Mukundan said there were currently about four ‘mother ships’ —
seized dhows or other larger fishing boats anchored near international
waters — being used by pirates. The pirates live on the mother ships,
storing arms, fuel and other supplies on board, and then target ships,
which can include fuel tankers, by catching up to them in high-speed
boats and boarding them with rope ladders while heavily armed. Mr.
Mukundan acknowledged the legalities of taking on ‘mother ships’ were
tricky, but said it could be done if governments gave their naval
forces instructions to do it.”


“Piracy is an international crime consisting of illegal acts of
violence, detention, or depredation committed for private ends by the
crew or passengers of a private ship or aircraft in or over
international waters against another ship or aircraft or persons and
property on board. (Depredation is the act of plundering, robbing, or

In international law piracy is a crime that can be committed only
on or over international waters (including the high seas, exclusive
economic zone, and the contiguous zone), in international airspace,
and in other places beyond the territorial jurisdiction of any nation.
The same acts committed in the internal waters, territorial sea,
archipelagic waters, or national airspace of a nation do not
constitute piracy in international law but are, instead, crimes within
the jurisdiction and sovereignty of the littoral nation.

Sea robbery is a term used to describe attacks upon commercial
vessels in ports and territorial waters. Such attacks are, according
to international law, not true acts of piracy but rather armed
robberies. They are criminal assaults on vessels and vessel crews,
just as may occur to truck drivers within a port area. Such attacks
pose a serious threat to trade. The methods of these attacks have
varied from direct force using heavy weapons to subterfuge in which
the criminals have identified themselves on VHF radio as the national
coast guard.

These maritime criminals are inclined to operate in waters where
government presence is weak, often lacking in both technical resources
and the political will to deal effectively with such attacks.
International law permits any warship or government vessel to repress
an attack in international waters. In a state’s territorial waters,
such attacks constitute an act of armed robbery and must be dealt with
under the laws of the relevant coastal state. These laws seldom, if
ever, permit a vessel or warship from another country to intervene.
The most effective countermeasure strategy is to prevent criminals
initial access to ports and vessels, and to demonstrate a consistent
ability to respond rapidly and effectively to notification of such a
security breach.

Acts of piracy can only be committed by private ships or private
aircraft. A warship or other public vessel or a military or other
state aircraft cannot be treated as a pirate unless it is taken over
and operated by pirates or unless the crew mutinies and employs it for
piratical purposes. By committing an act of piracy, the pirate ship or
aircraft, and the pirates themselves, lose the protection of the
nation whose flag they are otherwise entitled to fly.

To constitute the crime of piracy, the illegal acts must be
committed for private ends. Consequently, an attack upon a merchant
ship at sea for the purpose of achieving some criminal end, e.g.,
robbery, is an act of piracy as that term is currently defined in
international law. Conversely, acts otherwise constituting piracy done
for purely political motives, as in the case of insurgents not
recognized as belligerents, are not piratical.

International law has long recognized a general duty of all
nations to cooperate in the repression of piracy. This traditional
obligation is included in the 1958 Geneva Convention on the High Seas
and the 1982 LOS Convention, both of which provide: “[A]ll States
shall cooperate to the fullest possible extent in the repression of
piracy on the high seas or in any other place outside the jurisdiction
of any State.””


Lucrative Piracy Business Thrives Off Somali Coast / November 18,

The seizure Monday of a supertanker carrying $100 million of crude oil
off the coast of Somalia is one of many ship hijackings by pirates of
late. A cargo ship flying a Hong Kong flag also was taken over in the
Gulf of Aden on Tuesday — the seventh hijacking in the area in 12
days, according to The Associated Press. The magnitude of recent
piracy attacks is rising, and an interactive map maintained by the
International Chamber of Commerce shows where these attacks are
taking place. Many are focused around the eastern Horn of Africa, but
piracy in the waters around Indonesia also has been frequent. J. Peter
Pham, director of the Nelson Institute for International and Public
Affairs at James Madison University, says the recent spikes in piracy are
“a crime of both opportunity and expediency.”

“Somalia has lacked a government, effectively, since 1991 and the
current interim government — the 14th of its kind in a decade and a
half — is tottering on its last legs, so there is very little control
to prevent lawlessness,” he says. “There is also the fact that
increasingly commerce is moving in this direction — the demand for oil
and other resources. Roughly 11 percent of the world’s petroleum flows
through these waters.” For Somalis, Pham says, “this is really the
best thing they have going for them economically. Piracy and ransom
this year will exceed more than $50 million — it’s Somalia’s largest

“The ship owners and insurers have found that it’s more cost-effective
to pay ransoms. They are currently averaging slightly over $1 million
per vessel, and that’s cheaper than buying a new ship,” Pham says.
“The Saudi tanker that was seized [Monday] was just launched six
months ago and cost $150 million to build and the cargo on board is
worth $100 million, so I suspect the ship owners will be willing to
pay some fraction of that to get it back.” Pham says that most tankers
of that size are not armed, or if they are, they have small side arms.
The pirates come in fast speed boats, circle the vessel and threaten
to blow it out of the water with rocket-propelled grenades or shoulder-
launched missiles. “Faced with that prospect, most captains — to save
the life of their crew and save the vessels — will surrender control
of the vessel to the pirates,” Pham says.

The world’s most utterly failed state / Oct 2nd 2008

Tipped off by friends in ports from Odessa to Mombasa, Somali pirates
captured a Ukrainian freighter, the MV Faina, in the Gulf of Aden and
steered it to Somalia’s coast. At first they demanded $20m for the
release of ship and crew. The captain died, apparently of
“hypertension”, and several pirates may have then killed each other
after a quarrel. This recent incident was only the latest in a long
list of similar outrages and highlights the growing menace caused by
the total failure of the state of Somalia, the ultimate cause of the
virus of piracy in the region.

The ship was carrying 33 T-72 Russian tanks, anti-aircraft guns and
grenade launchers. Lighter weapons may have been offloaded on the
Somali shore before an American warship arrived on the scene. Kenya
claimed ownership of the cargo but the manifest suggests its
destination was south Sudan, with Kenya’s co- operation in its
delivery to be rewarded in the future with cheap south Sudanese oil.
At midweek, a Russian warship was steaming to the scene to take
responsibility for its citizens on the ship.

The attack was only one of at least 60 off Somalia this year. Foreign
navies can intercept vessels captured by pirates, but the desolation
and length of Somalia’s coastline give them little chance of stamping
out piracy without much larger and better co-ordinated forces. In
cahoots with gangs in Yemen, Somali pirates look set to go on hitting
vessels heading into or out of the Red Sea or passing through the Gulf
of Aden: about 10% of the world’s shipping.

It is big business. The pirates are increasingly sophisticated,
handsomely bankrolled by Somalis in Dubai and elsewhere. They are not
yet directly tied up with the Islamist insurgents in Somalia, though
they may yet have to pay cash to whoever controls their coastal havens
in return for uninterrupted business, thus assisting the purchase of
weapons and fuelling the violence. The nabbed ships are mostly
anchored off the village of Eyl in Puntland in the north-east or the
pirate town of Haradheere farther south (see map) until a ransom is
paid, which is usually within a month of capture. The average ransom
has tripled since 2007, as has the number of ships taken. Some $100m
may have been paid to pirates this year. By comparison, the United
Nations Development Programme’s annual budget for Somalia is $14m.

Piracy is a symptom of the power vacuum inside Somalia. The country’s
“transitional federal government”, headed by a warlord president,
Abdullahi Yusuf, and a bookish prime minister, Nur Hussein, is
powerless to stop its citizens raising the Jolly Roger, just as it
cannot halt the resurgent jihadists, some with al-Qaeda connections,
who have taken control of much of southern Somalia, including the port
town of Kismayo. Hundreds of thousands have fled street fighting in
the north of Mogadishu to camps outside the city; some head south to
refugee camps in Kenya. About 9,000 civilians have been killed in the
insurgency in the past year, according to human-rights groups.

The UN’s envoy to Somalia, Ahmedou Ould Abdullah, a former foreign
minister of Mauritania, is overseeing peace talks in nearby Djibouti
between the transitional government and the moderate wing of the
Alliance for the Reliberation of Somalia (ARS), an Islamist group
headed by a former teacher, Sharif Ahmed. The aim is to create a
genuine government of national unity before elections next year.

A condition of any agreement is the withdrawal of the 7,000-odd
Ethiopian troops now in Somalia. Mr Ould Abdullah wants to replace
them and a separate 2,200-strong African Union force of Ugandan and
Burundian troops with 8,000 UN peacekeepers. Ethiopia, which is losing
men and money, would be happy with that, if the peacekeepers were
somehow shoehorned in without the jihadists taking advantage of a
hiatus. America agrees, but only if the deployment of blue helmets is
matched by an effort to build a new Somali national army. Mr Ould
Abdullah is also keen for the International Criminal Court in The
Hague to indict some of the worst warlords, to show they cannot murder
their opponents with impunity. But it is unlikely, in present
circumstances, that UN peacekeepers will ever arrive. If the UN cannot
produce half its promised force for Darfur, despite a detailed plan
for one, Somalia stands little chance of getting any blue helmets at

Feuding among Somali leaders makes matters worse. “Somalia is a victim
of its political, business and military elite,” says Mr Ould Abdullah.
“They’ve taken the country hostage.” A slender hope, backed by Britain
and some other EU countries, is that ordinary Somalis will eventually
force their leaders to put national interest above self-interest and
sign the proposed agreement in Djibouti. In any event, says another
diplomat, “There is no Plan B.”

As the peace talks limp on, the insurgency is getting stronger. It is
led by the Shabab (Youth), the armed wing of the Islamic Courts Union,
which ran Somalia with some success for a few months in 2006 until it
was smashed, at the end of that year, by the invading Ethiopians, with
American backing. The Shabab has since reconstituted itself, making
ground with tactics copied from Iraq: roadside bombings, the kidnap
and murder of foreigners, local aid-workers and peace campaigners, and
grenade attacks on video shacks showing films or football.

My enemy’s enemy is my friend
Its fighters come under the leadership of a wily red-bearded 70-year-
old jihadist, Hassan Dahir Aweys, and a former deputy commander of the
Islamic Courts, Mukhtar Robow. They are backed by Eritrea, which has
offered sanctuary to the radical rump of the ARS in its capital,
Asmara. Eritrea’s interest is not to help Somalia but to hurt its
bitter enemy, Ethiopia. The Shabab is also backed by fighters from the
Hawiye clan and by hungry young freelance gunmen who represent
Somalia’s huge lost generation. Half the population, 10m-odd before
the exodus, was born after Siad Barre’s regime fell in 1991. Since
then, it is guessed, only 10% have had even rudimentary education;
health care barely exists.

Few foreign governments have shown much interest in trying to end
Somalia’s woes. Diplomats charged with trying to do so are frustrated
and depressed. Meanwhile the suffering is mounting. The UN reckons
3.2m Somalis now survive on food aid. The piracy means that warships
have to escort ships bringing food. If fighting intensifies, that will
be harder—and manipulating food aid could become a weapon, as it was
during fighting in 1991 and 1992, when 300,000 Somalis starved to

BY Hari Jagannathan Balasubramanian / October 06, 2008

…as I now read Richard Dowden’s Africa: Altered States, Ordinary
Miracles, the political outline is becoming clear: one man rule from
1969-1991; then civil war; a failed American rescue attempt; and then
no government; and more recently, Ethiopia meddling in its affairs.
The excerpts I’ll present here, though, are images of a modernizing
Somalia, of how in the absence of a government, a free market thrived
in the 90s and filled the void.

“In 1999 I went back to Somalia to see what had happened.
Considering there was no state and civil war sputtered on, life was
not as bad as I had expected. In some ways it was a lot better. Those
few aid agencies that stayed on were no longer run by expatriate
overlords but staffed by Somalis. Not many foreign aid workers wanted
to be there. Somalis had also managed to get the economy going –
without a single cent from the World Bank or IMF. The new economy was
largely built around a worldwide telephone banking system – a truly
free market system and , at the time, by far the world’s cheapest and
most efficient. Several Somalis who had worked in telecoms in America
bought dishes and telephone equipment and set up phone booths in small
towns. From here, for a dollar a minute, people could call cousins and
aunts and uncles all over the world.”

And how the cell phone is the perfect device for the wandering Somali
herder wanting to learn market prices:

“Somali herders move around in a yearly pattern. In the dry
season, towards the end of the year, they go down to the coast as they
have done for centuries to sell some of their animals to traders who
take them across the Red Sea to the markets of Saudi Arabia. I have
watched them at the port of Berbera, herds of camels and sheep driven
to holding areas where herders have to buy fodder for them and pay for
water at the trough markets. These herdsmen are at a big disadvantage
while they wait to sell their animals. But the mobile phone has
rescued them. They can call up traders in Jeddah directly to find out
the market price of animals there. They now know when to come down
out of the mountains and sell. A week later I watch a herdsman on the
outskirts of Berbera driving his herd towards the port with herding
stick in one hand and in the other a mobile phone – perfect technology
for the nomad.”’

Telecoms thriving in lawless Somalia
BY Joseph Winter / 2004/11/19

Rising from the ruins of the Mogadishu skyline are signs of one of
Somalia’s few success stories in the anarchy of recent years. A host
of mobile phone masts testifies to the telecommunications revolution
which has taken place despite the absence of any functioning national
government since 1991. Three phone companies are engaged in fierce
competition for both mobile and landline customers, while new internet
cafes are being set up across the city and the entire country. It
takes just three days for a landline to be installed – compared with
waiting-lists of many years in neighbouring Kenya, where there is a
stable, democratic government. And once installed, local calls are
free for a monthly fee of just $10. International calls cost 50 US
cents a minute, while surfing the web is charged at 50 US cents an
hour – “the cheapest rate in Africa” according to the manager of one
internet cafe. But how do you establish a phone company in a country
where there is no government?

No monopoly
In some respects, it is actually easier. There is no need to get a
licence and there is no state-run monopoly which prevents new
competitors being established. And of course there is no-one to demand
any taxes, which is one reason why prices are so low. “The government
post and telecoms company used to have a monopoly but after the
regime was toppled, we were free to set up our own business,” says
Abdullahi Mohammed Hussein, products and services manager of
Telcom Somalia, which was set up in 1994 when Mogadishu was still
a war-zone. “We saw a huge gap in the market, as all previous services
had been destroyed. There was a massive demand.” The main airport
and port were destroyed in the fighting but businessmen have built
small airstrips and use natural harbours, so the phone companies are
still able to import their equipment. Despite the absence of law and
order and a functional court system, bills are paid and contracts are
enforced by relying on Somalia’s traditional clan system, Mr Abdullahi

Mobile target
But in a country divided into hundreds of fiefdoms run by rival
warlords, security is a major concern. While Telcom Somalia has some
25,000 mobile customers – and a similar number have land lines – you
very rarely see anyone walking along the streets of Mogadishu chatting
on their phone, in case this attracts the attention of a hungry
gunman. The phone companies themselves say they are not targeted by
the militiamen, even if thieves occasionally steal some of their
wires. Mahdi Mohammed Elmi has been managing the Wireless African
Broadband Telecoms internet cafe in the heart of Mogadishu, surrounded
by the bustling and chaotic Bakara market, for almost two years. “I
have never had a problem with security,” he says and points out that
they have just a single security guard at the front door. Mr Abdullahi
says the warlords realise that if they cause trouble for the phone
companies, the phones will stop working again, which nobody wants. “We
need good relations with all the faction leaders. We don’t interfere
with them and they don’t interfere with us. They want political power
and we leave them alone,” he says.

Selling goats on the net
While the three phone companies – Telcom, Nationlink and Hormuud – are
engaged in bitter competition for phone customers, they have co-
operated to set up the Global Internet Company to provide the internet
infrastructure. Manager Abdulkadir Hassan Ahmed says that within 1.5km
of central Mogadishu, customers – mostly internet cafes – can enjoy
service at 150Mb/second through a Long Reach Ethernet. Elsewhere, they
can have a wireless connection at 11Mb/s. He says his company is able
to work anywhere in Somalia, whichever faction is in charge locally.
“Even small, remote villages are connected to the internet, as long as
they have a phone line,” he says. The internet sector in Somalia has
two main advantages over many of its Africa neighbours. There is a
huge diaspora around the world – between one and three million people,
compared with an estimated seven million people in Somalia – who
remain in contact with their friends and relatives back home. E-mail
is the cheapest way of staying in touch and many Somalis can read and
write their own language, instead of relying on English or French,
which restricts internet users to a smaller number of well educated
people. Just two days after it was opened, the Orbit internet cafe in
south Mogadishu’s km5 was already pretty busy, with people checking
their e-mail accounts, a livestock exporter sending out his invoices
and two nurses doing medical research.

Video calling
And Somalia’s telecoms revolution is far from over. “We are planning
to introduce 3G technology, including live video calling and mobile
internet, next year,” says Mr Abdullahi. But despite their success,
the telecoms companies say that like the population at large, they are
desperate to have a government. “We are very interested in paying
taxes,” says Mr Abdullahi – not a sentiment which often passes the
lips of a high-flying businessman. And Mr Abdulkadir at the Global
Internet Company fully agrees. “We badly need a government,” he says.
“Everything starts with security – the situation across the country.
“All the infrastructure of the country has collapsed – education,
health and roads. We need to send our staff abroad for any training.”
Another problem for companies engaged in the global telecoms business
is paying their foreign partners. At present, they use Somalia’s
traditional “Hawala” money transfer companies to get money to Dubai,
the Middle East’s trading and financial hub. With a government would
come a central bank, which would make such transactions far easier.
Taxes would mean higher prices but Mr Abdullahi says that Somalia’s
previous governments have kept taxes low and hopes this will continue
under the regime due to start work in the coming months. Somalia’s
telecoms companies are looking forward to an even brighter future with
the support of a functioning government – as long as it does not
impose punitive tax rates or state control in a sector which obviously
needs very little help to thrive.

Ayn Rand Comes to Somalia
In the absence of government bureaucracy and foreign aid, business is
starting to boom in Mogadishu.
BY Peter Maass / The Atlantic Monthly / May 2001

The headquarters of Telecom Somalia is filled with the sights and
sounds of Mogadishu-style success. Customers pour through the
entrance, funneling past machine-gun positions that flank the front
doors. After a pat-down by security guards, who take temporary
possession of any guns and knives, they enter the lobby and line up at
the appropriate counters to pay their bills or order new service.
Clocks on a wall display the time in New York, Paris, London, Sydney,
and Karachi—reminders of an outside world that has pretty much left
Somalia for dead. Computer keyboards clatter as workers punch in
information. Customers chat and argue with one another in a gregarious
manner that makes the lobby feel like a town square—all the more so if
a goat that’s being herded down the street happens to stray inside.

Telecom Somalia is the largest company in Mogadishu. It has 700
employees, and it offers some of the best and cheapest phone service
in Africa. It also provides a clue to the possible resuscitation of
the world’s most famous failed state. In 1995, when the international
community decided to wash its hands of Somalia and the last United
Nations peacekeepers left the country, Mogadishu was a Hobbesian
horror show. It remains a miserable and unstable place, a city where
taxi drivers ruin their own vehicles, denting the body work and
smashing the windows, so that thieves will not bother to steal them.
But it is less dismal than it used to be, and better times may be on
the way, owing to a new generation of businessmen who are determined
to bring the lawless capital back to life.

Prime among the city’s entrepreneurial leaders is Abdulaziz Sheikh,
the chief executive of Telecom Somalia. When I visited him last
summer, in a small office on the fourth floor of the company’s
headquarters, he was being blasted by a hurricane-force air-
conditioner that nearly drowned out the constantly ringing phones on
his desk. “You need to be here twenty-four hours a day,” he said,
explaining that he lives as well as works on the premises. Sheikh had
the running-on-fumes look of a campaign chairman in a never-ending
race, but at least he appeared to be winning. Anyone can walk into the
lobby of his building, plunk down a $100 deposit, and leave with a
late-model Nokia that works throughout the city, in valleys as well as
on hilltops, at all hours. Caller ID, call waiting, conference
calling, and call forwarding are available. There are two other
cellular-phone firms in town, and the three recently entered into a
joint venture and created the first local Internet-service provider.
Not all battles here are resolved by murder.

Mogadishu also has new radio and television stations (one night I
watched the Somali equivalent of Larry King Live, in which the
moderator and his guest, one of the city’s leading Islamic clerics,
fielded questions from callers), along with computer schools and an
airport that serves several airlines (although these fly the sorts of
airplanes that Americans see only in museums). The city’s Bekara
market offers everything from toilet paper, Maalox, and Colgate
toothpaste to Viagra, sarongs, blank passports (stolen from the
Foreign Ministry a decade ago), and assault rifles. The international
delivery company DHL has an office in Mogadishu, where its methods can
be unorthodox: if a client has an urgent package that cannot wait for
a scheduled flight out of the country, the company will dispatch it on
one of the many planes that arrive illegally from Kenya every day
bearing khat, a narcotic leaf that is chewed like tobacco but has the
effect of cocaine.

Mogadishu has the closest thing to an Ayn Rand-style economy that the
world has ever seen—no bureaucracy or regulation at all. The city has
had no government since 1991, when the much despised President
Mohammed Siad Barre was overthrown; his regime was replaced not by
another one but by civil war. The northern regions of Somaliland and
Puntland have stabilized under autonomous governments, but southern
Somalia, with Mogadishu at its core, has remained a Mad Max zone
carved up by warlords for whom fighting seems as necessary as oxygen.
The prospect of stability is a curious miracle, not simply because the
kind of business development that is happening tends to require the
presence of a government, but because the very absence of a
government may have helped to nurture an African oddity—a lean
and efficient business sector that does not feed at a public trough
controlled by corrupt officials.

Similarly, the lack of large-scale (and often corrupting) foreign aid
might have benefits as well as drawbacks. Somali investors are making
things happen, not waiting for them to happen. For example, on the
outskirts of town, on a plot of land the size of several football
fields and surrounded by twenty-foot-high walls, workers recently
completed a $2 million bottling plant. Everyone refers to it as “the
Pepsi factory,” even though Pepsi is not involved. The project’s
investors say the plant will become a Pepsi factory: they figure that
if they begin producing soft drinks, Pepsi or some other international
company will want to get in on the market.

Many of the larger companies in Mogadishu, including the bottling
plant, have issued shares, although there is of course no stock
exchange or financial authority of any sort in the city. Everything is
based on trust, and so far it has worked, owing to Somalia’s tightly
woven clan networks: everyone knows everyone else, so it’s less likely
that an unknown con man will pull off a scam. In view of Somalia’s
history, this ad hoc stock market is not as implausible as it may
sound. Until a century ago, when Italy and Britain divided what is
present-day Somalia into colonial fiefdoms, Somalis got along quite
well without a state, relying on systems that still exist: informal
codes of honor and a means of resolving disputes, even violent ones,
through mediation by clan elders.

Of course, the lack of a government poses problems, especially with
respect to the warlords. Sheikh and his fellow businessmen have kept
them at bay by paying them protection money and by forming their own
militias. Those manning the machine guns outside Telecom Somalia are
employees of the company, and when the firm’s linemen go out to lay
new cables (they used to string overhead lines, but those got shot up
by stray gunfire), they, too, are protected by company gunmen. All of
this is costly, so the business leaders have taken steps to bring
about a new government—one that will keep its hands out of their
pockets and focus on providing security and public services. The
process began two years ago, when Sheikh and other entrepreneurs got
fed up with the blight of checkpoints, at which everyone was required
to pay small tributes to armed teenagers affiliated with various
warlords. The businessmen decided collectively to fund a militia to
get rid of the checkpoints, resulting in an armed force that is
overseen by the city’s Islamic clerics. Having succeeded in its main
mission, the militia now serves as an informal sort of police force,
patrolling the streets in an effort to stop petty crime.

With the checkpoints gone and the warlords weakened by the loss of a
key source of income, the business elite is bankrolling a transitional
government that was appointed at a peace conference last August. The
government does not yet control much more than the heavily guarded
buildings that are its temporary headquarters, but it has begun
deploying its own policemen in some parts of the city. The businessmen
are pooling their company security forces to bolster the government
and are trying to lure the warlords’ gunmen to its side with cash
incentives. In February one of the leading warlords, Mohamed Qanyareh,
agreed to support the government in exchange for ministerial posts for
himself and his allies.

If the business community succeeds in returning Mogadishu to something
resembling normalcy, it will have shown that a failed state, or at
least its capital city, can get back on its feet without much help
from the outside world. This would constitute not an argument against
outside intervention but, rather, a lesson that intervention doesn’t
have to be of the UN-led, billion-dollar variety. Before leaving the
city I met with Hussein Abdullahi, a well-educated businessman who
fled Mogadishu in 1991 and wound up in Toronto, driving a taxi. Three
years ago, during a return visit, he was struck by the fact that his
Somali friends were living better at home than he was in Canada, at
the bottom of the immigrant ladder. He decided to move back and now
manages a thriving pasta factory, a bread factory, and a medical
clinic. Sipping an ice-cold Coke in his office, Abdullahi offered to
share a secret that, he promised, could make me rich. A chubby man
with a beatific smile, he leaned forward conspiratorially. “Everything
is possible in Mogadishu now, everything,” he said. “If you have the
money and the knowledge, you can do whatever you want. It is virgin
here.” Perhaps so, but only in the way of scorched earth.

BY Tatiana Nenova and Tim Harford / 11/1/2004

Telecommunications: networks link up
Many local companies have teamed up with international giants such as
Sprint (U.S.) and Telenor (Norway), providing mobile phones and
building new landlines. Vigorous competition has pushed prices well
below typical levels in Africa, and Somalia now has 112,000 fixed
lines and 50,000 mobile subscribers, up from 17,000 lines before 1991.
Yet not all is well. Calling every phone subscriber in Hargeisa, in
the Northwest, would require connections from four telephone firms.
But firms in Mogadishu have now agreed on interconnection standards,
and those in Hargeisa appear to be following suit. The negotiations
were brokered by the Somali Telecom Association, set up with the help
of the United Nations and International Telecommunication Union (ITU)
and head-quartered in Dubai.[1]

Electricity: simple solutions yield results
Entrepreneurs have worked around Somalia’s lack of a functioning
electricity grid, payment systems, and metering. They have divided
cities into manageable quarters and provide electricity locally using
secondhand generators bought in Dubai. They offer households a menu of
choices (daytime, evening, or 24-hour service) and charge per

Water: access but not cheap or safe
Public water provision is limited to urban areas, but a private system
extends to all parts of the country as entrepreneurs build cement
catchments, drill private boreholes, or ship water from public systems
in the cities. Prices naturally rise in times of drought.
Traditionally, destitute families have not had to pay for water, while
the slightly better-off borrow funds from relatives. Nevertheless,
after several years of drought the United Nations estimates that many
families in the Eastern Sanaag have debts of US$50–100 for water.
Moreover, access to safe water is low even by African standards
because neither regulators nor the market have been able to persuade
merchants to purify their water.

Air travel: outsourcing safety
In 1989 the national carrier (partly owned by Alitalia) operated just
one airplane and one international route.[2] Today the sector boasts
about 15 firms, more than 60 aircraft, 6 international destinations,
more domestic routes, and many more flights. But safety is a concern.
Airports lack trained air traffic controllers, fire services, runway
lights, and a sealed perimeter against stray animals, and checks on
aircraft and crew are inadequate. The makeshift solution:
international outsourcing. Somali carriers lease planes, often with
crews from Eastern Europe (the largest, Daallo Airlines, leases a
Boeing from the United Kingdom, to boost customer confidence). And
they operate out of Djibouti, Dubai, and Nairobi, using the facilities
there to check aircraft safety.

Private courts: quick but limited
A recent effort to endow Mogadishu with a functioning court collapsed
when the court tried to levy taxes and take over the privately run
port of El Ma’an. In any case Somalia lacks contract law, company law,
the concept of limited liability, and other key pillars of commercial
law. In some cases Somalis have used offshore registration of
businesses to import legal concepts and services. More commonly,
disputes are settled at the clan level, by traditional systems run by
elders and with the clan collecting damages. Such measures are free—
and fast by international standards. In a case involving the
oppression of minority shareholders in a large livestock company, out-
of-court talks were preferred, the company continued to operate
successfully, and the dispute was settled amicably. But clan-based
systems deal poorly with disputes outside the clan. In a dispute
involving the telecommunications company Aerolite, the interclan
committee of elders awarded the plaintiff from a weaker clan an
unfairly small settlement, and since it was not enforced, he received

Currency: perfect competition for dollars [2001]
Sharp inflation in 1994–96 and 2000–01 destroyed confidence in three
local currencies. U.S. dollars are harder to forge, do not need to be
carried around in large fragile bundles, and, most important, retain
their value. The feeble capabilities of the central bank have allowed
free entry into the currency exchange business, which is as close to
perfectly competitive as is ever likely to be possible.

International fund transfers: hawala system
The hawala system, a trust-based money transfer system used in many
Muslim countries, moves US$0.5–1 billion into Somalia every year. A
person in New York wishing to send money to his family in Tog-waajale
gives the hawala agent in New York the sum in cash, paying a 5 percent
commission. The agent deposits the cash in a local bank account to be
transferred to the company bank account in Djibouti or Dubai, then
alerts the clearinghouse in Hargeisa, which passes details on to Tog-
waajale. When the recipient shows up, the local agent quizzes him
about his clan lineage using questions provided by the relative
overseas as security against fraud. The transaction is usually
completed within 24 hours. Hawala networks are unregulated and do not
always keep records of transactions, but they are coming under
pressure from efforts to combat money laundering.[3]

Savings accounts and traveler’s checks
Somalia has adopted the widespread African institution of rotating
credit associations, which rely on clan links for enforcement and
provide a safe haven for savings. More innovative is the system of
traveler’s checks for the pilgrimage to Mecca, or hajj. Nobody would
accept Somali checks, so Somali firms set up accounts in Saudi banks
and write checks to pilgrims that can be cashed in any branch.

Gaps in private sector provision
In some areas the private sector has made little progress. The Somali
road system, for example, is limited and in poor condition. For a
private supplier to build a road and collect fees to cover the costs
is apparently too hard, partly because of prohibitive transaction
costs and partly because fee-paying users are not the only ones who
benefit from roads. Primary education is another disappointing story.
Some 71 percent of primary schools are privately owned (typically by
parents or communities), but enrollment is just 17 percent. By
contrast, it is 82 percent in West Africa, where countries are richer
and more stable and the government is much more heavily involved in
the economy. Ideally, benevolent government would sort out both
problems. But government that is merely stronger might not help. Where
municipal governments along the Berbera–Hargeisa road have the power
to collect tolls, they do not spend them on maintenance. The failings
of the education system are partly because half of Somalis are nomads.
It is not clear that government would do much better, especially since
the private schools are locally acknowledged to be superior to those
run by local government. Rather than try to create a government system
from scratch, a better policy would be to improve the network of
higher-quality private schools.

The achievements of the Somali private sector form a surprisingly long
list. Where the private sector has failed—the list is long here too—
there is a clear role for government interventions. But most such
interventions appear to be failing. Government schools are of lower
quality than private schools. Subsidized power is being supplied not
to the rural areas that need it but to urban areas, hurting a well-
functioning private industry. Road tolls are not spent on roads.
Judges seem more interested in grabbing power than in developing laws
and courts. A more productive role for government would be to build on
the strengths of the private sector. Given Somali reliance on clan and
reputation, any measures allowing these mechanisms to function more
broadly would be welcome; credit and land registries would be a good
start. And since Somali businesses rely heavily on institutions
outside the economy, international and domestic policies supporting
such connections would help. For governments and aid agencies, the
capability of some business sectors to cope under the most difficult
conditions should give hope and guidance in other reconstruction
efforts. It may take less encouragement than is commonly thought for
stripped-down systems of finance, electricity, and telecommunications
to grow.

1. “Somalia Telecoms Boom without Government,” Somaliland Times, July
22, 2004.
2. United States Institute for Peace, Removing Barricades in Somalia:
Prospects for Peace(Washington, D.C., 1998).
3. Abdusalam Omer, “Supporting System and Procedures for the Effective
Regulation and Monitoring of Somali Remittance Companies
(Hawala)” (United Nations Development Programme, Nairobi, 2003).

Somaliland’s addict economy
BY Tristan McConnell / July 17, 2009

Somalia’s economy is dominated by trade in khat, a narcotic banned in the U.S. and much of Europe. Eye-popping, head-buzzing khat is loved by Somali men who chew the leaves for their stimulant effect. While most of war-torn Somalia’s economy is moribund, khat does a bustling trade estimated at well over $50 million annually. Doctors warn, however, that the drug is not only a drain on limited Somali resources but is also destroying lives.

Hargeisa is the capital of Somaliland, the northern territory nominally independent from Somalia which maintains peace and economic activity, especially the khat trade. Lounging on a rug on the second floor of an ostentatious glass and stone mansion overlooking Hargeisa, Mohamed Yusuf Moge, aptly known as “The Fat Mohamed,” lit up another cigarette. In front of him was a pile of leafless khat twigs. His eyes were wide and red-rimmed, a symptom of the leaves that have been chewed. “We bring in 80-tons of khat every day,” he said. “We have many vehicles and two airplanes for transporting our produce. We control the market: We are the De Beers of the khat industry!”

“We” is “571 Allah Amin,” a family business started 15 years ago that has grown to become Somaliland’s biggest khat importer. Moge is 571’s country rep. Although he would not reveal how much the company makes, it is estimated that its revenue is $320,000 a day. Downtown at the company depot, the second of the day’s trucks arrives from the highland farms of neighboring Ethiopia mid-morning. Thursday is the busiest day of the week because, as one man explained, Friday is the Muslim day of rest so everyone can sleep off their khat hangover.

As the khat truck pulled in, barrow boys and vendors crowded round the tailgate to unload the 70 kg sacks of khat wrapped in hay to keep it fresh. Inside are small bundles of shoots that are bought wholesale for $1 and sold retail for $1.50. “Business is good!” shouted Omar Hersi Warfa, 571’s depot manager, over the clamor. “We are working hard and people are chewing!” Khat vendor Shamis Abdullahi Nur, 50, squatting on the ground nearby, agreed. “Business is very good because of our security and peace,” she said as she directed a sack of khat to be loaded into the back of a beat-up station wagon for the drive across town to her stall. Others pushed smaller consignments away in wheelbarrows. “I’ve been selling khat for over 30 years and now is the best time. There was a time of war, a time when I was a refugee, but now you can see I am sitting here eating my mango,” she said with a sticky, happy smile

Street prices are highest in the early afternoon because this is gayiil time when most men chew the khat and shoot the breeze. They can be found sitting on carpets in shady spots close to khat kiosks, with an ashtray, a flask of sweet tea and a jug of water at their feet. Women often sell khat but are not invited to chew. But increasingly men are also chewing in the morning, the evening and throughout the night. The stoned man in a cotton wrap tottering in a daze along a crumbling potholed road with a fistful of green stems is a common sight. Some warn the national habit does psychological damage. In the mental wing of Hargeisa’s main hospital, a staff member walked past the patients, many of whom were chained to a bed or a post or sat staring vacantly on the floor. “The majority of the men here are affected by chewing khat, most are schizophrenic,” said Faisal Ibrahim.

Dr. Yassin Arab Abdi, the hospital’s chief doctor, said: “Chewing is part of it although there are many reasons for mental illness. Before they used to chew at a certain time for a few hours now there are four sessions 24-hours a day. These people are addicts.” Back at the khat mansion, “Fat Mohamed” Moge and his colleagues, however, extolled the virtues of the drug. “Khat plays a great role in our society. If there’s conflict people have to sit down, chew, talk about it,” Moge said. “It is not like a drug which destroys the mind. It is a stimulant. If you chew khat in the right manner it doesn’t affect you.” But, he admitted, “There are some guys who are addicted, this is because they are jobless and have nothing to do.”

Unfortunately this description applies to many Somali men. The last national government — a military dictatorship — collapsed in 1991. Since then the unrecognized state of Somaliland has declared itself independent while Somalia has descended deeper into war and chaos. Isolation on the one hand and war on the other have left the formal economy shattered with many surviving on remittances sent from relatives abroad. Yet it is not unusual for men to spend $5 or $10 a day on khat, making the habit a huge drain on very limited resources. The government’s entire annual budget is less than $50 million, around $14 a head for each of Somaliland’s 3.5 million citizens. Such is the love of khat that to outlaw it would be political suicide. Nevertheless a senior Somaliland politician, Musa Behe of the opposition Kulmiye party, said, “The Somali man works less because he chews khat. We won’t ban it but we need to raise awareness of the harm khat does.”

Profile : Somalia

Somalia has been without an effective central government since
President Siad Barre was overthrown in 1991. The self-proclaimed state
of Somaliland and the region of Puntland run their own affairs.
* Population: 8.7 million (UN, 2007)
* Capital: Mogadishu
* Area: 637,657sq km (246,201 sq miles)
* Major languages: Somali, Arabic, Italian, English
* Major religion: Islam
* Life expectancy: 47 years (men), 49 years (women)
* Monetary unit: 1 Somali shilling = 100 cents
* Main exports: Livestock, bananas, hides, fish
* GNI per capita: n/a

President: Abdullahi Yusuf Ahmed
Abdullahi Yusuf Ahmed, a former leader of the semi-autonomous Somali
region of Puntland, was chosen by Somalia’s interim parliament as
president of the Transitional Federal Government in October 2004. The
election took place in Kenya because the Somali capital was regarded
as being too dangerous. A former army officer and faction leader, Mr
Yusuf led a guerrilla movement in the 1970s aimed at ousting the
Somali dictator Siad Barre. In the 1990s he emerged as the pre-eminent
leader of his native Puntland region; he declared the territory
autonomous in 1998. He is said to have an authoritarian approach to

Somalia’s disintegration is reflected in its media, which is
undeveloped, fragmented and often partisan. Broadcasters and
journalists operate in an atmosphere which is hostile to free
expression, and often dangerous. In spite of this, diverse and more
professional media outlets have emerged in recent years – in
particular, FM radio stations with no explicit factional links. The TV
and press sectors are weak and radio is the dominant medium. There are
around 20 radio stations, but no national, domestic broadcaster. Many
listeners tune to Somali-language media based abroad, in particular
the BBC Somali service. In secessionist Somaliland and Puntland the
authorities maintain a tight hold on broadcasting.




“Due to its unrecognized status, The Republic of Somaliland has no
official contacts with any other nation. The current foreign policy of
Somaliland is to try to secure international recognition as a
sovereign, stable country, so that international aid can be more
readily secured. Somaliland was independent for a 3 day period in
1960, between the end of British colonial rule and its union with the
former Italian colony of Somalia which status then continued until the
unilateral declaration reestablishing its independence in 1991.
Somaliland’s claims to sovereignty rests on its former independent
status. In addition, the fact that the rest of Somalia is in a state
of chaos while Somaliland is under stable government also lends
credence to its claim. The attitude of the United Nations and the
African Union on the preservation of existing national borders has so
far prevented recognition of Somaliland, despite the examples of the
former status of British Somaliland, and the fact that Eritrea
successfully broke away from Ethiopia and became a recognized country.
An African Union fact-finding mission that visited Somaliland in early
2005 recently published a report that recommended favorable
consideration for recognizing Somaliland’s independence.”

“The population of Somaliland is estimated at around 3.5 million. The
average population growth rate is 3.1%. Population density is
estimated at approximately 25 persons per sq. kilometre. Fifty-five
percent of the population is either nomadic or semi-nomadic, while 45%
live in urban centres or rural towns. The average life expectancy for
the male is 50 and for females it is 55.

The Republic of Somaliland known as the Somaliland Protectorate under
the British rule from 1884 until June, 26th 1960 when Somaliland got
its independence from Britain. On July 1st 1960 it joined the former
Italian Somalia to form the Somali Republic. The union did not work
according to the aspirations of the people, and the strain led to a
civil war from 1980s onwards and eventually to the collapse of the
Somali Republic. After the collapse of the Somali Republic, the people
of Somaliland held a congress in which it was decided to withdraw from
the Union with Somalia and to reinstate Somaliland’s sovereignty.

The country has a republican form of government. The legislative
assembly is composed of two chambers – an elected elder’s chamber, and
a house of representatives. An elected President and an elected Vice-
president head the government. The President nominates the cabinet
which is approved by the legislature. There is an independent

One of the provisions of the National Constitution of the Republic of
Somaliland is the establishment of a Bank to carry out Central Banking
functions. The bank of Somaliland (Baanka Somaliland) was thus
inaugurated in 1994 together with appropriate Banking Laws, to insure
that Banking regulations are carried out to the letter. Board of
Directors has accordingly been appointed together with a Governor of
the Bank, Vice-governor, and a Director General. In addition, the Bank
of Somaliland besides its functions as Central Bank, runs the
activities of Commercial sector.

The Bank’s main objectives are detailed in Article 3 of the
Constitutive Law of Somaliland Bank as follows: Fostering Monetary
stability maintaining the internal and external values of the
Somaliland Currency and promoting credit and exchange conditions
conductive to the balanced growth of the economy of the Republic and
within the limits of its powers, it shall contribute to the financial
and economic policies of the state.”





“Our foreign service hang-ups about recognition are getting in the way
of us… to build adequately on the efforts of the Government of
Somaliland to create a modern, democratic state. In effect, we are
putting the interests of the warmongers in the south ahead of those of
the peace-builders in the north.”

Democracy comes of age in Somaliland
BY Stefan Simanowitz / Contemporary Review / Dec 2005

The rising sun reveals two long lines of people snaking towards a
small concrete polling station in Gabiley, a town in rural Somaliland.
Many of them have walked considerable distances and queued all night
in order to vote in these, the first parliamentary elections held in
the territory for nearly forty years. But although voters across the
country have turned out in force, and although the election is deemed
free and fair by international observers, the result will not be
officially recognised beyond its territorial borders. Indeed, in the
eyes of the international community, Somaliland is a country that does
not exist.

Since its unilateral proclamation of independence in 1991, Somaliland,
an area the size of England and Wales in the north of Somalia, has
struggled to gain international recognition. Whilst neighbouring
Somalia has all but ceased to function as an administrative, judicial
and territorial entity, Somaliland has taken important steps towards
creating a stable working democracy in one of the poorest and most
dangerous regions of the world. A new constitution was adopted in 2001
following a referendum. In 2002 local elections passed off peacefully,
and in 2003 free and fair presidential elections took place. Having
thus laid the foundations of a functioning democracy, the
parliamentary elections of 29th September 2005 were seen as the final
step in the democratisation process and an important milestone in the
transition from a traditional clan-based, single-party-dominated
political structure to a stable multi-party democracy. Many
Somalilanders also regarded them as the final prerequisite for
international recognition.

However, despite the fact that Somaliland may fulfil the requirements
necessary for recognition as a sovereign state, the question of
recognition will be determined by a number of external geo-political
factors. These factors include the African Union’s position on the
sanctity of colonial borders and Somaliland’s role in the so-called
‘war on terror’.

Somaliland was a British Protectorate for over eighty years during the
colonial period. In 1960, it gained independence but formed a hasty
union with the former Italian Somaliland to create the Somali
Republic. In 1969 Mohamed Siad Barre’s military coup brought Somalia’s
flirtation with democracy to an end and planted the seeds of a
secessionist struggle in Somaliland. This struggle culminated in a
brutal three-year civil war in which 50,000 people were killed and
half a million refugees fled. Between 1988 and 1991, Barre’s forces
massacred civilians, laid over two million mines and reduced cities to

In 1991, the overthrow of Barre’s regime plunged Somalia into a state
of anarchy from which it is yet to emerge. Somaliland, however, was
quick to declare independence and, over the years, it has managed to
establish itself as a model of stability, good governance and economic
discipline. Rival militias have been demobilised, mines have been
cleared and refugees have been repatriated. The war-ravaged
infrastructure has been rebuilt and Somaliland now boasts modern
airports, hospitals, ports, power plants and universities. There is a
free press and the central bank manages an official currency with
relatively stable exchange rates. An unarmed police force and
independent judiciary maintain order.

What is most remarkable about this progress is that it has been
achieved with virtually no external help. Whilst economic development
has been heavily supported by Somalilanders in the Diaspora, lack of
international recognition has meant that Somaliland does not qualify
for bilateral aid or support from international financial
institutions. This international isolation has not, however, resulted
in isolationism. Lack of access to external aid has forced this
country of 3.5-million people to become more self-reliant than many
other African states. This self-reliance is reflected in what is
perhaps the most significant of Somaliland’s achievements: its system
of government.

Rather than having a Western democratic model of governance imposed
on them from outside, Somaliland has managed to fuse Western-style
institutions of government with its own traditional forms of social
and political organisation. Its bi-cameral parliament reflects this
fusion of traditional and modern, with the Senate consisting of
traditional elders, and the House of Representatives consisting of
elected representatives.

However, with its history of ‘tribalism’ and internecine fighting, the
key challenge for Somaliland’s new parliament is to try and replace
clan-based politics with party politics. For its first twelve years,
Somaliland had no political parties but instead followed more
traditional clan-based forms of political organisation. Political
parties were introduced during the presidential elections and it was
hoped that the recent parliamentary elections would help to usher in a
representative system without allowing representation to be overtly
clan-based. Clearly, if clan loyalties were to take precedence over
party loyalties, parliament would be seriously weakened. The
traditional clan-based political system had resulted in an under-
representation of some clans and it was hoped that having just three
non-clan-based parties would reduce the extent to which clan
allegiance affected the selection of candidates and the way in which
people voted. A limited number of political parties would force
alliances between clans to develop thereby increasing integration and

In the traditional clan system it is the male elders who make
decisions, and during the nomination process, many candidates were
indeed selected by elders along clan lines. The male-dominated nature
of the selection process was reflected in the fact that only seven of
the 246 candidates were female. There was also evidence that political
parties often chose candidates based on their perceived popularity and
support base. Whilst the absence of voter registration makes it hard
to analyse voter patterns, it would seem from the results that there
is some evidence that regional voting patterns reflect clan
preferences. There is also evidence however, that alliances were
sought between subgroups of different major clans across regions under
the different party umbrellas. This would indicate that, although
tribalism inevitably played some part in the election, it has been

The election itself was very tightly fought. At one stage it seemed
inevitable that the president’s Democratic United National Party
(UDUB) would lose to the Solidarity Party (Kulmiye). However, UDUB was
able to use its powerbase as the governing party to maintain its
percentage of the popular vote, while Kulmiye lost considerable ground
to the Justice and Welfare Party (UCID). The close nature of the
result means that parliament will not be dominated by clan or party,
but will require much greater consensus-building coalitions. It will
nevertheless be interesting to see how party loyalties will be
negotiated against clan interests in the new parliament.

Election Day
Lack of international recognition meant that Somaliland was not able
to access forms of governance support commonly received by post-
conflict areas such as Iraq and Afghanistan. Nevertheless, the
elections were well organised and successfully conducted with over
800,000 voters turning out to the country’s 985 polling stations to
elect 82 members of parliament. This represents a turnout of over 90
per cent.

Like all elections in infant democracies there were some inevitable
teething problems of a practical, administrative and logistical
nature. The absence of a census and voter register meant that a
decision was made to allow voters to vote in any of Somaliland’s six
regions: the only requirements for voting being that voters were 16
years of age and spoke Somali. Inevitably, this led to widespread
attempts at underage and multiple voting. Due to the tradition of
women decorating their hands with henna it was decided that invisible
ink (and black lamps) should be used instead of indelible ink. This
generally proved an effective barrier to multiple voting; however
punishment for those caught varied. In some polling stations those
attempting to vote more than once were merely turned away, often only
to rejoin the queues. In other polling stations people had their shoes
and belts taken away and were made to sit outside the polling station
awaiting detention by the police. Whilst the fact that 30 per cent of
the population are nomadic makes census taking and voter registration
more difficult, there is confidence that both will be in place before
the local elections in 2007.

With illiteracy rates as high as 80 per cent and with many people
having had little or no experience of voting, substantial voter
education was attempted prior to the elections. In addition, ballot
papers had symbols beside the name of each candidate to make it easier
for those that could not read. On the day however, many voters, not
even knowing which way up to hold the ballot paper, chose to announce
their choice to the local chairperson, who marked the paper for them.
Whilst this compromised the secrecy of the voting process, it did not
seem to bother voters who were generally eager to talk about whom they
had voted for.

