Janine Wedel - Shadow Elite - How the World's New Power Brokers Undermine Democracy, Government, and the Free Market

Complex information technologies invite not only governments to skirt transparency. Ever multiplying challenges to transparency and accountability are created by private players whose activities the complex technologies of today make possible when they join with the deregulatory fervor of the first transformational development. Take, for instance, the complex new financial instruments that have ballooned in size and scope. The U.S. government, in the name of financial innovation, has allowed parallel, but unregulated or “dark” (over-the-counter) commodity derivatives markets to operate alongside regulated markets. Dark markets are exempted from transparency and regulation through loopholes codified in the Commodity Futures Modernization Act of 2000. The provision of “legal uncertainty,” for instance, disables discretion on the part of regulators and exempts certain derivatives and other exotic financial instruments from government oversight. Exploiting such loopholes and the inherent lack of transparency in dark markets, speculators trading in energy, metals, and agricultural products have driven up the price of food and energy for billions of people around the world. The Bank for International Settlements (which tracks transactions in the so-called G-10 countries plus Switzerland) estimates that the notional value of these over-the-counter commodity derivatives grew from $5.4 trillion to $13.2 trillion between December 2005 and June 2008. 28

Despite the magnitude and impact of these derivatives markets, the Commodity Futures Trading Commission, the U.S.-based (non)regulator of these trades, not only collects no data on the size of these U.S.-based transactions. In July 2008, President Bush threatened to veto legislation that would provide such authority. The Obama administration is seeking to regulate many, but not all, over-the-counter derivatives; the G-8 finance ministers have called for regulation of over-the-counter commodity derivatives market to stem excessive speculation in oil. Effective reregulation, however, is far from certain; the political power of the financial services industry will likely force compromises. 29

The lack of transparency, the complexity of the transactions, and the dearth of government supervision in these vast dark markets empower investment banks and their lobbyists to define the terms of the debate, threaten capital flight and job loss if the instruments are regulated, and thereby acquire disproportionate power to craft the rules. The constant invention of such unregulated financial instruments encourages megawealthy innovators to play on the margins, shape the rules to their advantage, add layers of insulation that help them avoid notice, and ultimatey undermine the foundations of the economy. An anthropologist of finance has found that offshore finance, while appearing to be more regulated than ever before, is in fact “regulated” by the representatives of the financial services commissions of the countries that allow it and by the trust and estate practitioners who design offshore “financial architectures” for their clients. As he assesses, “the effect of these people saying ‘let us make the rules’ has fed in really nicely to neoliberal ideology of letting the subjects most involved in stuff be responsible for the actions.” Financial instruments few understand are invented daily. But unless legislators understand them, they can’t regulate them. And, because few grasp what the players are up to, appearances are what mostly matter. 30

These shenanigans are par for the course in an environment where the only dependable constant is change. As Don Kash, a scholar in the field of technological innovation, expresses it:

The most distinctive thing about our time is that technological innovation has become routine and it occurs in nearly every physical activity and in an increasing number of biological activities. . . . You get up every morning and there is capability to do things that did not exist the morning before. . . . Change has become the norm—the routine experience that we have. Many years ago a fellow wrote a book called Future Shock . What was the thesis of Future Shock? What is culture shock? First time I ever heard about culture shock, a friend of mine had an occasion to go to the Middle East, and he was invited to a celebration in the middle of the desert in a huge tent, and they ate all this good food sitting on rugs and so on and apparently had a good time, and when the meal was over, people started belching. His first reaction was “good god, how crude,” and then he realized that this was an indication of how good the food was. And so he belched, and said it really turned out to be a delightful thing to do because sometimes you need to get rid of gas, and here you had a culture that made releasing gas also a compliment of the food. Now culture shock is what happens when you go into another culture and you don’t know what the rules are. What’s future shock? . . . Future shock is when you get up and open the door to a technology that changes the rules of the game and you close the door, but it is distinct from culture shock because you can never go home. You can never go back to the place where you know the rules. 31

That place was more predictable and safer. But an ability to handle not

knowing the rules with agility—to be responsive—is a quality that is today required for effectiveness.

Amid such unpredictability, network systems, collectively organized and sustained, have become an integral part of our society. These modes of organizing have emerged in part because they are better adapted to creating and using complex technologies. Almost every technology is produced by an international network—a network that is “self-organizing” and “def[ies] hierarchical and centralized management,” as Kash contends.

New modes of network-based organizing have penetrated the most conservative of bureaucracies and helped launch challenges to established authorities. Even the U.S. Army is not exempt. A report by a major government contractor discussed the conundrum facing the U.S. military and many other organizations: how to deal with the next generation of workers who are tech savvy, open-minded, multitasking, and perhaps unprepared for command and control environments? The report was initiated because senior military officers were concerned by the use of new Web practices by young soldiers and officers in the ranks—practices that run counter to the formal doctrine and informal culture and norms of the military. These soldiers are now subject to modes of influence from a variety of sources, including online social media. New information technologies, networks, and practices often don’t recognize traditional boundaries and can undermine traditional sources of authority such as government and science. Meanwhile, people are more receptive to new forms of (nonhierarchical, noncentralized, and nonaccountable) governing. In turn, these forms of governing abet organizing outside traditional, centralized bureaucracy and accountability, even as they often rely on official power and resources. 32

What could be wrong with these new ways of organizing, with their obvious potential, if not for good (recall Rašidagić and Callman), then certainly to be benign? In decision making that is scattered through networks and organizations or centralized it’s-not-clear where, it is harder to locate just “who” is responsible for an action or decision. The downside to such self-organizing systems is that they “have changed the meaning of individual accountability,” as Kash and a coauthor put it. Assigning responsibility for errors or shortcomings, let alone future consequences for entire populations and the Earth, is like trying to catch a fly by its leg. 33