Shadow of Terror
The shadow that hung over the elections and continues to darken
Somaliland’s future is that cast by the threat of terrorism. On 25th
September the atmosphere in Hargeisa, Somaliland’s impoverished but
relaxed capital, changed. With the elections only days away, several
suspected Islamic militants were arrested following a shoot-out with
police. The following day a cache of arms, including heavy anti-tank
weapons, was discovered in the city. According to the Interior
Minister, one of the men arrested was a senior al-Qaeda operative
allegedly in the region to organise attacks on local leaders and
foreigners. This incident heightened fears of violence especially as
it coincided with the arrival of 76 international election observers
including potentially high-profile targets such as parliamentarians
from South Africa and Europe as well as a former US Ambassador. It
also provided a stark reminder of Somaliland’s precarious position in
the global war on terror.

Whilst Somaliland has managed to avoid the violent lawlessness and
extremism of Somalia, the discovery of Islamic militants in Hargeisa
does not come as a great surprise. Over the last two years, extremists
have murdered four foreign aid workers in Somaliland. Last month four
men were sentenced to death for murdering a British couple in 2003 in
a school they had built. Although the predominantly Sufi form of Islam
practised in Somaliland does not lend itself to extremism, concerns
have been raised by the presence of an increasing number of radical
clerics as well as the porous nature of the border with Somalia.
Mogadishu has become something of a haven for al-Qaeda-affiliated
fighters and Somalia was used as a transit point for the terrorists
who carried out the 1998 attacks on the US embassies in Kenya and
Tanzania, as well as the 2002 suicide bombing in Mombasa.

Whilst the threat of terrorism is clearly a problem for Somaliland, it
also presents an opportunity. Ironically, the discovery of al-Qaeda
operatives in the territory might do more to make Western governments
take notice of Somaliland than the free and fair conduct of their
elections. Somaliland is strategically positioned on the Gulf of Aden
and is also home to what could be an important navel base in Berbera.
Currently the only location in Africa where the US has a military base
is neighbouring Djibouti, and Somaliland is seen by the Americans as a
potentially important ally against the spread of extremism.

Somaliland is conscious that too close a relationship with the
Americans might not be popular with its population, but it also
recognises the advantages that collaboration with the US could bring
in terms of finance, security and long-term stability. By promoting
itself as a non-threatening strategic partner in the ‘war on terror’,
Somaliland could fast-track its entry into the international

Recognition and beyond
Even if the US were to support Somaliland’s right to self-
determination, it is unlikely that they or any other country will
recognise Somaliland without the approval of the Organisation of
African Unity. One of the OAU’s central principles is that African
colonial borders should not be redrawn. This is based on a well-
grounded fear that recognition of ‘separatist’ states could cause the
continent to descend into chaos. However, there is a strong argument
that by breaking a union that it had entered into as an independent
state, Somaliland would be reverting to, rather than redrawing its
colonial borders. It is also worth noting that despite its reluctance
to acknowledge secessionist states, the OAU has recently recognised
the newly formed nations of Eritrea and Western Sahara. It is also
important to note that thirty new countries have been internationally
recognised since 1990, although most of these emerged from the
dissolution of the USSR and Yugoslavia.

Despite OAU intransigence, Somalilanders remain optimistic about the
possibility of recognition and the benefits it will bring. As well as
giving Somaliland access to bilateral aid, recognition would finally
give access to the mining and oil companies eager to exploit
Somaliland’s proven natural resources. Large-scale extraction of oil,
coal, gemstones and minerals could transform this country where 43 per
cent of the population are living in extreme poverty. Whilst
international recognition is not a panacea that will lift Somaliland
out of poverty or eradicate its problems with health, education, food
insecurity, water supply, and HIV/AIDS, it would undoubtedly speed

Although there is still a distance to travel, Somaliland’s
accomplishments are impressive. It has created effective institutions
of state and attained a level of political maturity well beyond its
years. Somaliland provides a useful model of democracy that offers
lessons to us all. It reminds us that democracy is not a static,
prescriptive system but a living idea that is constantly adapting and
taking new forms. In Hargeisa, reminders of how far this small nation
has come are all around. When the rains come, a mass grave beside the
river is exposed. Bones protrude from the red earth, some still tied
at the wrist. Beside the airport road, a rusting Russian tank is
plastered with election posters: a reminder of Somaliland’s war-
ravaged past and a symbol of hope for a democratic future.

{Stefan Simanowitz is a writer and researcher. He was part of the
International Election Observer mission to Somaliland in September


“Following the pattern of the Booroma National Charter, which
formalized the birth of Somaliland during 1993, a new entity – the
Puntland State of Somalia – was established in July 1998 out of a long
Constitutional process that lasted more than two months. The
institutional recognition of the role played by the traditional
leadership in Puntland in the seven-year period of peaceful self-
government in a stateless situation, has come only at the end of this
process. However, the mediation role of the elders has not been so
successful in other regions of Somalia for several reasons. Generally
speaking, outside the Majeerteen context, Somali society lacks a
stable hierarchy of paramount chiefs, and it follows that mediation
can achieve only a local dimension. Nevertheless, in the northwestern
regions (Somaliland) a regionalist feeling has widely spread in the
last thirty years. In this part of Somalia, after the collapse of the
State, the elders have collectively expressed this feeling better than
the SNM, frequently paralyzed by leadership competition.

The local concept of State sovereignty does not naturally match with
the rigid concept of State territory. Instead, it should expand in the
‘official’ territory of other countries in a flexible way and wherever
members of its community are found. This is exactly one of the options
offered to end the conflict and to reconstruct Somalia by the LSE
consultant to the European Union during 1995. Today, is effectively
put into effect in all Somali regions without respect of internal and
external borders. From another point of view, it is a slide back to a
legal status of the community group, confirmed by a citizenship which
corresponds to kinship. These are new elements of extreme importance
to those who are directly or indirectly committed to developing
alternative solutions in the African context, split up between State
sovereignty and ethnic allegiance. What is advancing in Somalia is a
more flexible and a more restricted idea of what the State is and
means in Africa (and elsewhere).”


Badhan, Somaliland, August 18, 2007 – The semi-autonomous regional
state of Puntland (Majeerteenya) declared this week that the recent
formation of `Makhir state’ by eastern Sanag residents is `a load of
hoo ha and a dream’. In a press statement, The Puntland Minister of
Information, Mr Abdirahman Banga in recent press statement strongly
condemned last week’s declaration of a new state in eastern Sanag. Mr
Banga said that the people behind the declaration of Makhir State are
dreaming because it doesn’t exist.

The minister stressed that this area is 100% in the hands and control
of Puntland, though the area recently saw bloody clashes between
forces loyal to Puntland and Somaliland. Soon after the minister’s
statement, the self-appointed President of `Makhir’ state, Mr Jibril
Ali Salad, who used to be a Somaliland parliamentarian, spoke to the
local media in response to the minister’s statements. Mr Salad said,
“Puntland has no business to talk about our new state, and they are
powerless to stop us, and do not have the ability to even come here”.

“Makhir state is acknowledged by its people as a fully-fledged state
independent of Puntland and Somaliland,” added Jibril Ali Salad.
Makhir state was established last week in the Badhan district of
eastern Sanag and its president is Jibril Ali Salad, who up to early
this year was a member of Somaliland’s parliament House of
Representatives. Somaliland’s government has not made any comment
regarding this newly-established enclave inside its border.

Environmental Protection Corps in Maakhir State of Somalia

The roots of the destructive nature of the charcoal trade in Sanaag
region was due to lack of rules and regulations stemmed from the
collapse of the central Somali Government. This finally came to an end
since the declaration of Maakhir State. The Environmental Protection
Corps (EPC) of Maakhir State is growing in numbers and contributing to
a larger slowdown of charcoal trade and illegal gaming of wild

The authority in Maakhir State has banned charcoal trade because of
the environmental destruction and desertification that it does to the
fragile Somali environment. Traders drastically cut entire swaths of
forests, and as a result the trade was flourishing due to the high
demand for charcoal in the Arab Gulf States and other countries in
Asia. These are the reasons why the Environment Protection Corps are
confronting the charcoal profiteers and their militia that have been
menacing the Gebi Valley and Sool Plateau.

It is important to highlight that the newly established Maakhir
Authority did not receive any international aid for this effort. This
largely local effort has made an immediate impact on preserving and
protecting the environment in the Gebi Valley and Sool Plateau. As
indicated by the President of Maakhir Jibril Salad in last Thursday’s
press release; ” Maakhir Administration used traditional conflict
resolution methods to stop the traders and their militia, however
these militia are heavily equipped with automatic firearms who would
not cooperate, but the most effective and successful method for
limiting the harmful distress of our environment was creating and
using the EPC forces.”

The EPC in Maakhir apprehended more than 80 criminals over the past 4
months and jailed them in the district of Dhahar. The administration
constructed a new program of materials, structures, and training to
educate militia while they are held in jail. Jama Dahir Kodah, one of
the program directors of the EPC, told the media that their next
sustainable occurring project is to implement a plantation program in
the region.

The EPC is divided into three forces in the following areas of Maakhir
State and the main base is in city of Dhahar, the capital city of
Boharo region, the new region in Sanaag that Maakhir created:
1) The first battalion is responsible for the protection in vast areas
which stretches from Baragaha-Qol in Southern Sanaag to Eilbuh in
Central Sanaag.
2) The Second Battalion is responsible for an area which stretches
from Dhahar to Western Part of Bari region of Somalia near Boosaaso.
3) The Third and most important battalion have bases along the highway
that links Maakhir to Puntland and does stop and search in suspected




African Union replaces dictators’ club
BY Paul Reynolds / 8 July, 2002

A new wind of change is blowing through Africa. The move from OAU
(Organisation of African Unity) to AU (African Union) is supposed to
be more than the dropping of one letter. It is supposed to represent a
shift from a “dictators’ club” to a people-based grouping. Everything
of course depends on implementation. And given the sad record – and
current problems, such as AIDS – there must be doubts about how much
can be achieved. AIDS alone is reducing life in some countries,
especially in southern Africa, to nothing more than an existence. Life
expectancies are being cut to levels unknown since the 19th Century.
The OAU was set up to develop Africa after colonialism – and to help
liberate Southern Africa from white rule.

The African Union reflects the developments in many parts of Africa in
recent years, as democracy has started to take hold and a new emphasis
has emerged which concentrates less on the battles of the past and
more on the need to improve the lives of ordinary people. The key
shift is that the principle of state sovereignty has been abandoned.

It was the central belief of the OAU that nobody should interfere in
anyone else’s business. That was especially convenient for dictators.
Now the AU has as one of its aims the promotion of “democratic
principles and institutions, popular participation and good
governance.” It will have the right to initiate a so-called “peer
review” of a country’s record, intervene if there is genocide and war
crimes and impose sanctions. Everything of course depends on

High hopes
Nobody is mourning the end of the OAU. Yet when it was founded in
Addis Ababa in 1963, Africa was full of pride and hope. Its leaders
were giants of their day. Africa was coming out of colonial rule and
many had led their nations to independence. It was a time to be bold.
One of the key figures was Dr Kwame Nkrumah, President of Ghana which
became independent (and dropped its colonial name the Gold Coast) in
1957. He believed that the African continent should be “united.” But
defining that unity was the problem. The OAU solved the problem by
praising unity in its language, but avoiding it in its practice. The
differences across the continent were just too many and the principle
which the OAU adopted, of non-interference and non-intervention,
simply meant that member states turned a blind eye to their

When one of the founding members, Emperor Haile Selassie of Ethiopia
gave a speech to the OAU, he was praised in its formal thanks for his
“wisdom.” When the man who overthrew him in 1974 (and later murdered
him and buried him under a latrine), Colonel Mengistu Haile Mariam,
subsequently welcomed delegates back to Addis Ababa, he was thanked
for his “warm and generous hospitality.” Colonel Mengistu went on to
declare his “red terror” in which tens of thousands of opponents were
slaughtered by his neighbourhood committees. It was one of the
tragedies of the OAU that all that happened in the city where it was
founded. There were coups all over the place – including Nigeria
(which had been the jewel in the British colonial crown in Africa and
the hope for parliamentary democracy), Libya (which brought Colonel
Gaddafi to power) and Uganda (in which Idi Amin rose to fame). Kwame
Nkrumah was overthrown in a coup himself. It symbolised the problems
Africa was having in developing stable government. The OAU could say
little and did nothing.

Even after the recent elections in Zimbabwe, it was still bringing
forth its usual kind of statement when it objected to possible
American sanctions: “We are dismayed by this report, which amounts to
interference in the internal affairs of a member state.” It was more
successful over the years in trying to mediate in conflicts between
states. It helped mediate a border dispute between Algeria and Morocco
and between Somalia, Ethiopia and Kenya. One of the ironies was that
the OAU insisted on preserving the borders drawn by the colonial
rulers which often reflected spheres of influence rather than natural
divisions. The view at the time was also that Africa needed time to
settle down. And after all, it was achieving good economic growth of
about 5% a year in the 1960s. And the crisis in Southern Africa, where
white rule was being confronted, was regarded as more of a priority
for the OAU.

Faith lost
But Africa began to fail. Economic growth gave way to debt repayments;
the pioneering efforts to improve public health were swamped by AIDS,
wars were unending and famine stalked the land. The people lost faith
in governments and governments lost interest in the people. According
to Bernard Otabil of West Africa magazine: “The people did not feel
that the OAU satisfied their aspirations. It did not involve people on
the ground. It was top heavy.” The Secretary General of the OAU, Amara
Essy, who has helped to bring the new African Union about, was
scathing about the old grouping: “The OAU is the most difficult
organisation I have ever seen”, he told New African magazine. Mr
Otabil believes that the African Union is on the right course because
it is less grandiose and hopes to be more community based. It is also
offering an economic dimension and seeks African integration into the
world economy. One of the main tasks for the AU will be to push
forward with Nepad, the New Partnership for Africa’s Development. This
offers a bargain with the West – you give us aid and we will put our
house in order. It is a long way from 1963.

African Union supports Somali split
BY Jean-Jacques Cornish / Feb 10 2006

Hopes of recognition for Somaliland’s 15-year independence have been
raised by the favourable report of an African Union mission that
visited the territory last year. The report, a copy of which the Mail
& Guardian has obtained, comes at a time when signs of a new
flexibility in African thinking on boundary issues are emerging. It
suggests that official African aid be tapped by this country of
3,5million people that was effectively destroyed by the Somali
dictator Siad Barre. With the fall of Barre in 1991, the former
British colony broke its union with southern neighbour, the former
Italian colony of Somalia. Since Barre’s departure, Somalia has been
without an effective government.

But Somaliland has pulled itself up by its bootstraps. It has had a
referendum to adopt a democratic Constitution and has organised
presidential and parliamentary elections. Independent international
observers have endorsed all of these. The Organisation of African
Unity refused to recognise Somaliland’s independence, citing the maxim
that there would be chaos if colonial boundaries were not observed in
post-independence Africa.

Unions between Senegal and Gambia, and Egypt and Sudan, among
others, have been broken without affecting the recognition of these
countries. The AU mission accepts this, stating in its report that
Somaliland’s “case should not be linked to the notion of ‘opening a
Pandora’s box’. As such, the AU should find a special method for
dealing with this outstanding case. “The lack of recognition ties the
hands of the authorities and people of Somaliland, as they cannot
effectively and sustainably transact with the outside to pursue the
reconstruction and development goals.

“Furthermore, given the acute humanitarian situation prevailing in
Somaliland, the AU should mobilise financial resources to help
alleviate the plight of the affected communities, especially those
catering for the internally displaced persons and the returnees.
Finally, given also the high potential for conflict between Mogadishu
and Hargeisa, the AU should take steps to discuss critical issues in
the relations between the two towns. That initiative should be taken
at the earliest possible opportunity.”

Iqbal Jhazbhay, an Africa analyst at the University of South Africa,
says the report illustrates a new mood in the AU, an organisation
Somaliland has officially applied to join. “The AU-sponsored peace
deal in Sudan allows for a referendum, five years from now, on whether
the south wants to go it alone. This could not have happened if it
were business as usual. The AU now goes for results, and takes account
of subjective facts and practical realities,” says Jhazbhay. “The AU
clearly recognises the stability created in Somaliland and the
infrastructural development. It is determined to bring peace to the
horn. It is looking at post-conflict reconstruction and it has the
capacity to handle these issues.”


The Euro Elections: Vote Pirate  /  01 Jun 09

In Sweden, a force known as the Pirate party had (at the time of writing) grown to become the country’s third largest political organisation by membership. Its inspiration? The successful prosecution of file-sharing site Pirate Bay, for the illegal distribution of millions of films, albums and television programmes. With 45,000 members and counting, the Pirate party are campaigning on a simple platform: “to fundamentally reform copyright law, get rid of the patent system, and ensure that citizens’ rights to privacy are respected.”

They seem likely to win at least one seat in the European parliament—provided, Pirate party leader Rick Falkvinge notes, “we get our ballot papers out.” As a non-established political force, they must supply all 7,000 polling stations in Sweden with their own ballots by hand.

Pirate Party plans election raid  /  22 April 2009

Sweden’s Pirate Party says it has had a surge in membership, giving its leaders hope that anti-corporate feeling will translate into electoral success. The party is campaigning in the June European elections, fielding 20 candidates. It wants sweeping reform of copyright law and an end to patents. The membership boost followed the jailing last week of four founders of a file-sharing website, The Pirate Bay. The party says membership soared from 14,711 to 36,624 in just a few days.

Party leader Rick Falkvinge told BBC News that “in terms of membership it is now the fourth largest party in Sweden. If everybody who is angry about the Pirate Bay verdict votes then we’ll get at least one MEP,” he said, referring to the elections for the European Parliament.

Landmark case
Hundreds of supporters of Pirate Bay demonstrated in the Swedish capital Stockholm on Saturday, some of them waving Jolly Roger flags. In the verdict against the world’s most high-profile file-sharing website, the Stockholm district court found Frederik Neij, Gottfrid Svartholm Warg, Carl Lundstrom and Peter Sunde guilty of breaking copyright law and sentenced them to a year in jail. They were also ordered to pay $4.5m (£3m) in damages. Record companies welcomed the verdict, but the men plan to appeal.

Mr Falkvinge said support for the Pirate Party was not only coming from young people, but also “a considerably older crowd saying ‘enough is enough’. They see how these laws break civil liberties in an unacceptable way,” he said. He said the party membership was split about 50-50 between people aged under 25 and over. But its youth section is “by far the largest” among Swedish political parties, he added.

The party says it has only three issues on its agenda: “to fundamentally reform copyright law, get rid of the patent system and ensure that citizens’ rights to privacy are respected”. Mr Falkvinge said it was funded entirely by private donations, typically of 100 kronor (£8; $12).

The Pirate Bay, with an estimated 22 million users, is reckoned to be the most popular of the many file-sharing sites on the internet. Its success angered executives and artists in the music, TV and film industries, who saw the Swedish case as an important step in stamping out the illegal sharing of copyrighted media.

Pirate Bay Bias Charge: ‘Random’ Judge Assignment Wasn’t
BY David Kravets and Kerstin Sjoden  /  May 15, 2009

New allegations questioning the legitimacy of The Pirate Bay trial surfaced Friday when lawyers for the four file-sharing defendants accused the Swedish courts of secretly steering the case to a hostile judge. The latest ethics charges in the aftermath of the April conviction of the four founders of the world’s most notorious BitTorrent tracker alleged that the judge who presided over the trial wasn’t chosen at random, as is required under Swedish law.

The allegations came weeks after it was revealed that the same judge, Tomas Norström, is a member of pro-copyright enforcement groups. “We’ve found some things, particularly about the random selection. It doesn’t seem to have been random,” Per Samuelson, one of the defendant’s lawyers, told Swedish television station SVT. Samuelson, who is demanding a retrial, declined to elaborate on the latest misconduct allegations. Norström declined comment.

Cecilia Klerbo, the chief magistrate of the district court in Stockholm, where the case was tried, said the presiding judge was chosen at random.  “The procedure was carried out as usual,” she told SVT.

After weeks of testimony and delays ending April 17, Pirate Bay administrators Fredrik Neij, Gottfrid Svartholm Warg and Peter Sunde were found guilty in the case, along with Carl Lundström, who was convicted of funding the five-year-old operation.

In addition to one year of jail time, the defendants were ordered to pay damages of 30 million kronor ($3.6 million) to a handful of entertainment companies, including Sony Music Entertainment, Warner Bros, EMI and Columbia Pictures.

The case was brought by the Swedish government and Hollywood, in what’s best described as a joint civil-criminal trial. The defendants were charged with facilitating copyright infringement.

In the trial’s aftermath, several BitTorrent trackers across the globe have shuttered. The verdict has emboldened copyright authorities to crack down on torrent sites, and file sharing in Sweden has dropped. Mininova, one of the world’s largest BitTorrent indexer, has begun moving toward legitimacy.

But the verdict also triggered a political backlash among Swedish youth, and the Swedish Pirate Party more than doubled in size, giving the copyright-reform party a genuine shot a landing a seat in the European Parliment. The Pirate Bay, with more than 20 million users, keeps operating as usual, despite the contested convictions.

The first ethics violations lobbed against the court centered on Judge Norstrom’s membership in organizations that lobby for stricter copyright legislation. Norström is a member of the Swedish Copyright Association and is a board member of the Swedish Association for the Protection of Industrial Property.

Some legal experts said the appearance of bias by the judge is enough for a retrial. “The confidence in the legal system demands that the appeals court regards this is as a conflict of interest, and that means that the appeals court must order a retrial in the district court,” said Eric Bylander, a Gothenburg University legal scholar, told The Local, an English-language news site in Sweden.


Pirate Party 3rd Largest Political Party in Sweden
BY Ernesto  /  May 06, 2009

Support for the Swedish Pirate Party surged following the Pirate Bay verdict and today it became the third largest political party in the country. When they are elected for the European Parliament next month, the party hopes to end the abuse of copyright by multi-billion dollar corporations.

The explosive growth rate displayed after the Pirate Bay verdict has skyrocketed the Pirate Party’s member count and today they’ve surpassed that of the Center Party. Of all the established parties only the Social Democratic Party and the Moderate Party have more members.

The Pirate Party has tripled its ranks in only three weeks up to 44,000 members, and it’s on course to become the second largest political part in the country. TorrentFreak caught up with party leader Rick Falkvinge to congratulate him on this unprecedented achievement, and we used the opportunity to find out more about his future plans. First off, we asked him if the recent surge in members can be solely attributed to the outcome of the Pirate Bay trial.

“The Pirate Bay verdict was not a single event, but the final straw in a long series of events,” Falkvinge replied. “We tripled our member count in a week, and have kept growing at an accelerated pace. With just one month till the European elections, the timing of these horrible events arguably work as a catalyst for change.”

Falkvinge is looking forward to the upcoming European Parliament elections on June 6 this year. “I’m extremely optimistic,” he told TorrentFreak. “It’s not a question of ‘a’ seat any more. If everybody who is angry with the Pirate Bay verdict goes to vote, we will get at least one seat, and probably more.” Although things are looking good, the road to Brussels is not guaranteed yet. There are two hurdles left.

“One is to get our ballot papers out — contender parties are not served by the Election Authority, but have to distribute their ballot papers to all 7,000 polling stations by hand. That’s a logistical nightmare, but with 13,000 activists, we should be able to fix that. We had 1,600 activists in the last election, and covered 93%. The other hurdle is getting our folks to actually vote, but I believe they’re still angry enough.”

A question that has been under reported is what the party actually plans to achieve when they arrive in Brussels. One of the questions we asked is how torrent sites and trackers such as the Pirate Bay should be handled. “The Pirate Bay is infrastructure,” Falkvinge told us. “The messenger immunity, that the messenger is never responsible for the contents of a message, is crucial to how our society works. The Lobby is trying to gut that immunity, along with boneheaded politicians who see a chance to look tough on crime.”

“First of all, copyright needs to be reduced to cover commercial activities only. That would get copyright out of ordinary honest peoples’ bedrooms, which is badly needed. That would also make everything that happens over The Pirate Bay legal overnight, and so, there would be no copyright infringement that TPB could potentially facilitate. At that point, since they can’t be facilitating, aiding or abetting anything illegal [anymore] in any interpretation, this would also mean that they can be as commercial as they like.”

Falkvinge further told us that he’s toying with the idea of writing “Nothing that happens at The Pirate Bay violates copyright law” directly into Sweden’s copyright law. In 2010 the Pirate Party hopes to enter the Swedish parliament, and they want to make it absolutely clear that The Pirate Bay four will be acquitted on appeal.

“But that’s not enough,” Falkvinge told TorrentFreak. “The issues at stake are more important than that. The Lobby is constantly nagging on the gray area, making inroads, establishing new precedents, and acting very aggressively. They can do this without any risk at all, and that needs to stop. The Lobby is damaging the open society and our economy at a level that I think should be criminal, especially since they’re doing it as a commercial operation.”

So, the Pirate Party wants to reduce the abuse of power and copyright by the entertainment industry, and make that illegal instead. With the current level of support and indications by recent polls there is no doubt that they will get a seat in the European Parliament, and we hope they will be able to be heard there.

Political pirates: A history of Sweden’s Piratpartiet
BY Nate Anderson  /  February 25, 2009

The leader of Sweden’s Pirate Party is thinking big: seats in the European Parliament, seats in the Swedish parliament, and a string of Pirate Parties on six continents. He just needs more votes to make it happen. Ars explores the birth, growth, and awkward adolescence of political pirates.

Rick Falkvinge is the face and voice of the Swedish Pirate Party, the party that he founded in 2006, but being a pirate isn’t all gold doubloons and chests of booty. Falkvinge is a principled pirate—and that means working for the sake of the cause even when the pay is low, or nonexistent. He currently takes no salary for his work, but he gets along by finding supporters willing to donate toward the costs of his food and rent.

Limited resources don’t mean he’s thinking small, though. Indeed, he wants to (democratically) take over the world, and he has a plan.

A pirate’s life for me
What catapults someone into such a lifestyle? For Falkvinge, it was Sweden’s 2005 debate over changes to copyright law. In his view, the issue received tremendous media coverage and generated obvious interest among the public, but politicians basically failed to notice the entire debate. He wondered how to get their attention, and he concluded it probably couldn’t be done. So Falkvinge decided that the only way to make change happen was to “bypass the politicians entirely and aim for their power base.”

That meant a new political party, the Pirate Party—”Piratpartiet” in Swedish. Falkvinge registered the domain in December 2005 and threw up a website that “looked like shit.” But looks weren’t the point; the site’s manifesto was something he hoped would find an audience. (Read it in Swedish [PDF] or in an English translation).

It did. When the site went live on January 1, 2006, Falkvinge hoped he might “get a couple thousand visits,” collect some volunteers, and refine the document. The goal was (eventually) to round up enough signatures to get the Pirate Party registered with Sweden’s electoral authority so that it would be on the ballot for the upcoming September 2006 elections. After that, who knew—maybe the fledgling movement could even pick up a seat?

Falkvinge posted his new site into a chat channel—it was “all the advertising I ever did.” The site quickly racked up three million hits and pulled in links from sites like Slashdot and Digg. The challenge turned out not to be attracting interest, but channeling massive interest into a movement.

A theory of movement
Falkvinge had given some thought to “movements” already. He had a theory that every major social shift followed a three-stage pattern. First, wild activists provoke the public to generate attention around an issue. Next, academics get involved in researching the issue. Finally, the issue is successfully politicized. It’s a pattern that Falkvinge sees in both the labor and environmental movements, both of which have spawned vibrant European political parties such as the Social Democrats and the Greens.

When it came to issues of copyright, “piracy,” and the production of art and entertainment, provocateurs like Shawn Fanning of Napster fame had blazed a trail for a decade already. Academics had been pumping out a recent body of literature on copyright in the digital age. But there were no political parties that even appeared to take the issue seriously.

So Falkvinge set out to organize the inchoate interest generated by his Pirate Party website. His first test was Sweden’s electoral authority, which would not accept electronic signatures on petitions. That meant the hip new party’s first task was an old and unbelievably mundane one: collecting paper signatures from Swedish residents. When the volunteers came through with the required signatures, Falkvinge saw that he had a loose, unstructured organization—but one capable of getting things done.

To boost the party’s profile beyond the hardcore pirate demographic, the mainstream media’s reach was needed. But the media didn’t appear interested in a fledgling Pirate Party. That is, until the (unrelated) Pirate Bay file-sharing site was raided by Swedish authorities in the middle of 2006. In a moment, the issue of copyrights and file-sharing was front-and-center in the popular consciousness.

“We had been trying to get into mainstream media from January to May,” said Falkvinge, but after the raid, suddenly “my face was on every news broadcast on every hour on every channel.” The Pirate Party tripled its member count in a week.

The election: a splash of cold water
If the sudden success of the party made it seem as though God himself wore an eyepatch and flew the Jolly Roger, the 2006 Swedish elections sounded a wake-up call: this “politics” thing was going to be tough.

Under the Swedish system, parliamentary seats are handed out on a percentage basis—win ten percent of the vote and get ten percent of the seats. But, in order to keep Parliament from dissolving into a hundred tiny parties, each party has to clear a four percent national threshold (or gain 12 percent of the votes in any particular district) before it gets any seats at all. Get 3.9 percent of the vote and you go home with nothing.

In the 2006 fall elections, when Swedes went to the polls, Falkvinge had “high expectations” that his new party might pick up a seat or more. But when the votes were tallied, Piratpartiet had a mere 0.63 percent of the national total with 34,918 votes (results in Swedish). In other words, no seats.

On the other hand, the party had been around for less than a year and managed to garner more votes than did several established politicians. The Pirate Party was dismissed as “this election’s joker party,” says Falkvinge now, but he never accepted that characterization. Instead, he took comfort from the fact that the Pirate Party had become the third largest party… outside of parliament. It wasn’t much, but it was something.

Gaining seats
After the electoral defeat, Falkvinge and his fellow pirates sat down to talk strategy. They developed a three-part plan that would govern their actions for the next four years, fully expecting that they could board and loot both the European Parliament and the Swedish one in that amount of time.

The strategy began with the creation of a youth section called Young Pirate (Ung Pirat). Such youth political groups, common in Europe, are set up to develop young political talent and provide a counterbalance to the grey-haired elders who run most parties. Because the Pirate Party’s membership already skewed young (high school and college students are the largest demographics), it wasn’t long before Young Pirate was the third largest political youth group in Sweden.

What makes the Young Pirate story so odd is that the group is actually funded with taxpayer money. In Sweden, the government doles out kronor to youth groups based on the size of their membership. By January 2009, Young Pirate was raking in 1.3 million kronor a year (about $150,000) from the Swedish government, according to Swedish newspaper The Local.

The music industry was less than pleased. “It is surprising. Ung Pirat works in principle to encourage something illegal,” said Lars Gustafsson, head of IFPI Sweden. “That they then receive money from a state institution is remarkable.”

With the youth section developing quickly, the Pirate Party has been focused on the second bit of its plan for world domination: a seat in the European Parliament. The election for Swedish MEPs opens May 20, and voters can cast a ballot through June 7. MEP elections are notorious for significantly lower turnout than big national elections, and Falkvinge is counting on low turnout to propel his forces into a seat.

The Pirate Party needs an estimated 100,000 votes to cross the four percent threshold in the election. In 2006, it only picked up 35,000, so Falkvinge admits this is a challenge. Still, the party has seen significant growth in the last two and half years, and the success of its young wing was responsible for a 4.5 percent showing in recent mock elections in Swedish schools. Even if the pirates are closed out once more, time appears to be on Falkvinge’s side—unless his Young Pirates mellow as they age.

Even if the pirates get their coveted seat in the European Parliament, they won’t have much power among the nearly 800 MEPs. But Falkvinge hopes that gaining a seat would set the stage for a strong national showing during the 2010 Swedish parliamentary elections. Right now, because of the four percent threshold, many people refuse to vote for a small party in order not to “waste” their vote. Winning an MEP seat would “shatter that psychological barrier,” says Falkvinge.

The 2010 elections are the third stage in the strategy. If the pirates can scrape up five percent of the votes, they will suddenly have five percent of the seats in parliament, and they then hope to position themselves as a tiebreaker party in a coalition government. The price of their inclusion in a coalition: intellectual property reform, of course.

And how could they fail to do something at the polls? The elections are scheduled for September 19, 2010, after all—which happens to be Talk Like A Pirate Day.
World domination?

Making the party a presence in Swedish politics is one goal, but it’s only a stepping stone to bigger things. The pirates “want to change Sweden, Europe, and the rest of the world, in that order,” says Falkvinge.

The idea here is that if one country, such as Sweden, can challenge the “groupthink” on copyright issues, it will be like “pointing out that the emperor has no clothes.” It’s a long-term goal—Falkvinge estimates that gaining wide influence will take 20-30 years—but he’s convinced that his lack of pay and 90-hour workweeks are worth it.

“This is about control over our knowledge and culture,” he says. In his view, societies can go two ways: toward a culturally rich society where everyone participates and enjoys culture, or down another road in which culture is locked down and comes mainly from a few multinational companies.

It’s a stark vision of the world, but it’s one shared not just by Falkvinge and his fellow Swedes. Pirate Party offshoots have sprung up spontaneously in 15 or 20 countries. They aren’t controlled by the Swedish group, but each shares a similar view of the world and works toward similar ends. But despite the surprising success of the Swedish Pirate Party to date, however, the movement has struggled to generate significant support in most other places.

We checked in with the UK Pirate Party, but the party’s contact told us that “the UK branch has faded into nothingness. From all the initial excitement and setting up we ended up with just myself and one other trying to get things moving. Everyone else sort of, just left…”

Canada has fared no better. After some expressions of interest back in 2007, anything resembling a “movement” failed to materialize in quite spectacular fashion. There’s no website and no apparent leadership structure. Posting to an international Pirate Party forum back in December 2008, someone from Northern Ontario suggested starting small.

“We should/need to focus on smaller jurisdictions,” he wrote. “Trying to start a federal party requires a lot of money, a lot of people, and a central means of DIRECT interaction. So, I suggest starting parties on a provincial/terretorial [sic] level (OR, in the case of a civic partisan government like Vancouver, a municipal level). While this fractures the member base, the support of a the full national parent group would still be there, and the requirements of starting a party would be greatly lessened.”

How much interest did the appeal generate? In February 2009, the poster returned and noted that he had not received “the kind of reply at all I want. Is there someone willing to at least comment?”

Ahoy, California!
In the US, the Pirate Party is currently struggling just to get its name on at least one state ballot. Ars spoke with current party leader Glenn Kerbein, who took charge after a 2008 vote. He’s not presiding over a vast empire—yet, anyway. The current Pirate Party leadership in the US amounts to two or three officers, a website, and a Facebook group of less than 900.

The US branch was founded the week after The Pirate Bay was raided by Swedish authorities. Its immediate object was to register as a party in Utah, where one of the founders lived, but this required signatures. When the founder in question fell ill, Kerbein said, the project stalled, even though Utah required only a few thousand signatures to put a party on the ballot.

According to the group’s “About” page, this bid for recognition also failed “due to interference from the Libertarian Party. Many of the people who had already signed the Pirate Party petition backed out in order to support the Libertarians. Though we bear no ill will, this shows the extreme difficulty the Pirate Party faces.”

Kerbein, who lives in California, is now “trying to get the ball rolling” there; to do so, he needs to round up one percent of the voting population from the last primary election. In this case, that means 88,991 people. But before he can get started on that, the party needs to hold a caucus, elect officers, and have a constitution—which is still in progress.

Unlike the Swedish party, the US pirates are aiming their cannons at tiny targets. Kerbein says that the group’s current target is just getting all the signatures and being recognized by California’s Secretary of State. Actually winning any sort of seats, even at the state level, remains a long shot.

And the party doesn’t sound especially piratical in many ways. For one thing, it endorsed Barack Obama in 2008 (though there was debate within the membership about this due to Obama’s eventual support for the warrantless wiretapping bill).

Copyright isn’t even one of the main planks. Instead, Kerbein says that the US party wants to make sure that people can protest freely without excessive police action; to see that privacy is protected from warrantless wiretapping and other abuses; and to insist that secret government is wrong, and that full transparency is needed for democracy. Still, he does believe that the noncommercial trading of copyrighted material should be legalized.

Given the odds against him, Kerbein has chosen to invest his time in the fledgling party because “I feel like I’ve been gypped by politics as usual.” Nothing makes him angrier than lying politicians; his version of a “pirate” is someone who is honest, transparent, protects privacy, and doesn’t have anything against a little consensual blockbuster swapping among friends. But he knows that “the national climate for third parties is rather unforgiving” right now.

Sweden: the sneak preview
Not that the bad news bothers Falkvinge. He doesn’t believe that it’s a coincidence that Swedish broadband is some of the best in the world. Falkvinge talks about the heady days in the late 1990s when most of the world was just discovering DSL and cable, while Swedish entrepreneurs were running fiber to apartment buildings. In 1998, he had a symmetrical 10Mbps connection to his own apartment.

Falkvinge believes that by getting such a jump on most other nations, Sweden’s debates taking place around issues like file-sharing offer a sneak preview of what other nations will soon grapple with. If the pirates are now making gains in Sweden, a country where The Pirate Bay trial has become front page news, they may have to wait a few years to gain more credibility in countries with less-ubiquitous broadband.

That’s the hope, at least. The world’s big content industries haven’t yet agreed to be boarded, though, and they appear to believe that so-called “graduated response” programs can dragoon ISPs around the world into helping them police copyright infringement on the Internet. With such plans well underway in the US, the UK, France, Japan, New Zealand, and other countries, it’s still possible that the vast majority of casual Internet users can be steered into lawful shipping lanes.

But once a movement has exploded into the mainstream, has its own youth organization, and receives government funds, it looks increasingly legitimate. And if Piratpartiet can execute its plan to grab seats in the European Parliament and then at home, Sweden seems unlikely to do the creative industries’ bidding without major political battles.

That’s still a big “if,” and extending the scenario to the rest of the world requires an even longer leap of faith. When so much can be accomplished so fast by a man living off food and rent donations, however, it’s unwise to hold too firmly to a belief that a group of fractious “pirates” can’t possibly organize itself into something fearsome… or wonderful.

email : rick.falkvinge [at] piratpartiet [dot] se


History of the Party
The Swedish Pirate Party was formed by Rickard Falkvinge, and he created the embryo of this site and mentioned the address once on a busy DirectConnect hub on January 1, 2006. Within two days, the site displayed three million hits, and the first thousand or so members joined up. The principles of the Pirate Party soon began to take shape, as more and more members joined up, and in February they were voted through in the 3.0 version, which you can read in several languages further down on this page. The reform of copyright laws, the abolishing of patents and working against installing more regulations, and remove the Data Retention Act, that are seriously threatening citizens’ privacy are the only articles in the Pirate Party agenda.

The aim is to hold the balance of power, to be the tie-breaker, in the Swedish Riksdag and through that offer a collaboration of parties to gain the majority and thus give the governmental status, to either left or right. The difference between left and right, we feel, are no longer obvious, and therefore makes it easy for us to take this measure.

The issues that we represent are sorely missing, or are only fragmentarily represented, with an alarming display of lack of knowledge, and we hope to be able to bring in the legislative groups of Sweden into the 21st century. Feel free to show us your support by sending us a donation or a cheer in the Visitor’s corner when you’re here!

International Growth and Your Role In It
In order to create a place where international collaboration can start and grow, we have created PP International Net. We would very much like to invite you to participate. PPI can also to serve as a way of getting people in touch with eachother, interested in starting up a party in their respective country, as well as provide resources, discussions and advice to eachother across the borders.

Below are the links to sister parties abroad, as well as a list of existing translations of the Swedish Pirate Party’s declaration of principles. If you have a translation in a language missing, feel free to mail it to us at Piratpartiet.

Answer to a common question: Yes, you are free to use the Black Sail logotype for the Pirate Party in your own country. Most do.

Technical information about setting up a Pirate Party website can be found here.

email : info [at] piratpartiet [dot] se


Introduction to Politics and Principles
The Pirate Party wants to fundamentally reform copyright law, get rid of the patent system, and ensure that citizens’ rights to privacy are respected. With this agenda, and only this, we are making a bid for representation in the European and Swedish parliaments.

Not only do we think these are worthwhile goals. We also believe they are realistically achievable on a European basis. The sentiments that led to the formation of the Pirate Party in Sweden are present throughout Europe. There are already similar political initiatives under way in several other member states. Together, we will be able to set a new course for a Europe that is currently heading in a very dangerous direction.

The Pirate Party only has three issues on its agenda:

Reform of copyright law
The official aim of the copyright system has always been to find a balance in order to promote culture being created and spread. Today that balance has been completely lost, to a point where the copyright laws severely restrict the very thing they are supposed to promote. The Pirate Party wants to restore the balance in the copyright legislation.

All non-commercial copying and use should be completely free. File sharing and p2p networking should be encouraged rather than criminalized. Culture and knowledge are good things, that increase in value the more they are shared. The Internet could become the greatest public library ever created.

The monopoly for the copyright holder to exploit an aesthetic work commercially should be limited to five years after publication. Today’s copyright terms are simply absurd. Nobody needs to make money seventy years after he is dead. No film studio or record company bases its investment decisions on the off-chance that the product would be of interest to anyone a hundred years in the future. The commercial life of cultural works is staggeringly short in today’s world. If you haven’t made your money back in the first one or two years, you never will. A five years copyright term for commercial use is more than enough. Non-commercial use should be free from day one.

We also want a complete ban on DRM technologies, and on contract clauses that aim to restrict the consumers’ legal rights in this area. There is no point in restoring balance and reason to the legislation, if at the same time we continue to allow the big media companies to both write and enforce their own arbitrary laws.

An abolished patent system
Pharmaceutical patents kill people in third world countries every day. They hamper possibly life saving research by forcing scientists to lock up their findings pending patent application, instead of sharing them with the rest of the scientific community. The latest example of this is the bird flu virus, where not even the threat of a global pandemic can make research institutions forgo their chance to make a killing on patents.

The Pirate Party has a constructive and reasoned proposal for an alternative to pharmaceutical patents. It would not only solve these problems, but also give more money to pharmaceutical research, while still cutting public spending on medicines in half. This is something we would like to discuss on a European level.

Patents in other areas range from the morally repulsive (like patents on living organisms) through the seriously harmful (patents on software and business methods) to the merely pointless (patents in the mature manufacturing industries). Europe has all to gain and nothing to lose by abolishing patents outright. If we lead, the rest of the world will eventually follow.

Respect for the right to privacy
Following the 9/11 event in the US, Europe has allowed itself to be swept along in a panic reaction to try to end all evil by increasing the level of surveillance and control over the entire population. We Europeans should know better. It is not twenty years since the fall of the Berlin Wall, and there are plenty of other horrific examples of surveillance-gone-wrong in Europe’s modern history.

The arguments for each step on the road to the surveillance state may sound ever so convincing. But we Europeans know from experience where that road leads, and it is not somewhere we want to go. We must pull the emergency brake on the runaway train towards a society we do not want. Terrorists may attack the open society, but only governments can abolish it. The Pirate Party wants to prevent that from happening.


Pharmaceutical patents are harmful
Patents on drugs, or pharmaceutical patents, have many negative effects.
* Pharmaceutical patents prevent hundreds of thousands of people in poor countries from receiving the drugs they need, even though the drugs exist and could save their lives.
* Pharmaceutical patents distort the pharmaceutical research priorities, since it becomes more profitable to treat the symptoms of diseases that come from a high standard of living, than to cure poor people from malaria.
* Pharmaceutical patents continue to lead to ever increasing costs for drugs in Sweden and Europe, outside any form of political control

Are pharmaceutical patents necessary?
Despite all these negative effects, there are many people who defend pharmaceutical patents, and say they are nevertheless necessary. Pharmaceutical research is very expensive, so we have to make sure it is properly funded. Otherwise we wouldn’t get any new drugs in the future, and that would be even worse.

– Because it is so easy for anybody to copy a pharmaceutical substance that has cost billions in research money to develop, we unfortunately have to let the pharmaceutical companies have monopolies on new drugs, those who defend pharmaceutical patents say.

But that is not true.

The first part of the argument is of course valid. One way or another we have to make sure that there is serious money available for pharmaceutical research.

But the claim that pharmaceutical patents is the only conceivable system for raising that money, is simply not true.

The government pays for the research today
Today it is already the public sector (henceforth called “the government”) that pays for the bulk of all drugs that are used in Europe, thanks to various systems for universal medical coverage. (See for example page 37 in this report from EFPIA, The European Federation of Pharmaceutical Industries and Associations.) It is the government that pays for the pharmaceutical research today, by paying high prices to the pharmaceutical companies for patented drugs.

So there is no natural law that says that patents are the only way to get new drugs developed. If “the government” in the different countries funded the research directly, and made the results freely available, this would be at least as reasonable as today’s model, where the government instead creates and maintains private monopolies for the pharmaceutical companies.

The relevant question is which model provides the most efficient and cost effective way of funding pharmaceutical research. Because nobody claims that pharmaceutical research is cheap. The average cost for developing a new drug is just over a billion US dollars.

But considering that “the government” already provides most of the income for the pharmaceutical companies, a reasonable first step would be to find out how much of that income actually goes to research.

Fortunately, this is very easy to do, as all the big pharmaceutical companies have their annual reports available online. As an example, we can look at the numbers for Novartis (page 143), Pfizer or AstraZeneca.

They all spend around 15% of their revenues on research. The other 85% go to other things, according to their own figures. The numbers are typical for the industry.

So the question is: does the patent system really give us, the taxpayers, the maximum amount of pharmaceutical research for the money we are spending on drugs? Or is there room for improvement, when even the pharma companies themselves admit spending 85% of the money we give them on other things?

If the government would instead take 20% of what it currently spends on drugs, and allocate it directly to pharmaceutical research, there would be more money than today for the research. If the results are made freely available, the pharmaceutical companies would be able to produce modern drugs without spending any money on research themselves. All that would remain for the government would be to pay for the actual substances.

Patent free drugs are cheap

How would it affect the price of drugs if there were no pharmaceutical patents? To answer this question, we can look at the experience we have from patent free generic drugs. In that market segment we already have a situation where different (private) manufacturers of the drugs compete with each other, and the government buys from from cheapest and best ones.

And it works!

According to a report from the Swedish Food and Drugs Administration (pdf in Swedish), the price for drugs dropped on average 70% when they became free of patents (page 13 in the pdf).

In the case of generic drugs we are talking about drugs that are more than 20 years old. For newer drugs the pharmaceutical companies add an even greater surcharge, so the actual savings if pharmaceutical patents are abolished would almost certainly be considerably more than 70%. But let us still be conservative and use that number.

Half the cost, more money to research!

The price for a substance will then drop to 30% if we get rid of the patents. Add 20% to fund future research according to the proposal presented here, and we have reduced the government’s bill for drugs to 50% of what it is today. We would cut the cost in half, while still giving more money to pharmaceutical research.

Isn’t this an idea worth exploring?

What arguments are there for keeping the pharmaceutical patents, and rejecting the cost savings and other benefits possible if we choose a different approach?

Let us summarize the main points of the proposal:
* In Europe it is already the government that provides most of the revenues for the pharmaceutical industry, thanks to universal medical coverage.
* The pharmaceutical companies spend 15% of their revenues on research, according to their own numbers. The remaining 85 are spent on other things (mostly marketing and profits).
* If the government would instead take 20% of what it currently spends on drugs, and allocate that money directly to pharmaceutical research, there would be more money for research. The pharmaceutical companies wouldn’t have do do any research themselves, so there would be no need for pharmaceutical patents, as they would have no research costs to recoup.
* Without patents the price of the actual substances drop by at least 70% when they are manufactured on a free market with competition, instead of by a monopolist.

So: compared to today’s system the government’s cost would be 20% (for research) plus 30% (for the substances). A total of 50% of today’s costs, and still more money than today for research.

Realistic on the European level
An obvious counterargument would be that this is not something that Sweden alone could reasonably do. This is true. But on the European level it is quite doable.

If the European governments wanted to, they could easily decide to get rid of pharmaceutical patents, and instead allocate sufficient funds directly to pharmaceutical research. Whether a country recognizes patents or not is entirely up to the legislative body of that country to decide. And it is already the government that pays most of the pharmaceutical bill in all European countries.

Europe is big enough and rich enough, both to fund a substantial part of the global pharmaceutical research so that nobody could accuse us of freeloading on others, and to withstand the diplomatic pressures that will no doubt be put upon us the day we choose the open road.

So, to repeat the billion dollar question: What arguments are there to keep pharmaceutical patents, and to reject the cost savings and improvements that the open road would offer?

The Pirate Party’s position
The Pirate Party wants to abolish pharmaceutical patents as a long term goal, but realizes that this requires alternative systems for funding pharmaceutical research. We believe that the introduction of a new system should be done on the European level.

We urge the Swedish government to study the effects of different alternative system, such as the one proposed here, and to take initiatives to put the issue on the European political agenda for discussions.

Lars Gustafsson: “Why my vote goes to the Pirate Party”

Lars Gustafsson is probably Sweden’s most profilic living writer. Since the late 1950’s he has produced a steady flow of poetry, novels and literary criticism. At the same time, he has until recently been active as professor of philosophy at the University of Texas. Now he’s back in Sweden and just started publishing himself on a blog. He has also received a long list of literary awards, most recently – only two days ago – the Selma Lagerlöf award.

Therefore, it is making quite an excitement in Sweden as Lars Gustafsson, in today’s issue of Expressen, explains why copyright must be left behind and declares that he is voting for the Pirate Party in the ongoing European elections.

As this text could probably be of interest for a few people also outside of Sweden, I made a very fast translation. It is certainly not perfect, but please do not complain on translation wrongs in the comments – make an updated version instead, and post the link to it!

I could also add that I do not personally share every detail in Lars Gustafsson’s analysis. Especially, the dichotomy between “material” and “immaterial” is problematic, as digital technologies indeed lead to re-materializations everywhere – something we are right now exploring in the project Embassy of Piracy, culminating next week on the Venice Biennale. There are also good reasons to questions the status of Walter Benjamin’s concept of “reproducibility”. However, Lars Gustafsson – like Walter Benjamin – is powerfully formulating the ongoing conflicts in materialist terms and putting them in a very relevant historical perspective. Let this be a starting point for discussions. And once again, apologized for any translation wrongs…

“Why my vote goes to the Pirate Party”
BY Lars Gustafsson

According to an ancient source, the Emperor of Persia gave orders that the waves of the sea must be punished by beating, as the storm hindered him from transporting his troups by ship.

That was quite stupid of him. Today, would he maybe have tried with Stockholm district court? Or a consultative conversation with the judge?

It is odd, how strongly the situation spring 2009 – on the area of civil rights – reminds about the struggles over freedom of press in France, during the decades preceding the French revolution.

A new world of ideas is emerging and would not have been able to, were it not for an accelerating technology.

Raids against secret printing houses, confiscated pamphlets and – even more – confiscated printing equipment. Orders of arrest and adventurous nightly transports between Prussian enclave Neuchâtel – where not only large parts of the Encyclopedia was produced, but also lots of daring pornography, between the atheist pamphlets – and Paris.

Between the 1730’s and 1780’s, the number of state censors in France was doubled by four. The raids against illegal printing houses was rising at about the same pace. In retrospect, we know it did not help. Rather, the increase of censorship and printing house raids had a stimulating effect on the new ideas and made them spread even faster.

Now the conflict rage over the net’s continued existence as a forum of ideas and as an institution of civil rights, protected from privacy-threatening interventions and against powerful private interests.

That a mad French-German proposal just fell in the European parliament does certainly not mean that the freeedom of the net and the privacy is now safeguarded.

How real are then these threats? Let us think about the Dalälven river in spring flood times. A really critical year, the water may trespass 100 meters, maybe 200 meters, into house lots and meadows. Does it help to call the Ludvika police?

So for – this is shown by most historical experience – legislation has never been able to stop technological development.

Walter Benjamin wrote an influential essay, whose title usually is translated as “The Work of Art in the Age of Mechanical Reproduction“, where he draws a series of interesting conclusions about what the radical changes that must follow on his time’s relatively modest degree of reproducibility. The digital revolution has brought about a reproducibility which Walter Benjamin could hardly ever have dreamt about. One could talk about maximal reproducibility. Google is about to build a library that, if is is allowed to grow, will make most material libraries obsolete or at least outmoded.

Cinema and paper newspapers are since long drawn into this new immateriality. Films, novels, magazines let themselves be reproduced. Further on; also three-dimensional objects, like products of programmable lathes let themselves be reproduced. Wirelessy and rapidly.

This immaterialisation naturally threatens the material copyright. And then were are not only talking about run-of-the-mill writers like Mr. Jan Guillou, whose social problems of acquiring new country estates I am honestly ignoring.

Material copyright has much more serious aspects: What has the large pharmaceutical firms patents on aids medicin meant for the third world? Or what about Monsanto’s claim of holding rights on crops and pigs?

Every society must make its balance between differing interests and every hypocritic attempt to ignore that is nonsense. A functioning military defence is more important than ice hockey rinks and bicycle lanes. Probably the net implies a threat against the copyright of the material. And so what?

Intellectual and personal integrity for the citizens, briefly speaking an internet that has not been transformed into a government channel by lobby-marinated courts and EU politicians in leashes, is arguably more important than the needs of a primarily industrial scene of literarature and music, which is rapidly crumbling away already within the lifetime of the authors. The need of being read, of influenceing, to formulate one’s times, may but does not need to get in conflict with the wish to sell many copies. When the both needs are getting in conflict, the industrial interest must be put aside and the great intellectual sphere of the arts must be defended against threats.

The essential interest of artists and authors, given that they are intellectually and morally serious in hat they are doing, must certainly be to get read, to let their voice become heard in their generation. How that goal is attained, that is, how to reach the readers, is in this perspective of secondary importance.

The growing defence of the internet’s expanded freedom of speech, of the immaterial civil rights, that we are now witnessing in country after country, is the start of an – just as the last time in the early 18th century – liberalism that is carried by technology and therefore emancipated.

Therefore, my vote goes to the Pirate Party.

from [spectre]



How Pirates Shook European Politics
BY Ernesto / June 08, 2009

With 7.1 percent of the vote, the Swedish Pirate Party has shocked its critics and secured a seat in the European Parliament. The Pirates received more votes from those under 30 than any other party in the European elections yesterday, and this was celebrated with pints of rum and loads of pirate chants. Late Sunday night, Swedish Prime Minister Fredrik Reinfeldt congratulated the Pirate Party on their unprecedented win at the European elections. The Pirate Party is seen a serious competitor in Swedish politics now, a fact underscored by the Prime Minister who said that his own party will formulate a clear policy regarding net integrity and copyright issues in preparation for the Swedish national elections in September 2010.

A few hours earlier, the party dinner had come to a close with volunteers and members singing “The Broadband Hymn”. They had fittingly gathered at the Royal Institute of Technology in Stockholm, and as Swedish TV published the exit polls results indicating that the Pirate Party would get around 7% of the votes, wild cheers broke out. Party leader Rick Falkvinge took to the stage. “Together we have today re-shaped the political map in Europe,” he said. “Right now, Europe is watching what is happening here and politicians everywhere are scrambling to understand our issues. They now know that the party that has information-political perspectives can win many votes.”

And yes, it did. 214,313 of them in Sweden on Sunday. 7.1 percent of the vote and a guarantee of at least one seat in the European Parliament. The Pirate Party was the most popular party among voters under 30 years of age. Taking into account that Prime Minister Fredrik Reinfeldt’s Moderate Party is the most popular party among voters over 65 years of age, one can understand why Reinfeldt later in the evening said he will sit down with the Moderate Youth leader Niklas Wykman – a critic of the surveillance legislation and anti-filesharing laws – to discuss Internet issues. “We’ll share files in Brussels!” a young man shouted as he ran to the bar at election night. Meanwhile, journalists from all over Europe who had flown in to cover the unique occasion tried to get their piece of party leader Rick Falkvinge and vice chairman Christian Engström.

The latter, who will probably take the party’s seat in the EU parliament, held a short speech in which he thanked all the volunteers. The Pirate Party stays true to its net-roots and has no formal organization. Anyone who thinks he or she can contribute is welcome to do so simply by posting on the forum and going out and doing it. No formal decisions on campaigning are taken and the thousands of party ballots have been distributed to voting centers simply by someone living close and wanting to play their part. “It’s amazing that it worked. I never thought it would,” Engström joked.

A journalist from Swedish radio broke into the celebrations with a question for party founder Rick Falkvinge on how he felt. With champagne in his hand and pride in his eyes, he just smiled: “How does it feel to write history? It feels pretty damn good.” Today, after a night spent drinking rum and chanting seafarer standards, the pirates woke up finding themselves on the front pages of the Swedish newspapers. Pirates waving Jolly Rogers. Pirates taking celebratory late night dips in fountains. Pirates laughing. Pirates hugging. And there is consensus among the op-eds and political pundits on how it could happen: Enthusiasm paid off.

The two large parties in Sweden, the Social Democrats and the Moderate Party, are heavily criticized because of their lack of engagement in the European Parliament. Meanwhile, the Green Party (which also had a great election with 10.9%) and the Pirate Party positioned themselves on their respective expert issues and built a lot of support from the base. When the EU parliament meets after summer, there will be at least one pirate in the midst of European parliament. If the Lisbon treaty is voted through, there can be two. It may not seem a lot in order to make a difference, but as a blogger put it: One pirate can hijack a whole ship.


















“If I laugh too hard, I’ll die” – Sarah Onyango, Barack Obama’s step grandmother………

Jubilation at Obama’s Kenyan home
BY Juliet Njeri / BBC News, Kogelo

It took a few minutes for the historic news to register with the
residents of Kogelo, a small village in western Kenya where the father
of the next US president was born and raised. But when the declaration
that Barack Obama had won the US election finally sunk in, loud cheers
and ululations rang out. At least 100 residents had stayed up all
night in the village centre, sheltering from a heavy downpour in tents
set up by the village clinic to watch the results on a giant TV
screen. The sun rose bright and early and a few hours later, one of
the village elders took the microphone to announce that Mr Obama had
won the elections by an overwhelming majority. Although they were
thousands of miles away from the US, it was still a very personal win
for them as they truly consider Mr Obama a son of Kogelo.

“People of Kogelo come and celebrate, Obama has won,” rang out on the
loudspeakers as residents ran from their houses to join in the
jubilant celebrations. Children from the Senator Obama-Nyangoma
Primary School burst out of their classes shouting and screaming with
joy. A prayer of thanksgiving was said – what they had prayed for had
come to pass. About 1.5km from the health centre, Sarah Onyango, the
US president-elect’s 86-year old step-grandmother, could not restrain
herself and darted out of her house singing and dancing. “If I laugh
too hard, I’ll die,” she said. This was the first time she had been
seen since Sunday, when the family announced that they would not be
receiving the media or visitors until the results were released. The
family had been holed up in their heavily guarded home watching the
elections and results in private. But there was nothing guarded about
the euphoria and celebration that broke out after the results were
announced. Crowds of villagers hurriedly broke branches off trees and
waved them wildly in the air as they sang songs of praise for their

Feast planned
The wild cries only died down as they gathered to listen to his
acceptance speech, with periodic shouts and cheers, especially when he
mentioned his family in Kenya. “Yes We Can,” they chanted along with
him, bursting with pride. People kept pouring into the clinic’s
compound, driving the level of joyful noise even higher. A section of
the crowd rushed out of the gate and headed for the Obama homestead.
As they advanced, the gates flew open and finally the crowds could
congratulate the family. They danced around the compound and some
headed straight for the modest, tiled grave of Obama Snr, Mr Obama’s
father, paying honour even in death.

Malik Obama, Mr Obama’s half-brother, was carried shoulder high by the
euphoric crowd as they sang: “Obama has raised the profile of Kogelo”,
in the local Luo language. Then came the moment that everyone had been
waiting for as the family finally emerged to address large group of
local and foreign journalists camped outside the house. Auma Obama
made their excuses – after receiving the results, they had been trying
to come to terms with what it all meant for them as a family. “The
shock hasn’t set in that we’re the first family,” Mr Obama’s half
sister Auma Obama said. “It has been a very tough race and we’re very
happy that he won.”

Mr Obama’s step-grandmother announced that there was going to be a
grand feast, and joked that all types of food from around the country
would be available. A few metres away, tied to a tree, the bull that
will be slaughtered for the feast chewed away at the grass, unaware of
its impending fate. He has done us proud, the family said, and the joy
was evident in their wide smiles and easy manner. They said they are
definitely going to visit the president-elect and his family, although
they had not started making plans. Auma said she was looking forward
to making chapattis – a local flatbread – in the White House with
Michelle Obama. His grandmother says that is his favourite food.

Electricity arrives
She joked that with her brother’s win, every member of the family
could add the word “first” to their title – first sister, first
grandmother, first niece. But the family said it did not expect to be
treated differently from any other in Kenya. “We’re just a normal
family and we don’t expect anything. As my grandmother always says,
Barack is just doing a job, a civil service job,” Auma said. But it
seems the decision is already out of their hands. Soon after the press
conference ended, members of Kenya’s state security team ushered
people out of the compound. And just outside the main compound, 20
teams of technicians from the Kenya Power and Lighting Company were
preparing to lay down power lines to the compound. The Obama family
can expect to have electricity installed within a few days, the
company says. It seems change has come not just to the US and the
White House, but to the simple and sleepy village of Kogelo as well.

Kenya declares holiday for Obama

Kenya has declared Thursday a public holiday to celebrate the election
of Barack Obama to the US presidency. Mr Obama’s father was from Kenya
and his victory has prompted jubilation across the country. “We the
Kenyan people are immensely proud of your Kenyan roots,” President
Mwai Kibaki said. The BBC’s Juliet Njeri says Mr Obama’s step-
grandmother was seen dancing and cheering jubilantly outside her house
after the results were declared. She says Mr Obama’s family stayed up
all night in the western Kenyan village of Kogelo watching the
election count, and they are now preparing for a big party. African
leaders from South Africa to Somalia have sent their congratulations
to the US president-elect. Nelson Mandela, South Africa’s first black
president, welcomed Mr Obama’s victory as a sign of hope for everyone.
“Your victory has demonstrated that no person anywhere in the world
should not dare to dream of wanting to change the world for a better
place,” he said in a letter of congratulations.

In Kisumu city, near the Obamas’ home village, there is a carnival
atmosphere and people have poured onto the streets singing Mr Obama’s
praises, our reporter says. Political leaders are expected to join
massive celebrations planned in the city, which considers Mr Obama
their chosen son, she says. In January, Kisumu was the scene of
running battles between members of the public and police after riots
broke out over the Kenya’s contested elections. But correspondents say
the US election seems to be a unifying moment for the country, with
people reported to be saying that Mr Obama’s victory is a victory for
all Kenyans. In the capital, crowds were seen singing and dancing,
waving branches and carrying posters of Mr Obama along Ngong Road, one
of Nairobi’s major highways. “Your victory is not only an inspiration
to millions of people all over the world, but it has special resonance
with us here in Kenya,” Mr Kibaki said.

Mr Obama’s victory is being celebrated across the continent. South
African Archbishop Desmond Tutu said it showed “that for people of
colour, the sky is the limit”. The BBC’s world affairs correspondent
Adam Mynott says Mr Obama will inherit a foreign policy legacy in
Africa that has been one of the high points of the George Bush
administration. Earlier this year President Bush toured through five
African nations and people greeted him in their thousands to applaud
him for America’s huge contribution in the fight against HIV/Aids.
Since its launch five years ago, his Aids relief programme has spent
more than $15bn dollars (£9.5bn) on the continent and saved many
thousands of lives. He says Africans will look to Mr Obama to deliver
more when he takes office in January, and his difficulty will lie in
matching the soaring expectations.


Sarah Obama was getting hungry. Her step-grandson had just been
elected US president and she was going to celebrate “with a feast”.
But what would she eat? “Chapo”, Mama Sarah said – slang for chapatis
– to roars of laughter from relatives gathered on the lawn in front of
her house.

It was perhaps an apt choice for a woman who has always maintained
that the reflected glory of her grandson would not change her simple
way of life; waking at dawn, tending her vegetables, going to market,
going to bed. Even last night, when other members of the family camped
at her house could not sleep for all the excitement, she turned in
early, woke at 3am to find the result was still some way off and rose
again once the sun was up.

Only when the generator-powered television tuned to CNN announced that
Obama had won at 7am did she allow herself to get caught in the
emotion, rushing out of the family compound with a group of family
members, past a group of startled policemen guarding her gate, to
serenade the waiting media. “We are going to the White House,” they
sang, hugging and dancing. A few hours later, once the reality of
Obama’s victory had sunk in, she said: “I don’t know if I will die of

By then the euphoria spread across Kenya, where people consider Obama
to be one of their own. There were impromptu celebrations in the
eastern port city of Mombasa, the western lakeside town Kisumu and the
capital Nairobi, where some youths marched through a slum singing:
“Obama don’t sleep. The struggle is still on.”

A decision by President Mwai Kibaki to declare tomorrow a bank holiday
only added to the party mood. Elsewhere Obama’s win was seen as one
for all of Africa; in Uganda students burned tyres in celebration,
while in South Africa the former Archbishop of Cape Town Desmond Tutu
likened the US poll to Nelson Mandela’s election win in 1994. “We have
a new spring in our walk and our shoulders are straighter,” Tutu said.

At the village dispensary near Mama Sarah’s house in Kogelo, the
village in western Kenya where she raised Barack Obama’s late father,
hundreds of people had stayed awake through the night, dancing and
watching al-Jazeera’s election coverage on a large screen. Soon after
the result was announced they ran down the dirt road to Mama Sarah’s
homestead, where police had kept the media locked behind the gate.

Waving branches, beating drums and singing the refrain: “The Champion
has stepped into the arena, and everybody is watching,” they insisted
the police allow them into the compound. “We cannot be intimidated by
the Kenyan police,” a man shouted, threatening to tear the gate down.
“We are now under the US government.”

A policeman opened the gate and they stormed inside, dancing for
several minutes around the graves of Barack Obama Sr and his father
Hussein Onyango Obama. The police, who set up a post inside the
compound a few months ago, are likely to remain a permanent fixture
there now that Mama Sarah is a member of America’s first family. “They
will surely have to stay for security reasons,” said Wycliffe Obama,
22, a son of Barack Obama’s cousin, who spends most weekends at the
homestead and was yesterday draped in an American flag. “If Barack is
the president of the US then anything could happen here.”

Other changes are more welcome. Today workers were erecting
electricity poles outside the compound – preparing to connect Mama
Sarah’s three-bedroom house to the national grid for the first time.
For the past week government construction workers have been
frantically smoothing the road to her home, aware that a US
presidential visit may not be too far off.

But Auma Obama, the half-sister who Obama thanked in his victory
speech today, said that his Kenyan family already lived a “good life”
and were not anticipating any more favours from the local authorities,
or the US. “As a family we support Barack, but we have not got
expectations [of him helping us in Kenya]. He is an American … if
there are any changes they will be in America and the world.”

Before journalists were requested to leave the compound to allow the
Obamas to prepare for the feast – beside the chapatis, fleshly
slaughtered beef and chicken was on the menu – Mama Sarah had time for
a few more questions. Her advice to the new president? “He should work
very well globally, especially for global peace.” And would she be
travelling to the US for the inauguration?

“Do you really think I am going to be left behind?”

Kenya eyes US tourist boost after Obama win
BY Helen Nyambura-Mwaura  /   5 Nov 2008

NAIROBI (Reuters) – Kenya’s ailing tourism industry plans to ride on
Barack Obama’s U.S. election victory to attract more American
visitors, an industry official said on Wednesday. Fighting at the
start of 2008 after a disputed presidential election in east Africa’s
largest economy led to a downturn in tourism, Kenya’s second biggest
hard currency earner in 2007. But tourism authorities hope Obama’s
highly-publicised campaign, victory and his ties to Kenya will draw
tourists to the country’s sunny beaches and famed wildlife reserves.

“We’ll be looking at our strategy for marketing so that we give
greater attention to the U.S. market to respond to the greater
attention and interest being shown,” said Jake Grieves-Cook, chairman
of the Kenya Tourist Board (KTB). “It has very positive implications
for tourism. Kenya now is in the spotlight internationally. We are
bound to see an increased interest in Kenya,” he told Reuters in an
interview. Obama was born to a white mother from Kansas and a Kenyan
father, who hails from the western hamlet of Kogelo.

Within hours of Obama’s win, workers from the country’s electricity
distributor were surveying the area near his paternal grandmother’s
house for a possible connection. Kenyan police have tightened security
at the humble homestead and yellow graders have been smoothing the
dirt road to her home for several days.

Travel Warnings
Grieves-Cook said the United States is Kenya’s second biggest source
of tourists, after Britain. A total of 25,000 Americans visited Kenya
in the first nine months 2008, down from more than 100,000 in 2007,
according to KTB.

He said the United States should soften a warning to its citizens
about visiting Kenya in the light of continuing threats from terrorism
and crime. “For a long time, we have been the subject of a fairly
strong advisory by the U.S. State Department. It’s high time that the
travel warning is reviewed because of the increased interest in
Kenya,” he said.

The State Department has warned of potential terrorist attacks since
an al Qaeda truck bomb killed at least 225 people at the U.S. Embassy
in the capital Nairobi 10 years ago. A second attack in November 2002
killed 15 people at the Israeli-owned Paradise Hotel resort near
Mombasa on Kenya’s coast, bringing the key tourism sector to its

Grieves-Cook said he did not expect Kenya to be a terrorist target on
account of Obama. “There is a great deal of good will toward Kenya.
The U.S. policy is likely to change with the new president,” he said.
Kenyan tourism recovered after the two attacks to record earnings of
65.4 billion kenya shillings last year, but the ethnic and political
bloodshed in early 2008 has scared off many foreign holidaymakers.

Tourism earnings in the first nine months slumped to $435 million
compared with $620 million in the same period last year. Analysts
predict Kenya’s economy will grow by about 4.5 percent this year, down
from 7.0 percent in 2007. “Tourism has been very poor in the last 10
months as a result of the fighting,” he said. “We are now faced by the
problem of the credit crunch.”

Annan backs Kenya violence probe

Kofi Annan has urged the Kenyan government to set up a tribunal for
people accused of involvement in violence after last year’s elections.
The former UN secretary general brokered a power-sharing deal which
ended the violence in February. Establishing such a tribunal was a
central recommendation of a commission headed by a senior judge,
Philip Waki, which submitted its report last week. The commission
found that politicians on all sides had stirred up violence. Mr Waki
also said that the police had used excessive force against protestors.

‘No impunity’
The commission gave Mr Annan a sealed envelope containing the names of
suspects and he told the BBC he would pass on the information to
prosecutors at the appropriate time. “I think it is important that the
government acts on it,” he told the BBC’s Network Africa. “The victims
demand justice too.”

“The tendency sometimes to protect the perpetrators for the sake of
peace – ‘forget and let’s move on’ – doesn’t help society. Impunity
should not be allowed to stand.” More than 1,500 people were killed
and some 300,000 more fled their homes after then opposition leader
Raila Odinga said he had been cheated of victory by President Mwai

Under the deal brokered by Mr Annan, Mr Odinga became prime minister
and his Orange Democratic Movement took an equal share of cabinet
posts with Mr Kibaki’s party. Mr Annan dismissed the idea that the
Kenyan example had set a dangerous precedent for Africa, by
encouraging the idea that even if you lose you can still enter a power-
sharing coalition. “The concept of winning or losing elections is
something that we should internalise,” he said. “We cannot go and
create problems and expect to share power.” He said he thought that Mr
Kibaki and Mr Odinga had both gone into the elections hoping to win,
but the vote had resulted in an “almost perfect political gridlock”.

“I had come the conclusion during the negotiations that any attempt to
re-run the elections, to re-tally, to re-count, would have led to more
killings, and there was no certainty that either side would accept the
results,” Mr Annan said.

Politicians, the police and the electoral commission are all being pilloried
Spread the blame
Oct 23rd 2008 | NAIROBI

TWO reports examining the violence that ravaged Kenya early this year
after a disputed election have challenged the leaders on both sides of
the political divide to clean up their act and even to let some of
their biggest figures go before a tribunal for their alleged part in
fomenting the strife. If the recommendations are put into practice,
the culture of impunity that has protected Kenya’s leaders for many
years may be weakened. But there are also fears that delving into past
violence may reopen barely healed wounds and undermine the fragile
government of national unity that has run the country since April.

The first report, chaired by a South African judge, Johann Kriegler,
focuses on the actual election—and lambasts the electoral commission
for massive bungling. It makes clear that there were numerous
instances of vote-rigging but does not pronounce on who should have
been declared the winner. Most independent observers reckon that the
opposition, led by Raila Odinga, who is now the prime minister, was
cheated of victory—perhaps a narrow one—by a cabal surrounding
President Mwai Kibaki, which bullied the commission into accepting a
falsified result. Diplomats from the European Union, the United States
and Japan, which have provided vast amounts of aid over the years,
have pushed for a new electoral commission. The government reacted to
this suggestion with predictable outrage. But the diplomats say that,
far from treating Kenya with colonial disdain as the government
suggests, they are merely reflecting the views of ordinary Kenyans who
have lost confidence in the people who ran the election.

The second (quite separate) report is more controversial. Chaired by a
Kenyan judge, Philip Waki, it tries to get to the causes of the
violence and to finger its main perpetrators. At the report’s
presentation, Mr Waki handed a sealed envelope to Kofi Annan, a former
secretary-general of the UN who mediated after the election and
managed to bring a unity government together. The letter contains the
names, so far unpublished, of ministers, members of parliament and
businessmen accused of inciting violence and arming militias. Many
names are listed in an earlier report published by Human Rights Watch,
a New York-based monitoring group, and include several leading
politicians, including some who are close to Mr Kibaki and to Mr
Odinga. Mr Waki recommends that if the government fails to put the
accused before a special tribunal to be set up within 60 days, the
envelope should be passed to the International Criminal Court at The
Hague with a view to prosecution.

Mr Waki’s investigative team met victims across the country and quoted
from previously classified daily reports of Kenya’s National Security
Intelligence Service (NSIS). President Kibaki’s government, according
to the Waki report, had “lost its legitimacy” and was “not seen as
dispassionate”. It used state security forces and criminal gangs to
target opposition supporters. For their part, opposition leaders in
the ethnically mixed Rift Valley, where much of the violence occurred,
recruited thousands of armed men from the Kalenjin group to kill and
clear out Kikuyus, who had overwhelmingly backed their ethnic kinsman,
Mr Kibaki, in the election.

The 500-page report has some revealing and controversial details. It
cites, for instance, an NSIS finding that a worker at a bullet factory
in Eldoret had trained Kalenjin youths in guerrilla tactics. It also
supports longstanding claims by human-rights groups and others that
some of President Kibaki’s aides had met, at State House, leaders of
the Mungiki, an outlawed Kikuyu sect with a history of extortion and a
penchant for beheading its enemies. As a result, the Mungiki helped co-
ordinate the killing of Luos and Kalenjins in the towns of Naivasha
and Nakuru, where the population is mixed.

The report also damns Kenya’s police, which is said to have lacked
organisation and leadership—and to have taken part in the killing. At
least 405 of the 1,103 documented victims of the violence (several
hundred more are unaccounted for) were shot dead by the police, most
of them in the back; the majority were Luos who had supported Mr
Odinga and had run riot in their homeland in western Kenya, where
outrage at what they deemed a rigged election was fiercest. The
report’s emphasis on police failure has raised suspicion that the
police commissioner, Major-General Hussein Ali, may take the rap,
while politicians and other security services get off comparatively

Meanwhile, Messrs Kibaki and Odinga have been winning plaudits for
keeping the peace. Mr Kibaki says Kenyans should forget the past and
look to the future. Mr Annan, however, has urged the government to set
up the special tribunal, as suggested by Mr Waki, as soon as possible;
forgetting, he insists, would not help tackle the regrettable culture
of impunity.

Would a tribunal be able to bring some of Kenya’s “big men” to
justice? Some of those who are thought to be listed in the sealed
envelope have keenly endorsed the idea of a tribunal. They are
confident, it seems, that it would have no teeth.

Six months after its bloody election crisis, the country is still struggling to recover
Sep 4th 2008 | NAIROBI

IN THE past few weeks, Kenyans have been celebrating. They were
delighted when their athletes came back from the Olympics in China
with 14 medals, five of them gold, whereas South Africa, often the
continent’s sporting giant, got just one silver. A buoyant president,
Mwai Kibaki, handed bonus cheques to the medallists on their return.
And then Kenyans had the pleasure, early one morning on television, of
watching Barack Obama, the son of a Kenyan civil servant, accept the
Democratic nomination to be president of the United States.

But despite such good cheer it is evident that east Africa’s leading
country has yet to recover fully from the post-election violence that
ravaged it earlier in the year, when some 1,700 people were killed and
300,000 displaced. Its fragile coalition government is struggling to
take the necessary decisions to tackle the country’s manifold
problems. With Mr Kibaki as president and the opposition leader, Raila
Odinga, as prime minister, the mere fact that their cumbrous joint
administration has hung together is an achievement. But beyond that,
six months into its existence, it has little else to celebrate.

Since the bloodshed of January and February, the economy’s progress
has been jerky. Take tourism, the country’s biggest foreign-currency
earner. “It’s a wonderful, wonderful world,” purred Mr Kibaki on a
recent trip to the Masai Mara game reserve, as he looked out on a
muddy swollen river with crossing wildebeest and snapping crocodiles.
Yet the Kenya Tourism Board says the country lost $191m in revenue in
the first half of the year, with visitors down 36% to 561,000 compared
with the first six months of 2007. Safari firms say bookings are still
sparse; they hope a government marketing campaign will give them a
high-season Christmas boost and that the American State Department’s
recent lifting of its advice not to travel to Kenya will encourage
more Americans to fly in.

Agriculture is struggling too. Poor rains, a tripling in the cost of
fertiliser and pesticide, and land disputes linked to the election
crisis have wrecked this year’s maize harvest. The Kenya Cereal
Growers’ Association says production will slump from 34m bags of maize
to 24m. To make up the shortfall, the government has had to import
maize from South Africa at inflated prices. Exports of high-value
vegetables and fruit to the European Union, on which entrepreneurial
farmers have staked their future, have been hit by high fuel prices
and a trend towards buying food more locally and seasonally.

Flower farms say that demand in Europe for Kenyan roses and other cut
flowers is saturated; exports may dip slightly next year. Tea
production lost ground to India and Sri Lanka during the crisis and
has since been hit by pay demands and by the loss of some British
“fair trade” licences. Only coffee, another big export earner, was
unaffected; brokers in Nairobi, the capital, say production and prices
are steady.

The country’s stock exchange has weathered the storm, though recent
trading has been flat. A public offering of 25% of the largest mobile-
phone provider, Safaricom, boosted state coffers by $833m. Trade with
China is still rising, and may top $1 billion this year. The African
Development Bank reckons Kenya could grow by 7% this year and says a
government target of 10% by 2010 is attainable. But the World Bank is
less confident, pointing out that few economies, particularly ones
like Kenya’s that are rural-based and lack fossil fuels, have achieved
double-digit growth.

Whatever the growth rate, the prevailing mistrust between Mr Kibaki’s
Party of National Unity (PNU) and Mr Odinga’s Orange Democratic
Movement is denting investor confidence. The Oranges still believe Mr
Kibaki stole the election. A comprehensive exit poll on election day,
paid for in part by the American government, was recently released
after being suppressed since the crisis. It suggests that Mr Odinga
won 46% of the vote against 40% for Mr Kibaki, with a margin of error
of 1.3%. Such findings are not definitive, and suggest the Oranges
pilfered votes as well as the PNU, but they continue to undermine Mr
Kibaki’s legitimacy as president.

Mr Odinga is credited by some with sharpening government performance
by introducing contracts that are meant to make ministers and senior
civil servants work harder. But despite Mr Odinga’s claims to enjoy a
“warm, respectful friendship” with the president, the truth is that
the two barely co-operate, leaving a vacuum of leadership at the top.
Mr Odinga may have drawn some waverers onto his side, including some
ministers previously loyal to Mr Kibaki. But his office is
understaffed and his powers fettered. Mr Kibaki, for instance, still
appoints top civil servants. A recent sympathetic visitor described Mr
Odinga’s office as a “shell”.

The result is a palpable sense of drift. Any vestige of the previous
government’s anti-corruption drive, for example, has been abandoned.
This was made plain during a recent brief return visit by John
Githongo, Kenya’s former anti-corruption chief, who had been forced to
flee Kenya three years ago after blowing the whistle on ministers in
the previous government. His movements were kept secret for fear he
might be murdered; he met Mr Odinga but Mr Kibaki was disinclined to
see him. Corruption remains “out of control”, says Mr Githongo, and is
now not even a priority.

The drift cannot be allowed to extend to the big infrastructure
projects that Kenya must complete if it is to start moving again.
Several are pending: a cement factory at Athi River, south-east of
Nairobi; a tarmac road of 530km (329 miles) to link Kenya to Ethiopia;
a broadband internet connection via an undersea cable; a new terminal
for Nairobi’s airport; the overhaul of Kenya’s port at Mombasa; and a
plan to double energy production and slash prices by tapping the Rift
Valley’s geothermal potential.

A divided government may not be able to push these through. With water
and land, energy has become a make-or-break issue. The cost of
electricity has risen 51% this year, with demand growing and climate
change lowering the levels of hydroelectric dams. Kenya’s fractured,
ethnically divided politics has failed to deliver much in such fields
in the past. Yet no one seems enough in charge at the top to get
things moving now.

Trouble ahead for a governing coalition that has fared better than expected
A finance minister resigns
Jul 10th 2008 | NAIROBI

IN THE six months since Kenya’s electoral crisis the country has, in
many ways, done better than expected. About 1,500 Kenyans died in the
weeks following a disputed election, but the killing has abated and
efforts are under way to resettle some of the 300,000 people displaced
in the violence. At the top of the new government of national unity
relations between the president, Mwai Kibaki, and the prime minister
and former leader of the opposition, Raila Odinga, are distant but
respectful. The country has won plaudits for speaking out against
Zimbabwe’s election-stealing president, Robert Mugabe. The economy,
which took heavy blows in January and February, is recovering too.
Although tourism is still in the doldrums, tax revenues were up 20%
last year, exceeding the target by $143m.

Still, the distrust of politicians felt by ordinary Kenyans persists,
especially after the exposure of a complex saga involving the sale of
a government-owned luxury hotel in Nairobi to a Libyan company. Caught
out by the media, heckled by fellow ministers and subjected to the
indignity of a vote of no confidence in Parliament, the finance
minister, Amos Kimunya, was forced to resign on July 8th, two days
after insisting that he would rather “die” than leave office. Mr
Kimunya said he had only “stepped aside” to allow for an investigation
and denies any wrongdoing. Mr Odinga called the decision “honourable”.

The Grand Regency Hotel, just a few streets from the parliament
building, has come to haunt Kenyan politics. It became government
property after it was confiscated from Kamlesh Paul Pattni, a local
businessman alleged to have organised a scam in which the state paid
hundreds of millions of dollars to individuals close to Mr Kibaki’s
predecessor, Daniel arap Moi, for the export of gold and diamonds that
did not exist. Sources say Mr Pattni, now a Christian tele-evangelist,
may have handed over the hotel in exchange for immunity from further
prosecution. Under Kenya’s procurement law, the hotel should have been
advertised for sale and bids received, but Mr Kimunya sold it directly
to the Libyans, assisted by the central bank. He at first denied the
deal, then said it was “too sweet to resist” and that it strengthened
ties between Libya and Kenya.

It is unclear how much was paid. Mr Kimunya insists it was a fair
market price of $45m, though the hotel could be worth as much as
$115m. Mr Odinga says $40m of the money is still in a lawyer’s bank
account. Leaked papers suggest it may have gone for $28m. That
fuzziness in itself should be enough to ensure that Mr Kimunya will be
cleared of any criminal wrongdoing; Kenya has yet to prosecute anybody
significant for corruption.

The affair may, however, damage the stability of the coalition. Mr
Odinga’s Orange Democratic Movement, and particularly the lands
minister, James Orengo, led the calls for Mr Kimunya to go. Mr Kimunya
was loyal to Mr Kibaki and the Orange Democrats remain unhappy about
the distribution of cabinet posts. They would like to control the
finance ministry themselves. But those close to Mr Kibaki have made it
clear that if Mr Kimunya does not return the president will appoint a
replacement from his own Party of National Unity. That could spark a
new tussle.

On the other hand, the episode could encourage cleaner government.
That would be good for Kenya. Murky deals are liable to persist, not
least because politicians on both sides owe a lot of money to their
electoral backers. But legitimate business is looking more attractive,
and the boundaries of official misbehaviour might at last be

Hopes for Democracy, Stability and Education Alive in Kenya  /
September 8, 2008

As the world celebrates International Literacy Day today, there are
few countries being more closely watched than Kenya. In 2003, when
newly-elected President Mwai Kibaki announced during his inauguration
that primary school would now be free for all Kenyans, over two
million additional children poured into school. The cause of universal
free education was thus linked from the start with the new hopes for a
stable democracy in Kenya.

There is no question that early 2008 was at least a temporary set-back
to many of those hopes. After the economic and democratic gains that
had come with free elections in 2003 and an economy that had surged to
7% growth in 2007, ethnic violence exploded this January amidst
charges that Kibaki supporters had rigged votes in the December 2007
Presidential elections. Over 1300 Kenyans died before peace was
brokered. Beyond the tragic loss of life, school was disrupted for
hundreds of thousands of children displaced by the violence, while a
decline in tourism and the steep rise in oil prices appear to be
cutting growth in half for 2008. To top it off, in early July, Finance
Minister Amos Kimunya was forced to resign due to his suspicious sale
of Kenya’s Grand Regency Hotel.

And yet despite all this bad news, I returned from a week in Nairobi
this summer feeling optimistic about Kenya. Yes, the power-sharing
agreement between now Prime Minister Ralia Odinga of the Orange
Democratic Movement (ODM) candidate and President Mwai Kibaki of the
Party of National Unity (PNU) is unusual. Yes, peace was partially
bought by splitting existing ministries in two to create ministerial
slots to satisfy powerful advisors in each party. But the benefits of
peace – however it was garnered – are enormous for Kenya. And Odinga –
the likely winner of the election – showed real statesmanship by
accepting the number two spot in the interest of that peace. However
strained this political marriage between Kibaki and Odinga appears, it
does seem to be functioning. And the resulting stability is starting
to pay dividends. In July, France gave the green light to its citizens
to both visit and invest in Kenya again. The partial privatization of
Kenya’s telecom company, Safaricom, was dramatically oversubscribed.
With some luck on oil prices, growth could easily return to 6-7%
levels by 2009 or 2010.

And in a bright spot, one area where this coalition government seems
truly united is on education. Kenya made international news in 2003 by
eliminating the terrible practice of charging even poor parents fees
for each child they send to school – a practice that denies tens of
millions of your people – especially girls – an education in much of
the developing world. The announcement of free education by President
Kibaki brought 1 million new children into school in one week! Since
then, enrollment has gone from 5.9 million to over 8 million. Now
Kenya is taking the pioneering step of eliminating fees for secondary
school – even though it will cost the government ten times the amount
to cover the cost of secondary school as opposed to primary school.
While parents still face the expenses of boarding, uniforms, and
travel, the abolition of fees has again led to a surge in enrollment.

While President Kibaki and his first Education Minister George Saitoti
– both of the PNU – deserve great credit for pushing the elimination
of fees, the Orange Democratic Movement seems just as committed. When
I met with Prime Minister Odinga in his Nairobi office, he told me
that the same education goals were in the platforms of both parties
because “we all agree that education will be the ultimate engine of
Kenya’s economic growth.”

The Ministry of Education has garnered international respect through
both excellent civil servants like Permanent Secretary Karega Mutahi
and Basic Education Secretary George Godia as well as their
decentralized and transparent system for dispersing funds to local
school districts. Rather than hold the money in the Ministry of
Education, Kenya ensures that every shilling gets to the local level
by depositing a per-child grant of 1,020 Kenyan Shillings
(approximately $15 USD) to local banks accounts for each school. The
headmaster is then required to post the amount received in plain view
(which I saw firsthand in school after school that I visited) and work
more closely with parent committees on how to spend the money that
anything I had witnessed in the United States.

While Kenya is stepping up to the plate with serious reforms and the
financial commitment to replace lost school fees – including for 4,000
secondary schools – they cannot do it alone. The overwhelming funds
needed are for teacher salaries – which typically make up 80% of
school budgets. What Kenya most needs from the international community
is help with the recurrent costs that would come with hiring the
47,000 new teachers that current Minister of Education Sam Ongeri says
Kenya needs to handle the additional three million students while
focusing on quality.

This financial reality demonstrates how essential it is for donor
nations to not only start filling the $9 billion annual financing gap
needed for universal basic education, but also to ensure that such
support is, as Prime Minister Gordon Brown stresses, long-term and
predictable. Poor nations that are worried that assistance will only
be short-term will hesitate to bring on new teachers, fearful that
their funding will be cut-off just as those teachers have been trained
and deployed. And without an influx of new teachers, the admirable
effort to bring in millions of new students will mean exploding class
sizes and decreasing quality.

Everywhere I went in Kenya there were high hopes that if Barack Obama
were elected, these concerns would finally be heard. But no G-8 leader
should need to be the child of a Kenyan parent to know that both
educational reform from nations like Kenya and financial support from
donor nations like the United States will have to be long-term to
paint the most optimistic future for Africa.



Election Prediction Markets Bet on Obama
BY Ben Steverman / November 03 2008

Here’s one rare investment that, at least so far, has paid off
handsomely in 2008: Barack Obama. Various election futures markets
allow traders to make bets on politics. On Nov. 1, 2007, on the Iowa
Electronic Markets, the Illinois senator was given about a 14% chance
to merely win the Democratic presidential nomination. Today, traders
are betting Obama has a 90% chance of winning it all by being elected

Of course, the Republican nominee, Arizona Senator John McCain, could
make a lot of money for certain investors by pulling off an upset on
Nov. 4. As of midday on Nov. 3, the Iowa Electronics Market gives the
Republican a roughly 8.8% chance of winning the presidency. Thus, if
you bet on McCain for a “share price” of $8.80, you get a payoff of
$100 if he wins. That’s a return of more than 1,000% if you’re right.
Intrade also runs a presidential prediction market: It gives Obama a
92% chance and McCain a 9.5% chance of victory. Another site (not open
to U.S. bettors) is, which gives Obama odds of almost 93%
and McCain probability of about 8%.

How accurate are these markets? Many, including the founders of the
Iowa Electronic Markets (see video below for more on IEM), say the
collective wisdom of traders often beat the accuracy of polls in past
elections. Ben Kunz makes the argument for prediction markets — both
in politics and other fields like public health — in this BusinessWeek

On the IEM, you can bet on each candidate’s percentage of the popular
vote. Right now, that gives Obama about 53.4% and McCain 46.8% of
the vote. A key test of these markets will be how close this is to actual
results. There are plenty of legitimate questions about how well these
markets work. This fall, observers alleged that Intrade’s presidential
futures market was being manipulated, creating odds that were
inconsistent with (and more favorable to McCain than) other markets.
Intrade’s CEO John Delaney investigated and said one institutional
Intrade member had been making big buys that skewed the market.
Delaney said the trader was trying to “manage certain risks.”

Alex Tabarrok at Marginal Revolution didn’t think this called into
question the concept of prediction markets: “This supports Robin
Hanson’s and Ryan Oprea’s finding that manipulation can improve (!)
prediction markets – the reason is that manipulation offers informed
investors a free lunch. In a stock market, for example, when you buy
(thinking the price will rise) someone else is selling (presumably
thinking the price will fall) so if you do not have inside information
you should not expect an above normal profit from your trade. But a
manipulator sells and buys based on reasons other than expectations
and so offers other investors a greater than normal return. The more
manipulation, therefore, the greater the expected profit from betting
according to rational expectations.”

Even if markets get the liquidity they need to work efficiently, they
have yet to prove they’re much more than an entertaining parlor game.
These markets might be able to predict the obvious, but do they really
tell us more than a statistically adept poll-watcher like Nate Silver
or Chuck Todd? If working properly, the markets end up reflecting
conventional wisdom. But they don’t really predict the future. A year
ago, while Obama was given 14% of winning the Democratic nomination,
McCain was given a 7.5% chance of winning the Republican nomination.
Both “predictions” weren’t just wrong, but wildly so.

Furthermore, the usefulness of election prediction markets for
investors as a so-called “risk manager” is questionable. First, the
risks and benefits of an Obama victory should already be reflected in
other markets. For example, health care stocks already have been hurt
by the prospects for a successful Democratic effort to reform health
care. Second, unless you expect to get a job in a McCain or Obama
administration, the direct economic effect of a political outcome is
not easy to determine. The impact of, say, the Indiana gubernatorial
race (which you can also bet on at Intrade) is even harder to detect.

If you’re betting for McCain or Obama, in other words, it’s unlikely
you’re trying to hedge against other losses if you lose. Rather,
you’re probably just a political junkie having fun and trying to make
a little money. More than 100 million people will vote for president,
and each vote will have been determined by a multiplicity of factors.
The complexity of it all is mind-boggling. The only thing that comes
close to complexity of the factors that influence election vote totals
is the many inputs that determine the price movements of a stock or
other investment. And, as the past year has shown in both the
presidential campaign and the stock market, life can be very

Trader Drove Up Price of McCain ‘Stock’ in Online Market
BY Josh Rogin / Oct. 21, 2008

An internal investigation by the popular online market Intrade has
revealed that an investor’s purchases prompted “unusual” price swings
that boosted the prediction that Sen. John McCain will become
president. Over the past several weeks, the investor has pushed
hundreds of thousands of dollars into one of Intrade’s predictive
markets for the presidential election, the company said. “The trading
that caused the unusual price movements and discrepancies was
principally due to a single ‘institutional’ member on Intrade,” said
the company’s chief executive, John Delaney, in a statement released
Thursday. “We have been in contact with the firm on a number of
occasions. I have spoken to those involved personally.” After the
internal investigation into the trading patterns, Intrade found no
wrongdoing or violation of its exchange rules, according to the
company. Citing privacy policies, Delaney would not disclose the
investor’s identity or whether the investor was affiliated with any
political campaign. According to Delaney the investor was using
“increased depth” in the Intrade market “to manage certain risks.” The
action boosted the McCain prediction over its previous market value
and above the levels of competing predictive-market Web sites. Pundits
and politicians have used Intrade to track the fortunes of the two
presidential candidates. Through the site, begun in 1999 and
incorporated in Ireland, traders buy and sell “contracts” that
function as stocks, allowing investors to gamble on the outcome of
political, cultural, or even geological events such as the weather.
The company asserts and experts have found that the Intrade market is
generally more accurate in predicting the outcome of major events than
other leading indicators, including public opinion polls. But the
relatively small scale of the market and its lack of outside
regulation could leave the system vulnerable to unscrupulous
investors, scholars of predictive markets say. Justin Wolfers, an
associate professor at the University of Pennsylvania’s Wharton School
of Business, said the trades in question do not follow any logical
investment strategy. “Who knows who’s doing it, it’s obviously someone
who wants good news for McCain,” said Wolfers, who has been following
the situation closely. McCain campaign spokesman Michael Goldfarb
said: “It’s always a good time to buy McCain.”

Ripple Effects
Intrade users first noticed something amiss when a series of large
purchases running counter to market predictions sparked volatility in
the prices of John McCain and Barack Obama contracts. The investor
under scrutiny purchased large blocks of McCain futures at once,
boosting their price and increasing the prediction that McCain had a
greater chance of winning the presidential election. At other times,
according to Intrade’s online records, blocks of Obama futures were
sold — lowering the market’s prediction about Obama’s standing in the
race. According to Intrade bulletin boards and market histories,
smaller investors swept in to take advantage of what they saw as price
discrepancies caused by the market shifts — quickly returning the
Obama and McCain futures prices to their previous value. This resulted
in losses for the investor and profits for the small investors who
followed the patterns to take maximum advantage. The activities of the
trader, dubbed the “rogue trader” on Intrade’s message boards, raised
several questions. For example, the trader purchased large contracts
named specifically after McCain and Obama. There were no similar-sized
investments, however, in separate instruments that predict a generic
Republican or Democratic presidential win — even though both sets of
contracts apply to the same event, prices show. Some political news
sites, such as, prominently display Intrade’s
McCain contract value but do not display the corresponding value for a
Republican presidential win. Similar trading patterns were not found
in competing predictive market Web sites betting on John McCain , such
as the Iowa Electronic Markets or Betfair. This means the trader was
paying thousands of dollars more than necessary to purchase McCain
contracts on Intrade, where the price of betting on McCain was much
higher. On Sept. 24, for example, Obama contracts were trading on
Intrade at a price that predicts a 52 percent chance of an Obama
victory. At the same time, Betfair and IEM contracts equated to about
a 62 percent chance of an Obama victory, according to the political
site Intrade records show the trader often
purchased tens or hundreds of thousands of dollars of contracts in the
middle of the night, when activity was at its lowest, and in large
bursts. In a three-day period from Sept. 30 through Oct. 2, four
separate flurries of buying drove the price of the McCain contracts up
by 3 to 5 points each. Those numbers eventually settled when the
market compensated. “These movements over McCain largely occurred at
time when there was no way that any useful information came out that
was pro-McCain,” Wolfers said. “A profit-motivated guy wants to buy
his stock in a way that would minimize his impact on the price, a
manipulator wants to maximize it.”

Rogue Tactics
According to Intrade, the company contacted the investor and used
public and private data held by the company as part of its
investigation. That included an analysis of the trades made by the
investor, tracking of Internet addresses, checking physical addresses
and other information. Intrade released details about its
investigation in a statement on its Web site. Some Intrade users
commented on the company’s message board that the trader may believe
in McCain’s chances for victory, despite trends in recent public
opinion polls. Indeed, bucking conventional wisdom can be a profit-
making strategy. For example, David Rothschild, a researcher and Ph.D.
candidate at the Wharton School, said that during the first two
presidential debates, the trader bet thousands of dollars on a McCain
electoral victory at the same moment that instant polls were
suggesting that Obama would win. “That’s equivalent to buying a
company’s stock just as negative earning reports come out,” Rothschild
said. “It is a bad investment, but may make some observers think that
Mr. McCain won the debate, which, again would be the goal of market
manipulation.” Also, the trader paid a premium of 10 percent to 20
percent on every dollar traded by not placing similar bets on other
Web sites, according to Rothschild’s calculations. Overall, if the
trader’s motive was to influence the Intrade market, he was remarkably
successful, Rothschild said. The trader’s actions help keep the
probability of Obama winning the election on Intrade about 10 percent
lower than Betfair and IEM for more than a month. “If the investor did
this as investment, not to manipulate Intrade, he is one of the most
foolish investors in the world,” Rothschild said.


“This is big news but not for the reasons that most people think.
Although some manipulation is clearly possible in the short run, the
manipulation was already suspected due to differences between Intrade
and other prediction markets. As a result: “According to Intrade
bulletin boards and market histories, smaller investors swept in to
take advantage of what they saw as price discrepancies caused by the
market shifts — quickly returning the Obama and McCain futures prices
to their previous value. This resulted in losses for the investor and
profits for the small investors who followed the patterns to take
maximum advantage.”

This supports Robin Hanson’s and Ryan Oprea’s finding that
manipulation can improve (!) prediction markets – the reason is that
manipulation offers informed investors a free lunch. In a stock
market, for example, when you buy (thinking the price will rise)
someone else is selling (presumably thinking the price will fall) so
if you do not have inside information you should not expect an above
normal profit from your trade. But a manipulator sells and buys based
on reasons other than expectations and so offers other investors a
greater than normal return. The more manipulation, therefore, the
greater the expected profit from betting according to rational

An even more important lesson is that prediction markets have truly
arrived when people think they are worth manipulating. Notice that
the manipulator probably doesn’t care about changing the market
prediction per se. Instead, a manipulator willing to bet hundreds of
thousands to change the prediction of a McCain win must think that the
prediction will actually affect the outcome. And if people think
prediction markets are this important then can decision markets be far


Why Do Markets Create Bubbles?
BY Tim Harford / 10.21.08

Bubbles are like pornography: Everyone has his or her own opinion as
to what qualifies, but it is impossible to pen a precise definition.
If you wish to push the metaphor further, both are also fun for a
while, if you like that sort of thing, but apt to end up making you
feel deflated and embarrassed. Bubbles are also embarrassing for the
economics profession. It’s not that we have no idea what causes
bubbles to form, it’s that we have too many ideas for comfort. Some
explanations are psychological. Some point out that many bubbles have
been stoked not by markets but by governments. There is even a school
of thought that some famous bubbles weren’t bubbles at all.

The psychological explanation is the easiest to explain: People get
carried away. They hear stories of their neighbors getting rich and
they want a piece of the action. They figure, somehow, that the price
of stocks (1929) or dot-com start-ups (1999) or real estate (2006) can
only go up. A symptom of this crowd psychology is that the typical
investor displays exquisitely bad timing. The economist Ilia Dichev of
the University of Michigan has recently calculated “dollar-weighted”
returns for major stock indexes; this is a way of adjusting for
investors rushing into the market at certain times. It turns out that
“dollar-weighted” returns are substantially lower than “buy and hold”
returns. In other words, investors flood in when the market is near
its peak, tending to buy high and sell low. The herd instinct seems to
cost us money. That is awkward for economists, because mainstream
economic models do not really encompass “herd instinct” as a variable.
Still, some economists are teaming up with psychologists and even
neurophysiologists in the search for an answer.

Cambridge economist John Coates is one of them. He used to manage a
Wall Street trading desk and was struck by the way the (male) traders
changed as the dot-com bubble inflated. They would pump their arms,
yell, leave pornography around the office and in general behave as
though they were high on something. It turns out that they were: It
was testosterone. Many male animals–bulls, hares, rutting stags and
the like–fight with sexual rivals. The winner experiences a surge of
testosterone, which makes him more aggressive and more likely to take
risks. In the short run that tends to mean that winners keep winning;
in the long run, they take too many risks. Dr. Coates wondered if
profitable traders were also running on testosterone, and a few saliva
samples later it appears that he is right. Profitable trading days
boost testosterone levels and tend to encourage more risk-taking, more
wins and more testosterone. When the risks didn’t pay off, the
testosterone ebbed away to be replaced by a stress hormone, cortisol.
The whole process seems likely to exaggerate peaks and troughs. These
psychological explanations are likely to help us understand what goes
on as bubbles form and how they might be prevented. Yet they make me
nervous: It is too easy to blame a bubble on the mob psychology of the
market when a closer look at most bubbles reveals that there is much
more to the story than that.

For example, one famous early “mania” was the Mississippi bubble, in
which countless investors poured their money into the Compagnie des
Indes in France in 1720, and lost it. Yet there was more going on than
a free-market frenzy: The government could hardly have been more
closely involved. The Compagnie des Indes had effectively taken over
the French Treasury and legal monopolies on French trade with much of
the rest of the world (including Louisiana–hence “Mississippi
bubble”). Investors were hardly insane to think that such a political
machine might be profitable, especially since the king of France
personally held many of the shares. But the king sold out near the top
in 1720; within two years, the Compagnie was bankrupt and its
political power dismantled.

The government played its own part in the current credit crunch, too.
For all the scapegoating of deregulation, thoughtful commentators also
point to the Federal Reserve’s policy of cheap money, and Fannie and
Freddie’s enormous appetite for junk mortgages–urged all the way by
politicians trying to make credit available to poor and risky
borrowers. Market psychology was part of the story, but not the whole
story. The idea that ordinary people have a tendency to be caught up
in investment manias is a powerful one, thanks in part to Charles
Mackay, author in 1841 of the evergreen book Extraordinary Popular
Delusions and the Madness of Crowds. Mackay’s most memorable
example was the notorious Dutch tulip bubble of 1637, in which
–absurdity!–tulip bulbs changed hands for the price of a house.

It is the quintessential case study of financial hysteria, but it’s
not clear that there was ever an important tulip bubble. Rare tulip
flowers–we now know that their intricate patterning is caused by a
virus–were worth huge sums to wealthy Parisian gentlemen trying to
impress the ladies. Bulbs were the assets that produced these floral
gems, like geese that laid golden eggs. Their value was no fantasy.
Peter Garber, a historian of economic bubbles, points out that a
single bulb could, over time, be used to produce many more bulbs. The
price of the bulbs would, of course, fall as more were cultivated. A
modern analogy would the first copy of a Hollywood film: the final
copies may circulate for a few dollars, but the original is worth tens
of millions. Garber points out that rare flower breeds still change
hands for hundreds of thousands of dollars. Perhaps we shouldn’t be
quite so sure that the tulipmania really was a mania. Economists are
going to have to get better at understanding why bubbles form from a
heady mix of fraud, greed, perverse incentives, mob psychology and
government incompetence. What we should never forget is that
underneath the apparent hysteria, there is often a cold rationality to
it all.

The wisdom of crowds you say? As Surowiecki explains, yes, but only
under the right conditions. In order for a crowd to be smart, he says
it needs to satisfy four conditions:
1. Diversity. A group with many different points of view will make
better decisions than one where everyone knows the same information.
Think multi-disciplinary teams building Web sites…programmers,
designers, biz dev, QA folks, end users, and copywriters all
contributing to the process, each has a unique view of what the final
product should be. Contrast that with, say, the President of the US
and his Cabinet.
2. Independence. “People’s opinions are not determined by those around
them.” AKA, avoiding the circular mill problem.
3. Decentralization. “Power does not fully reside in one central
location, and many of the important decisions are made by individuals
based on their own local and specific knowledge rather than by an
omniscient or farseeing planner.” The open source software development
process is an example of effect decentralization in action.
4. Aggregation. You need some way of determining the group’s answer
from the individual responses of its members. The evils of design by
committee are due in part to the lack of correct aggregation of
information. A better way to harness a group for the purpose of
designing something would be for the group’s opinion to be aggregated
by an individual who is skilled at incorporating differing viewpoints
into a single shared vision and for everyone in the group to be aware
of that process (good managers do this). Aggregation seems to be the
most tricky of the four conditions to satisfy because there are so
many different ways to aggregate opinion, not all of which are right
for a given situation.

Satisfy those four conditions and you’ve hopefully cancelled out some
of the error involved in all decision making: “If you ask a large
enough group of diverse, independent people to make a prediciton or
estimate a probability, and then everage those estimates, the errors
of each of them makes in coming up with an answer will cancel
themselves out. Each person’s guess, you might say, has two
components: information and error. Subtract the error, and you’re left
with the information.”

James Surowiecki
email : jamessuro [at] aol [dot] com

Q & A with James Surowiecki

Q: How did you discover the wisdom of crowds?
A: The idea really came out of my writing on how markets work. Markets
are made up of diverse people with different levels of information and
intelligence, and yet when you put all those people together and they
start buying and selling, they come up with generally intelligent
decisions. Sometimes, though, they come up with remarkably stupid
decisions—as they did during the stock-market bubble in the late
1990s. I was interested in what explained the successes and the
failures of markets, and as I got further into it I realized that it
wasn’t just markets that were smart. In fact, crowds of all sorts were
often remarkably wise.

Q: Could you define “the crowd?”
A: A “crowd,” in the sense that I use the word in the book, is really
any group of people who can act collectively to make decisions and
solve problems. So, on the one hand, big organizations—like a company
or a government agency—count as crowds. And so do small groups, like a
team of scientists working on a problem. But just as interested—maybe
even more interested—in groups that aren’t really aware themselves as
groups, like bettors on a horse race or investors in the stock market.
They make up crowds, too, because they’re collectively producing a
solution to a complicated problem: the bets of people betting on a
horse race determine what the odds on the race will be, and the
choices of investors determine stock prices.

Q: Under what circumstances is the crowd smarter?
A: There are four key qualities that make a crowd smart. It needs to
be diverse, so that people are bringing different pieces of
information to the table. It needs to be decentralized, so that no one
at the top is dictating the crowd’s answer. It needs a way of
summarizing people’s opinions into one collective verdict. And the
people in the crowd need to be independent, so that they pay attention
mostly to their own information, and not worrying about what everyone
around them thinks.

Q: And what circumstances can lead the crowd to make less-than-stellar
A: Essentially, any time most of the people in a group are biased in
the same direction, it’s probably not going to make good decisions. So
when diverse opinions are either frozen out or squelched when they’re
voiced, groups tend to be dumb. And when people start paying too much
attention to what others in the group think, that usually spells
disaster, too. For instance, that’s how we get stock-market bubbles,
which are a classic example of group stupidity: instead of worrying
about how much a company is really worth, investors start worrying
about how much other people will think the company is worth. The
paradox of the wisdom of crowds is that the best group decisions come
from lots of independent individual decisions.

Q: What kind of problems are crowds good at solving and what kind are
they not good at solving?
A: Crowds are best when there’s a right answer to a problem or a
question. (I call these “cognition” problems.) If you have, for
instance, a factual question, the best way to get a consistently good
answer is to ask a group. They’re also surprisingly good, though, at
solving other kinds of problems. For instance, in smart crowds, people
cooperate and work together even when it’s more rational for them to
let others do the work. And in smart crowds, people are also able to
coordinate their behavior—for instance, buyers and sellers are able to
find each other and trade at a reasonable price—without anyone being
in charge. Groups aren’t good at what you might call problems of skill—
for instance, don’t ask a group to perform surgery or fly a plane.

Q: Why are we not better off finding an expert to make all the hard
A: Experts, no matter how smart, only have limited amounts of
information. They also, like all of us, have biases. It’s very rare
that one person can know more than a large group of people, and almost
never does that same person know more about a whole series of
questions. The other problem in finding an expert is that it’s
actually hard to identify true experts. In fact, if a group is smart
enough to find a real expert, it’s more than smart enough not to need

Q: Can you explain how a betting pool can help predict the future?
A: Well, predicting the future is what bettors try to do every day,
when they try to figure out what horse will win a race or what
football team will win on Sunday. What horse-racing odds or a point
spread represent, then, is the group’s collective judgment about the
future. And what we know from many studies is that that collective
judgment is often remarkably accurate. Now, we have to be careful
here. In the case of a horse race, for instance, what the group is
good at predicting is the likelihood of each horse winning. The
potential benefits of this are pretty obvious. If you’re a company,
say, that’s trying to decide which product you should put out, what
you want to know is the likelihood of success of your different
options. A betting pool—or a market, or some other way of tapping into
the wisdom of crowds—is the best way for you to get that information.

Q: Can you give an example of a current company that is tapping into
the “wisdom of crowds?”
A: There’s a division of Eli Lilly called e.Lilly, which has been
experimenting with using internal stock markets and hypothetical drug
candidates to predict whether new drugs will gain FDA approval. That’s
an essential thing for drug companies to know, because their whole
business depends on them not only picking winners—that is, good, safe
drugs—but also killing losers before they’ve invested too much money
in them.

Q: You’ve explained how tapping into the crowd’s collective wisdom can
help a corporation, but how can it help other entities, like a
government, or perhaps more importantly, an individual?
A: Well, the same principles that make collective wisdom useful to a
company make it just as useful to the government. For instance, in the
book I talk about the Columbia disaster, showing how NASA’s failure to
deal with the shuttle’s problems stemmed, in part, from a failure to
tap into knowledge and information that the people in the organization
actually had. And in a broader sense, I think the book suggests that
the more diverse and free the flow of information in a society is, the
better the decisions that society will reach. As far as individuals
go, I think there are two consequences. First, we can look to
collective decisions—as long as the groups are diverse, etc.—to give
us good predictions. But the collective decisions will only be smart
if each of us tries to be as independent as possible. So instead of
just taking the advice of your smart friend, you should try to make
your own choice. In doing so, you’ll make the group smarter.

Q: When you talk about using the crowd to make a decision, are you
talking about consensus?
A: No, and this is one of the most important points in the book. The
wisdom of crowds isn’t about consensus. It really emerges from
disagreement and even conflict. It’s what you might call the average
opinion of the group, but it’s not an opinion that every one in the
group can agree on. So that means you can’t find collective wisdom via

Q: What would Charles MacKay—the author of Extraordinary Popular
Delusions and the Madness of Crowds—think of your book?
A: He would probably think I’m deluded. Mackay thought crowds were
doomed to excess and foolishness, and that only individuals could
produce intelligent decisions. On the other hand, a good chunk of my
book is about how crowds can, as it were, go mad, and what allows them
to succumb to delusions. Mackay would like those chapters.

Q: What do you most hope people will learn from reading your book?
A: I think the most important lesson is not to rely on the wisdom of
one or two experts or leaders when making difficult decisions. That
doesn’t mean that expertise is irrelevant, or that we don’t need smart
people. It just means that together all of us know more than any one
of us does.

BY James Surowiecki

As it happens, the possibilities of group intelligence, at least when
it came to judging questions of fact, were demonstrated by a host of
experiments conducted by American sociologists and psychologists
between 1920 and the mid-1950s, the heyday of research into group
dynamics. Although in general, as we’ll see, the bigger the crowd the
better, the groups in most of these early experiments—which for some
reason remained relatively unknown outside of academia—were relatively
small. Yet they nonetheless performed very well. The Columbia
sociologist Hazel Knight kicked things off with a series of studies in
the early 1920s, the first of which had the virtue of simplicity. In
that study Knight asked the students in her class to estimate the
room’s temperature, and then took a simple average of the estimates.
The group guessed 72.4 degrees, while the actual temperature was 72
degrees. This was not, to be sure, the most auspicious beginning,
since classroom temperatures are so stable that it’s hard to imagine a
class’s estimate being too far off base. But in the years that
followed, far more convincing evidence emerged, as students and
soldiers across America were subjected to a barrage of puzzles,
intelligence tests, and word games. The sociologist Kate H. Gordon
asked two hundred students to rank items by weight, and found that the
group’s “estimate” was 94 percent accurate, which was better than all
but five of the individual guesses. In another experiment students
were asked to look at ten piles of buckshot—each a slightly different
size than the rest—that had been glued to a piece of white cardboard,
and rank them by size. This time, the group’s guess was 94.5 percent
accurate. A classic demonstration of group intelligence is the jelly-
beans-in-the-jar experiment, in which invariably the group’s estimate
is superior to the vast majority of the individual guesses. When
finance professor Jack Treynor ran the experiment in his class with a
jar that held 850 beans, the group estimate was 871. Only one of the
fifty-six people in the class made a better guess.

There are two lessons to draw from these experiments. First, in most
of them the members of the group were not talking to each other or
working on a problem together. They were making individual guesses,
which were aggregated and then averaged. This is exactly what Francis
Galton did, and it is likely to produce excellent results. (In a later
chapter, we’ll see how having members interact changes things,
sometimes for the better, sometimes for the worse.) Second, the
group’s guess will not be better than that of every single person in
the group each time. In many (perhaps most) cases, there will be a few
people who do better than the group. This is, in some sense, a good
thing, since especially in situations where there is an incentive for
doing well (like, say, the stock market) it gives people reason to
keep participating. But there is no evidence in these studies that
certain people consistently outperform the group. In other words, if
you run ten different jelly-bean-counting experiments, it’s likely
that each time one or two students will outperform the group. But they
will not be the same students each time. Over the ten experiments, the
group’s performance will almost certainly be the best possible. The
simplest way to get reliably good answers is just to ask the group
each time.

A similarly blunt approach also seems to work when wrestling with
other kinds of problems. The theoretical physicist Norman L. Johnson
has demonstrated this using computer simulations of individual
“agents” making their way through a maze. Johnson, who does his work
at the Los Alamos National Laboratory, was interested in understanding
how groups might be able to solve problems that individuals on their
own found difficult. So he built a maze—one that could be navigated
via many different paths, some shorter, and some longer—and sent a
group of agents into the maze one by one. The first time through, they
just wandered around, the way you would if you were looking for a
particular café in a city where you’d never been before. Whenever they
came to a turning point—what Johnson called a “node”—they would
randomly choose to go right or left. Therefore some people found their
way, by chance, to the exit quickly, others more slowly. Then Johnson
sent the agents back into the maze, but this time he allowed them to
use the information they’d learned on their first trip, as if they’d
dropped bread crumbs behind them the first time around. Johnson
wanted to know how well his agents would use their new
information.Predictably enough, they used it well, and were much
smarter the second time through. The average agent took 34.3
steps to find the exit the first time, and just 12.8 steps to find it
the second.

The key to the experiment, though, was this: Johnson took the results
of all the trips through the maze and used them to calculate what he
called the group’s “collective solution.” He figured out what a
majority of the group did at each node of the maze, and then plotted a
path through the maze based on the majority’s decisions. (If more
people turned left than right at a given node, that was the direction
he assumed the group took. Tie votes were broken randomly.) The
group’s path was just nine steps long, which was not only shorter than
the path of the average individual (12.8 steps), but as short as the
path that even the smartest individual had been able to come up with.
It was also as good an answer as you could find. There was no way to
get through the maze in fewer than nine steps, so the group had
discovered the optimal solution. The obvious question that follows,
though, is: The judgment of crowds may be good in laboratory settings
and classrooms, but what happens in the real world?




email : max [at] maxkeiser [dot] com


Hunting for scalps / Oct 23rd 2008
The pressure for convictions is great but prosecutors have their work
cut out

Americans are turning creative as they strive to make sense of the
crisis. On October 29th a group of artists will stage a “literal
meltdown” by placing a 1,500lb (680kg) ice sculpture of the word
“economy” in Manhattan’s Foley Square. The installation will,
according to one collaborator, “metaphorically capture the results of
unregulated markets.” For many, though, catharsis will come only
through another capture: the arrest and courtroom humiliation of the
erstwhile Wall Street titans the public holds responsible for the
mess. In today’s political climate, the government will feel immense
pressure to put a few moneymen in the dock. The FBI alone is probing
more than two dozen firms. Market regulators, state attorneys-general
and the Department of Justice are also jostling to unearth wrongdoing,
sifting through e-mails and seeking whistle-blowers at firms such as
Fannie Mae, American International Group and Lehman Brothers, the only
Wall Street firm allowed to go bust. At least 17 former Lehman
executives, including Dick Fuld, once its boss, are expected to
receive grand-jury subpoenas.

Investigators are likely to focus mainly on disclosure and valuation.
Ken Lay, boss of Enron, the failed energy giant, was convicted in part
because of upbeat public statements he made even as he knew the firm
was in trouble. Some may try to draw a parallel with Lehman, which
said its capital position was “strong” just days before it filed for
bankruptcy. But to constitute fraud there must be intent to deceive.
Proving that beyond reasonable doubt may not be easy, even to a jury
disinclined to give fat cats the benefit of the doubt. Likewise,
sloppy risk management, though lamentable, is not illegal.
Paradoxically, the severity of the financial storm could help
defendants. “As the crisis has grown, it has become harder for
prosecutors to charge that any single firm has committed fraud,”
argues Robert Giuffra of Sullivan & Cromwell, a law firm. Moreover,
showing that executives deliberately overvalued complex mortgage
securities could be hard. Those accused of masking losses can point to
the continuing debate over mark-to-market rules, which regulators
recently relaxed—though any e-mails that reflect internal doubts about
marks could “create smoke”, says Mary Jo White of Debevoise &
Plimpton, another law firm.

The legal climate has shifted in favour of corporate defendants, too.
Some aggressive tactics used by prosecutors after the bursting of the
dotcom bubble have been curbed: for instance, firms can again cling to
attorney-client privilege—the right to keep their communications
confidential—without it being viewed as unco-operative by the
authorities. New sentencing guidelines means 25-year jail terms are
less likely. In civil cases three Supreme-Court rulings have made
fraud harder to prove. Investigators are yet to turn up clear evidence
of unethical behaviour, let alone anything that warrants a long
stretch in jail. They have a lot more digging to do—witness the
subpoenas just handed to analysts who covered Lehman, requesting
information that might suggest they were misled. They may find dirt—
but it will be harder to make it stick.


a vote to keep: “I added some, not all, of the material on the Max
Keiser entry and there was at one point an explanation of the
significance of the underlying patent on HSX. It was however deleted.
The three underlying patents which are still linked to in the article,
I believe, are the only patents for prediction markets and virtual
currencies. The virtual specialist technology he invented is a
mechanism for creating a price for previously unpriceable things like
fame, popularity, ideas, time spent online, etc. Prediction markets
were called the biggest financial and market trend for the future by
the Economist Magazine (December 2005). So, his virtual specialist
technology is notable to economics and finance even if the average
person doesn’t understand the notability. The debate held between
Keiser and the Hollywood studios in the public during 1999 when Keiser
said studios were going to have to compete with a ‘price point called
free’ was revolutionary at the time. From the Hollywood industry trade
magazines linked to in the article, it is clear to see that no other
person had suggested this publicly at that time and it was considered
heretical as the articles make clear. In terms of Karmabanque not
being relevant, Cheuvreux, a major European bank, only just came out
with a report this month, June 2007, called “Consumer Power: Pricing
Power versus Consumer Power” and the report specifically cites Max
Keiser alone as having innovated a powerful market solution to the
demand side of the consumer / corporation equation with Karmabanque.
And Newsweek Japan is profiling Max Keiser and Karmabanque for the
final issue of June 2007. The Karmabanque Hedge fund concept is the
first ever mechanism for monetizing dissent in a day and age of anti-
globalisation protests where hundreds of thousands protest G8 like
events. Karmabanque has been profiled in the Washington Post, Dow
Jones Marketwatch, Atlanta Journal Constitution and dozens of other
important financial trade magazine and has been included in the
curriculum at universities (Robert W. Benson, Loyola Law School) as
well as legal opinions issued by the Washington Legal Foundation. So,
while it may not be easy for the the average person to understand the
significance at this moment in time, it is notable in financial,
market, banking and academic sectors – all of which also use
Wikipedia. And, finally, Max Keiser is an American presenter for
Aljazeera English. He has made six films for them and most of the
films are linked to in the article. Aljazeera English is a notable
international broadcaster with significance at this moment in


Prediction markets are doomed to fail / June 6 2008

From Mr Max Keiser.
Sir, I predict that if John Authers keeps quoting prediction markets
in his columns (“Recession fears”, The Short View, June 3), their
ability to generate reliable price signals will diminish as those in a
position of power will try to subvert these markets with “spin” and
PR, as they do now on various other markets. I had this experience
when I was running the Hollywood Stock Exchange, the first and most
influential of all prediction markets. When I predicted box office
success, the networks (which also own film studios) would broadcast
that information. When I predicted box office losers, they chose to
ignore it. Naturally, we tended to talk up MovieStocks that looked as
if they were going to be winners, and this ended up defeating the
whole purpose of having a prediction market.

Max Keiser,
75005 Paris, France
Former Chief Executive and Co-Founder, HSX Holdings/ Hollywood Stock

June 27 2008

From Mr Max Keiser.
Sir, The opposite of a stock price bubble is a stock price vacuum.
Just as stock prices are inflated to a point where the tiniest prick
of reality can pop the bubble and cause a wave of selling, stock
prices that are driven lower by rampant, unfounded short-selling can
snap back with a rally as soon as the oxygen of buyers emerges to
eliminate the price vacuum.

Max Keiser,
75005 Paris, France

Transparency is the essence of market economy
By Max Keiser / June 29 2007

From Mr Max Keiser.
Sir, Martin Wolf makes a good case for reforming capitalism (“Risks
and rewards of today’s unshackled global finance”, June 27) but fails
to address the key problem underlying the various inequalities and
distortions he describes. Transparency used to be the hallmark of
market economics. Buyers and sellers had confidence in the “invisible
hand” of multiple self-interested parties seeking maximum utility for
themselves – and, in so doing, inadvertently contributing to fair
prices. Today the business of market-making, the so-called price
discovery mechanism at the heart of every exchange in the world, is
dominated by “black box” algorithmic proprietary trading models of
unregulated hedge funds and private equity that thrive on market
opaqueness. These private funds argue that to become transparent would
mean giving away trade secrets. In other words, the very essence of
free market capitalism, transparency and fair play, has gone “off
balance sheet” as surely as those hundreds of billions of dollars
worth of misplaced synthetic derivatives we keep reading about. Until
these fund managers are forced to disclose the actual risk they carry,
we cannot expect the situation to rectify itself before being forced
to do so with an inevitable “exogenous” repricing event like the one
we saw in October of 1987.

Max Keiser,
Founder and chairman,
Karma Banque,
Paris 75005, France

Problem with banks was insolvency / November 28 2007

From Mr Max Keiser.
Sir, Lawrence Summers needs to wake up and smell the inadequacies of
his analysis (“Wake up to the dangers of a deepening crisis”, November
26). Two months ago (“Beware the moral hazard fundamentalists”,
September 24) he was trying to convince us that the problem with banks
was not insolvency but rather illiquidity. Insightful observers of the
credit markets knew then, as they know now, that the primary source of
revenues for much of the banking industry for the past decade has been
their foolhardy participation in a global Ponzi scheme backed by what
we now know to be largely counterfeit mortgage paper. Therefore it is
insolvency along with its corollaries – opacity, misleading
statements, dishonesty and larceny – that constitute the problem and
illiquidity that is its symptom.

Max Keiser,
Founder and Chairman,
Karma Banque,
Paris 75005, France

‘Integrity’ blinding environmentalists
By Max Keiser, Financial Times / Jan 02, 2004

From Mr Max Keiser.
Sir, Allow me to comment on your editorial “Not so great
revolt” (December 30). I started a website 18 months ago that
recommends to all activists, not just shareholder activists, how to
take positions against corporations based on a company’s highest point
of vulnerability, its stock price. To this end, we offer an index that
lists which companies’ stock prices are the most vulnerable to a
boycott, the low-cost weapon of choice for most activists. What I have
discovered during this time sadly confirms what I construe to be the
FT’s findings, that activists are blind when it comes to recognising
the potential of targeting a company’s stock price in their campaigns.
In the case of the environmentalists I have talked to, I can report
that the reason they refuse to look at the world in this way is
because they consider talking about markets and money as the basis for
a campaign to be beneath their integrity as moral guardians of the
ecosphere. They would rather be hauling buckets of sludge and tar off
a beach in Spain or Alaska than working to clean up the environment of
finance, even though companies have proved many times over they do not
care as much about oil-drenched rare birds as they do about their
stock price. Hedge funds, interestingly enough, send me e-mails every
day asking when activists will launch a stock-price targeted campaign
so that they can start shorting shares in these companies – this
implies that activists have an incredible leverage in this economy to
effect change, leverage they are not making use of, simply because
their high-minded definition of the environment refuses to include the
environment of money and markets.

Max Keiser, Chairman and Founder, Karmabanque, Villefranche Sur Mer
06230, France

Anti-Americanism: the ‘third way’
By Max Keiser / Financial Times / Feb 26, 2003

From Mr Max Keiser.
Sir, Moisés Naím’s commentary (“Anti-Americanism’s nasty taste”,
February 24) describes two types of pernicious anti-Americanism:
murderous fanatics who want to destroy America; and those who just
want to rant, a group he calls anti-Americanism “light”. Both groups,
he says, create an unacceptable cost of fanning the flames of
animosity towards the US and therefore should be avoided. I
wholeheartedly disagree and offer a third version of anti-Americanism,
one that I feel is necessary now that the US has wilfully abdicated
its leadership role in matters of universal global seriousness, such
as protection of the environment. In my opinion, the US no longer
qualifies for the type of critical exemption suggested by Mr Naím. The
US voluntarily stepped down from the pedestal of moral accountability
when Bush took office and walked away from various international
treaties and organisations. Therefore, it stands to reason that the US
must now deal with the consequences of living in a world that views
its franchise not as a perennial force for good but as just another
economic entity either to buy or to sell. As an American, I am
expressing my anti-Americanism by selling short the Standard & Poor’s
500 and I will continue to do so for as long as America’s rhetoric
about maintaining social contracts such as freedom and democracy races
ahead of its actions in places such as the Gulf. I will gladly cover
my shorts when the US starts to act like a country that believes in
democracy instead of one that just talks about it. If every hedge fund
manager in the world focused his collective market power in this way I
believe the US would be forced to change its behaviour or risk getting
“decapitalised” in a non-violent, non-fanatical way, a third way not
mentioned by Mr Naím in his commentary.

Max Keiser, Co-founder, Chairman, Karma Banque, Villefranche-sur-Mer,

NGOs would do well to become more transparent
By Max Keiser / Financial Times / May 26, 2004

From Mr Max Keiser.
Sir, Rational cost accounting, economies of scale and cost-benefit
analysis, as Bjorn Lomborg suggests (“The Copenhagen Consensus will
help save lives”, May 24) comprise a long-overdue development in the
field of activism. Until morality starts trading on one of the main
exchanges it is impractical to think that the moral argument used by
virtually all non-governmental organisations will sway the behaviour
of those who run socially irresponsible companies. Activists arguing
against Mr Lomborg’s ideas seem to think that putting a dollar value
on their activities is tantamount to cheapening the importance of what
they are trying to accomplish. Is this not the inverse of the same
argument corporations use to legitimise their irresponsible behaviour;
that trying to put a dollar amount on morality reduces their ability
to serve shareholders by pursuing, as Milton Friedman might say,
maximum profit? Perhaps activists are being disingenuous. They seem to
be putting up a smoke screen when more transparency is in order. In
other words, is it possible that cost-efficiency, if embraced by the
thousands of NGOs that are now operating without basic economic
principles, might lead to the realisation that the structure of NGOs
themselves is as inefficiently bloated as the corporations they
criticise. NGOs seem to be saying they are against Mr Lomborg’s
methods, but I think what they are really saying is they are against
losing their jobs.

Max Keiser, Chairman and founder, Karmabanque, Villefranche-sur-Mer,
France 06230

Hedge Funds Banking on Social and Moral Issues
BY Thomas M. Kostigen / December 25, 2004

Wealthy British scion Zak Goldsmith and investment activist Max Keiser
want to take down Coca-Cola Co., and they have added a new twist to
the age-old tactic of boycotting: They have opened a hedge fund
designed to profit from any decline in the soft drink conglomerate’s
stock price. “We’re simply picking up on a trend and giving people the
tools to use,” Keiser said. “The Internet allows people, activists,
from all over the world to gather, or swarm, and hit a company where
it hurts most — in their stock price.” Hedge funds are a popular
investment option for the wealthy. But creating a hedge fund with a
specific social agenda, like the one promoted by Goldsmith and Keiser,
is a recent development, according to Doug Wheat, director of business
development at SRI World Group, a financial news and data monitoring
service in Vermont. “There are only five or six hedge funds like
that,” Wheat said. “Meanwhile, there are like 8,000 hedge funds.” A
hedge fund is a type of private investment vehicle for wealthy
investors who choose to pool their money and invest in securities.
Many hedge funds invest in unusual securities in unusual ways. They
sometimes assume substantial risks on speculative strategies. This
sometimes includes “hedging,” or leveraging investments to get the
most gain. Hedge funds are subject to few regulations. The Securities
and Exchange Commission requires only that the investors be
accredited, meaning that they must earn more than $200,000 per year or
have a net worth of more than $1 million. Hedge fund managers are not
currently required to register with the SEC. “We don’t get into who’s
investing,” said SEC spokesman John Heine. But that hands-off approach
may change. Regulators started eyeing hedge funds after the 1998 near-
collapse of Long-Term Capital Management LP, which lost billions in
derivatives trading and created a financial market disaster,
necessitating a private-sector bailout organized by the Federal
Reserve Bank of New York. In October, the SEC voted 3 to 2 to increase
hedge fund oversight by mandating that hedge fund managers register by
February 2006. But on Monday, the head of a New York-based hedge
fund, Opportunity Partners LP, sued the SEC in an effort to block the
registration requirement. In public comments dissenting from the
adoption of the proposed registration rule, the two Republican
commissioners, Cynthia A. Glassman and Paul S. Atkins, questioned
whether the registration requirement would be too rigorous on certain
issues and too lax on others. Heine said that requiring hedge funds to
register with the commission “will not have any effect on the
suitability requirement for hedge fund investors.” Even within the
context of traditional stock and bond investing, hedge funds sometimes
seek out esoteric niches, such as interest rate swaps and
collateralized mortgage obligations, according to Todd Goldman,
managing principal at Walnut Creek, Calif., accounting firm Rothstein
Kass, which serves hedge funds. “The whole point of hedge fund
investing is the ability to specialize,” Goldman said, pointing out
that there are hedge funds producing steady returns that strictly
invest in credit card debt and funds that invest in tax liens. To
date, specialization among hedge funds has meant inventing new
investment strategies within a core group of publicly traded
securities — stocks, bonds, currencies, futures and options. But some
investors are expanding beyond what most people would even consider
investments. Billionaire Mark Cuban, owner of the NBA’s Dallas
Mavericks, for example, said in November that he is preparing to
launch a hedge fund focused on gambling. “This hedge fund won’t invest
in stocks or bonds, or any type of business. It’s going to be a fund
that only places bets,” Cuban said in a posting on his Web log, He promised in his posting to hire top professional
gamblers to figure out what bets to place or what games to play. Their
performance of gambling wins and losses, of course, will generate the
return for investors, Cuban said. He declined to comment further on
his hedge fund plans in response to an e-mail message from The
Washington Post on the subject. Some funds already invest in the
gaming sector, albeit through trading shares of companies operating in
that industry. The Vice Fund, based out of Texas, for example, is a
mutual fund that invests only in companies with ties to weaponry,
smoking, drinking and gambling. Other funds take great pains to avoid
so-called “sin” stocks. Shariah Funds, managed by Meyer Capital
Partners of New Canaan, Conn., invests according to Islamic law,
avoiding companies associated with gambling, alcohol, tobacco and food
processing (because of dietary restrictions). “We look at a company’s
primary business first, and then we look at their financials,” said
Sheikh Yusuf Talal DeLorenzo, an Islamic scholar and adviser to the
fund. DeLorenzo noted that although Islamic law prevents the taking of
interest and allows investments only in tangible assets, he has
configured a way to hedge using futures and options. The money behind
Shariah Funds comes from wealthy investors in the Middle East and
Asia, DeLorenzo said. Other groups with religious affiliations have
also launched hedge funds. Last year, Catholic Institutional
Investors, a coalition of five Catholic health care organizations,
launched the Good Steward Fund. And the Church of Jesus Christ of
Latter-day Saints has a private investment fund — Ensign Peak
Advisors — to serve its Mormon constituents. Mission-oriented hedge
funds fall into a category known as “socially responsible” investments
that permit investors to grow financially while still adhering to
their own individual social or moral preferences. Investment managers
typically screen potential investments so that they match a client’s
beliefs. Socially responsible investing is one of the fastest-growing
sectors in the financial services industry, with more than $2 trillion
of assets being managed in such fashion, according to the Social
Investment Forum, a District-based nonprofit organization providing
research and education. The anti-Coke campaign has been called by its
founders a “smart boycott.” Goldsmith said he believes he can push
Coca-Cola shares to as low as $22. They closed at $41.51 in Thursday
trading on the New York Stock Exchange. U.S. financial markets were
closed yesterday. “Coke represents the cutting edge of a global
monoculture that is undermining real human diversity,” said Goldsmith,
29, who is the son of a famed British corporate raider, the late Sir
James Goldsmith. With a reported inheritance of about $700 million,
Goldsmith could wage a formidable battle against Coca-Cola via his
family’s magazine, the Ecologist, where he is founding editor. Coca-
Cola has issued numerous statements clarifying its positions on the
corporate issues at which Goldsmith and Keiser are taking aim. “This
so-called campaign is based on blatant falsehoods,” said Ben Deutsch,
a Coca-Cola spokesman. “It’s unfortunate that anyone would attempt to
hurt Coke shareholders . . . without the facts.” Investors in the
unnamed anti-Coca-Cola fund will get a stated annual return akin to a
long-term Treasury bond. But, after a 2 percent management fee, the
rest of profits will go to aid disaffected farmers in India, AIDS
organizations in Africa and human rights monitoring groups in Central
and South America. “We’re now focused on closing a $100 million fund
by the end of 2005,” said Keiser, who founded, the
Web site through which the anti-Coca-Cola campaign is being managed.

An Internal Futures Market
BY Robert Charette / March 2007

“The economic problem of society is thus not merely a problem of how
to allocate “given” resources … it is a problem of the utilization
of knowledge which is not given to anyone in its totality.” Friedrich
Hayek, the 1974 Nobel Prize winner in economics, wrote these words in
his 1945 classic essay, The Use of Knowledge in Society, in which he
argued that centrally-planned economies are unable to efficiently
allocate societal resources because their planners, no matter how
smart they were, would never have all the information required to make
the correct decisions. Hayek, on the other hand, asserted that pricing
systems, (e.g. stock markets), which reflect the collective knowledge
of a myriad of individuals is a much better approach for performing
resource allocation decisions. Market systems which signal the value
of a resource through a numerical index (i.e. price), he said, are “a
mechanism for communicating information”, with the “most significant
fact about this system [being] the economy of knowledge with which it
operates, or how little the individual participants need to know in
order to be able to take the right action.”

The problems that Hayek said governments face in best allocating
resources are nearly identical to what most organizations face. How
can the corporate planners have access to all of the information they
need to best allocate scarce corporate resources to increase
shareholder value? And, as Dominic Dodd and Ken Favaro, in their book,
“The Three Tensions,” point out, is the best way to increase
shareholder value to increase corporate profitability or growth?
Allocate resources for results today or tomorrow? Allocate resources
to increase the performance of the corporation as a whole or
performance of standalone business units? Could it be some combination
of all six?

The Future Value of Decisions
The growth of business intelligence over the past decade reflects the
idea that corporate planners – be they on the corporate executive
staff, business managers or line managers – need better information to
make their allocation decisions, and properly structured BI can often
help fulfill this need. However, the focus of BI in many instances
seems to be more on answering questions about “what was” or possibly
on “what is,” data that reflects the past or recent past – rather than
on what will be. The current focus on BI corporate dashboards is an
example. What planners truly need is information about “what might
be.” – i.e., what is the future value of present decisions?

Markets systems fit this bill nicely since they are focused primarily
towards predicting the future. A corporation’s stock price, for
instance, reflects not only information about the corporation’s
current course and speed but also its projected course and speed as
perceived by its current investors and non-investors alike. When a
corporation releases its quarterly earnings and investors react
positively or negatively, for example, they are making a collective
judgment on the corporation’s future financial risks, not its current
state of play.

It has long been recognized that collective judgment provided by
market systems can be very useful in making accurate predictions about
future events, but it has only been in the past 30 years or so that
“maverick” economists such as Vernon Smith (who won a Nobel prize in
economics in 2002), Charles Plott, John Ledyard and Robert Forsythe
have focused on how to use the predictive power of markets for uses
other than for managing financial risk. As detailed in James
Surowieki’s recent book, “The Wisdom of Crowds,” the theoretical work
of these four economists, combined with Internet’s ability to quickly
form markets, has spawned the creation of a number of prediction/
information markets, like Forsythe’s Iowa Electronic Market, which is
used to predict elections, TradeSports in Ireland which focuses
primarily on sporting events, and the Hollywood Stock Exchange, which
focuses on the various goings-on of the film industry.

Market Systems and the Enterprise
In conjunction with using markets for “public” prediction purposes, a
number of economists have investigated the use of predictive markets
that also could be used by corporations internally. Economist Robin
Hanson (who studied under Plott), came up with the concept of the idea
or innovation future market, where specific questions of some future
event could be evaluated for its likelihood of occurrence. One
question of interest, Hansen says, might be the probability that the
greenhouse effect and other causes will have raised the average world
sea levels by 1 meter by 2030. By establishing a market focused on
that question, a rapid consensus – in the form of a probability that
is related to the going market price – can be reached about this
particular issue.

Over the past decade, a small but growing number of companies have
been creating their own internal idea, innovation or prediction
markets. For instance, France Telecom Group created an internal
predictive market called Project Destiny that examines certain
technological trends. A France Telecom employee is able to place bets
concerning different technology questions, for example, will Skype
reach “X” million of users by a given date? France Telecom believes
that by posing questions whose outcome can affect its business,
executives and managers can be better prepared to address them. Of the
18 questions posed, Project Destiny claims its internal market to have
correctly predicted 16 of them.

Similarly, Yahoo, in a joint venture with O’Reilly Media, has created
a prediction market called the Tech Buzz Game. The game is made up of
a number of sub-markets that match a small number of rival
technologies against one another, Internet browsers for instance. The
object of the game is to anticipate a technology’s “buzz” as measured
by the number of Yahoo!Search users seeking information about that
individual technology. Yahoo hopes by conducting this game it can
evaluate whether power of prediction markets can help forecast high-
technology trends.

Google has created an internal predictive market that according to
Google, aims to “forecast product launch dates, new office openings,
and many other things of strategic importance to Google.” Google says
that over 20 percent of its staff has bid in the 100-plus online
markets it has run, covering over 350 events in more than 40 different
topic areas. Google says that the online market prediction accuracy is
about 70 percent.

HP Labs created its own internal market system and supporting software
called BRAIN (Behaviorally Robust Aggregation of Information in
Networks) to help predict certain critical business issues such the
quarterly sales forecast or the price of DRAM memory chips in one,
three or six months. The importance of being right about a forecast
can have major impact. If a chip price forecast is off by just a
couple of pennies, a significant impact on HP’s hardware profit margin
can result. HP has found that its internal market predictions are
often more accurate than the company’s “official” forecasts (for
instance, six out of eight times the market was better at predicting
computer sales). HP is now working with Pfizer pharmaceutical to
create an internal prediction market using BRAIN starting in 2007.

Many other companies are experimenting with or creating different
types of internal prediction markets: Microsoft (for predicting
product ship dates); GE (for discovering new ideas); Eli Lilly (for
discovering new drug candidates); BP Amoco (for reducing carbon-
dioxide emissions); Intel (for allocating computer chip production),
and; Siemens AG (for improving the accuracy of product developments).
As these companies and others report their experiences with the
application of internal prediction markets, it is likely that others
will follow suit.

Making a Market
For internal markets (or any market for that matter) to work well, a
number of requirements must be met. First, there has to be a diversity
of opinion: the more diverse the opinion, the better the prediction.
Second, the market participants need to have independent opinions. If
these first two requirements are not met, you tend to get a “group
think” result. Third, decentralized information sources need to exist,
in other words, unique levels of knowledge should be held by the
market participants. Finally, the information from everyone needs to
be aggregated in some way. A stock’s price, as Hayek says, serves to
aggregate information. If these are not met, then the prediction value
of the market starts to decline.

While the concept of using internal predictive markets is very
seductive, their use should not be seen as end-alls or be-alls. As Max
Keiser, the inventor of the technology that runs the Hollywood Stock
Exchange, warns, “Markets (are) unable to forecast the future with any
certainty.” This can readily be seen from just a couple of the
examples cited above. They are generally better than other predictive
measures, such as polling or Delphi techniques, but they shouldn’t be
endowed with powers they don’t have.

Furthermore, while markets may be good at predicting certain events,
they don’t tell you “why” events are going to happen. For instance,
some companies have used internal markets to predict software delivery
schedules, which proved more accurate than the internal estimates.
However, “the market” couldn’t indicate why the software was going to
be delivered late – or how the development approach could be improved
so that future delivery dates could be met. It may be that by using BI
analytics with prediction markets this issue could be addressed.

As far as I am aware, no one has tried to tie BI in with the use of
prediction markets, but it would seem to be a very natural fit. For
instance, access to BI systems could allow some market participants to
increase the level of decentralized or special knowledge (think
insider trading information), which could help improve market
predictions. Or, BI’s ability to aggregate corporate information in
novel ways could be used to help create interesting questions for an
internal market to contemplate (remember, markets don’t ask questions
– someone else has to). Or, from a risk management perspective, an
internal market used with BI analytics could help increase the
understanding of how to manage the three elemental tensions –
profitability or growth, results today or tomorrow, synergistic or
stand alone performance – better or to create improved contingency
plans based as a result of a set of internal market predictions.

Internal prediction markets are only in their infancy, but I expect
them to become more common in the next decade. For those in the BI
field, now is a good time to see how BI and market information can be
tied together.








Playing Virtual Markets / July 11, 2001
Regarding the report “Just a Game? Some Virtual Traders Aren’t Playing
Around” (July 7):

It is true that virtual markets are better at predicting outcomes than
polls, but markets are horrible predictors of anything. If the markets
did not continuously defy prediction there would be no risk, and
without risk there would be no speculation, and without speculation
there would be no liquidity, and without liquidity there would be no
markets. The reason markets work as an effective means of raising
capital is precisely because they are so unpredictable, which invites
speculation, which invites liquidity. Anyone who believes that he or
she can predict an outcome by watching virtual markets like
NewsFutures and the Hollywood Stock Exchange does not understand
markets. One prediction that appears guaranteed, however, is that
people who invest in a company that bases its revenues on predicting
outcomes by predicting markets will lose their money.

Max Kieser, Villefranche-sur-Mer, France.



Consider a May 9, 2004 article by Simon Romero in The New York Times,
“War and Abuse Do Little to Harm U.S. Brands.” Romero begins: “When
American troops moved into Iraq last year, European executives at the
Ford Motor Company braced for an adverse consumer reaction.” Niel
Golightly, a Ford spokesman in Cologne, Germany added: “Our sales and
image and market share are things we monitor extremely closely. So the
potential fallout risk from Ford being perceived as a symbol of
America’s foreign policy is something we’re always looking at.” Romero
goes on to claim that U.S. corporations have thus far remained
relatively unscathed by the rampant anti-American feelings across the
globe. “McDonald’s, one of the largest private-sector employers in
Brazil, is sometimes the target of taunts in left-wing demonstrations
on Avenida Paulista, one of Sâo Paulo’s main streets, but it is also
common to see demonstrators eating at McDonald’s after the rallies,”
he explains. “For the most part, boycotts announced against American
products last year have fizzled out.”

An example of this took place just before the U.S. invaded Iraq in
March 2003. “The Muslim Consumer Association of Malaysia called for a
boycott of Coca-Cola,” writes Romero, “and there was a flurry of news
media reports on the sudden popularity of local brands of cola.”
According to Marimuthu Nadason, secretary general of the Federation of
Malaysian Consumers Associations, that boycott was essentially
ignored. “Anyone can call for a boycott,” Nadason said, “but it won’t
work.” Not so, says Max Keiser, founder of Karmabanque (http://, where “the civil disobedience of Gandhi” is
combined with “the financial savvy of George Soros.”

“You don’t need guns or money to destroy American companies-and the
environmental catastrophes they thrive on,” Keiser declares. “All we
ask is that you focus your dissent on one company at a time and we ask
that you focus that dissent/attention on a company that is vulnerable
to the low cost weapon of choice for activists: the boycott.”

Keiser points to the recent “carbohydrate boycott”-and resulting
plummet in the stock price-of Krispy Kreme donuts. “These companies
are not able to defend against a boycott or organized dissent,” he
says. According to Karmabanque’s Boycott Vulnerability Ratio-and
contrary to unsuccessful efforts in Malaysia-Coca Cola is about as
vulnerable to boycott as a corporation can get. “This means that for
every dollar I do not spend on Coke, I am erasing 5 dollars off their
market capitalization (number of shares outstanding times the current
stock price),” says Keiser. The number, he explains, is devised by
dividing market capitalization by trailing twelve-month sales.

The “magic,” says Keiser, occurs when “word gets out to the 800
billion dollar hedge fund industry-beholden to no one-that there is a
very large boycott of Coke’s stock. A big boycott equals loss of
revenues equals lower stock price. Mr. Hedge Fund sells short stock (a
bet that the stock price will go down) in Coke. Sure enough, the stock
price is going down. More boycotters, cost free to them, join the
boycott and more hedge money goes into selling short the stock. Now,
my $1 of dissent, multiplied times 5, is multiplied again thanks to
the hedge money.

“Both hedge funds and activists benefit when a target company’s stock
price declines,” says Keiser. “The hedge funds get dollars, while the
activists get a new way to pressure companies by attacking their stock
price. At some point, the stock price gets so low that the company
cries ‘uncle’ and gives in to the pressure group is some way.”

George Soros, irrationality and contrarian activism / BY Max Keiser

The typical activist approach of trying to get rich countries and
companies to ‘share the world’s resources’ fails to take into
consideration how the individuals in these countries and companies got
rich to begin with. What activists don’t understand is that the
process of accumulating wealth is rarely a rational, direct path.
Trying to appeal to the rich to act rationally, therefore is, in most
cases, folly.

Activists need to get into the heads of the rich and understand that
in order to create above-average wealth it is necessary for the rich
to think in ways no average (read: poor) person is thinking.
Financiers and speculators call this form of antagonism-for-profit
‘contrarianism’ and it forms the basis of an entire school of finance
that attempts to figure out where the ‘crowd’ is heading, and then do
the opposite. Some quick examples of how this works; 1) the put-call
ratio in the options markets. What this number tells contrarians is
where most of the speculators are making bets in the markets, and as
most speculation ends up in losses it makes sense, according to the
contrarian doctrine, to bet the other way. 2) Another contrarian
speculating strategy is to look at where professional money managers
are placing their bets with their professionally managed funds. Again,
since most professional money managers fail to ‘beat the market,’ it
makes sense to do the opposite of whatever they’re doing.

Probably the king of contrarianism is the most successful investor in
the history of Wall Street: George Soros. He’s taken the contrarian
concept and developed it even further into what he calls his theory of
‘reflexivity’ or the ‘human uncertainty principle.’

What Soros has observed about markets is that contrarianism itself can
breed second and third generations of contrarianism that is self
referential or ‘reflexive’ that, instead of doubling back and ending
up where it started, has the power to change the underlying market
fundamentals in ways that make the contrarian assumption the de factor
market norm. When such situations develop, it’s only a matter of time
before the market realizes it’s ‘smoking its own belly button
lint’ (my expression) and we get what Soros calls, a ‘return to
equilibrium’ i.e., a crash, like we saw in stocks in 1929, 1987 and
2000. For the professional trader, identifying these inflection points
where the market suddenly realizes that its assumptions are worth
zero, great fortunes can be made betting the other way. Soros caught
the crash in the English pound back in 1992 using this technique and
pocketed over 1 billion dollars in one day.

The point I’m making here for activists is that activists’ approach to
changing the way business treats the environment relies almost
entirely on trying to get business people to act more rationally. And
yet, to get to where they got, these business leaders have relied
mostly on obeying the voices in their head that the status quo claims
are irrational. This has set up a paradox making NGO’s lives more
difficult. Whatever an NGO thinks is a good idea, is probably a
terrible way to make money in the minds of most businessmen. They’ll
listen to what an NGO has to say, but only to know what not to do if
they want to continue making money. It’s like what Milton Friedman
advises corporations to do when an NGO walks into their office with a
list of demands, and I paraphrase; ‘listen politely, then figure out
if there’s any money to be made with what’s been said, if not, use the
meeting as a PR opportunity, but that’s all.’

So does this mean NGO’s should give up? No. What it does mean,
however, is that NGO’s should consider adopting new strategies that
will tap into businessmen’s love of the irrational. For
environmentalists, I think carbon trading offers a huge opportunity to
turn the tables on business and use the power of irrationality for a
positive change.

Take a group like Greenpeace for example. They have over 100 million
dollars sitting in the bank collecting money market interest. For all
intents and purposes, this money is what Wall Street would call, ‘dead
money.’ I propose the following. Greenpeace should start organizing a
banking crusade with their money and other NGO money (NGO’s
combined operating budgets are worth 1 trillion dollars) and start
buying Carbon Credits in the open market for the current price of
approximately 8 dollars a ton. (the EU has started a program of
capping carbon emissions for corporations; but giving them the
opportunity to go over their cap by buying ‘credits’ from companies
whose carbon output is below the cap).

This would set up an irrational chain reaction, each part of which
represents a net positive for the environment. First, the price of
carbon credits will be pressured upward thanks to the speculative
buying of a new force in the market, NGO’s. Corporations who are
banking on the price of carbon credits to remain in a certain range
will be forced to recalculate their assumptions and in many cases will
be forced to buy more credits than they had planned to in the short
term to give themselves the kind of hedging protection these carbon
credits offer for their carbon abuse. This will drive the price even
higher. As demand goes up, so does the price and now we get to the
irrational part; higher carbon prices will incentivize companies
across the business spectrum to put forward various carbon-efficiency
schemes as a way to make money with their excess credits. The money a
company makes chasing carbon efficiencies could equal if not eclipse
the profits made burning carbon. The government in turn, has the
ability to lower the carbon caps greasing this contrarian cycle even
more by making carbon more expensive, thus providing more incentive to
produce greater efficiencies.

On paper, activists will look at this and balk. They don’t like the
idea of commoditizing nature. They don’t understand why a company
would engage in such a scheme. They don’t like the fact that the whole
thing seems irrational, but that’s the point. Business today runs on
irrationality and until NGO’s adapt, they’ll always be behind the
curve. You would think NGO’s would have already figured this out. They
know for example that ExxonMobil’s business model is irrational to the
bone. ExxonMobil extract irreplaceable natural resources for virtually
nothing, sell them for a fraction of their replacement costs and then
we burn them without ever having to pay the environmental costs; all
this resulting in parts of CO2 per million in the atmosphere breaching
the ‘can’t go back’ levels where the species (ours) is put on the
extinction watch list. ExxonMobil’s business model is irrational and
suicidal. NGO’s know this, so why do they insist in trying to get
Exxon to act rationally when nothing in Exxon corporate DNA suggests
they even understand what that word means.

Exxon is not rational, but they are profitable. For NGO’s to attack
their rationale is a non-starter because the company knows it’s
irrational and doesn’t care. Environmentalists, to win against this
insanity, must tear a page out of the irrational’s handbook in order
to effectively combat the current trends blighting our futures. The
carbon trading scheme mentioned above is a step in that direction. As
distasteful as it must seem for NGO’s to drink the ‘Koolaide’ that
runs business, not to do so at this point is completely irrational.


How to Decentralize Monetary Policy / July 21, 2006

Today’s Wall Street Journal reports: “Federal Reserve policy makers
raised interest rates last month in part because markets expected them
to do so, and they figured failure to act might hurt their credibility
as inflation fighters, minutes of the meeting suggest.”

Some people might view this response as wimpy–doing what financial
markets want rather than showing real leadership. But one can view
this approach as a step toward decentralizing monetary decision
making. Suppose the Fed has a long-term inflation target. And suppose
the Fed followed this rule: “Look at the market’s forecast of interest
rates and inflation over the next few years. If the market expects
inflation above target, set a path for interest rates a bit higher
than the market expects. If the market expects inflation below target,
set a path for interest rates a bit lower than the market expects. If
the market expects inflation to come in on target, set a path for
interest rates equal to what the market expects.”

This might seem circular: The Fed is responding to the market, and the
market is responding to the Fed. But there is nothing wrong with that.
Economists are used to simultaneity. Of course, the market will catch
on to the policy, but that’s okay. In fact, it is ideal. We end up in
a fixed-point equilibrium in which the market expects the Fed will hit
its inflation target. In this equilibrium, the market’s forecast of
interest rates will tell the Fed what it needs to do to accomplish
what it wants to accomplish.


What’s the connection between a 1906 poultry exhibition and the 2008 US election?
BY Leighton Vaughan Williams / 18 September 2008

Sir Francis Galton was an English explorer, anthropologist, scientist,
who was born in 1822 and died in 1911. To students of prediction
markets he is best known, however, for his visit, at the age of 85, to
the West of England Fat Stock and Poultry Exhibition, and what
happened when he came across a competition in which visitors could,
for sixpence, guess the weight of an ox.

Those who guessed closest would receive prizes. About 800 people
entered. Ever the scientist, he decided to examine the ledger of
entries to see how clever these ordinary folk actually were in
estimating the correct weight. In letters to ‘Nature’ magazine,
published in March of 1907, he explained just how ordinary those
entering the competition were. “Many non-experts competed”, he wrote,
“like those clerks and others who have no knowledge of horses, but who
bet on races, guided by newspapers, friends, and their own fancies …
The average was probably as well fitted for making a just estimate of
the dressed weight of the ox as an average voter is of judging the
merits of most political issues”.

The results surprised him. For what he found was that the crowd had
guessed (taking the mean, i.e. adding up the guesses and dividing by
the number of entrants) that the ox would weigh 1,197 pounds. In fact,
it weighed 1,198 pounds! The median estimate (listing the guesses from
the highest to the lowest and taking the mid-point) was also close
(1,207 pounds, and therefore still within 1% of the correct weight)
but not as close. Some have argued that Galton himself favoured the
use of the median rather than the mean, and so was double-surprised
when the mean beat the median. Others have argued that the point is
incidental and what this tale demonstrates about the wisdom of the
crowd is more important than such a fine statistical detail.

I think that both these points of view contain some merit. The power
of the market to aggregate information is indeed a critically
important idea. But it is also important to be able to distinguish in
different contexts which measure of the ‘average’ (the mean, the
median, or perhaps some other measure) is more suited to the purpose
at hand.

Take the stream of opinion polls which contribute to the collective
knowledge that drives the Betfair market about the identity of the
next President of the United States. If five are released, say, on a
given day, what is the most appropriate way of gauging the information
contained in them? Should we simply add up the polling numbers for
each candidate and divide by the number of polls, or should we list
them from highest polling score to lowest and take the mid-point. The
convention adopted by sites such as is to
take the mean. But is there a better measure than the mean of
discerning the collective wisdom contained in the polls, and if so,
what is it? The jury is still deliberating.

Leighton Vaughan Williams
email : leighton.vaughan-williams [at] [dot] uk

“Question: How do you find a missing submarine? Answer: Ask the audience”
BY Leighton Vaughan Williams / 8 April 2008

During a car journey between Nottingham and Warwick the other week I
was told a story about the value of crowd wisdom in turning up buried
treasure. The story was that by asking a host of people, each with a
little knowledge of ships, sailing and the sea, where a vessel is
likely to have sunk in years gone by, it is possible with astonishing
accuracy to pinpoint the wreck and the bounty within. Individually,
each of those contributing a guess as to the location is limited to
their special knowledge, whether of winds or tides or surf or sailors,
but the idea is that together their combined wisdom (arrived at by
averaging their guesses) could pinpoint the treasure more accurately
than a range of other predictive tools. At least that’s the way it was
told to me by an economist who was in turn told the story by a
physicist friend.

To any advocate of the power of prediction markets, this certainly
sounds plausible, so I decided to investigate further. Soon I was
getting acquainted with the fascinating tale of the submarine USS
Scorpion, as related by Mark Rubinstein, Professor of Applied
Investment Analysis at the University of California at Berkeley. In a
fascinating paper titled, ‘Rational Markets? Yes or No? The
Affirmative Case’, he tells of a story related in a book called ‘Blind
Man’s Bluff: The Untold Story of American Submarine Espionage’ by
Sherry Sontag and Christopher Drew.

The book tells how on the afternoon of May 27, 1968, the submarine USS
Scorpion was declared missing with all 99 men aboard. It was known
that she must be lost at some point below the surface of the Atlantic
Ocean within a circle 20 miles wide. This information was of some
help, of course, but not enough to determine even five months later
where she could actually be found.

The Navy had all but given up hope of finding the submarine when John
Craven, who was their top deep-water scientist, came up with a plan
which pre-dated the explosion of interest in prediction markets by
decades. He simply turned to a group of submarine and salvage experts
and asked them to bet on the probabilities of what could have
happened. Taking an average of their responses, he was able to
identify the location of the missing vessel to within a furlong (220
yards) of its actual location. The sub was found.

Sontag and Drew also relate the story of how the Navy located a live
hydrogen bomb lost by the Air Force, albeit without reference in that
case to the wisdom of crowds. Perhaps, though, that tale is too secret
yet to be told!

What then, I wonder, would those scientific giants, Karl Pearson and
Lord Rayleigh, have made of it all? It was their correspondence, you
may recall, in the pages of the scientific journal, ‘Nature’, which
answered the classic query of where to find the drunk you left in a
field. “Where you left him,” was the answer. Which is all very well,
of course, if you were sober enough yourself to know exactly where
that might have been!

Information Successes of Speculative Markets / BY Robin D. Hanson

While democratic policy seems to suffer from information failures,
speculative markets show striking information successes. Most markets
for stocks, bonds, currency, and commodities futures are called
speculative markets because they allow people to bet on future prices
by buying or selling today in the hope of reversing such trades later
for a profit. Such opportunities to “buy low, sell high” occur when
identical durable items are frequently traded in a market with low
transaction costs. Given such opportunities, everyone is in essence
invited to be paid to correct the current market price, by pushing
that price closer to the future price. Such invitations are accepted
by those sure enough of their beliefs to “put their money where their
mouth is,” and wise enough not to have lost too much money in previous
bets. Betting markets are speculative markets that trade assets that
are specifically designed to allow people to bet on particular matters
of fact, such as which horse will win a race. The final values of such
assets are defined in terms of some official final judgment about the
fact in question. By construction, such assets are durable, identical,
and can be created in unlimited supply. Betting and other speculative
markets have been around for many centuries, and for many decades
economists have studied the ability of such markets to aggregate
information. The main finding of this research is that such markets
tend to be relatively “efficient” in the sense that it is hard to find
information that has not been incorporated into market prices (Lo,
1997; Hausch, Lo, & Ziemba, 1994). The main possible exceptions seem
to be long-term aggregate price movements, and a long-shot bias in
high-transaction-cost betting markets.

Many have suggested that asset markets have too much long-term
aggregate price variation, such as stock market “bubbles” (Shiller,
2000). Risk and delay most discourage speculators from correcting such
pricing errors, and irrational traders can actually gain superior
returns (though not utility) from irrationally-large risk-taking (De
Long, Shleifer, Summers, & Waldmann, 1990). Long-term aggregate
prices, however, are also where it is hardest to empirically
distinguish irrationality from rational information about fundamental
economic change (Barsky & De Long, 1993), and where selection effects
most pollute our data (Jorion & Goetzmann, 2000). Even if speculative
markets are distorted by irrational bubbles, it is not clear that any
of our other information institutions do better. For example, no other
information institution in our society, such as academia or news
media, consistently predicted that we were over-investing during the
“dotcom” bubble. Yes some individual academics or reporters so
predicted, but so did some individual stock investors. Over the last
few decades economists have also studied speculative markets in
laboratory experiments, where they have more control over trader
information and preferences. Such experiments find that speculative
markets aggregate information well, even with four traders trading $4
over four minutes, and even when such traders know little about their
environment or other traders (Sunder, 1995). For example, traders can
aggregate information well when they are experienced in their role and
abstractly know the payoffs of players in other roles (Forsythe &
Lundholm, 1990). If the structure of traders’ information is complex
enough relative to the number of assets available to trade, however,
information “traps” can occur where individual traders have no direct
incentive to reveal their information (Noeth, Camerer, Plott, &
Webber, 1999). Such problems are typically, though not always, reduced
by allowing trading of more kinds of related assets.

Absolute accuracy levels, however, are not the key issue. The key
policy question about any institution is how it performs relative to
alternative institutions dealing with the same situation. A few
studies have presented field data on this question, directly comparing
real world speculative markets with other real world institutions for
aggregating information. For example, racetrack market odds improve on
the prediction of racetrack experts (Figlewski, 1979). Florida orange
juice commodity futures improve on government weather forecasts (Roll,
1984), Oscar markets beat columnist forecasts (Pennock, Giles, &
Nielsen, 2001), and gas demand markets beat gas demand experts
(Spencer, 2004). Betting markets beat major national opinion polls 451
out of 596 times in predicting U.S. presidential election results
(Berg & Rietz, 2002). Finally, betting markets beat Hewlett Packard
official forecasts 6 times out of 8 at predicting Hewlett Packard
printer sales (Chen & Plott, 2002; Plott, 2000). Unfortunately, no
studies have directly compared estimates from speculative markets to
estimates from academic-style institutions We do know, however, that
those who do best at betting on horse races are smart in ways they can
not articulate, and in ways unrelated to I.Q. (Ceci & Liker, 1986).
Academic-style institutions, in contrast, seem largely limited to
aggregating articulated knowledge from those with high I.Q. Academic
institutions put a great deal of weight on the opinions of experts
relative to ordinary people. And while speculative markets may put
less weight on experts, it does not seem that they place too little;
if anything, they seem to put too much weight on experts, both public
and private (Figlewski, 1979; Metzger, 1985; Lichtenstein, Kaufmann, &
Bhagat, 1999). How can betting markets beat opinion polls when they
use the same fallible human sources?

A study of election betting markets found that traders overall
suffered from standard biases such as expecting their favored
candidate to win, and seeing that candidate as having won debates.
“Market makers,” however, were found to be on average much less
biased. These were traders who made offers that others accepted,
rather than accepting offers made by others. Compared to other
traders, market makers invested twice as much, traded more, earned
higher returns, and made one sixth as many errors. They also tended to
be more highly educated, and experienced at trading (Forsythe, Nelson,
Neumann, & Wright, 1992; Forsythe, Rietz, & Ross, 1999). Betting
markets seem to meet or beat competing institutions in part because of
the disproportionate influence such markets give to rational and
informed traders. We also know more generally that people with
stronger incentives to be accurate show fewer cognitive biases
(Kruglanski & Freund, 1983). There are costs to create and run
markets, so there is a limit to the number of markets that can be
created. However, while it was once thought that speculative markets
could only be viable if they annually traded millions of dollars, say
10,000 trades of $100 each (Carlton, 1984), it is now clear thatmuch
smallermarkets are viable. For example, laboratory experiments
consistently show the viability of very small markets. Low internet
transaction costs are also now spurring a burst of innovation
exploring a great many new market forms (Varian, 1998; Shiller, 1993;
Hanson, 2003a). Play money web markets are now available where
anyone can create new betting topics, and where a handful of traders
betting play pennies once every few weeks are typically successful at
aggregating information into prices (see, for example,, (Kittlitz, 1999; Pennock et al., 2001)).

Gambling and securities regulations make it very difficult, however,
to create real money markets like these play money markets. This
regulatory block on financial innovation should not be surprising,
because all of our familiar financial institutions were once
prohibited by laws against gambling and usury. For example, a
thirteenth century decree by Pope Gregory IX prohibited maritime
insurance as usury. The 1570 Code of the Low Countries outlawed life
insurance as gambling (Brenner & Brenner, 1990). In response to
speculation in the South Sea Bubble, in 1720 Britain basically banned
the formation of joint-stock companies (Kindleberger, 1984). And
futures markets were banned as gambling in the late nineteenth century
U.S. (Brenner & Brenner, 1990). The history of financial regulation
can thus be roughly summarized as everything being banned as gambling
(or usury) until an exception was granted for some newly legitimized
higher purpose. For each purpose, such as capitalizing firms, insuring
idiosyncratic risk, or insuring common risk, laws and regulations were
created to ensure that generic gambling could not slip in. We may thus
reasonably hope to someday legitimate, and thereby legalize, markets
whose main function is to aggregate information on questions that
matter (Bell, 1997).

Ayn Rand Saw This Coming / October 9, 2008
“Despite overwhelming evidence that government policies caused the
current financial crisis, Congress is blaming businessmen,” said Yaron
Brook, executive director of the Ayn Rand Center for Individual
Rights. “What’s worse, the capitalists who have been shackled with
unprecedented regulatory burdens are unable to defend themselves
morally. Though the events are different, this pattern of abuse and
submission is straight out of Ayn Rand’s Atlas Shrugged. “The cycle
starts with government intervening into the economy and imposing
regulations and controls on business. This distorts the free market,
leading to economic dislocations. When the problems caused by these
distortions inevitably follow, everyone blames the free market and its
greedy capitalists. The proposed solution? More government controls.
Over the years, conservative critics of creeping government have
repeatedly exposed this illogic but have always been helpless to
explain why the cycle keeps repeating, decade after decade. “The
pattern keeps recurring because businessmen are willing to take the
blame. From capitalism’s inception, its defenders have been morally
disarmed by the widespread view that self-interest is morally suspect,
and disinterested service to others is a moral ideal. So each new
spate of controls has been grudgingly accepted as a fair price to pay
for society’s toleration of the selfish pursuit of profit. “Atlas
Shrugged depicted a society in economic collapse due to this recurring
cycle, and today’s parallels are obvious. Government manipulation of
money, credit, and lending standards over several decades caused the
mess we’re in. Now, the offered solution is more of the poison that
sickened the economy–more bailouts, more cheap money, more
government-guaranteed loans, and above all, more regulations. “This
chronic cycle will not end until businessmen accept that their production
of profit is neither immoral nor amoral–it is the capstone of moral virtue.
Once they shrug off the role of scapegoat, businessmen can demand with
moral certitude that government punish fraud and enforce contracts but
refrain from interfering with voluntary trades among consenting
adults. “When America’s markets are finally free of all coercion–in
other words, when laissez-faire is achieved–financial crises such as
the one we’re experiencing will never happen again.”

Greenspan Has No Free Market Philosophy / October 24, 2008
“Opponents of the free market are giddy at Alan Greenspan’s
declaration that the financial crisis has exposed a “flaw” in his
“free market ideology.” Greenspan says he is “in a state of shocked
disbelief” because he “looked to the self-interest of lending
institutions to protect shareholder’s equity”–and it didn’t. But
according to Dr. Yaron Brook, executive director of the Ayn Rand
Center for Individual Rights, “any belief Greenspan ever had in truly
free markets was abandoned long ago. While Greenspan long ago wrote
in favor of a truly free market in banking, including the gold standard
that such markets always adopt, he then proceeded to work for two
decades as leader and chief advocate of the Federal Reserve, which
continually inflates the money supply and manipulates interest rates.
Advocates of free banking understand that when the government inflates
the currency, it artificially increases prices and causes booms in
certain sectors of the economy, followed by inevitable busts. But not
only did Greenspan lead the inflation behind the dot-com bubble and
the real estate boom, he blamed the market for their treacherous
collapses. Greenspan should have recognized that what he wrote in 1966
of the boom preceding the 1929 crash applied here: ‘The excess credit
which the Fed pumped into the economy spilled over into the stock
market–triggering a fantastic speculative boom.’ Instead, he
superficially blamed ‘infectious greed.’ “Should it be any shock that
Greenspan now blames the free market for today’s meltdown–rather than
the Fed’s policies, which fueled an inflationary housing boom, which
rewarded reckless lenders and borrowers from Wall Street to Main
Street? Greenspan didn’t mention the word ‘inflation’ once in his
testimony. “Whatever Greenspan’s economic philosophy is, it is not
anything resembling a free market.””

Greenspan Shrugged? Did Ayn Rand Cause Our Financial Crisis?

“Those of us who have looked to the self-interest of lending
institutions to protect shareholders’ equity, myself especially, are
in a state of shocked disbelief.” So said former Fed Chairman Alan
Greenspan in his dramatic testimony before the House Committee on
Oversight and Government Reform, as he was grilled by committee
members on the causes of the nation’s financial crisis. Greenspan,
whose laissez-faire capitalist leanings led him to reject decades of
calls for more robust government oversight of financial markets, was
repeatedly interrupted by the lawmakers in a contentious exchange that
clearly shows the gloves are off in regard to the former chairman’s
legacy. In his startling admission, the former head of the Federal
Reserve reveals that his long-held and controversial notion that
enlightened self-interest alone would prevent bankers, mortgage
brokers, investment bankers and others from gaming the system for
their own personal financial benefit has, as the English say, come a
cropper. Bankers ruled by anything other than greed?

Where did Greenspan ever get that idea? Ayn Rand. To readers of Atlas
Shrugged, Ayn Rand’s 1957 magnum opus, Greenspan’s hands-off
philosophy of marketplace management sounds very familiar. At its
core, the book supports a radically utopian political-economic system
called Objectivism, which suggests that the morality of rational self-
interest, as opposed to religious or government intervention, should
be the foundation of the ideal political structure.

According to a short description of Objectivism given by Ayn Rand in
1962, “The ideal political-economic system is laissez-faire capitalism
… In a system of full capitalism, there should be (but, historically,
has not yet been) a complete separation of state and economics, in the
same way and for the same reasons as the separation of state and
church.” In other words, Ayn Rand’s theory of the “morality of self-
interest” exactly parallels Alan Greenspan’s testimony today about his
now-shaken belief in the ability of “self-interest of lending
institutions to protect shareholder’s equity.”

Early in his career, Alan was an avid Rand acolyte, a frequent guest
at the Manhattan salon of the novelist and philosopher, and those who
gathered to hear the litanies of like-minded notables were loosely
known as “The Collective.” It was there that the Rand philosophy of
Objectivism was discussed in the context of current events, world
markets and religion. Today, 40 years after the heyday of those
gatherings, Greenspan surprised many with his “Yes, I found a flaw”
response to a grilling from the Committee. Responding to the clear
failure of the notion of “enlightened self-interest” to stop the
cascade of financial catastrophies that have roiled world markets, he
said, “That is precisely the reason I was shocked, because I’d been
going for 40 years or more with very considerable evidence that it was
working exceptionally well.”

Greenspan’s critics have long charged that his refusal as Fed Chairman
to impose greater government regulations on mortgage lenders is one of
the causes of the sub-prime mortgage meltdown. Committee Chairman
Harry Waxman (D-CA), in a heated exchange told the former Fed
Chairman that he had “the authority to prevent irresponsible lending
practices that led to the subprime mortgage crisis. You were advised to
do so by many others, and now our whole economy is paying the price.”

posted BY CharlesMac
“This always astounds me. Even when writers claim to be very well
acquainted with Rand’s work, they miss the most obvious intellectual
contradiction of Geenspan’s entire career with the Fed. Ayn Rand
considered The Federal Reserve one of the greatest abominations ever
created. She had no problem with the concept of a Central Bank created
by the banks to facilitate that private industry. But to give that
entity manipulative control over the American monetary system was
anathema. A TREMENDOUS threat to her laissez faire capitalism. To her,
a horrific concept made worse by its fragmentation from any direct
connection to the democratic Republic process. This stuff is Ayn Rand
101. And Greenspan would become a major influence and Chair it for 18
years? Greenspan never got his PhD. He would be granted it in 1977
without thesis or dissertation. That is not in any way to cast
dispersions on his qualifications. It is to note that he was Ayn
Rand’s #1 economic student/representative. It was their discussions,
from which Greenspan concluded that the schooling was not in line with
his thinking and a waste of time. That’s how close they were. To this
day, Greenspan has never publicly resolved the intellectual
contradiction of his job at The Fed, with the teachings of Ayn Rand.
The gnarliest supposition being he believed only he could prevent this
innate monster from doing its evil. That’s sad.”



Ayn Rand’s Normative Ethics: the Virtuous Egoist
BY Tara Smith / Reviewed by Helen Cullyer

Those who think of Ayn Rand as the icon of callow youths rather than a
serious moral philosopher are unlikely to recognize the Rand whom
Smith presents to us. Drawing on Rand’s novels, lectures, essays, and
letters, Smith shows that her ethical theory is a form of naturalistic
eudaimonism, which shares some features with the Aristotelian virtue
ethics of Hursthouse and Foot, but differs from them in its
unapologetic ethical egoism. This egoism is, however, as Smith argues,
non-predatory and can accommodate helping others, genuine friendship,
and even in certain circumstances risking one’s life for another.
Ultimately Rand appears as a somewhat paradoxical figure. A veneer of
Nietzschean immoralism conceals the fact that, according to Smith,
serving one’s own interest in Randian fashion entails treating others
in ways that are not as out of line with standard moral thinking as we
may first assume. After tracing the outlines of Smith’s argument, I
will a raise worry as to whether her insistence that the virtuous
agent places non-instrumental value on a variety of social
relationships actually undermines Rand’s egoistic individualism, and
discuss briefly the political implications of Rand’s ethics that hover
just beneath the surface of the book.

In her Introduction, Smith argues that contemporary virtue ethicists
dance around the question of ethical egoism. The reason is that egoism
is usually considered predatory, hedonistic, or subjectivist. Chapters
2 and 3 provide a rigorous discussion of the Aristotelian grounding of
Rand’s project. Humans, just like animals or plants, have certain
objective ends (food, water, safety) that promote our lives, but
humans’ ultimate goal is not only to maintain our lives, but to live
well, which means excellent functioning, both physical and
psychological (32). Such functioning is manifest primarily, as we
learn in Chapter 8, as the active exercise of the virtue of
productiveness, when we transform our natural surroundings in ways
that meet our material and spiritual needs. Since excellent
functioning is the goal of human life, reasons for acting must be
egoistic; a person can only achieve this goal through her own efforts
(33). Egoistic rational principles “stem entirely from their practical
service to self-interest, as that is judged by rational, long-range
standards” (36), and genuine self-interest cannot truly conflict with
the interest of others (39). To be rational is to recognize and accept
“reason as one’s only source of knowledge. . . It means one’s total
commitment to a state of full consciousness awareness, to the
maintenance of a full mental focus” (52). The human capacity for
reason is grounded metaphysically in free will, but to reason well is
to realize the inescapability of general facts about human nature and
also the context-dependent facts of particular situations.

Chapters 4-9 concern the other six virtues (honesty, independence,
justice, integrity, productiveness and pride), which are forms or
aspects of rationality, the “master” virtue (49). Smith’s discussion
of the six is searching and often compelling. In fact, even those who
do not think that egoism is a viable moral theory will recognize the
importance of many of these virtues for the virtuous life. Pride turns
out to be self-respect plus the desire for self-improvement. Integrity
is strength not only in holding onto one’s ideals, but also in making
them practical reality. The egoistic defense of honesty is also
intriguing: pretense is “metaphysically impotent” in that in
misrepresenting reality we cannot change it (79). Moreover, dishonesty
is detrimental to self-esteem and fosters a sense of worthlessness.

Most controversial is the egoistic defense of justice. Smith argues,
following Rand, that it is in one’s own interests to treat people in
accordance with objective desert. This view entails a rejection of
egalitarianism, and Smith sets the Randian conception of justice
squarely in opposition to that of Rawls. But the Randian view is
tempered by three qualifications: (1) desert is contextual, and one
must distinguish between those things over which people do and do not
have control; (2) justice coexists with rights, since “each individual
has a right to his own life and to pursue his own happiness” (171);
and (3) the virtuous egoist will refuse to sanction evil.

In Chapter 10 and the Appendix, Smith moves away from Rand’s
“official” seven virtues and discusses implications for charity,
generosity and temperance, and for loving others. Although the
virtuous egoist will often have no reason to act generously or
charitably, Smith gives examples of many situations where the virtuous
egoist will act in these ways for the sake of some benefit to herself.
In an Appendix, Smith, employing arguments that bear some similarity
to those of Aristotle in Nicomachean Ethics 9.8, argues that the
virtuous agent can in fact love others for their own sake, although
her own happiness remains her ultimate goal.

Before raising an objection to Smith and Rand, it is worth noting
briefly how they differ from other philosophers in the eudaimonistic
tradition, who tend to view the good of the individual as both social
and political. Most Aristotelians think that character is formed in a
social and political context, and that human flourishing cannot be
understood without considering individuals as parts of a community; as
a result of ethical habituation, but also of natural sociality, we
have reason to promote others’ good. Thus Foot argues that humans are
just particularly complex social animals, and she does not take the
agent-centeredness of her ethical theory to entail that all of the
virtuous agent’s reasons for acting are egoistic. [1] Aristotle
himself asserts that the virtuous agent undertakes fine actions for
the sake of the fine (to kalon). While this motivation is not
altruistic, fine actions are just those that are contextually
appropriate for a socially and politically embedded individual. For
Rand on the other hand, the moral self, while existing in a community,
is free of it, self-created, and materially and psychologically
independent; humans are not by nature “social” but they are
“contractual” (130). Smith endorses not only Rand’s principle that it
is never moral to put another’s good above one’s own but also asserts
that “ethics is not essentially social” (284).

Smith works hard, however, to show that the virtuous egoist’s
relationships with other people will be rich and rewarding. The egoist
may even risk her life for another. Consider this example. A man,
Bill, risks his life for the woman he loves, because “for him to
courageously attempt the rescue and not “chicken out” would be in his
interest (assuming that he values the woman’s well-being more valuable
than his life without her)” (194). According to egoism one should not
sacrifice oneself for another (38), but the egoistic defense of the
action is that this woman is one of the things that makes Bill’s life
worth living. Bill is making no sacrifice, but rationally placing her
well-being, which he sees as central to his own happiness, above his
own safety. We should note that Smith makes clear in her Appendix that
the virtuous egoist can love others for their own sake, and not
instrumentally, precisely because “another person might become
valuable by becoming a vital ingredient of a person’s
happiness” (302). But if one’s own flourishing includes the welfare of
others, then we might object that human flourishing is after all a
social rather than individualistic enterprise. For Bill realizes that
his happiness involves loving others and risking himself for them.
Smith will reply that the above example is unusual, and should not be
taken as evidence that morality is somehow social. This kind of love
is the exception and not the norm. It is only moral to put oneself in
harm’s way for another when two self-created, independent, and
rational individuals love each other as friends. Most people will not
merit this treatment. For one must exercise one’s own independent
judgment to figure out who is truly valuable to oneself (130-32).

But in fact Smith recognizes so many social relationships which
enhance the flourishing of the individual (258-61), and which are
based on affection, respect, and shared activity, that the careful
reader may wonder whether Rand’s view that man is a “contractual”
animal, rather than a “lone wolf” or a “social animal” (130) can any
longer be sustained. Smith begins to address this worry by noting that
although generosity is only rational when it represents a fair trade
of one value for another, the return that the benefactor receives in
compensation for his service is not necessarily material: “the return
can take many forms — intellectual, emotional, the pleasure of a
person’s company, the deepening of a relationship” (261). One might
agree with Smith here that if I give away a football ticket to an
acquaintance, I am certainly acting in a way that shows that the value
I place on the relationship is greater than the value I place on the
ticket. I gain from the act of generosity by deepening our friendship,
and ‘trade’ the ticket for something better. But the act of generosity
is not truly a trade with my acquaintance unless I give the ticket to
her with an expectation of receiving a determinate quantifiable and
commensurable benefit in direct return. If I trade a football ticket
for the deepening of a friendship, has ‘trade’ here not become a mere
metaphor? The pleasure of company and the deepening of relationships
are surely benefits to be shared and enjoyed communally, not traded?
If this is the case, then individual human flourishing may turn out to
be activity of the individual who is fully immersed in shared
activities and purposes, rather than the rational trading of benefits
between contractual individuals. The virtuous agent may still be an
egoist formally speaking, in that she realizes that what is really in
her interest is to engage in shared activities and purposes. But the
‘I’ tends to become a ‘we’, and the other and self united in a
relationship that promotes our happiness.

Smith’s discussion of independence (129-30) suggests that one
important aspect of the claim that humans are not social is that the
ethical-intellectual formation of the individual is not dependent on
society. But if social activity is somehow central to the life of a
rational adult, as Rand and Smith admit, might we not object that such
activity is also central to the life of an incipiently rational child
and that it is precisely this social context of human development that
shapes the self? Smith dismisses the idea that individuals’ characters
and actions are determined by the society in which they are raised as
empirically indefensible (129), but there is a more subtle and
convincing position that Smith should address; namely that we are
necessarily influenced, although not determined, by the societies in
which we are raised and that moral and practical reasoning capacities
grow not spontaneously, but out of and in reaction to specific

Perhaps, however, we can best understand Rand’s and Smith’s position
by putting it into its proper political context. The real claim being
made here is not that humans do not tend towards sociality, but rather
that by nature we are not part of a mutually sustaining political
community or society in which individuals depend on each other. We
must respect others’ rights, but we have no reason to help others whom
we do not know and value personally, although we will trade goods with
many for our own benefit. While altruism is placing others above the
self as a “fundamental rule of life”, egoism does not entail
sacrificing others for the sake of oneself, because the true egoist
recognizes an objective and impartial right of everyone to pursue
their own interest (39).

The coexistence of rights (to life, liberty, and property) and egoism
is crucial to Rand’s ethics and politics. Smith does not try to argue
here that recognizing and respecting the rights of others is directly
or indirectly in one’s self-interest (174-5). In fact, the grounding
of individual rights that she delineates looks rather Kantian: “Every
living human being is an end in himself, not the means to the ends of
the welfare of others. . . ” (171). The respecting of others’ rights,
therefore, looks like it is a constraint on and exception to the
egoistic ethical norm; act in self-interest except when it would
infringe the rights of others. Yet Rand’s theory of rights and ethical
egoism rest on the same teleological basis; since the goal of each
individual is to maintain her life and to flourish, each individual
requires freedom from the predatory actions of others.[2]

Rand’s egoistic individualism supports her libertarian political
outlook, and this is certainly not concealed in Smith’s treatment,
although it is not in the foreground. Rand’s view of the virtuous
egoist as self-created, contractual, and productive provides the
ethical basis of her political ideal of unregulated laissez-faire
capitalism in which government’s only role is to protect basic liberty
and property rights. We should note that Rand’s libertarianism is
consistent in some respects with social liberalism, having no truck
with discrimination on the basis of sex, race, or sexual orientation,
and supporting freedom of speech in all contexts. But if we ask why
the virtuous egoist should not be a social democrat, voting for higher
taxes in order to ensure not only freedom from predation, but basic
opportunities (like healthcare, education, social insurance) which
benefit not only others but also herself, the Randian will reply that
such taxes would violate property and liberty rights, and true
justice. The social democrat’s reply may argue for expanded
conceptions of rights and freedom. But it will also surely attack as
far too stringent Rand’s assumption that virtue requires that each of
us is able to be materially independent, providing for the self “all
the material values that his life requires” (202), and stress that the
libertarian ignores the increased opportunity and power that
individuals enjoy when they act in common. It is not to be taken as a
criticism of Smith’s book that she does not engage more fully with
these issues, given the ethical rather than political focus of the
book. In fact, her 1995 book (see n. 2) does engage with some of these
issues, although not from an explicitly Randian perspective. I raise
the issue of Rand’s politics only to point out that her ethics and
politics are intertwined.

It should be stressed in conclusion that whether one is a fan or a
detractor of Ayn Rand, the issues raised by this book are manifold and
provocative. This book should force a debate of renewed vigor about
what we mean by egoism, whether and how the egoism / altruism
dichotomy should be applied within eudaimonistic ethical theories, and
what our ethical theories imply about our political outlook. Smith
provides us with a version of egoism that will need to be argued
against by those who find it distasteful or misguided, rather than
simply dismissed.

The Benefits and Hazards of the Philosophy of Ayn Rand
A Personal Statement by Nathaniel Branden / May 25, 1982






NY City Subpoenas Creator of Text Messaging Code
BY Colin Moynihan  /  March 30, 2008

When delegates to the Republican National Convention assembled in New
York in August 2004, the streets and sidewalks near Union Square and
Madison Square Garden filled with demonstrators. Police officers in
helmets formed barriers by stretching orange netting across
intersections. Hordes of bicyclists participated in rolling protests
through nighttime streets, and helicopters hovered overhead.

These tableaus and others were described as they happened in text
messages that spread from mobile phone to mobile phone in New York
City and beyond. The people sending and receiving the messages were
using technology, developed by an anonymous group of artists and
activists called the Institute for Applied Autonomy, that allowed
users to form networks and transmit messages to hundreds or thousands
of telephones.

Although the service, called TXTmob, was widely used by demonstrators,
reporters and possibly even police officers, little was known about
its inventors. Last month, however, the New York City Law Department
issued a subpoena to Tad Hirsch, a doctoral candidate at the
Massachusetts Institute of Technology who wrote the code that created

Lawyers representing the city in lawsuits filed by hundreds of people
arrested during the convention asked Mr. Hirsch to hand over
voluminous records revealing the content of messages exchanged on his
service and identifying people who sent and received messages. Mr.
Hirsch says that some of the subpoenaed material no longer exists and
that he believes he has the right to keep other information secret.
“There’s a principle at stake here,” he said recently by telephone. “I
think I have a moral responsibility to the people who use my service
to protect their privacy.”

The subpoena, which was issued Feb. 4, instructed Mr. Hirsch, who is
completing his dissertation at M.I.T., to produce a wide range of
material, including all text messages sent via TXTmob during the
convention, the date and time of the messages, information about
people who sent and received messages, and lists of people who used
the service.

In a letter to the Law Department, David B. Rankin, a lawyer for Mr.
Hirsch, called the subpoena “vague” and “overbroad,” and wrote that
seeking information about TXTmob users who have nothing to do with
lawsuits against the city would violate their First Amendment and
privacy rights.

Lawyers for the city declined to comment. The subpoena is connected to
a group of 62 lawsuits against the city that stem from arrests during
the convention and have been consolidated in Federal District Court in
Manhattan. About 1,800 people were arrested and charged, but 90
percent of them ultimately walked away from court without pleading
guilty or being convicted. Many people complained that they were
arrested unjustly, and a State Supreme Court justice chastised the
city after hundreds of people were held by the police for more than 24
hours without a hearing.

The police commissioner, Raymond W. Kelly, has called the convention a
success for his department, which he credited with preventing major
disruptions during a turbulent week. He has countered complaints about
police tactics by saying that nearly a million people peacefully
expressed their political opinions, while the convention and the city
functioned smoothly. Mr. Hirsch said that the idea for TXTmob evolved
from conversations about how police departments were adopting
strategies to counter large-scale marches that converged at a single

While preparing for the 2004 political conventions in New York and
Boston, some demonstrators decided to plan decentralized protests in
which small, mobile groups held rallies and roamed the streets. “The
idea was to create a very dynamic, fluid environment,” Mr. Hirsch
said. “We wanted to transform areas around the entire city into
theaters of dissent.”

Organizers wanted to enable people in different areas to spread word
of what they were seeing in each spot and to coordinate their
movements. Mr. Hirsch said that he wrote the TXTmob code over about
two weeks. After a trial run in Boston during the Democratic National
Convention, the service was in wide use during the Republican
convention in New York. Hundreds of people went to the TXTmob Web site
and joined user groups at no charge.

As a result, when members of the War Resisters League were arrested
after starting to march up Broadway, or when Republican delegates
attended a performance of “The Lion King” on West 42nd Street, a
server under a desk in Cambridge, Mass., transmitted messages
detailing the action, often while scenes on the streets were still

Messages were exchanged by self-organized first-aid volunteers,
demonstrators urging each other on and even by people in far-flung
cities who simply wanted to trade thoughts or opinions with those on
the streets of New York. Reporters began monitoring the messages too,
looking for word of breaking news and rushing to spots where mass
arrests were said to be taking place. And Mr. Hirsch said he thought
it likely that police officers were among those receiving TXTmob
messages on their phones.

It is difficult to know for sure who received messages, but an
examination of police surveillance documents prepared in 2003 and
2004, and unsealed by a federal magistrate last year, makes it clear
that the authorities were aware of TXTmob at least a month before the
Republican convention began.

A document marked “N.Y.P.D. SECRET” and dated July 26, 2004, included
the address of the TXTmob Web site and stated, “It is anticipated that
text messaging is one of several different communications systems that
will be utilized to organize the upcoming RNC protests.”


Tad Hirsch
email : tad [at] media [dot] mit [dot] edu

John Henry
Institute for Applied Autonomy
email : iaa [at] appliedautonomy [dot] com


TXTmob: Text Messaging For Protest Swarms
BY Tad Hirsch and John Henry

Abstract: “This paper describes cell phone text messaging during the
2004 US Democratic and Republican National Conventions by protesters
using TXTmob – a text-message broadcast system developed by the
authors.  Drawing upon analysis of TXTmob messages, user interviews,
self-reporting, and news media accounts, we describe the ways that
activists used text messaging to share information and coordinate
actions during decentralized protests. We argue that text messaging
supports new forms of distributed participation in mass mobilizations.




Competition to Offer Prizes and SMS Platform to Grassroots NGOs  /
Sep. 17, 2007
nGOmobile initiative highlights the benefits of mobile technology in
the developing world

CAMBRIDGE, England, Sept. 17 /PRNewswire/ — Mobile technology
organization has launched its latest non-profit mobile
initiative – nGOmobile, a competition to help grassroots NGOs take
advantage of text messaging.

The explosive entry of mobile technology into the developing world has
opened up a raft of opportunities for the non-profit sector. Text
messaging has proved itself to be remarkably versatile, helping remind
patients to take their medicine, providing market prices to farmers
and fishermen, distributing health information, allowing the reporting
of human rights abuses and promoting increased citizen participation
in government. While the list may be long, not everyone has been able
to reap the benefits.

nGOmobile is a competition aimed exclusively at grassroots non-profit
Non Governmental Organizations (NGOs) working for positive social and
environmental change throughout the developing world. “Behind the
scenes, the often unsung heroes of the NGO community battle against
the daily realities of life in developing countries, where it can take
all day to fulfill the simplest task,” said Ken Banks, Founder of “These people don’t lack passion and commitment, they
lack tools and resources” said Banks.”

Grassroots NGOs around the world are invited to submit short project
ideas explaining how greater access to mobile technology – and SMS
text messaging in particular – would benefit them and their work. The
competition is open from today until 14th December 2007 with the
winners announced in January 2008.

The top four entries, chosen by a distinguished panel of judges, will
each win a brand new Hewlett Packard laptop computer, two Nokia mobile
phones, a GSM modem,’s own entry-level text messaging
platform – FrontlineSMS – and to top it all, a cash prize of US$1,000.

Sponsors of the competition include Hewlett Packard, Nokia,
ActiveXperts, 160 Characters, Wieden+Kennedy, mBlox and Perkins Coie

Panel of Judges Ken Banks, Founder, Neerja Raman, From
Good to Gold Mike Grenville, Editor, 160 Characters Micheline Ntiru,
Nokia’s Head of Corporate Social Investment for the Middle East and
Africa Bill Thompson, Journalist/commentator Renny Gleeson, Global
Director of Digital Strategies at Wieden+Kennedy The competition
website can be found at

Ken Banks, Founder
email : ken [dot] banks [at] ngomobile [dot] org

About Since 2003, has been helping local,
national and international non-profit Non-Governmental Organizations
(NGOs) make better use of information and communications technology in
their work. Specializing in the application of mobile technology, it
provides a wide range of ICT-related services drawing on over 22
year’s experience of its Founder, Ken Banks. believes that
all non-profits, whatever their size and wherever they operate, should
be given the opportunity to implement the latest mobile technologies
in their work, and actively seeks to provide the tools to enable them
to do so.





BY Jeffrey Kosseff   /  March 25, 2003

At first glance, it looks like a 9-1-1 log or a transcript from the
police scanner:

05:37pm Protesters damage cars on Second and Davis.
05:38pm March spreading north into Oldtown.
05:43pm Morrison Bridge closed again.

But the communications Thursday during antiwar protests in downtown
Portland weren’t from the police. Instead, they were part of 126 text
messages sent out to 65 protesters’ cell phones, pagers and e-mail

Protesters say they have long searched for an efficient and quick way
of sharing news of bridge shutdowns, flag burnings and pepper
spraying. And they seem to have found it in a relatively young
wireless technology that is reliable, cheap and instantaneous, sending
short bursts of text onto many cell-phone screens at once.

“It definitely helped spread the news around,” said Michael Plump, a
24-year-old computer programmer who organized a text-messaging system
to improve communication among protesters.

Spreading news of developments takes too long with cell-phone calls
because organizers can reach only one person at a time. Walkie-talkies
aren’t reliable or secure enough. And most people don’t have laptops
with wireless e-mail access.

Plump said that since police pepper-sprayed him at a protest during
President Bush’s Aug. 23 visit to Portland, he has wanted to get more
involved with peace protests. “I wanted to help people know where the
police actions were occurring and where they were pepper spraying so
they could get away from it,” Plump said.

Web of reports

So he developed a Web-based program that allows protesters to enter
their cell phone or pager numbers or e-mail addresses into an online
database, which he promoted on Portland activist Web sites. Most
people received the alerts on cell phones or pagers, though a few
received e-mails.

From 4 p.m. to midnight Thursday, about 15 protesters throughout
downtown Portland phoned or sent e-mail and text messages to Plump’s
friend, Casey Spain. Spain summarized developments into a few words
and sent them on to the 65 cell-phone numbers in the database. Plump,
who was in downtown Portland throughout the protests, said cheers
erupted whenever Spain sent news of activists storming a bridge or

And even amid the chaos, the protesters found time for text-messaging

08:27pm Rummor — police may be planning assult from under Burnside
08:28pm Someone plase scout under the bridge please!
08:31pm Police may be eating donuts under the bridge.

Cell-phone text messaging is gaining popularity. According to
Telephia, a California research firm, 24 percent of U.S. cell-phone
subscribers used text messaging in the first quarter of this year, up
from 20 percent the previous quarter.

Verizon service up

Verizon Wireless, which charges 10 cents to send and 2 cents to
receive each text message, has seen its news-alert service double
since January for headlines about the military and Federal Bureau of
Investigation. “A lot of people use text messaging now, and it has
been going up all the time,” said Georgia Taylor, a Verizon Wireless

Wireless companies began offering text messaging in the United States
about two years ago, said Goli Ameri, president of eTinium, a Portland
telecommunications consulting firm. It is not yet as popular in the
United States as it is in Asia and Europe. Intel recently ranked
Portland the top city in the nation for the use of wireless
technology, so Ameri said she isn’t surprised that people here are
finding new uses for text messaging.

“Portland is a pretty tech-savvy city,” she said. “That’s why you see
so many of these new technologies get introduced here first.”

{email : jeffkosseff [at] news [dot] oregonian [dot] com}


Videos Challenge Accounts of Convention Unrest
BY Jim Dwyer  /  April 12, 2005  /  New York Times

Dennis Kyne put up such a fight at a political protest last summer,
the arresting officer recalled, it took four police officers to haul
him down the steps of the New York Public Library and across Fifth

“We picked him up and we carried him while he squirmed and screamed,”
the officer, Matthew Wohl, testified in December. “I had one of his
legs because he was kicking and refusing to walk on his own.”

Accused of inciting a riot and resisting arrest, Mr. Kyne was the
first of the 1,806 people arrested in New York last summer during the
Republican National Convention to take his case to a jury. But one day
after Officer Wohl testified, and before the defense called a single
witness, the prosecutor abruptly dropped all charges.

During a recess, the defense had brought new information to the
prosecutor. A videotape shot by a documentary filmmaker showed Mr.
Kyne agitated but plainly walking under his own power down the library
steps, contradicting the vivid account of Officer Wohl, who was
nowhere to be seen in the pictures. Nor was the officer seen taking
part in the arrests of four other people at the library against whom
he signed complaints.

A sprawling body of visual evidence, made possible by inexpensive,
lightweight cameras in the hands of private citizens, volunteer
observers and the police themselves, has shifted the debate over
precisely what happened on the streets during the week of the

For Mr. Kyne and 400 others arrested that week, video recordings
provided evidence that they had not committed a crime or that the
charges against them could not be proved, according to defense lawyers
and prosecutors.

Among them was Alexander Dunlop, who said he was arrested while going
to pick up sushi.

Last week, he discovered that there were two versions of the same
police tape: the one that was to be used as evidence in his trial had
been edited at two spots, removing images that showed Mr. Dunlop
behaving peacefully. When a volunteer film archivist found a more
complete version of the tape and gave it to Mr. Dunlop’s lawyer,
prosecutors immediately dropped the charges and said that a technician
had cut the material by mistake.

Seven months after the convention at Madison Square Garden, criminal
charges have fallen against all but a handful of people arrested that
week. Of the 1,670 cases that have run their full course, 91 percent
ended with the charges dismissed or with a verdict of not guilty after
trial. Many were dropped without any finding of wrongdoing, but also
without any serious inquiry into the circumstances of the arrests,
with the Manhattan district attorney’s office agreeing that the cases
should be “adjourned in contemplation of dismissal.”

So far, 162 defendants have either pleaded guilty or were convicted
after trial, and videotapes that bolstered the prosecution’s case
played a role in at least some of those cases, although prosecutors
could not provide details.

Besides offering little support or actually undercutting the
prosecution of most of the people arrested, the videotapes also
highlight another substantial piece of the historical record: the
Police Department’s tactics in controlling the demonstrations, parades
and rallies of hundreds of thousands of people were largely free of
explicit violence.

Throughout the convention week and afterward, Mayor Michael R.
Bloomberg said that the police issued clear warnings about blocking
streets or sidewalks, and that officers moved to arrest only those who
defied them. In the view of many activists – and of many people who
maintain that they were passers-by and were swept into dragnets
indiscriminately thrown over large groups – the police strategy
appeared to be designed to sweep them off the streets on technical
grounds as a show of force.

“The police develop a narrative, the defendant has a different story,
and the question becomes, how do you resolve it?” said Eileen Clancy,
a member of I-Witness Video, a project that assembled hundreds of
videotapes shot during the convention by volunteers for use by defense

Paul J. Browne, a police spokesman, said that videotapes often do not
show the full sequence of events, and that the public should not rush
to criticize officers simply because their recollections of events are
not consistent with a single videotape. The Manhattan district
attorney’s office is reviewing the testimony of Officer Wohl at the
request of Lewis B. Oliver Jr., the lawyer who represented Mr. Kyne in
his arrest at the library.

The Police Department maintains that much of the videotape that has
surfaced since the convention captured what Mr. Browne called the
department’s professional handling of the protests and parades. “My
guess is that people who saw the police restraint admired it,” he

Video is a useful source of evidence, but not an easy one to manage,
because of the difficulties in finding a fleeting image in hundreds of
hours of tape. Moreover, many of the tapes lack index and time
markings, so cuts in the tape are not immediately apparent.

That was a problem in the case of Mr. Dunlop, who learned that his
tape had been altered only after Ms. Clancy found another version of
the same tape. Mr. Dunlop had been accused of pushing his bicycle into
a line of police officers on the Lower East Side and of resisting
arrest, but the deleted parts of the tape show him calmly approaching
the police line, and later submitting to arrest without apparent

A spokeswoman for the district attorney, Barbara Thompson, said the
material had been cut by a technician in the prosecutor’s office. “It
was our mistake,” she said. “The assistant district attorney wanted to
include that portion” because she initially believed that it supported
the charges against Mr. Dunlop. Later, however, the arresting officer,
who does not appear on the video, was no longer sure of the specifics
in the complaint against Mr. Dunlop.

In what appeared to be the most violent incident at the convention
protests, video shot by news reporters captured the beating of a man
on a motorcycle – a police officer in plainclothes – and led to the
arrest of one of those involved, Jamal Holiday. After eight months in
jail, he pleaded guilty last month to attempted assault, a low-level
felony that will be further reduced if he completes probation. His
lawyer, Elsie Chandler of the Neighborhood Defender Service of Harlem,
said that videos had led to his arrest, but also provided support for
his claim that he did not realize the man on the motorcycle was a
police officer, reducing the severity of the offense.

Mr. Browne, the police spokesman, said that despite many civilians
with cameras who were nearby when the officer was attacked, none of
the material was turned over to police trying to identify the
assailants. Footage from a freelance journalist led police to Mr.
Holiday, he said.

In the bulk of the 400 cases that were dismissed based on videotapes,
most involved arrests at three places – 16th Street near Union Square,
17th Street near Union Square and on Fulton Street – where police
officers and civilians taped the gatherings, said Martin R. Stolar,
the president of the New York City chapter of the National Lawyers
Guild. Those tapes showed that the demonstrators had followed the
instructions of senior officers to walk down those streets, only to
have another official order their arrests.

Ms. Thompson of the district attorney’s office said, “We looked at
videos from a variety of sources, and in a number of cases, we have
moved to dismiss.”


Texting It In: Monitoring Elections With Mobile Phones
BY KatrinVerclas  /  August 11, 2007

In Sierra Leone’s national election today, 500 election observers at
polling stations around the country are reporting on any
irregularities via SMS with their mobile phones. Independent
monitoring of elections via cell phone is growing aqround the world,
spearheaded by a few innovative NGOs.

The story starts in Montenegro, a small country in the former
Yugoslavia. On May 21, 2006 the country saw the first instance of
volunteer monitors using SMS, also known as text messaging, as their
main election reporting tool. A Montenegrin NGO, the Center for
Democratic Transition (CDT), with technical assistance from the
National Democratic Institute (NDI) in the United States, was the
first organization in the world to use text messaging to meet all
election day reporting requirements.

Since then, mobile phones have been deployed in six elections in
countries around the world, with volunteers systematically using text
messaging in election monitoring. Pioneered by NDI, SMS monitoring is
becoming a highly sophisticated rapid reporting tool used not just in
a referendum election like in Montenegro, but in parliamentary
elections with a plethora of candidates and parties and complex data
reported via SMS. This was the case in Bahrain, a small country in the
Middle East, where monitors reported individual election tallies in a
series of five to fourty concurrent SMS messages, using a
sophisticated cosding system, with near accuracy.

Today’s election in Sierra Leone is lead by the National Election
Watch (NEW), a coalition of over 200 NGOs in the country. Assisted by
NDI, NEW has monitors at 500 of the 6171 polling stations. Monitors
report on whether there are any irregularities via SMS back to
headquarters. This election is particularly significant for the
country: It is the first presidential election since U.N. peacekeepers
withdrew two years ago. It considered a historic poll that many hope
will show that the country can transfer power peacefully after a long
civil war and military coups. In the run-up to the election there was
sporadic violence in Freetown; making the independent monitoring by
NGOs particularly relevant and necessary.

Election monitoring is a highly technical discipline, with a
sophisticated set of methodologies and extensive volunteer training.
Preparation for an election monitoring exercise involves volunteer
training and advance planning that often starts months before an
election.  Election monitors, typically led by domestic non-
governmental organizations (NGOs) often with the help of foreign
technical assistance providers like NDI, can report on multiple
dimensions.  They may, depending on the election, report on
quantitative data such as real-time voter turnout and even on actual
election results. In those cases, monitors use the data to provide a
“quick count” projection of the election results.  If a “quick count”
is conducted then a statistical random sample of polling places is
carefully selected to ensure the validity of projections.

Monitors also report on qualitative data about how well the election
is executed. This may include information on whether polls are opening
on time, whether there are enough ballots available, whether there is
free access to polling places, and whether there is any evidence of
intimidation or any other irregularities.

Reports are transmitted using an agreed-upon set of codes from a
representative sample of polling places around the country. In Sierra
Leone, for example, there are monitors stationed at 500 polling places
in every part of the country who text in reports at regular intervals.

In many contested elections, especially in emerging democracies, speed
of reporting is of the essence. It is critical that NGOs and
independent civil society organizations report data accurately and
quickly even before official results are released, especially when
fraud is feared. Mobile phones have been an important tool in this
regard. They are, of course, not a new phenomenon in election
monitoring; after all, cell phones have been around for a while now.
But prior to NDI showcasing that SMS is a viable and reliable
communication medium in elections, mobile phones were used merely to
transmit reports verbally that then still had to be transcribed in a
time-consuming and error-prone manual process.

Chris Spence, Director of Technology at NDI recalls: “In 2003, we had
24/7 shifts of college students in five locations across Nigeria
entering data from paper forms that were faxed or hand-carried into
the data centers. Timeliness and quality control were huge issues when
nearly 15,000 forms containing dozens of responses each had to be
manually entered into a database. Today, in the elections where we’ve
used SMS, you watch the data flow into the database directly when it
is time for the monitors to report. The system automatically sends
confirmation messages back to the observer in an interactive exchange
of SMS messages, so accuracy increases. At reporting time, it is quite
amazing to see the numbers change on the screen as the sms messages
pour into the database.”

In addition to increased speed and greater accuracy of reporting, SMS
election monitoring has a noteworthy ancillary benefit: the real-time
ability by headquarters to communicate with observers throughout the
election day by sending text reminders and updates keeps volunteers
motivated and engaged. SMS and phone contact also provides vital
opportunities for security updates should political conditions take a
turn for the worst.  As a result, morale amongst the volunteers soars
there is far less polling station abandonment.

In order for large-scale SMS election monitoring to succeed, a number
of conditions have to be in place. When NDI assisted an Albanian
consortium of NGOs in the local elections there in 2006, all the right
elements were present: NDI was working with an experienced and
reliable local NGO partner; SMS bulk messaging was available for all
of the mobile phone companies; the phone companies worked with the
NGOs and were available and ready during election day to deal with any
problems on the spot; phone companies and the bulk SMS vendors were
able to handle thousands of messages per minute to a few numbers at
reporting times, wireless coverage even in rural areas was excellent,
and the phone companies provided so-called interconnect ability that
allowed monitors to send messages from all of the different carriers
to one reporting number.

In Sierra Leone where most of the carriers lack international gateway
interconnect ability, the NGO coalition there will need to set up a
series of local phone numbers so that observers can text to a number
within their own provider network.  This necessitates a much more
rudimentary and complicated setup: Seven phones are tethered to a
laptop and observers are texting directly to those phones without any
bulk messaging intermediary.  Messages arrive in the phone and are
passed to computer, the software reads it using custom scripts, and
the data is compiled in an Access database ready for analysis.
Concerns about the phones handling a high volume of messages in this
situation necessitates a more complicated reporting strategy whereby
each observer will report all of data in a single text message using a
simple coding scheme.  Because Sierra Leone has more spotty wireless
coverage, election monitors in rural areas will have to travel to
areas where there is coverage to send in their reports at the end of
the day.

An important consideration is the cost of a wide-scale program. To
date NDI has found this method of reporting much more economical than
other strategies.  Pricing for bulk sms from a provider like Clickatel
is relatively inexpensive. In the Albanian election, for example, the
bulk messaging costs for a total of some 41,000 messages received and
sent from 2100 monitors was $2400 US Dollars — an extremely
inexpensive way to receive such massive amounts of data.

NDI uses a software called SMS Reception Center, built by a developer
in Russia and costing all of $69 USD. NDI tweaked the scripts over
time, and paid the developer to improve the product for its purposes
and specific local conditions.

In addition to the technical issues and costs inherent in running a
large-scale operation, Spence notes a number of strategic issues to
consider: The NGO partner on the ground needs to be experienced in
electoral monitoring, the information collected needs to be suitable
for the limited text messaging format of 160 chracters, and text
messaging needs to be commonly used and part of the local culture.
Notes Spence: “In all the countries we have worked, one thing we do
not have to do is train anyone how to text.”

In Nigeria earlier this year, a local NGO, the Human Emancipation
Project, ran a small-scale citizen monitoring program that used
untrained citizen reporters to send in SMS messages to one number. The
NGO compiled and aggregated the incoming messages and issued a report
after the election. Using a grassroots software tool, Frontline SMS,
organizers reported that about 8,000 individuals texted in some kind
of report. This is a very different method from the systematic
election monitoring conducted by NGO observer organizations and their
technical assistant providers where a more rigorous protocol is
adhered to. There is merit in engaging every-day citizens to protect
their country’s elections even if these efforts do not produce
reliable and verifiable election results and reports in the manner
that systematic election monitoring does. The Nigerian effort was
widely covered BBC News, and other outlets.

In the two years since the first large-scale SMS monitoring in
Montenegro, there have been rapid improvements in mobile services as
competition in the wireless industry has increased worldwide, and
there is growing interest and understanding on the part of NGOs that
systematic election monitoring is not as difficult as it first may
seem. As election monitoring via SMS becomes standardized and NGOs
gain experience, there is no reason for mobile phones and SMS not to
play a greater role in other areas of civic participation. For
example, imagine citizen oversight of public works projects where
people might report on whether a clinic is actually built as indicated
in a local budget. Other applications may be monitoring and
accountability of elected officials, and dissemination of voter
registration information such as the address of where to register, or
the nearest polling station. Several pilot projects in the United
States showed promising results in increasing voter turnout by text
message reminders. The future is bright for innovative ways in which
cell phones are used by citizens to participate and engage in their
countries as the mobile revolution unfolds.


Moving beyond Nigeria’s mobile rough patch
BY Judy Breck  /  August 27th, 2007

Reuters is reporting this morning that “Nigeria Aims to Let Mobile
Phone Users Keep Numbers.” The plan is to allow subscribers to keep
their numbers as they switch among providers — hopefully to improve
service through competition. The report includes this description of
the roughness of present service in Nigeria, which is interesting to
realize. Mobile has been making a positive transition in Africa in
spite of the problems described below. When mobile service gets
better, the transition should have important new impetus one would

Nigeria’s booming mobile phone market has grown from scratch to over
30 million subscribers in six years, making it one of the fastest-
growing in the world.

It is seen as having potential for many more years of rapid growth as
Nigeria is Africa’s most populous country with 140 million people, the
majority of whom do not have phones.

However, the quality of service from mobile phone providers has always
been patchy and it has deteriorated over time.

Subscribers often have to dial several times before a call goes
through. Sometimes no calls go through for hours. When they do
connect, the lines are often so bad that callers cannot hear each
other. Calls frequently cut off after a few seconds and text messages
can be delayed by hours.

Mobile operators argue that services are impaired by frequent
blackouts, forcing companies to provide their own power with costly
diesel generators, and constant vandalism and armed attacks on
facilities and staff.


Monks Are Silenced, and for Now, Internet Is, Too
BY Seth Mydans  /  October 4, 2007

BANGKOK, Oct. 3 — It was about as simple and uncomplicated as shooting
demonstrators in the streets. Embarrassed by smuggled video and
photographs that showed their people rising up against them, the
generals who run Myanmar simply switched off the Internet. Until
Friday television screens and newspapers abroad were flooded with
scenes of tens of thousands of red-robed monks in the streets and of
chaos and violence as the junta stamped out the biggest popular
uprising there in two decades.

But then the images, text messages and postings stopped, shut down by
generals who belatedly grasped the power of the Internet to jeopardize
their crackdown. “Finally they realized that this was their biggest
enemy, and they took it down,” said Aung Zaw, editor of an exile
magazine based in Thailand called The Irrawaddy, whose Web site has
been a leading source of information in recent weeks. The site has
been attacked by a virus whose timing raises the possibility that the
military government has a few skilled hackers in its ranks.

The efficiency of this latest, technological, crackdown raises the
question whether the vaunted role of the Internet in undermining
repression can stand up to a determined and ruthless government — or
whether Myanmar, already isolated from the world, can ride out a
prolonged shutdown more easily than most countries.

OpenNet Initiative, which tracks Internet censorship, has documented
signs that in recent years several governments — including those of
Belarus, Kyrgyzstan and Tajikistan — have closed off Internet access,
or at least opposition Web sites, during periods preceding elections
or times of intense protests. The brief disruptions are known as “just
in time” filtering, said Ronald J. Deibert of OpenNet. They are
designed to quiet opponents while maintaining an appearance of
technical difficulties, thus avoiding criticism from abroad. In 2005,
King Gyanendra of Nepal ousted the government and imposed a weeklong
communications blackout. Facing massive protests, he ceded control in

Myanmar has just two Internet service providers, and shutting them
down was not complicated, said David Mathieson, an expert on Myanmar
with Human Rights Watch. Along with the Internet, the junta cut off
most telephone access to the outside world. Soldiers on the streets
confiscated cameras and video-recording cellphones. “The crackdown on
the media and on information flow is parallel to the physical
crackdown,” he said. “It seems they’ve done it quite effectively.
Since Friday we’ve seen no new images come out.” In keeping with the
country’s self-imposed isolation over the past half-century, Myanmar’s
military seemed prepared to cut the country off from the virtual world
just as it had from the world at large. Web access has not been
restored, and there is no way to know if or when it might be.

At the same time, the junta turned to the oldest tactic of all to
silence opposition: fear. Local journalists and people caught
transmitting information or using cameras are being threatened and
arrested, according to Burmese exile groups. In a final, hurried
telephone call, Mr. Aung Zaw said, one of his longtime sources said
goodbye. “We have done enough,” he said the source told him. “We can
no longer move around. It is over to you — we cannot do anything
anymore. We are down. We are hunted by soldiers — we are down.”

There are still images to come, Mr. Aung Zaw said, and as soon as he
receives them and his Web site is back up, the world will see them.
But Mr. Mathieson said the country’s dissidents were reverting to
tactics of the past, smuggling images out through cellphones, breaking
the files down for reassembly later. It is not clear how much longer
the generals can hold back the future. Technology is making it harder
for dictators and juntas to draw a curtain of secrecy. “There are
always ways people find of getting information out, and authorities
always have to struggle with them,” said Mitchell Stephens, a
professor of journalism at New York University and the author of “A
History of News.”

“There are fewer and fewer events that we don’t have film images of:
the world is filled with Zapruders,” he said, referring to Abraham
Zapruder, the onlooker who recorded the assassination of President
John F. Kennedy in 1963. Before Friday’s blackout, Myanmar’s hit-and-
run journalists were staging a virtuoso demonstration of the power of
the Internet to outmaneuver a repressive government. A guerrilla army
of citizen reporters was smuggling out pictures even as events were
unfolding, and the world was watching.

“For those of us who study the history of communication technology,
this is of equal importance to the telegraph, which was the first
medium that separated communications and transportation,” said Frank
A. Moretti, executive director of the Center for New Media Teaching
and Learning at Columbia University. Since the protests began in mid-
August, people have sent images and words through SMS text messages
and e-mail and on daily blogs, according to some exile groups that
received the messages. They have posted notices on Facebook, the
social networking Web site. They have sent tiny messages on e-cards.
They have updated the online encyclopedia Wikipedia.

They also used Internet versions of “pigeons” — the couriers that
reporters used in the past to carry out film and reports — handing
their material to embassies or nongovernment organizations with
satellite connections. Within hours, the images and reports were
broadcast back into Myanmar by foreign radio and television stations,
informing and connecting a public that hears only propaganda from its

These technological tricks may offer a model to people elsewhere who
are trying to outwit repressive governments. But the generals’ heavy-
handed response is probably a less useful model. Nations with larger
economies and more ties to the outside world have more at stake.
China, for one, could not consider cutting itself off as Myanmar has
done, and so control of the Internet is an industry in itself. “In
China, it’s massive,” said Xiao Qiang, director of the China Internet
Project and an adjunct professor at the graduate school of journalism
at the University of California, Berkeley.

“There’s surveillance and intimidation, there’s legal regulation and
there is commercial leverage to force private Internet companies to
self-censor,” he said. “And there is what we call the Great Firewall,
which blocks hundreds of thousands of Web sites outside of China.” Yet
for all its efforts, even China cannot entirely control the Internet,
an easier task in a smaller country like Myanmar.

As technology makes everyone a potential reporter, the challenge in
risky places like Myanmar will be accuracy, said Vincent Brossel, head
of the Asian section of the press freedom organization Reporters
Without Borders. “Rumors are the worst enemy of independent
journalism,” he said. “Already we are hearing so many strange things.
So if you have no flow of information and the spread of rumors in a
country that is using propaganda — that’s it. You are destroying the
story, and day by day it goes down.” The technological advances on the
streets of Myanmar are the latest in a long history of revolutions in
the transmission of news — from the sailing ship to the telegraph to
international telephone lines and the telex machine to computers and
satellite telephones.

“Today every citizen is a war correspondent,” said Phillip Knightley,
author of “The First Casualty,” a classic history of war reporting
that starts with letters home from soldiers in Crimea in the 1850s and
ends with the “living room war” in Vietnam in the 1970s, the first war
that people could watch on television. “Mobile phones with video of
broadcast quality have made it possible for anyone to report a war,”
he said in an e-mail interview. “You just have to be there. No trouble
getting a start: the broadcasters have been begging viewers to send
their stuff.”


Shanghai’s Middle Class Launches Quiet, Meticulous Revolt
BY Maureen Fan  /  January 26, 2008

SHANGHAI — Bundled against the cold, the businessman made his way
down the steps. Coming toward him in blue mittens was a middle-aged
woman. “Do you know that we’re going to take a stroll this weekend?”
she whispered, using the latest euphemism for the unofficial protests
that have unnerved authorities in Shanghai over the past month. He

Behind her, protest banners streamed from the windows of high-rise
apartment blocks, signs of middle-class discontent over a planned
extension of the city’s magnetic levitation, or maglev, train through
residential neighborhoods. The couple checked to make sure no
plainclothes police were nearby and discussed where security forces
had been posted in recent days. “Did you take any photos?” the man
asked. Yes, she said, promising to send them to him so he could post
the evidence online. In a minute, the exchange was over, but the news
would soon be added to the steady flow of reports being posted on
blogs and community bulletin boards, as well as in housing compounds
along the proposed extension — which residents contend will bring
noise pollution and possibly dangerous radiation to their

The sudden “strolls” by thousands of office workers, company managers,
young families and the elderly in this sleek financial hub are the
latest chapter in a quiet middle-class battle against government
officials. The protesters are going about their mission carefully, and
many speak anonymously for fear of retribution in a country that
stifles dissent. The Communist Party has a massive security apparatus
that closely monitors what it views as subversive activity. The party
sometimes allows public protests if they serve its political
interests, such as the ouster of corrupt officials.

But the protests here have been unusual. They are led by homeowners
and professionals — people who may not previously have had much to
complain to the government about but whose awareness of their
individual rights has grown along with their prosperity. Police, who
have routinely put down rural protests by poor farmers, have found it
more difficult to intimidate an affluent, educated crowd in a major

The demonstrations do have at least one recent precursor, and it is
one Shanghai residents acknowledge using for inspiration. In the
picturesque seaside city of Xiamen, thousands of middle-class
residents have managed at least temporarily to halt the construction
of a $1 billion chemical factory because of environmental concerns.
Demonstrators in that city, in Fujian province, relied on the Internet
and cellphone text messaging to organize strolls and other opposition.
“We learned from Xiamen,” said Gu Qidong, 36, a Shanghai protester and
freelance sales consultant in the health-care industry. “We have no
other way besides this. We once asked if we could apply for a march
permit, and the police said they would never approve it.”

As in Xiamen, Shanghai residents have spent countless hours
researching their cause. They have posted fliers sprinkled with such
phrases as “electromagnetic compatibility” and wooed residents and
news media with slick PowerPoint presentations that question whether a
55-yard-wide safety buffer envisioned for each side of the rail
extension would be sufficient to keep noise and vibration from
reaching their apartments.

They say the existing maglev route, which takes passengers from an out-
of-the-way suburban subway stop to one of the city’s international
airports in less than eight minutes, is a showy waste of money. When
it opened four years ago, they note, the line operated at less than 20
percent capacity; after ticket prices were lowered, it ran at 27
percent capacity.

Armed with knowledge of the law, the Shanghai residents became angry
that public officials had neither given proper notice of their plans
for the extension nor held a public hearing. And so they decided they
had no alternative but to “take a stroll” or “go shopping.” They
started small, and they were careful to say they did not oppose the

First, a small group of protesters met at a shopping center the
morning of Jan. 6, shouting “Reject the maglev!” and “We want to
protect our homes!” They left after an hour, regrouping later in a
neighborhood near where the extension would be built.

A few days later, hundreds of people went to a mall that is popular
with tourists and made an evening stop in another affected
neighborhood. By Jan. 12, thousands of people were gathering at
People’s Square and on Nanjing Lu, both high-profile locations in
downtown Shanghai, shouting “People’s police should protect the
people!” and “Save our homes!”

The growing boldness of the protesters has prompted city officials to
emphasize that residents should find “normal” channels to vent their
unhappiness. “We will forestall and defuse social tensions,” Shanghai
Mayor Han Zheng said in his annual government report Thursday, in what
appeared to be a tacit nod to the protesters’ concerns.

After each stroll, residents upload photos and videos to Chinese Web
sites, which are often blocked by the government, and to YouTube, a
site that isn’t. The project has turned neighbors who did not know
each other into close friends and allies who now compare notes and
strategize. “They can’t arrest everybody,” said Yao, a 58-year-old
protester who asked that his full name not be used because he is a
manager at a state-owned enterprise. “We haven’t done anything wrong,”
said Wang Guowei, 51, a manager in a Chinese-Japanese plastics venture
whose family lives near the planned extension. “We always follow the
Chinese constitution, we never violate the law. And in our many
contacts with the police, they say we are within the law.”

A victory for the protesters here does not seem as likely as the one
activists achieved in Xiamen. Proud city officials hope the maglev
extension will further cement Shanghai’s reputation as the mainland’s
most advanced city when the train connects the city’s two airports and
the site of the 2010 World Expo. City officials have already made some
concessions. An original plan to extend the train from Shanghai to the
city of Hangzhou, for example, was scrapped in May. The new extension
proposal announced Dec. 29 lops almost two miles off the old plan, and
one section of track would be underground. But opponents say such
concessions are small.

Critics of the government plan point out that even some residents who
use the train are skeptical of the usefulness of an extension. “I’d
rather see an ordinary railway connecting” Pudong international and
Hongqiao airport. “It’s cheap, and it’s almost the same convenience,”
said Chen Min, 37, an airline pilot who rides the train each time he
flies abroad. “Does China really need more maglev trains? Does China
really need expensive things?”

Shanghai municipal officials declined requests for comment. At a news
conference this week, government spokeswoman Jiao Yang said Shanghai
Maglev Transportation Development Co., the Shanghai Academy of
Environmental Science and the Municipal Urban Planning Administration
would analyze public opinion “seriously.”

Without the entire city united against the project, residents concede
they are not optimistic the extension will be scrapped. “But we must
insist on our position. We require our government to respect the law,
and public construction must follow a legal framework and the right
procedure,” said the 54-year-old businessman who asked another
protester for her photos. “Our action is a way to wake up people’s
awareness of their civil rights.”

Facebook used to target Colombia’s FARC with global rally

Internet site to spawn protests in 185 cities Monday against rebel
group’s methods
BY Sibylla Brodzinsky  /  February 4, 2008

Bogotá, Colombia – Hundreds of thousands of Colombians are expected to
march throughout the country and in major cities around the world
Monday to protest against this nation’s oldest and most powerful rebel

What began as a group of young people venting their rage at the
Revolutionary Armed Forces of Colombia (FARC) on Facebook, an Internet
social-networking site, has ballooned into an international event
called “One Million Voices Against FARC.”

“We expected the idea to resound with a lot of people but not so much
and not so quickly,” says Oscar Morales, who started the Facebook
group against the FARC, which now has 230,000 members. Organizers are
expecting marches in 185 cities around the world.

The event is another example of how technology – such as text
messaging on cellphones – can be used to rally large numbers of people
to a cause. Some observers say it’s less a response to the FARC’s
ideology than it is global public outrage over kidnapping as a weapon.

Colombia continues to be the world’s kidnapping capital with as many
as 3,000 hostages now being held. Anger over the practice has risen in
recent months after two women released by the FARC last month after
six years in captivity recounted the hardships they and other hostages

Monday’s protests have the support of the government, many
nongovernmental organizations, and some political parties but its main
battle cry of “No More FARC” has also polarized some Colombians rather
than bringing them together.

While few Colombians support the Marxist insurgent army that has been
fighting the Colombian state for more than 40 years, many people are
uncomfortable with the message of Monday’s rally. They would prefer a
broader slogan against kidnapping and in favor of peace and of
negotiations between the government and the rebels to exchange
hostages for jailed rebels. The leftist Polo Democratico Party said it
will hold a rally in Bogotá in favor of a negotiation but would not
march. Some senators say they will march against Venezuelan President
Hugo Chávez, and other participants say they will be marching in favor
of Colombian President Alvaro Uribe.

Consuelo González de Perdomo, one of the two women released by the
FARC on Jan. 10 said she would not be marching at all.

The families of the 45 remaining FARC hostages will not march either.
“The way the march was called aims to polarize the country,” says
Deyanira Ortiz, whose husband, Orlando Beltrán Cuéllar, has been held
by the FARC for six years. “It’s not for the freedom of the hostages
but against the FARC. And that doesn’t serve any purpose.”

Instead, the families and released FARC hostages will gather in
churches to pray for the release of their loved ones and for a
humanitarian agreement.

Rosa Cristina Parra, one of the original organizers of the march said
the position of the hostage families is “completely understandable”
and will not detract from the importance of the event. “We cannot
forget the other victims of the FARC, the land-mine victims, the
displaced people,” she says.



NYC, the NYPD, the RNC, and Me
Fortress Big Apple, 2007  /  BY Nick Turse

One day in August, I walked into the Daniel Patrick Moynihan
United States Courthouse in lower Manhattan. Nearly three years before
I had been locked up, about two blocks away, in “the Tombs” — the
infamous jail then named the Bernard B. Kerik Complex for the now-
disgraced New York City Police Commissioner. You see, I am one of the
demonstrators who was illegally arrested by the New York City Police
Department (NYPD) during the protests against the 2004 Republican
National Convention (RNC). My crime had been — in an effort to call
attention to the human toll of America’s wars — to ride the subway,
dressed in black with the pallor of death about me (thanks to
cornstarch and cold cream), and an expression to match, sporting a
placard around my neck that read: WAR DEAD.

I was with a small group and our plan was to travel from Union
Square to Harlem, change trains, and ride all the way back down to
Astor Place. But when my small group exited the train at the 125th
Street station in Harlem, we were arrested by a swarm of police,
marched to a waiting paddy wagon and driven to a filthy detention
center. There, we were locked away for hours in a series of razor-wire-
topped pens, before being bussed to the Tombs.

Now, I was back to resolve the matter of my illegal arrest. As I
walked through the metal detector of the Federal building, a security
official searched my bag. He didn’t like what he found. “You could be
shot for carrying that in here,” he told me. “You could be shot.”

For the moment, however, the identification of that dangerous
object I attempted to slip into the federal facility will have to
wait. Let me instead back up to July 2004, when, with the RNC fast-
approaching, I authored an article on the militarization of Manhattan
— “the transformation of the island into a ‘homeland-security state'”
— and followed it up that September with a street-level recap of the
convention protests, including news of the deployment of an
experimental sound weapon, the Long Range Acoustic Device, by the
NYPD, and the department’s use of an on-loan Fuji blimp as a “spy-in-
the-sky.” Back then, I suggested that the RNC gave New York’s
“finest,” a perfect opportunity to “refine, perfect, and implement new
tactics (someday, perhaps, to be known as the ‘New York model’) for
use penning in or squelching dissent. It offered them the chance to
write up a playbook on how citizens’ legal rights and civil liberties
may be abridged, constrained, and violated at their discretion.”
Little did I know how much worse it could get.

No Escape

Since then, the city’s security forces have eagerly embraced an
Escape From New York-aesthetic — an urge to turn Manhattan into a
walled-in fortress island under high-tech government surveillance,
guarded by heavily armed security forces, with helicopters perpetually
overhead. Beginning in Harlem in 2006, near the site of two new luxury
condos, the NYPD set up a moveable “two-story booth tower, called Sky
Watch,” that gave an “officer sitting inside a better vantage point
from which to monitor the area.” The Panopticon-like structure —
originally used by hunters to shoot quarry from overhead and now also
utilized by the Department of Homeland Security along the Mexican
border — was outfitted with black-tinted windows, a spotlight,
sensors, and four to five cameras. Now, five Sky Watch towers are in
service, rotating in and out of various neighborhoods.

With their 20-25 neighborhood-scanning cameras, the towers are
only a tiny fraction of the Big Apple surveillance story. Back in
1998, the New York Civil Liberties Union (NYCLU) found that there were
“2,397 cameras used by a wide variety of private businesses and
government agencies throughout Manhattan” — and that was just one
borough. About a year after the RNC, the group reported that a survey
of just a quarter of that borough yielded a count of more than 4,000
surveillance cameras of every kind. At about the same time, military-
corporate giant Lockheed Martin was awarded a $212 million contract to
build a “counter-terrorist surveillance and security system for New
York’s subways and commuter railroads as well as bridges and tunnels”
that would increase the camera total by more than 1,000. A year later,
as seems to regularly be the case with contracts involving the
military-corporate complex, that contract had already ballooned to
$280 million, although the system was not to be operational until at
least 2008.

In 2006, according to a Metropolitan Transit Authority (MTA)
spokesman, the MTA already had a “3,000-camera-strong surveillance
system,” while the NYPD was operating “an additional 3,000 cameras”
around the city. That same year, Bill Brown, a member of the
Surveillance Camera Players — a group that leads surveillance-camera
tours and maps their use around the city, estimated, according to a
Newsweek article, that the total number of surveillance cameras in New
York exceeded 15,000 — “a figure city officials say they have no way
to verify because they lack a system of registry.” Recently, Brown
told me that 15,000 was an estimate for the number of cameras in
Manhattan, alone. For the city as a whole, he suspects the count has
now reached about 40,000.

This July, NYPD officials announced plans to up the ante. By the
end of 2007, according to the New York Times, they pledged to install
“more than 100 cameras” to monitor “cars moving through Lower
Manhattan, the beginning phase of a London-style surveillance system
that would be the first in the United States.” This “Ring of Steel”
scheme, which has already received $10 million in funding from the
Department of Homeland Security (in addition to $15 million in city
funds), aims to exponentially decrease privacy because, if “fully
financed, it will include…. 3,000 public and private security
cameras below Canal Street, as well as a center staffed by the police
and private security officers” to monitor all those electronic eyes.

Spies in the Sky

At the time of the RNC, the NYPD was already mounted on police
horses, bicycles, and scooters, as well as an untold number of marked
and unmarked cars, vans, trucks, and armored vehicles, not to mention
various types of water-craft. In 2007, the two-wheeled Segway joined
its list of land vehicles.

Overhead, the NYPD aviation unit, utilizing seven helicopters,
proudly claims to be “in operation 24/7, 365,” according to Deputy
Inspector Joseph Gallucci, its commanding officer. Not only are all
the choppers outfitted with “state of the art cameras and heat-sensing
devices,” as well as “the latest mapping, tracking and surveillance
technology,” but one is a “$10 million ‘stealth bird,’ which has no
police markings — [so] that those on the ground have no idea they are
being watched.”

Asked about concerns over intrusive spying by members of the
aviation unit — characterized by Gallucci as “a bunch of big boys who
like big expensive toys” — Police Commissioner Raymond W. Kelly
scoffed. “We’re not able to, even if we wanted, to look into private
spaces,” he told the New York Times. “We’re looking at public areas.”
However, in 2005, it was revealed that, on the eve of the RNC
protests, members of the aviation unit took a break and used their
night-vision cameras to record “an intimate moment” shared by a
“couple on the terrace of a Second Avenue penthouse.”

Despite this incident, which only came to light because the same
tape included images that had to be turned over to a defendant in an
unrelated trial, Kelly has called for more aerial surveillance. The
commissioner apparently also got used to having the Fuji blimp at his
disposal, though he noted that “it’s not easy to send blimps into the
airspace over New York.” He then “challenged the aerospace industry to
find a solution” that would, no doubt, bring the city closer to life
under total surveillance.

Police Misconduct: The RNC

As a result of its long history of brutality, corruption, spying,
silencing dissent, and engaging in illegal activities, the NYPD is a
particularly secretive organization. As such, the full story of the
department’s misconduct during the Republican National Convention has
yet to be told; but, even in an era of heightened security and
defensiveness, what has emerged hasn’t been pretty.

By April 2005, New York Times journalist Jim Dwyer was already
reporting that, “of the 1,670 [RNC arrest] cases that have run their
full course, 91 percent ended with the charges dismissed or with a
verdict of not guilty after trial. Many were dropped without any
finding of wrongdoing, but also without any serious inquiry into the
circumstances of the arrests, with the Manhattan district attorney’s
office agreeing that the cases should be ‘adjourned in contemplation
of dismissal.'” In one case that went to trial, it was found that
video footage of an arrest had been doctored to bolster the NYPD’s
claims. (All charges were dropped against that defendant. In 400 other
RNC cases, by the spring of 2005, video recordings had either
demonstrated that defendants had not committed crimes or that charges
could not be proved against them.)

Since shifting to “zero-tolerance” law enforcement policies under
Mayor (now Republican presidential candidate) Rudolph Giuliani, the
city has been employing a system of policing where arrests are used to
punish people who have been convicted of no crime whatsoever,
including, as at the RNC or the city’s monthly Critical Mass bike
rides, those who engage in any form of protest. Prior to the Giuliani
era, about half of all those “arrested for low-level offenses would
get a desk-appearance ticket ordering them to go to court.” Now the
proportion is 10%. (NYPD documents show that the decision to arrest
protesters, not issue summonses, was part of the planning process
prior to the RNC.)

Speaking at the 2007 meeting of the American Sociological
Association, Michael P. Jacobson, Giuliani’s probation and correction
commissioner, outlined how the city’s policy of punishing the presumed
innocent works:

“Essentially, everyone who’s arrested in New York City, in the
parlance of city criminal justice lingo, goes through ‘the system’….
if you’ve never gone through the system, even 24 hours — that’s a
shocking period of punishment. It’s debasing, it’s difficult. You’re
probably in a fairly gross police lockup. You probably have no toilet
paper. You’re given a baloney sandwich, and the baloney is green.”

In 2005, the Times’ Dwyer revealed that at public gatherings since
the time of the RNC, police officers had not only “conducted covert
surveillance… of people protesting the Iraq war, bicycle riders taking
part in mass rallies and even mourners at a street vigil for a cyclist
killed in an accident,” but had acted as agent provocateurs. At the
RNC, there were multiple incidents in which undercover agents
influenced events or riled up crowds. In one case, a “sham arrest” of
“a man secretly working with the police led to a bruising
confrontation between officers in riot gear and bystanders.”

In 2006, the Civilian Complaint Review Board (CCRB), reported
“that hundreds of Convention protesters may have been unnecessarily
and unlawfully arrested because NYPD officials failed to give adequate
orders to disperse and failed to afford protesters a reasonable
opportunity to disperse.”

Police Commissioner Kelly had no hesitation about rejecting the
organization’s report. Still, these were strong words, considering the
weakness of the source. The overall impotence of the CCRB suggests a
great deal about the NYPD’s culture of unaccountability. According to
an ACLU report, the board “investigates fewer than half of all
complaints that it reviews, and it produces a finding on the merits in
only three of ten complaints disposed of in any given year.” This
inaction is no small thing, given the surge of complaints against NYPD
officers in recent years. In 2001, before Mayor Bloomberg and Police
Commissioner Kelly came to power, the CCRB received 4,251 complaints.
By 2006, the number of complaints had jumped by 80% to 7,669. Even
more telling are the type of allegations found to be on the rise (and
largely ignored). According to the ACLU, from 2005 to 2006, complaints
over the use of excessive force jumped 26.8% — “nearly double the
increase in complaints filed.”

It was in this context that the planning for the RNC
demonstrations took place. In 2006, in five internal police reports
made public as part of a lawsuit, “New York City police commanders
candidly discuss[ed] how they had successfully used ‘proactive
arrests,’ covert surveillance and psychological tactics at political
demonstrations in 2002, and recommend[ed] that those approaches be
employed at future gatherings.” A draft report from the department’s
Disorder Control Unit had a not-so-startling recommendation, given
what did happen at the RNC: “Utilize undercover officers to distribute
misinformation within the crowds.”

According to Dwyer, for at least a year prior to those
demonstrations, “teams of undercover New York City police officers
traveled to cities across the country, Canada and Europe” to conduct
covert surveillance of activists. “In hundreds of reports, stamped
‘N.Y.P.D. Secret,’ [the NYPD’s] Intelligence Division chronicled the
views and plans of people who had no apparent intention of breaking
the law, [including] street theater companies, church groups and
antiwar organizations, as well as environmentalists and people opposed
to the death penalty, globalization and other government policies.”
Three elected city councilmen — Charles Barron, Bill Perkins and
Larry B. Seabrook — were even cited in the reports for endorsing a
protest event held on January 15, 2004 in honor of Dr. Martin Luther
King Jr.’s birthday.

In August, the New York Times editorial page decried the city’s
continuing attempts to keep documents outlining the police
department’s spying and other covert activities secret:

“The city of New York is waging a losing and ill-conceived
battle for overzealous secrecy surrounding nearly 2,000 arrests during
the 2004 Republican National Convention…. Police Commissioner Ray
Kelly seemed to cast an awfully wide and indiscriminate net in seeking
out potential troublemakers. For more than a year before the
convention, members of a police spy unit headed by a former official
of the Central Intelligence Agency infiltrated a wide range of groups…
many of the targets … posed no danger or credible threat.”

The Times concluded that — coupled with Mayor Michael Bloomberg’s
efforts to disrupt and criminalize protest during the convention week
— “police action helped to all but eliminate dissent from New York
City during the Republican delegates’ visit. If that was the goal,
then mission accomplished. And civil rights denied.”

Police Commissioner Kelly had a radically different take on his
department’s conduct. Earlier this year, he claimed that “the
Republican National Convention was perhaps the finest hour in the
history of the New York City Department.”

Police Misconduct: 2007

“Finest” might seem a funny term for the NYPD’s actions, but these
days everyone’s a relativist. In the years since the RNC protests, the
NYPD has been mired in scandal after scandal — from killing unarmed
black men and “violations of civil rights” at the National Puerto
Rican Day Parade to issuing “sweeping generalizations” that lead to
“labeling almost every American Muslim as a potential terrorist.” And,
believe it or not, the racial and political scandals were but a modest
part of the mix. Add to them, killings, sexual assaults, kidnapping,
armed robbery, burglary, corruption, theft, drug-related offenses,
conspiracy — and that’s just a start when it comes to crimes members
of the force have been charged with. It’s a rap sheet fit for Public
Enemy #1, and we’re only talking about the story of the NYPD in the
not-yet-completed year of 2007.

For example, earlier this year a 13-year NYPD veteran was
“arrested on charges of hindering prosecution, tampering with
evidence, obstructing governmental administration and unlawful
possession of marijuana,” in connection with the shooting of another
officer. In an unrelated case, two other NYPD officers were arrested
and “charged with attempted kidnapping, armed robbery, armed burglary
and other offenses.”

In a third case, the New York Post reported that a “veteran NYPD
captain has been stripped of his badge and gun as part of a federal
corruption probe that already has led to the indictment of an Internal
Affairs sergeant who allegedly tipped other cops that they were being
investigated.” And that isn’t the only NYPD cover-up allegation to
surface of late. With cops interfering in investigations of fellow
cops and offering advice on how to deflect such probes, it’s a wonder
any type of wrongdoing surfaces. Yet, the level of misconduct in the
department appears to be sweeping enough to be irrepressible.

For instance, sex crime scandals have embroiled numerous officers
— including one “accused of sexually molesting his young
stepdaughter,” who pled guilty to “a misdemeanor charge of child
endangerment,” and another “at a Queens hospital charged with
possessing and sharing child pornography.” In a third case, a member
of the NYPD’s School Safety Division was “charged with the attempted
rape and sexual abuse of a 14-year-old girl.” In a fourth case, a
“police officer pleaded guilty…. to a grotesque romance with an
infatuated 13-year-old girl.” Meanwhile, an NYPD officer, who molested
women while on duty and in uniform, was convicted of sexual abuse and
official misconduct.

Cop-on-cop sexual misconduct of an extreme nature has also
surfaced…. but why go on? You get the idea. And, if you don’t, there
are lurid cases galore to check out, like the investigation into
“whether [an] NYPD officer who fatally shot his teen lover before
killing himself murdered the boyfriend of a past lover,” or the
officer who was “charged with intentional murder in the shooting death
of his 22-year-old girlfriend.” And don’t even get me started on the
officer “facing charges of conspiracy to distribute narcotics and
conspiracy to commit robberies of drugs and drug proceeds from
narcotics traffickers.”

All of this, and much more, has emerged in spite of the classic
blue-wall-of-silence. It makes you wonder: In the surveillance state
to come, are we going to be herded and observed by New York’s finest

It’s important to note that all of these cases have begun despite
a striking NYPD culture of non-accountability. Back in August, the New
York Times noted that the “Police Department has increasingly failed
to prosecute New York City police officers on charges of misconduct
when those cases have been substantiated by the independent board that
investigates allegations of police abuse, officials of the board say.”
Between March 1, 2007 and June 30, 2007 alone, the NYPD “declined to
seek internal departmental trials against 31 officers, most of whom
were facing charges of stopping people in the street without probable
cause or reasonable suspicion, according to the city’s Civilian
Complaint Review Board.” An ACLU report, “Mission Failure: Civilian
Review of Policing in New York City, 1994-2006,” released this month,
delved into the issue in even greater detail. The organization found
that, between 2000 and 2005, “the NYPD disposed of substantiated
complaints against 2,462 police officers: 725 received no discipline.
When discipline was imposed, it was little more than a slap on the

Much has come to light recently about the way the U.S. military
has been lowering its recruitment standards in order to meet the
demands of ongoing, increasingly unpopular wars in Iraq and
Afghanistan, including an increase in “moral waivers” allowing more
recruits with criminal records to enter the services. Well, it turns
out that, on such policies, the NYPD has been a pioneering

In 2002, the BBC reported that “New York’s powerful police union….
accused the police department of allowing ‘sub-standard’ recruits onto
the force.” Then, just months after the RNC protests, the New York
Daily News exposed the department’s practice of “hiring applicants
with arrest records and shoving others through without full background
checks” including those who had been “charged with laundering drug
money, assault, grand larceny and weapons possession.” According to
Sgt. Anthony Petroglia, who, until he retired in 2002, had worked for
almost a decade in the department’s applicant-processing division, the
NYPD was “hiring people to be cops who have no respect for the law.”
Another retiree from the same division was blunter: “It’s all judgment
calls — bad ones…. but the bosses say, ‘Send ’em through. We’ll
catch the problem ones later.'”

The future looks bright, if you are an advocate of sending the
force even further down this path. The new choice to mold the
department of tomorrow, according to the Village Voice, the “NYPD’s
new deputy commissioner of training, Wilbur ‘Bill’ Chapman, should
have no trouble teaching ‘New York’s Finest’ about the pitfalls of
sexual harassment, cronyism, and punitive transfers [because h]e’s
been accused of all that during his checkered career.”

In the eerie afterglow of 9/11, haunted by the specter of
terrorism, in an atmosphere where repressive zero-tolerance policies
already rule, given the unparalleled power of Commissioner Kelly —
called “the most powerful police commissioner in the city’s history”
by NYPD expert Leonard Levitt — and with a police department largely
unaccountable to anyone (as the only city agency without any effective
outside oversight), the Escape from New York model may indeed
represent Manhattan’s future.

Nick Turse v. The City of New York

So what, you might still be wondering, was it that led the
security official at the federal courthouse to raise the specter of my
imminent demise? A weapon? An unidentified powder? No, a digital audio
recorder. “Some people here don’t want to be recorded,” he explained
in response to my quizzical look.

So I checked the recording device and, accompanied by my lawyer,
the indomitable Mary D. Dorman, made my way to Courtroom 18D, a
stately room in the upper reaches of the building that houses the
oldest district court in the nation. There, I met our legal nemesis, a
city attorney whose official title is “assistant corporation counsel.”
After what might pass for a cordial greeting, he asked relatively
politely whether I was going to accept the city’s monetary offer of
$8,500 — which I had rejected the previous week– to settle my
lawsuit for false arrest. As soon as I indicated I wouldn’t (as I had
from the moment the city started the bidding at $2,500), any hint of
cordiality fled the room. Almost immediately, he was referring to me
as a “criminal” — declassified NYPD documents actually refer to me as
a “perp.” Soon, he launched into a bout of remarkable bluster,
threatening lengthy depositions to waste my time and monetary
penalties associated with court costs that would swallow my savings.

Then, we were all directed to a small jury room off the main
courtroom, where the city’s attorney hauled out a threatening prop to
bolster his act — an imposingly gigantic file folder stuffed with
reams of “Nick Turse” documents, including copies of some of my
disreputable Tomdispatch articles as well as printouts of suspicious
webpages from the American Empire Project — the obviously criminal
series that will be publishing my upcoming book, The Complex.

There, the litany of vague threats to tie me down with
depositions, tax me with fees, and maybe, somehow, send me to jail for
a “crime” that had been dismissed years earlier continued until a
federal magistrate judge entered the room. To him, the assistant
corporation counsel and I told our versions of my arrest story —
which turned out to vary little.

The basic details were the same. As the city attorney shifted in
his seat, I told the judge how, along with compatriots I’d met only
minutes before, I donned my “WAR DEAD” sign and descended into the
subway surrounded by a phalanx of cops — plainclothes, regular
uniformed, Big Brother-types from the Technical Assistance Response
Unit (TARU), and white-shirted brass, as well as a Washington Post
photographer and legal observers from the National Lawyers Guild —
and boarded our train. I explained that we sat there looking as dead
as possible for about 111 blocks and then, as the Washington Post
reported, were arrested when we came back to life and “tried to change
trains.” I asked, admittedly somewhat rhetorically why, if I was such
a “criminal,” none of the officers present at my arrest had actually
showed up in court to testify against me when my case was dismissed
out of hand back in 2004? And why hadn’t the prosecutor wanted to
produce the video footage the NYPD had taken of the entire action and
my arrest? And why had the city been trying to buy me off all these
years since?

Faced with the fact that his intimidation tactics hadn’t worked,
the city attorney now quit his bad-cop tactics and I rose again out of
the ditch of “common criminality” into citizenship and then to the
high status of being addressed as “Dr. Turse” (in a bow to my PhD).
Offers and counteroffers followed, leading finally to a monetary
settlement with a catch — I also wanted an apology. If that guard
hadn’t directed me — under threat of being shot — to check my
digital audio recorder at the door, I might have had a sound file of
it to listen to for years to come. Instead, I had to be content with
the knowledge that an appointed representative of the City of New York
not only had to ditch the Escape from New York model — at least for a
day — pony up some money for violating my civil rights, and, before a
federal magistrate judge, also issue me an apology, on behalf of the
city, for wrongs committed by the otherwise largely unaccountable

The Future of the NYPD and the Homeland-Security State-let

I’m under no illusions that this minor monetary settlement and
apology were of real significance in a city where civil rights are
routinely abridged, the police are a largely unaccountable armed
force, and a culture of total surveillance is increasingly the norm.
But my lawsuit, when combined with those of my fellow arrestees, could
perhaps have some small effect. After all, less than a year after the
convention, 569 people had already “filed notices that they intended
to sue the City, seeking damages totaling $859,014,421,” according to
an NYCLU report. While the city will end up paying out considerably
less, the grand total will not be insignificant. In fact, Jim Dwyer
recently reported that the first 35 of 605 RNC cases had been settled
for a total of $694,000.

If New Yorkers began to agitate for accountability — demanding,
for instance, that such settlements be paid out of the NYPD’s budget
— it could make a difference. Then, every time New Yorkers’ hard-
earned tax-dollars were handed over to fellow citizens who were
harassed, mistreated, injured, or abused by the city’s police force
that would mean less money available for the “big expensive toys” that
the “big boys” of the NYPD’s aviation unit use to record the private
moments of unsuspecting citizens or the ubiquitous surveillance gear
used not to capture the rest of the city on candid camera. It wouldn’t
put an end to the NYPD’s long-running criminality or the burgeoning
homeland security state-let that it’s building, but it would, at
least, introduce a tiny measure of accountability.

Such an effort might even begin a dialogue about the NYPD, its
dark history, its current mandate under the Global War on Terror, and
its role in New York City. For instance, people might begin to examine
the very nature of the department. They might conclude that questions
must be raised when institutions — be they rogue regimes, deleterious
industries, unaccountable corporations, or fundamentally-tainted
government institutions — consistently, over many decades, evidence a
persistent disregard for the law, a lack of accountability, and a deep
resistance to reform. Those directly affected by the NYPD, a nearly
38,000-person force — larger than many armies — that has
consistently flouted the law and has proven remarkably resistant to
curtailing its own misconduct for well over a century, might even
begin to wonder if it can be trusted to administer the homeland
security state-let its top officials are fast implementing and, if
not, what can be done about it.


Nick Turse is the associate editor and research director of He has written for the Los Angeles Times, the San
Francisco Chronicle, the Nation, the Village Voice, and regularly for His first book, The Complex, an exploration of the
new military-corporate complex in America, is due out in the American
Empire Project series by Metropolitan Books in 2008. His new website (up only in rudimentary form) will fully launch in the
coming months.

Why security matters

Every email takes a perilous journey. A typical email might travel
across twenty networks and be stored on five computers from the time
it is composed to the time it is read. At every step of the way, the
contents of the email might be monitored, archived, cataloged, and

However, it is not the content of your email which is most
interesting: typically, a spying organization is more concerned by
whom you communicate with. There are many ways in which this kind of
mapping of people’s associations and habits is far worse than
traditional eavesdropping. By cataloging our associations, a spying
organization has an intimate picture of how our social movements are
organized–a more detailed picture than even the social movements
themselves are aware of.

This is bad. Really bad. The US government, among others, has a long
track record of doing whatever it can to subvert, imprison, kill, or
squash social movements which it sees as a threat (black power, anti-
war, civil rights, anti-slavery, native rights, organized labor, and
so on). And now they have all the tools they need to do this with
blinding precision.

We believe that communication free of eavesdropping and association
mapping is necessary for a democratic society (should one ever happen
to take root in the US). We must defend the right to free speech, but
it is just as necessary to defend the right to private speech.

Unfortunately, private communication is not possible if only a few
people practice it: they will stand out and open themselves up to
greater scrutiny. Therefore, we believe it is important for everyone
to incorporate as many security measures in your email life as you are

Email is not secure

You should think of normal email as a postcard: anyone can read it,
your letter carrier, your nosy neighbor, your house mates. All email,
unless encrypted, is completely insecure. Email is actually much less
secure than a postcard, because at least with a postcard you have a
chance of recognizing the sender’s handwriting. With email, anyone can
pretend to be anyone else.

There is another way in which email is even less private than a
postcard: the government does not have enough labor to read everyone’s
postscards, but they probably have the capacity and ability to scan
most email. Based on current research in datamining, it is likely that
the government does not search email for particular words but rather
looks for patterns of association and activity.

In the three cases below, evidence is well established that the
government conducts widespread and sweeping electronic survillence.

full-pipe monitoring
According to a former Justice Department attorney, it is common
practice for the FBI to practice “full-pipe monitoring”. The process
involves vacuuming up all traffic of an ISP and then later mining that
data for whatever the FBI might find interesting. The story was first
reported on January 30, 2007 by Declan McCullagh of CNET

The Electronic Frontier Foundation (EFF) filed a class-action
lawsuit against AT&T on January 31, 2006, accusing the telecom giant
of violating the law and the privacy of its customers by collaborating
with the National Security Agency (NSA) in its massive and illegal
program to wiretap and data-mine Americans’ communications.

Because AT&T is one of the few providers of the internet backbone
(a so called Tier 1 provider), even if you are not an AT&T customer is
is likely that AT&T is the carrier for much of your interent traffic.
It is very likely that other large internet and email providers have
also worked out deals with the government. We only know about this one
because of an internal whistleblower.

For legal domestic wiretaps, the U.S. government runs a program
called Carnivore (also called DCS1000).

Carnivore is a ‘black box’ which some ISPs are required to install
which allows law enforcement to do ‘legal’ wiretaps. However, no one
knows how they work, they effectively give the government total
control over monitoring anything on the ISP’s network, and there is
much evidence that the government uses carnivore to gather more
information than is legal.

As of January 2005, the FBI announced they are no longer using
Carnivore/DCS1000 and are replacing it with a product developed by a
third party. The purpose of the new system is exactly the same.

ECHELON is a spy program operated cooperatively with the
governments of the United States, Canada, United Kingdom, Australia,
and New Zealand. The goal is to monitor and analyze internet traffic
on a wide scale. The EU Parliament has accused the U.S. of using
Echelon for industrial espionage.

Call database

On May 10, USAToday broke the story that the NSA has a database
designed to track every phone call ever made in the US. Although this
applies to phone conversations, the fact that the government believes
that this is legal means that they almost certainly think it is legal
to track all the email communication within the US as well. And we
know from the AT&T case that they have the capability to do so.

You can do something about it!

What a gloomy picture! Happily, there are many things you can do.
These security pages will help outline some of the simple and not-so-
simple changes you can make to your email behavior.

* Secure Connections: by using secure connections, you protect
your login information and your data while is in transport to
* Secure Providers: when you send mail to and from secure email
providers, you can protect the content of your communication and also
the pattern of your associations.
* Public Key Encryption: although it is a little more work, public
key encryption is the best way to keep the content of your
communication private.

See the next page, Security Measures, for tips on these and other
steps you can take. Remember: even if you don’t personally need
privacy, practicing secure communication will ensure that others have
the ability to freely organize and agitate.

Practice secure behavior!
These pages include a lot of fancy talk about encryption. Ultimately,
however, all this wizbang cryto-alchemy will be totally useless if you
have insecure behavior. A few simple practices will go a long way
toward securing your communications:

1. Logout: make sure that you always logout when using web-mail.
This is very important, and very easy to do. This is particular
important when using a public computer.
2. Avoid public computers: this can be difficult. If you do use a
public computer, consider changing your password often or using the
virtual keyboard link (if you use for your web-mail).
3. Use good password practice: you should change your password
periodically and use a password which is at least 6 characters and
contains a combination of numbers, letters, and symbols. It is better
to use a complicated password and write it down then to use a simple
password and keep it only in your memory. Studies show that most
people use passwords which are easy to guess or to crack, especially
if you have some information about the interests of the person. You
should never pick a password which is found in the dictionary (the
same goes for “love” as well as “10v3” and other common ways of
replacing letters with numbers).
4. Be a privacy freak: don’t tell other people your password. Also,
newer operating systems allow you to create multiple logins which keep
user settings separate. You should enable this feature, and logout or
“lock” the computer when not in use.

Use secure connections!
What are secure connections?

When you check your mail from the server, you can use an
encrypted connection, which adds a high level of security to all
traffic between your computer and Secure connections are
enabled for web-mail and for IMAP or POP mail clients.

This method is useful for protecting your password and login. If you
don’t use a secure connection, then your login and password are sent
over the internet in a ‘cleartext’ form which can be easily
intercepted. It is obvious why you might not want your password made
public, but it may also be important to keep your login private in
cases where you do not want your real identity tied to a particular
email account.

How do I know if I am using a secure connection?

When using web browser (Firefox, Safari, etc.)
If you are using a web browser to connect to Riseup, you can look at
three things to check to see if you are using a secure connection.

The first is easy, are you using Internet Explorer? If so, switch to
Firefox. The security problems with Internet Explorer are too numerous
to mention and making the switch to Firefox is an easy step in the
right direction.

Secondly, look up at the URL bar, where the address is. If it starts
with “https://” (NOTE the ‘s’), then you have a secure connection, if
its just “http://” (NO ‘s’), then you are not using a secure
connection. You can change that “http” to “https” by clicking on the
URL bar and adding the ‘s’ and then hit to load the page securely.

The third way to tell is by looking for a little padlock icon. It will
either appear in the URL location bar, or in the bottom corner of the
window, it should appear locked, if the lock doesn’t exist, or the
lock picture looks like it is unlocked, you are not using a secure
connection. You can hover your mouse over the padlock to get more
information, and often clicking (or sometimes right-clicking) on the
lock will bring up details about the SSL certificate used to secure
the connection.

If you click on the padlock, you can verify Riseup’s certificate
fingerprints, this is a very good idea! Follow these directions to
verify our fingerprint.

When using a mail client (Thunderbird, Outlook, etc.)
For POP and IMAP, your mail client will have the option of enabling
SSL or TLS. For sending mail (SMTP), both SSL and TLS will work, but
some ISPs will block TLS, so you might need to use SSL. For more
specific, step-by-step configurations for your mail client, see our
mail client tutorials and SMTP FAQ.

The limits of secure connections

The problem with email is that takes a long and perilous journey. When
you send a message, it first travels from your computer to the mail server and then is delivered to the recipient’s mail
server. Finally, the recipient logs on to check their email and the
message is delivered to their computer.

Using secure connections only protects your data as it travels from
your computer to the the servers (and vice versa). It does
not make your email any more secure as it travels around the internet
from mail server to mail server. To do this, see below.

Use secure email providers
What is StartTLS?

There are many governments and corporations who “sniff” general
traffic on the internet. Even if you use a secure connection to check
and send your email, the communication between mail servers is almost
always insecure and out in the open.

Fortunately, there is a solution! StartTLS is a fancy name for a very
important idea: StartTLS allows mail servers to talk to each other in
a secure way.

If you and your friends use only email providers which use StartTLS,
then all the mail traffic among you will be encrypted while in
transport. If both sender and recipient also use secure connections
while talking to the mail servers, then your communications are likely
secure over its entire lifetime.

We will repeat that because it is important: to gain any benefit from
StartTLS, both sender and recipient must be using StartTLS enabled
email providers. For mailing lists, the list provider and each and
every list subscriber must use StartTLS.

Which email providers use StartTLS?
Currently, these tech collectives are known to use StartTLS:


We recommend that you and all your friends get email accounts with
these tech collectives!
Additionally, these email providers often have StartTLS enabled:

* universities:,,,,,,,,,,,,,,,,,,,
* organizations:,
* companies:,,,,,,,,, greennet (

What are the advantages of StartTLS?
This combination of secure email providers and secure connections has
many advantages:

* It is very easy to use! No special software is needed. No
special behavior is needed, other than to make sure you are using
secure connections.
* It prevents anyone from creating a map of whom you are
communicating with and who is communicating with you (so long as both
parties use StartTLS).
* It ensures that your communication is pretty well protected.
* It promotes the alternative mail providers which use StartTLS.
The goal is to create a healthy ecology of activist providers–which
can only happen if people show these providers strong support. Many of
these alternative providers also also incorporate many other important
security measures such as limited logging and encrypted storage.

What are the limitations of StartTLS?
However, there are some notable limitations:

* Your computer is a weak link: your computer can be stolen,
hacked into, have keylogging software or hardware installed.
* It is difficult to verify: for a particular message to be
secure, both the origin and destination mail providers must use
StartTLS (and both the sender and recipient must use encrypted
connections). Unfortunately, it is difficult to confirm that all of
this happened. For this, you need public key encryption (see below).

Use public-key encryption
If you wish to keep the contents of your email private, and confirm
the identity of people who send you email, you should download and
install public-key encryption software. This option is only available
if you have your own computer.

Public-key encryption uses a combination of a private key and a public
key. The private key is known only by you, while the public key is
distributed far and wide. To send an encrypted message to someone, you
encrypt the message with their public key. Only their private key will
be able to decrypt your message and read it.

The universal standard for public-key encryption is Pretty Good
Privacy (PGP) and GNU Privacy Guard (GPG). GPG is Free Software, while
PGP is a proprietary product (although there are many freeware
versions available). Both work interchangeably and are available as
convenient add-ons to mail clients for Linux, Mac, and Windows.

For information configuring your mail client to use public key
encryption, see our mail client tutorial pages. In particular, see the
tutorials for Apple Mail and Thunderbird. Otherwise, you should refer
the to documentation which comes with your particular mail client.

Although it provides the highest level of security, public-key
encryption is still an adventure to use. To make your journey less
scary, we suggest you keep these things in mind:

* Be in it for the long haul: using public-key encryption takes a
commitment to learning a lot of new skills and jargon. The widespread
adoption of GPG is a long way off, so it may seem like a lot of work
for not much benefit. However, we need early adopters who can help
build a critical mass of GPG users.
* Develop GPG buddies: although most your traffic might not be
encrypted, if you find someone else who uses GPG try to make a
practice of communicating using only GPG with that person.
* Look for advocates: people who use GPG usually love to
evangelize about it and help others to use it to. Find someone like
this who can answer your questions and help you along.

Although you can hide the contents of email with public-key
encryption, it does not hide who you are sending mail to and receiving
mail from. This means that even with public key encryption there is a
lot of personal information which is not secure.

Why? Imagine that someone knew nothing of the content of your mail
correspondence, but they knew who you sent mail to and received mail
from and they knew how often and what the subject line was. This
information can provide a picture of your associations, habits,
contacts, interests and activities.

The only way to keep your list of associations private is to to use an
email provider which will establish a secure connection with other
email providers. See Use secure email providers, above.

What are certificates?

On the internet, a public key certificate is needed in order to verify
the identity of people or computers. These certificates are also
called SSL certificates or identity certificates. We will just call
them “certificates.”

In particular, certificates are needed to establish secure
connections. Without certificates, you would be able to ensure that no
one else was listening, but you might be talking to the wrong computer
altogether! All servers and all services allow
or require secure connections. It can sometimes be tricky to coax a
particular program to play nice and recognize the
certificates. This page will help you through the process.

If you don’t follow these steps, your computer will likely complain or
fail every time you attempt to create a secure connection with

What is a certificate authority?
Certificates are the digital equivalent of a government issued
identification card. Certificates, however, are issued by private
corporations called certificate authorities (CA).

I thought you were against authority?
We are, but the internet is designed to require certificate
authorities and there is not much we can do about it. There are other
models for encrypted communication, such as the decentralized notion
of a “web of trust” found in PGP. Unfortunately, no one has written
any web browsers or mail clients to use PGP for establishing secure
connections, so we are forced to rely on certificate authorities. Some
day, we hope to collaborate with other tech collectives to create a
certificate (anti) authority.

Your certificate is not recognized – what should I do?
We recently installed new certificates that should solve this issue
for webmail and mail client users. However, users accessing the secure
pages for,, and will still receive this annoying error message. The
problem is that these servers use a CA Cert root certificate, which is
not on the list of “trusted” certification authorities. So, in order
to use the certificates without receiving the error message, you will
need to import the CA Cert Root Certificate.

What are the fingerprints of’s certificates?
Some programs cannot use certificate authorities to confirm the
validity of a certificate. In that case, you may need to manually
confirm the fingerprint of the certificate. Here are some
fingerprints for various certificates:

Hash: SHA1

1. SSL fingerprint for
* sha1: BA:73:F5:45:E0:98:54:E5:6D:BA:5C:4B:98:EF:1A:A9:4B:C1:47:9D
* md5:  88:12:94:4D:D5:43:FE:22:84:4E:67:C9:0C:1E:DC:DA

2. SSL fingerprint for
* sha1: F2:1D:DC:23:89:36:15:F9:1B:2C:66:F0:93:99:6E:C8:EB:2C:43:BB
* md5:  A1:3E:38:19:39:70:DA:F0:0E:B1:58:D9:1A:67:41:AD

3. SSL fingerprint for
* sha1: 13:C8:86:19:53:52:C7:A1:B8:03:B0:53:1A:E9:DA:FF:AD:A9:BB:24
* md5:  84:32:84:43:81:13:16:56:0F:CE:68:A9:CF:29:4D:8D
Version: GnuPG v1.4.6 (GNU/Linux)


When should I verify these fingerprints?
You should verify these fingerprints whenever they change, or you are
using a computer that you do not control (such as at an internet cafe,
or a library). Verify them if you are suspicious, be suspicious and
learn how to verify them and do it often.

How do I verify these fingerprints?
To verify these fingerprints, you need to look at what your browser
believes the fingerprints are for the certificates and compare them to
what is listed above. If they are different, there is a problem.

In most browsers, the way you look at the fingerprints of the
certificate that you were given is by clicking on the lock icon that
is located either in the URL location bar, or in the bottom corner of
your browser. This should bring up details about the certificate being
used, including the fingerprint. Some browsers may only show the MD5
fingerprint, or the SHA1 fingerprint, some will show both. Usually one
is good enough to verify the validity of the fingerprint.

I want to learn more

Great, this is an important topic and we encourage you to read this
piece which clearly articulates in a non-technical way the problems
involved in certificate authorities as well as outlining some
interesting suggestions for ways that the existing architecture and
protocols can be tweaked just a little bit to change the situation for
the better.


Policy at
We strive to keep our mail as secure and private as we can.

* We do not log your IP address. (Most services keep detailed
records of every machine which connects to the servers. We keep only
information which cannot be used to uniquely identify your machine.)
* All your data, including your mail, is stored by in
encrypted form.
* We work hard to keep our servers secure and well defended
against any malicious attack.
* We do not share any of our user data with anyone.
* We will actively fight any attempt to subpoena or otherwise
acquire any user information or logs.
* We will not read, search, or process any of your incoming or
outgoing mail other than by automatic means to protect you from
viruses and spam or when directed to do so by you when



Security resources for activists

This site contains a quick overview of email security. For more in-
depth information, check out these websites:
Helping activists stay safe in our oppressive world.
A series of briefings on information security and online safety for
civil society organizations.
Guide to Email Security Using Encryption and Digital Signatures
Computer Security for the Average Activist
An introduction to activism on the internet


FBI taps cell phone mic as eavesdropping tool
BY Anne Broache and Declan McCullagh  /  December 1, 2006

The FBI appears to have begun using a novel form of electronic
surveillance in criminal investigations: remotely activating a mobile
phone’s microphone and using it to eavesdrop on nearby conversations.

The technique is called a “roving bug,” and was approved by top U.S.
Department of Justice officials for use against members of a New York
organized crime family who were wary of conventional surveillance
techniques such as tailing a suspect or wiretapping him.

Nextel cell phones owned by two alleged mobsters, John Ardito and his
attorney Peter Peluso, were used by the FBI to listen in on nearby
conversations. The FBI views Ardito as one of the most powerful men in
the Genovese family, a major part of the national Mafia.

The surveillance technique came to light in an opinion published this
week by U.S. District Judge Lewis Kaplan. He ruled that the “roving
bug” was legal because federal wiretapping law is broad enough to
permit eavesdropping even of conversations that take place near a
suspect’s cell phone.

Kaplan’s opinion said that the eavesdropping technique “functioned
whether the phone was powered on or off.” Some handsets can’t be fully
powered down without removing the battery; for instance, some Nokia
models will wake up when turned off if an alarm is set. While the
Genovese crime family prosecution appears to be the first time a
remote-eavesdropping mechanism has been used in a criminal case, the
technique has been discussed in security circles for years.

The U.S. Commerce Department’s security office warns that “a cellular
telephone can be turned into a microphone and transmitter for the
purpose of listening to conversations in the vicinity of the phone.”
An article in the Financial Times last year said mobile providers can
“remotely install a piece of software on to any handset, without the
owner’s knowledge, which will activate the microphone even when its
owner is not making a call.”

Nextel and Samsung handsets and the Motorola Razr are especially
vulnerable to software downloads that activate their microphones, said
James Atkinson, a counter-surveillance consultant who has worked
closely with government agencies. “They can be remotely accessed and
made to transmit room audio all the time,” he said. “You can do that
without having physical access to the phone.”

Because modern handsets are miniature computers, downloaded software
could modify the usual interface that always displays when a call is
in progress. The spyware could then place a call to the FBI and
activate the microphone–all without the owner knowing it happened.
(The FBI declined to comment on Friday.) “If a phone has in fact been
modified to act as a bug, the only way to counteract that is to either
have a bugsweeper follow you around 24-7, which is not practical, or
to peel the battery off the phone,” Atkinson said. Security-conscious
corporate executives routinely remove the batteries from their cell
phones, he added.

FBI’s physical bugs discovered

The FBI’s Joint Organized Crime Task Force, which includes members of
the New York police department, had little luck with conventional
surveillance of the Genovese family. They did have a confidential
source who reported the suspects met at restaurants including Brunello
Trattoria in New Rochelle, N.Y., which the FBI then bugged.

But in July 2003, Ardito and his crew discovered bugs in three
restaurants, and the FBI quietly removed the rest. Conversations
recounted in FBI affidavits show the men were also highly suspicious
of being tailed by police and avoided conversations on cell phones
whenever possible.

That led the FBI to resort to “roving bugs,” first of Ardito’s Nextel
handset and then of Peluso’s. U.S. District Judge Barbara Jones
approved them in a series of orders in 2003 and 2004, and said she
expected to “be advised of the locations” of the suspects when their
conversations were recorded.

Details of how the Nextel bugs worked are sketchy. Court documents,
including an affidavit (p1) and (p2) prepared by Assistant U.S.
Attorney Jonathan Kolodner in September 2003, refer to them as a
“listening device placed in the cellular telephone.” That phrase could
refer to software or hardware.

One private investigator interviewed by CNET, Skipp Porteous
of Sherlock Investigations in New York, said he believed the FBI
planted a physical bug somewhere in the Nextel handset and did not
remotely activate the microphone. “They had to have physical
possession of the phone to do it,” Porteous said. “There are several
ways that they could have gotten physical possession. Then they
monitored the bug from fairly near by.”

But other experts thought microphone activation is the more likely
scenario, mostly because the battery in a tiny bug would not have
lasted a year and because court documents say the bug works anywhere
“within the United States”–in other words, outside the range of a
nearby FBI agent armed with a radio receiver.

In addition, a paranoid Mafioso likely would be suspicious of any ploy
to get him to hand over a cell phone so a bug could be planted. And
Kolodner’s affidavit seeking a court order lists Ardito’s phone
number, his 15-digit International Mobile Subscriber Identifier, and
lists Nextel Communications as the service provider, all of which
would be unnecessary if a physical bug were being planted.

A BBC article from 2004 reported that intelligence agencies routinely
employ the remote-activiation method. “A mobile sitting on the desk of
a politician or businessman can act as a powerful, undetectable bug,”
the article said, “enabling them to be activated at a later date to
pick up sounds even when the receiver is down.”

For its part, Nextel said through spokesman Travis Sowders: “We’re not
aware of this investigation, and we weren’t asked to participate.”
Other mobile providers were reluctant to talk about this kind of
surveillance. Verizon Wireless said only that it “works closely with
law enforcement and public safety officials. When presented with
legally authorized orders, we assist law enforcement in every way
possible.” A Motorola representative said that “your best source in
this case would be the FBI itself.” Cingular, T-Mobile, and the CTIA
trade association did not immediately respond to requests for comment.

Mobsters: The surveillance vanguard

This isn’t the first time the federal government has pushed at the
limits of electronic surveillance when investigating reputed mobsters.
In one case involving Nicodemo S. Scarfo, the alleged mastermind of a
loan shark operation in New Jersey, the FBI found itself thwarted when
Scarfo used Pretty Good Privacy software (PGP) to encode confidential
business data. So with a judge’s approval, FBI agents repeatedly snuck
into Scarfo’s business to plant a keystroke logger and monitor its

Like Ardito’s lawyers, Scarfo’s defense attorneys argued that the then-
novel technique was not legal and that the information gleaned through
it could not be used. Also like Ardito, Scarfo’s lawyers lost when a
judge ruled in January 2002 that the evidence was admissible. This
week, Judge Kaplan in the southern district of New York concluded that
the “roving bugs” were legally permitted to capture hundreds of hours
of conversations because the FBI had obtained a court order and
alternatives probably wouldn’t work.

The FBI’s “applications made a sufficient case for electronic
surveillance,” Kaplan wrote. “They indicated that alternative methods
of investigation either had failed or were unlikely to produce
results, in part because the subjects deliberately avoided government

Bill Stollhans, president of the Private Investigators Association of
Virginia, said such a technique would be legally reserved for police
armed with court orders, not private investigators. There is “no law
that would allow me as a private investigator to use that type of
technique,” he said. “That is exclusively for law enforcement. It is
not allowable or not legal in the private sector. No client of mine
can ask me to overhear telephone or strictly oral conversations.”

Surreptitious activation of built-in microphones by the FBI has been
done before. A 2003 lawsuit revealed that the FBI was able to
surreptitiously turn on the built-in microphones in automotive systems
like General Motors’ OnStar to snoop on passengers’ conversations.
When FBI agents remotely activated the system and were listening in,
passengers in the vehicle could not tell that their conversations were
being monitored.

Malicious hackers have followed suit. A report last year said Spanish
authorities had detained a man who write a Trojan horse that secretly
activated a computer’s video camera and forwarded him the recordings.

From the archive, originally posted by: [ spectre ]


Bruce Schneier Blazes Through Your Questions
By Stephen J. Dubner  /  December 4, 2007

Last week, we solicited your questions for Internet security guru
Bruce Schneier. He responded in force, taking on nearly every
question, and his answers are extraordinarily interesting, providing
mandatory reading for anyone who uses a computer. He also plainly
thinks like an economist: search below for “crime pays” to see his
sober assessment of why it’s better to earn a living as a security
expert than as a computer criminal.

Thanks to Bruce and to all of you for participating. Here’s a note
that Bruce attached at the top of his answers: “Thank you all for your
questions. In many cases, I’ve written longer essays on the topics
you’ve asked about. In those cases, I’ve embedded the links into the
necessarily short answers I’ve given here.”

Q: Assuming we are both still here in 50 years, what do you believe
will be the most incredible, fantastic, mind-blowing advance in
computers/technology at that time?

A: Fifty years is a long time. In 1957, fifty years ago, there were
fewer than 2,000 computers total, and they were essentially used to
crunch numbers. They were huge, expensive, and unreliable; sometimes,
they caught on fire. There was no word processing, no spreadsheets, no
e-mail, and no Internet. Programs were written on punch cards or paper
tape, and memory was measured in thousands of digits. IBM sold a disk
drive that could hold almost 4.5 megabytes, but it was five-and-a-half
feet tall by five feet deep and would just barely fit through a
standard door.

Read the science fiction from back then, and you’d be amazed by what
they got wrong. Sure, they predicted smaller and faster, but no one
got the socialization right. No one predicted eBay, instant messages,
or blogging.

Moore’s Law predicts that in fifty years, computers will be a billion
times more powerful than they are today. I don’t think anyone has any
idea of the fantastic emergent properties you get from a billion-times
increase in computing power. (I recently wrote about what security
would look like in ten years, and that was hard enough.) But I can
guarantee that it will be incredible, fantastic, and mind-blowing.

Q: With regard to identity theft, do you see any alternatives to data
being king? Do you see any alternative systems which will mean that
just knowing enough about someone is not enough to commit a crime?

A: Yes. Identity theft is a problem for two reasons. One, personal
identifying information is incredibly easy to get; and two, personal
identifying information is incredibly easy to use. Most of our
security measures have tried to solve the first problem. Instead, we
need to solve the second problem. As long as it’s easy to impersonate
someone if you have his data, this sort of fraud will continue to be a
major problem.

The basic answer is to stop relying on authenticating the person, and
instead authenticate the transaction. Credit cards are a good example
of this. Credit card companies spend almost no effort authenticating
the person — hardly anyone checks your signature, and you can use your
card over the phone, where they can’t even check if you’re holding the
card — and spend all their effort authenticating the transaction. Of
course it’s more complicated than this; I wrote about it in more
detail here and here.

Q: What’s the next major identity verification system?

A: Identity verification will continue to be the hodge-podge of
systems we have today. You’re recognized by your face when you see
someone you know; by your voice when you talk to someone you know.
Open your wallet, and you’ll see a variety of ID cards that identify
you in various situations — some by name and some anonymously. Your
keys “identify” you as someone allowed in your house, your office,
your car. I don’t see this changing anytime soon, and I don’t think it
should. Distributed identity is much more secure than a single system.
I wrote about this in my critique of REAL ID.

Q: If we can put a man on the moon, why in the world can’t we design a
computer that can “cold boot” nearly instantaneously? I know about
hibernation, etc., but when I do have to reboot, I hate waiting those
three or four minutes.

A: Of course we can; Amiga was a fast booting computer, and OpenBSD
boxes boot in less than a minute. But the current crop of major
operating systems just don’t. This is an economics blog, so you tell
me: why don’t the computer companies compete on boot-speed?

Q: Considering the carelessness with which the government (state and
federal) and commercial enterprises treat our confidential
information, is it essentially a waste of effort for us as individuals
to worry about securing our data?

A: Yes and no. More and more, your data isn’t under your direct
control. Your e-mail is at Google, Hotmail, or your local ISP. Online
merchants like Amazon and eBay have records of what you buy, and what
you choose to look at but not buy. Your credit card company has a
detailed record of where you shop, and your phone company has a
detailed record of who you talk to (your cell phone company also knows
where you are). Add medical databases, government databases, and so
on, and there’s an awful lot of data about you out there. And data
brokers like ChoicePoint and Acxiom collect all of this data and more,
building up a surprisingly detailed picture on all Americans.

As you point out, one problem is that these commercial and government
organizations don’t take good care of our data. It’s an economic
problem: because these parties don’t feel the pain when they lose our
data, they have no incentive to secure it. I wrote about this two
years ago, stating that if we want to fix the problem, we must make
these organizations liable for their data losses. Another problem is
the law; our Fourth Amendment protections protect our data under our
control — which means in our homes, in our cars, and on our computers.
We don’t have nearly the same protection when we give our data to some
other organization for use or safekeeping.

That being said, there’s a lot you can do to secure your own data. I
give a list here.

Q: How do you remember all of your passwords?

A: I can’t. No one can; there are simply too many. But I have a few
strategies. One, I choose the same password for all low-security
applications. There are several Web sites where I pay for access, and
I have the same password for all of them. Two, I write my passwords
down. There’s this rampant myth that you shouldn’t write your
passwords down. My advice is exactly the opposite. We already know how
to secure small bits of paper. Write your passwords down on a small
bit of paper, and put it with all of your other valuable small bits of
paper: in your wallet. And three, I store my passwords in a program I
designed called Password Safe. It’s is a small application — Windows
only, sorry — that encrypts and secures all your passwords.

Here are two other resources: one concerning how to choose secure
passwords (and how quickly passwords can be broken), and one on how
lousy most passwords actually are.

Q: What’s your opinion of the risks of some of the new (and upcoming)
online storage services, such as Google’s GDrive or Microsoft’s Live
Drive? Most home computer users don’t adequately safeguard or backup
their storage, and these services would seem to offer a better-
maintained means of storing files; but what do users risk by storing
that much important information with organizations like Google or

A: Everything I wrote in my answer to the identity theft question
applies here: when you give a third party your data, you have to both
trust that they will protect it adequately, and hope that they won’t
give it all to the government just because the government asks nicely.
But you’re certainly right, data loss is the number one risk for most
home users, and network-based storage is a great solution for that. As
long as you encrypt your data, there’s no risk and only benefit.

Q: Do you think that in the future, everything will go from hard-wired
to wireless? If so, with cell phones, radios, satellites, radar, etc.
using all the airwaves (or spectrum), do you think there is a
potential for, well, messing everything up? What about power outages
and the such?

A: Wireless is certainly the way of the future. From a security
perspective, I don’t see any major additional risks. Sure, there’s a
potential for messing everything up, but there was before. Same with
power outages. Data transmitted wirelessly should probably be
encrypted and authenticated; but it should have been over wires, too.
The real risk is complexity. Complexity is the worst enemy of
security; as systems become more complex, they get less secure. It’s
not the addition of wireless per se; it’s the complexity that wireless
— and everything else — adds.

Q: There has been some work to date on the cost-benefit economics of
security. In your estimation, is this a sound approach to motivate
better security, and do you think it is doomed to begin with since
society disproportionately values other things before it values
security? If so, do you think it’s time for us to take up digital
pitchforks and shine some light on the economic gatekeepers’ personal

A: Security is a trade-off, just like anything else. And it’s not true
that we always disproportionately value other things before security.
Look at our terrorism policies; when we’re scared, we value security
disproportionately before all other things. Looking at security
through the lens of economics (as I did here) is the only way to
understand how these motivations work and what level of security is
optimal for society. Not that I’m discouraging you from picking up
your digital pitchforks. People have an incredibly complex
relationship with security — read my essay on the psychology of
security, and this one on why people are so bad at judging risks — and
the more information they have, the better.

Q: Is there an equilibrium point in which the cost (either financial
or time) of hacking a password becomes more expensive than the value
of the data? If so what is it?

A: Of course, but there are too many variables to answer the question.
The cost of password guessing is constantly going down, and the value
of the data depends on the data. In general, though, we’ve long
reached a point where the complexity of passwords an average person is
willing to remember is less than the complexity of passwords necessary
to be secure against a password-guessing attack. (This is for
passwords that can be guessed offline only. Four-digit PINs are still
okay if the bank disables your account after a few wrong guesses.)
That’s why I recommend that people write their passwords down, as I
said before.

Q: With over a billion people using computers today, what is the real
threat to the average person?

A: It’s hard not to store sensitive information (like social security
numbers) on your computer. Even if you don’t type it yourself, you
might receive it in an e-mail or file. And then, even if you delete
that file or e-mail, it might stay around on your hard drive. And lots
of people like the convenience of Internet banking, and even more like
to use their computers to help them do their jobs — which means
company secrets will end up on those computers.

The most immediate threat to the average person is crime — in
particular, fraud. And as I said before, even if you don’t store that
data on your computer, someone else has it on theirs. But the long-
term threat of loss of privacy is much greater, because it has the
potential to change society for the worse.

Q: What is the future of electronic voting?

A: I’ve written a lot about this issue (see here and here as well).
Basically, the problem is that the secret ballot means that most of
the security tricks we use in things like electronic funds transfers
don’t work in voting machines. The only workable solution against
hacking the voting machines, or — more commonly — innocent programming
errors, is something called a voter-verifiable paper trail. Vote on
whatever touch-screen machine you want in whatever way you want. Then,
that machine must spit out a printed piece of paper with your vote on
it, which you have the option of reviewing for accuracy. The machine
collects the votes electronically for a quick tally, and the paper is
the actual vote in case of recounts. Nothing else is secure.

Q: Do you think Google will be able to eliminate the presence of phony
malware sites on its search pages? And what can I do to ensure I’m not
burned by the same?

A: Google is trying. The browsers are trying. Everyone is trying to
alert users about phishing, pharming, and malware sites before they’re
taken in. It’s hard; the criminals spend a lot of time trying to stay
one step ahead of these identification systems by changing their URLs
several times a day. It’s an arms race: we’re not winning right now,
but things will get better.

As for how not to be taken in by them, that’s harder. These sites are
an example of social engineering, and social engineering preys on the
natural tendency of people to believe their own eyes. A good bullshit
detector helps, but it’s hard to teach that. Specific phishing,
pharming, and other tactics for trapping unsuspecting people will
continue to evolve, and this will continue to be a problem for a long

Q: I recently had an experience on eBay in which a hacker copied and
pasted an exact copy of my selling page with the intention of routing
payments to himself. Afterwards, people informed me that such mischief
is not uncommon. How can I ensure that it doesn’t happen again?

A: You can’t. The attack had nothing to do with you. Anyone with a
browser can copy your HTML code — if they couldn’t, they couldn’t see
your page — and repost it at another URL. Welcome to the Internet.

Q: All ethics aside, do you think you could make more money obtaining
sensitive information about high net worth individuals and using
blackmail/extortion to get money from them, instead of writing books,
founding companies, etc.?

A: Basically, you’re asking if crime pays. Most of the time, it
doesn’t, and the problem is the different risk characteristics. If I
make a computer security mistake — in a book, for a consulting client,
at BT — it’s a mistake. It might be expensive, but I learn from it and
move on. As a criminal, a mistake likely means jail time — time I
can’t spend earning my criminal living. For this reason, it’s hard to
improve as a criminal. And this is why there are more criminal
masterminds in the movies than in real life.

Q: Nearly every security model these days seems to boil down to the
fact that there must be some entity in which you place your trust. I
have to trust Google to keep my personal data and passwords secure
every time I check my mail, even as they’re sharing it across their
Google Reader, Google Maps, and Google Notebook applications. Even in
physical security models, you usually have to trust someone (e.g., the
security guard at the front desk, or the police). In your opinion, is
there a business/economic reason for this, or do you see this paradigm
eventually becoming a thing of the past?

A: There is no part of human social behavior that doesn’t involve
trust of some sort. Short of living as a hermit in a cave, you’re
always going to have trust someone. And as more of our interactions
move online, we’re going to have to trust people and organizations
over networks. The notion of “trusted third parties” is central to
security, and to life.

Q: What do you think about the government or a pseudo-governmental
agency acting as a national or global repository for public keys? If
this were done, would the government insist on a back-door?

A: There will never be a global repository for public keys, for the
same reason there isn’t a single ID card in your wallet. We are more
secure with distributed identification systems. Centralized systems
are more valuable targets for criminals, and hence harder to secure. I
also have other problems with public-key infrastructure in general.

And the government certainly might insist on a back door into those
systems; they’re insisting on access to a lot of other systems.

Q: What do you think needs to be done to thwart all of the Internet-
based attacks that happen? Why it is that no single company or
government agency has yet to come up with a solution?

A: That’s a tall order, and of course the answer to your question is
that it can’t be done. Crime has been part of our society since our
species invented society, and it’s not going away anytime soon. The
real question is, “Why is there so much crime and hacking on the
Internet, and why isn’t anyone doing anything about it?”

The answer is in the economics of Internet vulnerabilities and
attacks: the organizations that are in the position to mitigate the
risks aren’t responsible for the risks. This is an externality, and if
you want to fix the problem you need to address it. In this essay
(more here), I recommend liabilities; companies need to be liable for
the effects of their software flaws. A related problem is that the
Internet security market is a lemon’s market (discussed here), but
there are strategies for dealing with that, too.

Q: You have repeatedly maintained that most of the investments that
the government has made towards counter-terrorism are largely
“security theater,” and that the real way to combat terrorism is to
invest in intelligence. However, Tim Weiner’s book, Legacy of Ashes,
says that the U.S. government is particularly inept at gathering and
processing intelligence. Does that leave us with no hope at all?

A: I’m still a fan of intelligence and investigation (more here) and
emergency response (more here). No, neither is perfect, but they’re
way better than the “defend the target” or “defend against the tactic”
thinking we have now. (I’ve written more about this here.) Basically,
security that only forces the bad guy to make a minor change in his
plot is largely a waste of money.

On the other hand, the average terrorist seems to be quite the idiot.
How you can help: refuse to be terrorized.

Q: I travel a lot and am continually frustrated with airport security.
What can we, the little people, do to help ease these frustrations
(besides taking a deep breath and strapping on our standard-issue
orange jumpsuits, I mean)?

A: I share your frustration, and I have regularly written about
airport security. But I got to do something you can’t do, and that’s
take it out on the TSA director, Kip Hawley. I recommend this
interview if you are interested in seeing him try to answer — and not
answer — my questions about ID checks, the liquid ban, screeners that
continually do badly in tests, the no-fly list, and the cover-your-ass
security that continues to cost us time and money without making us
appreciably safer.

As to what you can do: complain to your elected officials, and vote.

Q: What kinds of incentives can organizations put into place to 1)
decrease the effectiveness of social engineering, and 2) persuade
individuals to take an appropriate level of concern with respect to
organizational security? Are you aware of any particularly creative
solutions to these problems?

A: Social engineering will always be easy, because it attacks a
fundamental aspect of human nature. As I said in my book, Beyond Fear,
“social engineering will probably always work, because so many people
are by nature helpful and so many corporate employees are naturally
cheerful and accommodating. Attacks are rare, and most people asking
for information or help are legitimate. By appealing to the victim’s
natural tendencies, the attacker will usually be able to cozen what
she wants.”

The trick is to build systems that the user cannot subvert, whether by
malice, accident, or trickery. This will also help with the other
problem you list: convincing individuals to take organizational
security seriously. This is hard to do, even in the military, where
the stakes are much higher.

Q: I am someone that knows little to nothing about computers. As such,
what advice would you give to someone like me who wants to become
educated on the topic?

A: There are probably zillions of books and classes on basic computer
and Internet skills, and I wouldn’t even know where to begin to
suggest one. Okay, that’s a lie. I do know where to begin. I would
Google “basic computer skills” and see what comes up.

But I don’t think that people should need to become computer experts,
and computer security experts, in order to successfully use a
computer. I’ve written about home computer users and security here.

Q: How worried are you about terrorists or other criminals hacking
into the computer systems of dams, power plants, air traffic control
towers, etc.?

A: Not very. Of course there is a security risk here, but I think it’s
overblown. And I definitely think the risk of cyberterrorism is
overblown (for more on this, see here, as well as this essay on

Q: Can two-factor authentication really work on a Web site? Biometrics
isn’t feasible because most people don’t have the hardware. One-time
password tokens are a hassle, and they don’t really scale well. Image
identification and PC fingerprinting technology that some banks are
using is pretty easy to defeat with an evil proxy (i.e., any phishing
Web site).

A: Two-factor authentication works fine on some Web sites. My
employer, BT, uses two-factor access for the corporate network, and it
works great. Where two-factor authentication won’t work is in reducing
fraud in electronic banking, electronic brokerage accounts, and so on.
That’s because the problem isn’t an authentication problem. The
reasoning is subtle, and I’ve written about it here and here. What I
predicted will occur from two-factor authentication — and what we’re
seeing now — is that fraud will initially decrease as criminals shift
their attacks to organizations that have not yet deployed the
technology, but will return to normal levels as the technology becomes
ubiquitous and criminals modify their tactics to take it into account.

Q: How much fun/mischief could you have if you were “evil” for a day?

A: It used to be a common late-night bar conversation at computer
security conferences: how would you take down the Internet, steal a
zillion dollars, neutralize the IT infrastructure of this company or
that country, etc. And, unsurprisingly, computer security experts have
all sorts of ideas along these lines.

This is true in many aspects of our society. Here’s what I said in my
book, Secrets and Lies (page 389): “As technology becomes more
complicated, society’s experts become more specialized. And in almost
every area, those with the expertise to build society’s infrastructure
also have the expertise to destroy it. Ask any doctor how to poison
someone untraceably, and he can tell you. Ask someone who works in
aircraft maintenance how to drop a 747 out of the sky without getting
caught, and he’ll know. Now ask any Internet security professional how
to take down the Internet, permanently. I’ve heard about half a dozen
different ways, and I know I haven’t exhausted the possibilities.”

What we hope is that as people learn the skills, they also learn the
ethics about when and when not to use them. When that doesn’t happen,
you get Mohommad Attas and Timothy McVeighs.

Q: In that vein, what is the most devilish idea you have thought

A: No comment.

Q: What’s your view on the difference between anonymity and privacy,
and which one do you think is more important for society? I’m thinking
primarily of security-camera paranoia (as if nosy neighbors hadn’t
been in existence for thousands of years).

A: There’s a huge difference between nosy neighbors and cameras.
Cameras are everywhere. Cameras are always on. Cameras have perfect
memory. It’s not the surveillance we’ve been used to; it’s wholesale
surveillance. I wrote about this here, and said this: “Wholesale
surveillance is a whole new world. It’s not ‘follow that car,’ it’s
‘follow every car.’ The National Security Agency can eavesdrop on
every phone call, looking for patterns of communication or keywords
that might indicate a conversation between terrorists. Many airports
collect the license plates of every car in their parking lots, and can
use that database to locate suspicious or abandoned cars. Several
cities have stationary or car-mounted license-plate scanners that keep
records of every car that passes, and save that data for later

“More and more, we leave a trail of electronic footprints as we go
through our daily lives. We used to walk into a bookstore, browse, and
buy a book with cash. Now we visit Amazon, and all of our browsing and
purchases are recorded. We used to throw a quarter in a toll booth;
now EZ Pass records the date and time our car passed through the
booth. Data about us are collected when we make a phone call, send an
e-mail message, make a purchase with our credit card, or visit a Web

What’s happening is that we are all effectively under constant
surveillance. No one is looking at the data most of the time, but we
can all be watched in the past, present, and future. And while mining
this data is mostly useless for finding terrorists (I wrote about that
here), it’s very useful in controlling a population.

Cameras are just one piece of this, but they’re an important piece.
And what’s at stake is a massive loss of personal privacy, which I
believe has significant societal ramifications.

Q: Do you think it will ever be feasible to vote for public officials
via the Internet? Why or why not?

Internet voting has the same problems as electronic voting machines,
only more so. That being said, we are moving towards vote-by-mail and
(for the military) vote-by-fax. Just because something is a bad
security idea doesn’t mean it won’t happen.

Q: Hacker movies have become quite popular recently. Do any of them
have any basis in reality, or are the hacking techniques fabricated by

A: I’ve written a lot about what I call “movie-plot threats”: the
tendency of all of us to fixate on an elaborate and specific threat
rather than the broad spectrum of possible threats. We see this all
the time in our response to terrorism: terrorists with scuba gear,
terrorists with crop dusters, terrorists with exploding baby
carriages. It’s silly, really, but it’s human nature.

In the spirit of this silliness, on my blog I conducted two Movie-Plot
Threat Contests. (First contest rules and entries here, and winner
here. Second contest here and winner here.)

As to the movies: they all have some basis in reality, but it’s pretty
slim — just like all the other times science or technology is
portrayed in movies. Live Free or Die Hard is pure fiction.

Q: What would you consider to be the top five security vulnerabilities
commonly overlooked by programmers? What book would you recommend that
explains how to avoid these pitfalls?

A: It’s hard to make lists of “top” vulnerabilities, because they
change all the time. The SANS list is as good as any. Recommended
books include Ross Anderson’s Security Engineering, Gary McGraw’s
Software Security, and my own — coauthored with Niels Ferguson —
Practical Cryptography. A couple of years I wrote a reading list for
The Wall Street Journal, here.

Q: Can security companies really supply secure software for a stupid
user? Or do we just have to accept events such as those government
computer disks going missing in the UK which contained the personal
information of 25 million people (and supposedly had an underworld
value of $3 billion)?

A: I’ve written about that UK data loss fiasco, which seems to be
turning into a privacy Chernobyl for that country, here. Sadly, the
appropriate security measure — encrypting the files — is easy. Which
brings us to your question: how do we deal with stupid users? I stand
by what I said earlier: users will always be a problem, and the only
real solution is to limit the damage they can do. (Anyone who says
that the solution is to educate the users hasn’t ever met an actual

Q: So seriously, do you shop on Amazon, or anywhere else online for
that matter?

A: Of course. I shop online all the time; it’s far easier than going
to a store, or even calling a mail-order phone number, if I know
exactly what I want.

What you’re really asking me is about the security. No one steals
credit card numbers one-by-one, by eavesdropping on the Internet
connection. They’re all stolen in blocks of a million by hacking the
back-end database. It doesn’t matter if you bought something over the
Internet, by phone, by mail, or in person — you’re equally vulnerable.

Q: Wouldn’t the world be simpler if we went back to “magic ink”? How
awesome was that stuff!

A: If you like invisible ink, I recommend you go buy a UV pen. Great
fun all around.

Q: Should I visit Minneapolis anytime soon, what is one restaurant
that I would be wrong to pass up?

A: 112 Eatery. (Sorry, my review of it isn’t online.)

Q: What was the one defining moment in your life that you knew you
wanted to dedicate your life to computer security and cryptography?

A: I don’t know. Security is primarily a way of looking at the world,
and I’ve always looked at the world that way. As a child, I always
noticed security systems — in retail stores, in banks, in office
buildings — and how to defeat them. I remember accompanying my mother
to the voting booth, and noticing ways to break the security. So it’s
less of a defining moment and more of a slow process.

Q: What’s the worst security you’ve seen for a major financial firm? I
use ING and their site forces you to use just a 4-digit pin.

A: There’s a lot of stupid security out there; and I honestly don’t
collect anecdotes anymore. I even have a name of security measures
that give the appearance of security without the reality: security
theater. Recently I wrote about security theater, and how the
psychological benefit is actually important.

Q: I read that AES and Twofish have protection against timing
analysis. How does that work?

A: What an esoteric question for such a general forum. There is
actually a timing attack against AES; a link to the specific attack,
and a description of timing attacks in general, is here. This is a
more general description of the attacks and defenses.

Q: How does it feel to be an Internet meme?

A: Surreal. It’s surreal to be mentioned in The DaVinci Code, to
appear before the House of Lords, or to answer questions for the
Freakonomics blog.

The hardest part is the responsibility. People take my words
seriously, which means that I can’t utter them lightly. If I say that
I use a certain product — PGP Disk, for example — people buy the
product and the company is happy. If, on the other hand, I call a
bunch of products “snake oil,” people don’t buy the products and the
companies occasionally sue me.

Q: Is it true that there is a giant database of every site we have
ever visited, and that with the right warrant a government agency
could know exactly where we’ve been? What are our real footprints on
the Web, and would it be possible for, say, an employer to someday
find out every site you visited in college? Is there a way to hide
your presence on sites that you believe to be harmless that others may
hold against you?

A: There really isn’t any good way to hide your Web self. There are
anonymization tools you can use — Tor for anonymous web browsing, for
example — but they have their own risks. What I said earlier applies
here, too; it’s impossible to function in modern society without
leaving electronic footprints on the Web or in real life.

Q: Is there any benefit to password protecting your home Wifi network?
I have IT friends that say the only real benefit is that multiple
users can slow down the connection, but they state that there is no
security reason. Is this correct?

A: I run an open wireless network at home. There’s no password, and
there’s no encryption. Honestly, I think it’s just polite. Why should
I care if someone on the block steals wireless access from me? When my
wireless router broke last month, I used a neighbor’s access until I
replaced it.

Q: Why do large government agencies and companies continue to put
their faith in computer passwords, when we know that the human mind
cannot memorize multiple strong passwords? Why is so much more effort
put into password security than human security?

A: Because it’s easier. Never underestimate the power of doing the
easy stuff and ignoring the hard stuff.

Q: Do you still find that lying about successes in counter-terrorism
is an appropriate option for security experts commenting on these

A: For those of you who don’t want to follow the links, they’re about
the German terrorist plot that was foiled in September, and about how
great a part electronic eavesdropping played in the investigation. As
I wrote earlier, as well as in the links attached to that answer, I
don’t think that wholesale eavesdropping is effective, and I
questioned then whether its use had anything to do with those arrests.
I still don’t have an answer one way or another, and made no
definitive claims in either of the two above links. If anyone does
have any information on the matter, I would appreciate hearing it.

Again, thank you all. That was fun. I hope I didn’t give you too many
links to read.

From the archive, originally posted by: [ spectre ]


“Some people define “multicultural” by targeting demographics of
individuals defined most often by race, language, ethnicity and
religion.  Burson-Marsteller defines multicultural as “multiple
communities” and our multicultural offerings are borne out of a keen
understanding of a world that is becoming more and more community-
centric with communities built around a clear cultural identity,
common interests and shared values.  When, how and why individuals
self-select to identify or join with a community has never been more
varied and it is typical for people to identify or join with more than
one community at any given time.

Because of the specificity of the “common ground” in these
communities, it is often difficult to engage with community members
through traditional channels.  Our research-based approach to
identifying the motivations and drivers of these communities, coupled
with our knowledge of digital and grassroots outreach, enables us to
shape programs with the specificity and relevance necessary to
generate receptivity, motivation and action.”


BY Tim Lott  /  11/10/2007
who reviews Microtrends by Mark J. Penn with E. Kinney Zalesne

Along with such recent publishing hits as The Long Tail and The
Tipping Point, Microtrends is a book that develops our vision of how
societies work at a time when they are becoming so complex as to be
frustratingly opaque.

The central premise is that the US, and much of the world, is no
longer driven primarily by a few large-scale forces, but by a
multitude of small, elusive criss-crossing tendencies, groups and

These exert a disproportionate influence through their intensity of
interest, the fact that they are growing and the fact that their needs
are as yet unmet by the commercial and political policy-makers.

Thus, although we can all cite globalisation, turbo-capitalism and the
communications revolution as large-scale trends, it is a patchwork of
smaller trends appearing ‘off the radar’ that gives significant clues
as to where the world is heading and offers opportunities and cues for
those who seek to hook up with both voters and consumers.

This picture is complex and contradictory but it is real and it is
significant. Furthermore, it is counterintuitive – Mark Penn believes
that with the speed of change in the modern world and the multiplying
currents of ‘mass individualism’, gut feelings based on common sense
are increasingly misleading.

These emerging markets and groups do not have to be that large, Penn
claims, to exert an important influence. He cites a figure of one per
cent of the population as constituting a microtrend. He never quite
succeeds in making it clear why this number is so magical outside of
his own specialist area (political polling where a small group of
swing voters are so crucial).

Can it really matter that there are seven million archers in America?
Or that there are one and a half times more Umbandans (a religious
group) in the world than there are Jews? Or that a phone poll asking
young Californians what they were going to be doing in 10 years time
revealed that a full one per cent of them (which turns out to be a
grand total of six) said they wanted to be snipers?

Likewise Penn ‘identifies’ trends that feel like common knowledge. We
all know that long-distance or ‘extreme’ commuters are on the rise
(particularly in the UK). And the fact that caffeine consumption is on
a massive spike is neither a microtrend nor a fresh insight.

But the beauty of this book is that it brings all the fibres of a
complicated tapestry into a focus that makes it susceptible to
discrete analysis. And it produces a picture of the world that
confounds preconceptions. The book delivers jolt after jolt on this

Were you aware that in the US women outspend men on technology by a
factor of three to two? Or that more women buy cars than men? As Penn
points out, you would never guess from the male-message-loaded

I was shocked that double the number of people aged 20-44 took
sleeping pills in America in 2004 than in 2000. That eight out of 10
dog owners buy birthday gifts for their pets. That there are three
million straight spouses left behind by ‘Late Breaking Gays’. That one
third of African women are not malnourished but overweight. That the
average age for video and computer game users is not 15 but 33.

These figures come – to me, anyway – out of the blue. But Penn also
gives shape and substance to many ‘common sense’ perceptions that turn
out to be only half formed.

We are all aware, for example, that women have made advances but who
would have known that, in America at least, 70 per cent of PR
employees are women, along with 57 per cent of news anchors, analysts
and journalists and more than of half of law school graduates.

Women’s control and mastery of words (Penn dubs them ‘Wordy Women’)
explains why the news agenda has become relatively feminised, with
abortion, childcare and sex-discrimination stories all working up the

Even more illuminating is a statistic Penn quotes about voting
behaviour. He points out that, contrary to popular expectations,
holders of PhDs are much more emotionally driven when making decisions
on how to vote than the blue-collar workers are. Why? Because they are
not at the cutting edge of changes. They are insulated against swings
in policy in the way that those at the economic and social coal-face
are not.

This turns conventional wisdom on its head and explains why political
commentators on both sides of the Atlantic so often get it wrong. A
‘satisfied élite’ is driving media perspectives – in a misleading
direction. Hence, in this country, the absurd surprise of the
commentariat at the success of Gordon Brown when he was so supposedly
voter unfriendly and disconcertingly unBlairlike. It was the economy,

One of the pleasures of the book is that you will also inevitably
recognise yourself – as I did (a Do-over Dad, a Snowed Under Slob, a
Stay At Home Worker, and a 30-Winker). I am not alone – and neither
are you.

The greatest compliment I can pay this book is that it made me want to
go and start a business, so rich is its suggestion of untapped,
unidentified social realities.

As a ‘Snowed Under Slob’ I probably won’t be bothered, but even so,
Microtrends gave me a picture of the world that surprised and
challenged me. It is also internationally relevant, not only because
the world tends to follow the US, but because Penn has included panels
that fill in the global picture (did you know 82 per cent of Italian
men aged 18-30 still live with their parents?)

The book is like Schott’s Miscellany without the irrelevance. That is,
it is not merely fun to read but bursting with essential, and almost
certainly profitable, information for policy-makers, businessman,
pundits and punters alike.

BY Rachel Sylvester  /  19/09/2007
who gets to grips with Mark Penn’s ‘microtrend’ voting categories

Mark Penn argues that the world is increasingly made up of “societal
atoms”. These are, he says, “small trends that reflect changing habits
and choices.” Often, they are counter-intuitive. By analyzing polling
data, he has identified 75 “microtrends”, categories of people who
might just change the world. Although most of the research in his book
is based on American polls, many of the findings are replicated in the

1. Sex-ratio singles. Around three per cent of women are, according to
Penn, now left on the shelf because there are not enough straight men
to go round.

2. Cougars. Women who date younger men. The number following the
example of Mrs Robinson in The Graduate has more than trebled in the
last ten year.

3. Office romancers. According to one recent survey nearly 60 per cent
of Americans have mixed business and pleasure.

4. Commuter couples. The number of people who live in separate cities
has doubled in the last fifteen years.

5. Internet marrieds. Couples who meet on line are more likely to
cross class and race barriers.

6. Working retired. The baby boomers are refusing to give up their
jobs at 65.

7. Extreme commuters. The number of those who travel at least 90
minutes each way to get to work has doubled in the last ten years.

8. Stay-at-home workers. Up 23 per cent in the US since 1990.

9. Wordy women. It’s not just JK Rowling. Females have a rising
profile in language-based professions such as the media, PR, law and

10. Ardent Amazons. Women are also increasingly going into jobs that
demand physical strength, such as the military, fire-fighting,
plumbing, sport and building.

11. Stained glass ceiling breakers. The number of female vicars has
trebled in the last twenty years.

12. Pro-Semites. According to Penn: “Jew-loving is a bit of a craze.”

13. Interracial families. More than one per cent of couples in the US
are mixed race.

14. Protestant Hispanics. Latino immigrants are a powerful lobby group
and those who are Protestant, rather than Catholic, are a surprisingly
important subgroup.

15. Moderate Muslims.

16. Sun-haters. Those who are turning against tanning are “early
adopters” of a trend that Penn believes will soon spread.

17. 30-winkers. Margaret Thatcher survived on four hours a night, and
the number of people who sleep fewer than six hours is rising fast.

18. Left-handers. The number has doubled in a generation and will
continue to rise, thanks, Penn thinks, to more liberal teaching and

19. DIY doctors. We are all researching, diagnosing and curing
ourselves via the internet.

20. Hard-of-hearers. The number of people with hearing loss doubled
between 1970 and 2000.

21. Old new dads. Fathers having children in their 40s and 50s, up
dramatically. Pet parents.

22. Not only are people having more animals, they are also treating
them more like children.

23. Pampering parents. Nurture, not discipline, is the order of the

24. Late-breaking gays. Those leaving heterosexual marriages for gay
relationships. One study found that one in five gay men were past 40
when they had their first homosexual experience.

25. Dutiful sons. Although the bulk of those caring for elderly
relatives are women, the number of men is rising.

26. Impressionable elites. Wealthy and educated people who are now
more obsessed by personality, rather than issue-based, politics than
their working class counterparts.

27. Swing is still king. The non tribal centrist voters will still,
according to Penn, determine elections.

28. Militant illegals. In the US, illegal immigrants are increasingly
taking to the streets to demand more rights.

29. Christian Zionists. Christians who support Israel outnumber Jews.

30. Newly released ex-cons.

31. Mildly disordered. Conditions such as attention deficit disorder
are on the rise.

32. Young knitters. The fastest growing group of people who knit are
in their teens and 20s.

33. Black teen idols. There is a new class of black super-achievers
graduating for the first time.

34. High school moguls. The internet and eBay make teenage
entrepreneurship easier than ever.

35. Aspiring snipers. The most bizarre fact Penn has discovered is
that one per cent of young Californians told a pollster that they want
to be snipers. “Stealth,” he says “is in openness is out.”

36. Vegan children. The younger generation is turning off meat in a
big way.

37. Obese adults. There are an estimated 300 million obese people in
the world, compared with 200 million in 1995, with all the
implications for health policy.

38. The thinning thousands. There are meanwhile thousands cutting
their calories to near-starvation levels in an attempt to lengthen
their lives.

39. Caffeine crazies. Starbucks and Red Bull are taking over the

40. Long attention spanners. 50 million Americans do jigsaw puzzles,
best-selling books are on average 100 pages longer than 10 years ago –
and Penn believes politics is moving from soundbites to issue-based

41. Neglected dads. The man who discovered the Soccer Mums thinks
advertisers, and politicians are now ignoring fathers.

42. Native language speakers. The number of people living in
households where no-one speaks English well has increased by more than
50 per cent in recent years.

43. Unisexuals. After metrosexuals, we have unisexuals, people to whom
as Penn puts it “the binary gender classification system is arbitrary,
limiting and oppressive.”

44. Second home buyers. Middle income earners are the fastest growing
group of those buying rural retreats.

45. Modern Mary Poppinses. Well-educated, well-heeled women are
increasingly becoming nannies.

46. Shy millionaires. There is a significant group of rich and super-
rich who live below their means. Penn calls them Secret Succeeders and
Satisfied Savers.

47. Bourgeois and Bankrupt. In America personal bankruptcy filings
have climbed nearly 350 per cent in the last 25 years.

48. Non-profiteers. The number working for charities and non-profit
organizations has soared.

49. Uptown tattooed. High earners are now more likely than low earners
to have ‘body art’.

50. Snowed under slobs. One in ten people identify themselves as ‘very
messy’ – and they are almost twice as likely to be Democrats as

51. Surgery lovers. There has been a huge increase in cosmetic surgery
and nearly half of surgeons say they have treated teenagers.

52. Powerful petites. According to Penn, ‘little women are big

53. Social geeks. Computer nerds are now more sociable than their
technophobic neighbours.

54. New luddites. A dedicated band who refuse to logon.

55. Tech fatales. Women spend a third more on technology than men.

56. Car-buying soccer moms. Although you would not guess it from the
adverts, they are also the majority of car-buyers today.

57. Archery moms. Niche sports – such as archery – are taking over
from mainstream ones such as soccer.

58. xxx men. There are 4 million pornographic websites worldwide,
about 12 per cent of the total, and one in four search engine requests
on an average day is for pornography.

59. Video game grown ups. Mothers over 45 are one of the fastest
growing group of computer game players.

60. Neo-classicals. Classical music is growing in popularity.

61. Smart children left behind. Middle class parents are increasingly
holding their child back a year, so they are the oldest not the
youngest in the class.

62. The home-schooled. A growing band are abandoning mainstream

63. College drop-outs. Although college enrollment has gone up college
graduation rates have stayed about the same.

64. Numbers junkies. Science is failing to attract enough students.
There are only 77 maths students at Harvard, out of over 6,700

65. Mini-churched. According to the World Christian Encyclopedia,
there are nearly 10,000 distinct religions in the world with two or
three new ones being created every day.

66. International home buyers.

67. LAT couples. One million couples in Britain live apart – but are
not separated.

68. Mammonies. In Italy 82 per cent of men age 18-30 are still living
at home with their parents.

69. Eurostars. Although Americans are reproducing at a rate of 2.1
children per woman of child-bearing age, European women are having an
unsustainable 1.5 children each.

70. Vietnamese entrepreneurs. Vietnam is one of the most successful

71. French teetotalers. No country has cut its alcohol consumption
more than France in the last 40 years.

72. Chinese Picassos. Between 1993 and 2005, China’s premier art
auction house nearly quadrupled its annual sales volume.

73. Russian swings. Russians who, in the 1990s, swung towards
democracy are now swinging back.

74. Indian women. An increasingly powerful force.

75. Educated terrorists.

Why There’s Strength in Small Numbers
By HARRY HURT III  /   September 16, 2007

THE human psyche finds something supremely reassuring about numbers.
Just ask my 9-year-old son. His favorite prime-time television series
is CBS’s “Numb3rs,” spelled with a digit in place of the third-to-last
letter. The show features an F.B.I. agent and his math-genius brother
solving crimes with the aid of formulas like Bacon’s Cipher and the
Knapsack Algorithm.

“There’s no way the bad guys can win,” my son assures me each time we
watch the show together. “They can’t do the math, Dad.”

Mark J. Penn and his co-author, E. Kinney Zalesne, profess a similarly
deep-seated faith in the power of numbers in their new book,
“Microtrends: The Small Forces Behind Tomorrow’s Big Changes” (Twelve,
448 pages, $25.99). Mr. Penn, chief executive of Burson-Marsteller, is
a longtime pollster who is chief political adviser to Hillary Rodham
Clinton. He won fame for identifying “soccer moms” as a crucial
constituency in President Bill Clinton’s 1996 re-election campaign.

The thesis of Mr. Penn’s book is that “you can’t understand the world
anymore only in terms of ‘megatrends,’ or universal experience. In
today’s splintered society, if you want to operate successfully, you
have to understand the intense identity groups that are growing and
moving, fast and furious, in crisscrossing directions.” In the United
States, he notes, these society-changing “microtrends” can involve as
few as three million people, about 1 percent of the population.

So how does Mr. Penn identify the 75 most important microtrends of the
current age? By numbers, largely those obtained through polls and

“Americans claim to be a ‘gut’ nation – which is kind of a bodily term
for what we roughly term our ‘values,’ ” he declares. But according to
Mr. Penn, the advice we get from our guts is “lousy” most of the time
because it is inexact and often contrary to statistically determined
facts. Numbers, he believes, do not lie. ”Numbers will almost always
take you where you want to go if you know how to read them,” he

Except perhaps for the fictional math genius in “Numb3rs,” few people
are better at gathering or reading numbers than Mr. Penn.
“Microtrends” is a diligently researched tome chock-full of
counterintuitive facts and findings that may radically alter the way
you see the present, the future, and your places in both. The book’s
15 main chapters group microtrends in virtually every area of life,
like “Love, Sex, and Relationships,” “Politics,” “Technology,”
“Education,” “Food, Drink & Diet” and “Looks and Fashion.”

“Microtrends” is the perfect bible for a game of not-so-trivial
pursuits concerning the hidden sociological truths of modern times.

Suppose, for example, you were asked to name an American subculture
that marries at a rate of 70 percent and registers to vote at a rate
of 82 percent. Chances are you wouldn’t guess that group is the
“moderate Muslims” identified by Mr. Penn. Likewise, with all the
stories about poverty breeding political unrest, you probably wouldn’t
figure that the Muslim terrorists who perpetrated acts like the 9/11
attacks were mostly middle class and college educated, as Mr. Penn
duly documents.

Let’s say you want to elected president of the United States with the
help of the soccer moms Mr. Clinton charmed last decade. Better take a
fresh look at your target electorate.

According to Mr. Penn, most of the soccer moms of the 1990s have
already sent their children off to college; many of these mothers are
now seeking personally fulfilling leisure activities. Archery ranks as
the nation’s fourth-fastest-growing sport behind skateboarding,
kayaking and rafting, and snowboarding – so go after those “archery

What should you do on the educational front if you have a child with
an aptitude for numbers, as mine does? Both of you had better get
cracking, because American college students are studying less math. As
an example, “Microtrends” says Harvard has only 77 math majors out of
6,700 undergraduate students.

The math story is different in China and India, which are graduating
as many as 950,000 engineers a year. Granted, both nations are far
more populous than the United States, but that is a lot of engineers.

Mr. Penn notes that a 2001 bipartisan commission “said that the
greatest threat to American national security – behind only terrorist
attacks – was the threat of failing to provide sufficient math and
science education in America.”

If Mr. Penn’s array of microtrends is unrelentingly fascinating, the
sheer number is a bit much to digest in one or even several sittings.
As an admittedly “impressionist” portrait, a statistical snapshot
frozen in recent past time, it is also a bit lacking in a coherent
vision of the future. Mr. Penn predicts that “the explosion of
individual expression” will also make it much harder for autocracies
to flourish in China and elsewhere. But in the next breath, he warns
that the “weakness of a world driven by personal choice is that mass
collective action” against those autocracies will become “more
difficult to organize and sustain.”

THAT said, the book’s numbers offer a measure of reassurance about the
future of politics that is almost on par with the reassurance my son
gets from watching the math genius and his F.B.I. agent brother defeat
the bad guys on “Numb3rs.”

Mr. Penn says in the last chapter that “it is only a matter of time”
until either the Republican Party or the Democratic Party breaks
apart. “As of the spring of 2007, the Democratic Party is energized
and showing greater unity,” he writes. “The Republican Party, on the
other hand, is losing membership and arguably its identity, and is
probably more ripe for breakup.”

Is it to much to hope that with the continuing “explosion of personal
choice” both parties might go under at the same time? Stay tuned.

Mark J. Penn, Worldwide President & CEO

Office: New York
Phone: 212-614-4446
Fax: 212-598-5679
Email address: markjpenn [at] bm [dot] com

“Mark Penn is worldwide CEO of Burson-Marsteller and President of
Penn, Schoen and Berland. As CEO of Burson-Marsteller, Mark oversees a
global network of 94 offices and 1600 employees that brings world-
class public relations to companies around the world. As President of
PSB, a position he has held since 1975 when he was an undergraduate at
Harvard, Mark focuses on providing research-based communications
strategy to political figures, corporations and crisis situations.

Mark has been called “Master of the Message” by Time Magazine; “The
king of polls” by the London Times; and an “incandescent intellect” by
the New York Times. On his wall are notes saying “you were brilliant”
from Tony Blair after his historic third win and “thanks” from Bill
Clinton after his impeachment acquittal along with photos of Mark
working with CEOs including Bill Gates and Bill Ford, Jr. The
Washington Post, in “Politics and Policy by the Numbers” summed up his
influence in the White House and the corporate boardroom as a “unique
vantage point: adviser to the preeminent innovator of the past decade
in the realm of politics, Bill Clinton, and the preeminent innovator
in the realm of business and technology, Bill Gates.”

The techniques applied to these political and corporate battles were
honed from early major corporate experiences with AT&T, Texaco and
others. In “The Guru of Small Things” the New York Times explains how
he has combined innovative techniques of micro-targeting, issue-based
messaging and visual message testing to win major corporate, marketing
and political battles.

Today, Mark serves as strategic consultant to several Fortune 500
companies and CEOs on a wide range of image, branding and corporate
reputation issues. His client relationships include Ford Motor
Company, Merck, Verizon, BP, McDonald’s and Microsoft. He has been a
key adviser to Bill Gates and Steve Ballmer since 1998, helping
Microsoft affect a complete corporate turnaround from anti-trust
scandal to Most Trusted Company (Wall Street Journal).

In 2007, Mark published a ground-breaking book, Microtrends: The Small
Forces Behind Tomorrow’s Big Changes that has been compared to The
Tipping Point by Kirkus Reviews and has received praise from President
Bill Clinton and Bill Gates.

Mark has helped to elect over 25 leaders in the United States, Asia,
Latin America and Europe. Most recently, he served as advisor to Prime
Minister Tony Blair, helping achieve an unprecedented third term win
for the Labour party in the United Kingdom. He is also well known for
serving as President Clinton’s pollster and political adviser for the
1996 re-election campaign and throughout the second term of the
administration. Currently, Mark serves as a key strategic advisor to
Senator Hillary Rodham Clinton. He has worked with Mrs. Clinton for
over six years, since he ran the polling and messaging for her
successful election to the US Senate in 2000.

Mark won the Pollster of the Year award, given every 4 years, in both
1996 and 2000, the top honor in his profession, from the American
Association of Political Consultants. Mark has written for
publications including the New York Times and the Washington Post, and
has appeared frequently on networks including CNN and Fox News.”

“I do not have any formal public relations training. How then do I
move into the industry?”

We suggest you visit any one of the following Web sites for general
information as well as career advice. (links)

* Canadian Public Relations Society
* European Association of Public Relations and Communications
* European Public Relations Confederation (Confederation
Europeenne des Relations Publiques)
* Global Alliance for Public Relations and Communication
* Institute of Public Relations of Singapore
* Inter-American Confederation of Public Relations
* International Association of Business Communicators
* International Communications Consultancy Organisation
* International Labour Organization
* International Public Relations Association
* Latin American Association of University Careers of Public
Relations (Asociación Latinoamericana de Carreras Universitarias de
Relaciones Públicas)
* Public Relations Consultants Association of India
* Public Relations Consultants Association
* Public Relations Institute of Australia
* Public Relations Institute of New Zealand
* Public Relations Institute of Southern Africa
* Public Relations Society of America
* Public Relations Society of Japan


EXCERPT of Microtrends
by Mark J. Penn and E. Kinney Zalesne

In fact, the whole idea that there are a few huge trends that
determine how America and the world work is breaking down. There are
no longer a couple of megaforces sweeping us all along. Instead,
America and the world are being pulled apart by an intricate maze of
choices, accumulating in “microtrends”-small, under-the-radar forces
that can involve as little as 1 percent of the population, but which
are powerfully shaping our society. It’s not just that small is the
new big. It’s that in order to truly know what’s going on, we need
better tools than just the naked eye and an eloquent tongue. We need
the equivalent of magnifying glasses and microscopes, which in
sociological terms are polls, surveys, and statistics. They take a
slice of the matter being studied and lay it open-bigger and clearer-
for examination. And inside, you will find yourself, your friends,
your clients, your customers, and your competition, clearer than you
ever thought you might.

Working for President Clinton in 1996, I identified the under-the-
radar group that became known as the Soccer Moms. (I like to think I
did something for the youth soccer movement, although I really didn’t
mean to. The phrase was just meant to get at busy suburban women
devoted to their jobs and their kids, who had real concerns about real
presidential policies.) Until that campaign, it was generally thought
that politics was dominated by men, who decided how their households
would vote. But the truth was, in 1996, most male voters had already
made up their minds by the campaign. The people left to influence were
the new group of independent Moms, devoted to both work and their
kids, who had not yet firmly decided which party would be good for
their families. They, not their husbands, were the critical swing
voters. To win them over, President Clinton initiated a campaign to
give them a helping hand in raising their kids-drug-testing in
schools, measures against teen smoking, limits on violence in the
media, and school uniforms. These Moms did not want more government in
their lives, but they were quite happy to have a little more
government in their kids’ lives to keep them on the straight and

In retrospect, a profound political change was spawned by this bit of
trend-spotting. Previously, almost all Democrats had targeted
downscale, noncollege workers, particularly in the manufacturing
sector. But union membership and manufacturing jobs were shrinking,
more people were going to college, and almost the entire electorate in
the U.S. was calling itself middle class. If Democrats missed the key
trends, they would miss the boat.

Now candidates enthusiastically target Soccer Moms-although someone
may want to let them know that trends move fast, and Soccer Moms, too,
have moved on. Now, a decade later, their kids are getting ready for
college, many of them have been through a divorce, and their own
financial security has become as big an issue for them as raising
their children was ten years ago.

And with all of the attention being paid to those Moms, Dads-suburban-
based, family-focused, office-park-working Dads-are all but neglected
in politics, advertising, and the media. In the twenty-first century,
Dads spend more time with their children then ever in history. Has
Madison Avenue adjusted? Are Dads ever the target of back-to-school

There could be as big a shift ahead in marketing as 1996 saw in
Democratic politics.

The art of trend-spotting, through polls, is to find groups that are
pursuing common activities and desires, and that have either started
to come together or can be brought together by the right appeal that
crystallizes their needs. Soccer Moms had been there for a decade or
more-but they became a political class only when they were recognized
as a remarkably powerful voting bloc in America.

Today, changing lifestyles, the Internet, the balkanization of
communications, and the global economy are all coming together to
create a new sense of individualism that is powerfully transforming
our society. The world may be getting flatter, in terms of
globalization, but it is occupied by 6 billion little bumps who do not
have to follow the herd to be heard. No matter how offbeat their
choices, they can now find 100,000 people or more who share their
taste for deep fried yak on a stick.

In fact, by the time a trend hits 1 percent, it is ready to spawn a
hit movie, best-selling book, or new political movement. The power of
individual choice is increasingly influencing politics, religion,
entertainment, and even war. In today’s mass societies, it takes only
1 percent of people making a dedicated choice-contrary to the
mainstream’s choice-to create a movement that can change the world.

Just look at what has happened in the U.S. to illegal immigrants. A
few years ago, they were the forgotten Americans, hiding from daylight
and the authorities. Today they are holding political rallies, and
given where they and their legal, voting relatives live, they may turn
out to be the new Soccer Moms. Militant immigrants fed up with a
broken immigration system just may be the most important voters in the
next presidential election, distributed in the key Southwest states
that are becoming the new battleground areas.

It’s the same in business, too, since the Internet has made it so easy
to link people together. In the past, it was almost impossible to
market to small groups who were spread around the country. Now it’s a
virtual piece of cake to find 1 million people who want to try your
grapefruit diet, or who can’t get their kids to sleep at night.

The math can be not just strategic, but also catastrophic. If Islamic
terrorists were to convince even just one-tenth of 1 percent of
America’s population that they were right, they would have 300,000
soldiers of terror, more than enough to destabilize our society. If
bin Laden could convert just 1 percent of the world’s 1 billion
Muslims to take up violence, that would be 10 million terrorists, a
group that could dwarf even the largest armies and police forces on
earth. This is the power of small groups that come together today.

The power of choice is especially evident as more and more Americans
make decisions about their own lives. For example, the population
growth in America has slowed to .9 percent, but the number of
households has exploded. Between people getting divorced, staying
single longer, living longer, and never marrying at all, we are
experiencing an explosion in the number of people who are heads of
households-almost 115 million in 2006 compared to about 80 million in
1980. The percentage of households consisting of one person living
alone increased from 17 percent in 1970 to 26 percent in 2003. The
proportion of married-with-kids households has fallen to less than 25

All these people out there living a more single, independent life are
slivering America into hundreds of small niches. Single people, and
people without kids at home, have more time to follow their interests,
pick up hobbies, get on the Internet, have a political debate, or go
out to movies. By all rights, no one should even go to the movies
anymore-you can get movies practically as fast by downloading them or
using pay-per-view-but for people with a free Saturday night, movies
are such a solid preference that theaters are raising their prices,
not lowering them. More people have more disposable resources
(including money, time, and energy) than ever before. They are
deploying them in pursuit of personal satisfaction like never before.
And as a result, we’re getting a clearer picture of who people are and
what they want. And in business, politics, and social-problem-solving,
having that information can make all the difference.

This book is all about the niching of America. How there is no One
America anymore, or Two, or Three, or Eight. In fact, there are
hundreds of Americas, hundreds of new niches made up of people drawn
together by common interests.

Nor is niching confined just to America. It is a global phenomenon
that is making it extremely difficult to unify people in the twenty-
first century. Just when we thought that, thanks to the Internet, the
world would be not only connected but ultimately unified around shared
values favoring democracy, peace and security, exactly the opposite is
happening. We are flying apart at a record pace.

I recently went bowling and, contrary to another popular but misguided
idea, no one was there alone. But actually, the people hurling the
balls down the lanes weren’t the clichéd pot-bellied, beer-drinking
bowlers, either. In fact, there appeared to be no similarity at all
from one group to another. In one lane was a family of Indian
immigrants, including the grandparents. In another lane was a black
Mom with two adolescent kids. In a third lane were four white teens,
some with tattoos, some with polo shirts. And two lanes down, a
Spanish-speaking man and woman were clearly on a bowling date,
smooching between spares.

With the rise in freedom of choice has come a rise in individuality.
And with the rise of individuality has come a rise in the power of
choice. The more choices people have, the more they segregate
themselves into smaller and smaller niches in society.

The Explosion of Choice

At the Boston Tea Party in 1773, there was probably only one kind of
tea hurled overboard-English Breakfast. Today, if Americans staged
that rebellion, there would be hundreds of different teas flying into
the harbor, from caffeine-free jasmine rose to Moroccan mint to sweet
Thai delight.

You can’t even buy potato chips anymore without having to pick from
among baked, fried, rippled, fat-reduced, salted, or flavored-with
flavor subcategories including barbeque, sweet potato, onion and
chive, and Monterey Pepper Jack.

We live in a world with a deluge of choices. In almost every area of
life, Americans have wider freedom of choice today than ever in
history, including new kinds of jobs, new foods, new religions, new
technologies, and new forms of communication and interaction.

In some sense, it’s the triumph of the Starbucks economy over the Ford
economy. In the early 1900s, Henry Ford created the assembly line so
that mass consumerism could take place-uniformly. Thousands of workers
turned out one black car, millions and millions of times.

Today, few products still exist like that. (One that does, ironically,
is the personal computer, which has made it to every desk in every
home in essentially the same form. There is some customization around
the edges, but if you go to a typical CompUSA to buy a computer,
you’ll have fewer options than you do choosing lettuce in the

By contrast, Starbucks is governed by the idea that people make choices
-in their coffee, their milk, their sweetener-and that the more
choices people have, the greater satisfaction they feel. (And in just
those simple choices, you can see the unpredictability of the consumers
-some are avoiding caffeine, fat, or sugar, and others are happily
ordering them all.) Starbucks is successful because it can be all
things to all people-it makes no bets on one set of choices over

Whereas in the Ford economy, the masses were served by many people
working to make one, uniform product, in the Starbucks economy, the
masses are served by a few people working to make thousands of
customized, personalized products.

The Starbucks model seems to be winning. iPods are popular not because
we can carry around music-we could do that with the Walkman in the
1980s. They are popular because they let us pick and choose our own
songs. Personal technology has become personalized technology, and now
we can have exactly what we want in almost every consumer area. You
can even have a made-to-order car delivered in less than a month-
longer than it takes to get a pizza, but still an amazing feat made
possible by technology.

The triumph of personalization and choice is a boon for coffee-
drinkers and car-buyers, but it’s a nightmare for trend-spotters. As
choices get more and more finely sliced, you have to look all the
harder to see how choices change.

But remember the terrorists, or realize that the best-selling car in
America is bought by barely 300,000 people. Unlike any other time in
history, small trends can make a big difference. So while it is harder
than ever to spot trends, it is also more important.

Small groups, drawn together by shared needs, habits, and preferences,
are on the rise. They are powerful, and they are hard to find. This
book aims to pin some of them down.

The Power of Numbers

There have been some very good books in recent years that claim that
America is moving in a couple of big directions. This book contends
the opposite. America is moving in hundreds of small directions. At
once. Quickly. It’s part of our great energy and part of our looming

Because small trends pay very little deference to one another. For
every high-profile group of young, urban chic in America, there is
another group of older, old-fashioned churchgoers. For every group of
Gadget Geeks, there are the people who say turn the technology off.
Americans are dieting more than ever, but the steak houses have never
been more full. Politics is split to the extremes with “red states”
and “blue states,” but there have never been more voters who call
themselves Independent.

For thirty years since reading V. O. Key, I have used the most
reliable device I know of to spot trends, or the shifts and evolutions
in these groups: numbers. Americans claim to be a “gut” nation-which
is kind of a bodily metaphor for what we roughly term our “values.”
How many times do you hear that the right thing to do is to follow
your gut?

Most of the time, though, that advice is pretty lousy. If you want the
safest form of transportation, get on a plane; don’t go near a car. If
you want to lose weight, count calories; forget the cranberry juice
and flaxseed. Numbers will almost always take you where you want to go
if you know how to read them.

In general we love numbers-a hit TV show these days is even called
Numb3rs. But we also fear them. In part because we’re less well
trained in math and science than we are in language and literature. As
a country, we suspect we’re not that good at numbers. They scare us,
almost as much as public speaking. At the same time they fascinate us.

Many of us have a healthy mistrust of numbers, because some people, in
an effort to advance an agenda, misuse them. Do you remember the Y2K
scare? Every computer-user on earth worried that their files were in
jeopardy as the millennium turned over. In fact, only one-third of the
world’s computers were ever even susceptible to Y2K errors-and in
those, hardly any problems materialized. Or avian flu. In late 2005,
it sped around the world that out of 140 or so human cases of avian
flu reported in Southeast Asia, more than half had resulted in death.
Reporters somberly concluded that the mortality rate for avian flu is
more than 50 percent. Terrifying! But in fact the sample those numbers
came from was only the very sickest people. People who contracted the
flu and never went to the hospital never even made it into the
calculations. I call these reported numbers “scaretistics.”

My job, in thirty years as a pollster, has been to separate the wheat
from the chaff when it comes to numbers. In working for different
kinds of clients, from Bill Clinton to Bill Gates to Tony Blair, I
have learned to pierce through remarkably stubborn conventional
wisdom, finding counterintuitive trends in society that can help solve
substantial challenges. Imagine for a moment that you are a powerful
leader. Eloquent advocates tug at you every day, and the press gives
you its opinions. Your advisers chime in. It becomes hard to make the
right choice unless you also have the missing ingredient: the numbers.
My job was to wade through all the opinions and offer a solid,
quantitative view of reality based on the numbers, so that leaders had
a true picture when they made their decisions. In my view, words
without numbers are as meaningless as numbers without words-you need
the right balance, so that eloquent arguments are backed up by reality
as depicted by numbers. Later in the book, we talk about rising crime
in America-a very difficult subject that has been the focus of
countless treatises and theories on everything from unemployment to
permissive parenting. But when you understand that the number of
felons being released from jail has lately escalated to 650,000 people
a year, you instantly have a model of a new threat on the streets and
are pointed to a new set of solutions.

In my role as pollster and strategist, I have helped generate winning
counterintuitive strategies that follow the numbers. Going after the
Soccer Moms in 1996. Helping soon-to-be Senator Hillary Clinton in
2000 look for votes in upstate New York, where Democrats had not
traditionally found many. Breaking the mold on advertising for
companies by having them pitch their ads to older people, not young
ones. Advising the winners of fifteen foreign presidential elections
in languages I could not even pronounce, let alone understand, because
I stuck to the numbers and not local biases. Often, people are just
too close to the situation to see the real facts-and it takes an
objective look to tell them what is really going on. Leaders can be
even more isolated, often captive to their staffs, and hearing only
what local journalists say is going on. Numbers can cut to the chase
in any language.

I remember one day telling the new president of Colombia that his
people were ready for an all-out war on drugs by an overwhelming
percentage. They did not, as most people thought, want to turn a blind
eye but wanted to modernize the country. The president was silent on
the matter-but finally his chief of staff said, “Mark, you are right,
but we would all be killed.” He taught me the limits of the numbers
that day, but eventually both that president and the country did
decide to make war on the drug lords, and risk their lives in the

This book is about the power of numbers and how they drive America and
the world. Rarely are things what they seem on the surface, and
nonquantitative, conventional wisdom is usually not wisdom at all.
Hidden right in front of us are powerful counterintuitive trends that
can be used to drive a new business, run a campaign, start a movement,
or guide your investment strategy. Even though these trends are
staring us in the face, we often don’t really see them.

Trend Spotters in Context

I am part of a proud line of trend-spotters. Alvin Toffler, who wrote
the Future Shock series, and John Naisbitt, who wrote Megatrends, were
some of the first thinkers in the modern era to look at the huge,
changing world of human behavior and try to make some sense of it with
facts and data. They got it right that the Information Age would
change everything.

But one thing in particular that it changed was the nature of looking
at trends themselves. As we’ll see throughout this book, you can’t
understand the world anymore only in terms of “megatrends,” or
universal experiences. In today’s splintered society, if you want to
operate successfully, you have to understand the intense identity
groups that are growing and moving, fast and furious in crisscrossing
directions. That is microtrends.

It is very different, however, from what most people do when they
“spot trends”-which is itself a growing trend. Lately there is
something of a cottage industry of marketers and sociologists who will
tell you the Ten or Fifteen Things You Must Know to get through the
next two or five or ten years. They define and refine the world around
them with ever cuter and cleverer names for the consumer, cultural,
and personal changes going on in society. Yes, I aim for some sticky
labels in this book, too. But in this book, a trend is not merely a
“development,” like the declining use of cash. It is not simply a
“shift” in how people do things, like more women taking their
husband’s name. It is not just an evolving “preference” for a product
or activity, like the growing use of GPS systems. A microtrend is an
intense identity group, that is growing, which has needs and wants
unmet by the current crop of companies, marketers, policymakers, and
others who would influence society’s behavior.

Diving In

In Microtrends, we will look at seventy-five groups who, by virtue of
their daily decisions, are forging the shape of America and the world
both today and tomorrow. While some groups are larger than others,
what they have in common is that they are relatively unseen-either
because their actual numbers are small or because conventional wisdom
hides their potential in the shadows, sometimes even emphasizing the
exact opposite.

In some of the groups, you will see yourself or your friends, your
clients or your constituents. Some groups will seem wildly remote.
Some funny. Others tragic. Occasionally, I have documented
diametrically opposing trends. Taken together, they are a kind of
impressionist painting of America and the world.

At the end, we’ll take a step back and look at the portrait. No longer
the sum of a few master strokes, America and the world are now a
collection of fine dots, to be examined one by one. We’ll see what
image emerges at the end, and what it means for our future.