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The Age of Global Transparency

with Colonel Sean Larkin, Henry Farrell, and Thorgils Jonsson

The age of global transparency is upon us. Whether you’re using mobile wiretaps, drones, or satellites, surveillance has become cheap and ubiquitous. And governments aren’t the only ones doing it. These days, almost anyone can peek into the lives of the world’s rich and powerful—and expose sensitive information, using new-fangled technologies or old-fashioned methods like leaks to the press.

In this episode of Foreign Affairs Unedited, we’re taking a closer look at what the end of secrecy really means for governments, politicians, and everyday people.

Guest-hosted by Deputy Web Editor Brian O’Connor and featuring guests Colonel Sean Larkin, Henry Farrell, and Thorgils Jonsson. 

Don’t miss an episode of Foreign Affairs Unedited, subscribe on iTunesPodBean, and Stitcher to have this podcast delivered right to your audio player of choice. 

This podcast has been edited and condensed. A rush transcript is available at ForeignAffairs.com.

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Brian O’Connor: This is Foreign Affairs Unedited, and I’m Brian O’Connor.

The age of global transparency is upon us. Whether you’re using mobile wiretaps, drones, or satellites, surveillance has become cheap and ubiquitous. And governments aren’t the only ones doing it. These days, almost anyone can peek into the lives of the world’s rich and powerful—and expose sensitive information, using new-fangled technologies or old-fashioned methods like leaks to the press.

In this episode of Foreign Affairs Unedited, we’re taking a closer look at what the end of secrecy really means for governments, politicians, and everyday people.

We start today with Foreign Affairs editor Gideon Rose, who recently sat down with Sean P. Larkin, a U.S. Air Force Colonel and Military Fellow at the Council on Foreign Relations, to discuss his recent article, The Age of Transparency.

Gideon Rose: Secrecy has been a core element of international life from the beginning, everyone wants to keep their own affairs secret and spy on and figure out what's happening to everybody else, and the thesis of your piece is this is all eroding. So what are the trends that are making this the incoming age of transparency?

Colonel Sean Larkin: So Gideon, what I found really interesting was that the trends are technology-driven but they're also market-driven. There's a tremendous commercial market for data, whether that data is coming from commercial satellite imagery, from drones, from social media, and from any other number of technologies that continue to expand at an accelerated rate. And this has the effect of empowering what previously would have been weaker actors in global affairs to observe what other states do, especially in denied areas.

ROSE: So everybody now has massive overflight capabilities and real time data on what's going on everywhere?

LARKIN: Well not yet, but I kind of project within about 10 years is when a lot of these trends are gonna converge. Right now, there's perhaps 80 commercial satellites orbiting the Earth that can image the Earth. In another five years, there's gonna be about 600, and you'll go from one of the major satellite providers... From me being able to take a picture of a particular area once or twice a day, to that area being observable 70 or more times a day.

ROSE: Okay, let's take an example of how this plays out in practice and see what's different. So in the Cuban missile crisis, we woke up to find that missiles were coming in, some of them were already there, and it's all a big problem and, "Oh my God, what do we do?" Compare that to what's going on with the islands in the South China sea, in which we're seeing in real time the runways being built, the sand being added. It's all happening in front of everybody without the kind of secrecy that it was with Cuba, but does that change the fundamental issue or how we deal with it?

LARKIN: It doesn't change the fundamental issue, but it kind of changes how... The fact that the government has to deal with it in public. One small example is that Fox News exposed the deployment of a Chinese advanced serviced air missile system on Woody Island in the Paracels. And within 24 hours of Fox News revealing this, it had been commented on by both the Chinese and the US. And to compare it to your Cuban missile crisis example, in that case President Kennedy had about six days from the time he was told about the missiles and came up with a plan with the EXCOMM and before he actually made a public statement.

ROSE: So it's interesting to hear, though, about this transparency because although there are these technological trends, in some ways it seems like the dominant fact of life in recent years has been surprise rather than transparency, whether it was 9/ll coming in, somewhat out of the blue, whether it was Saddam not having the weapons that everybody thought he had. Those things seem to indicate we're not fully transparent yet.

LARKIN: Now that's absolutely correct. And I don't argue in the piece that all secrets will be revealed, but what I argue is that when a state decides to take an action, when they deploy forces, when they send spies over a border, when they change a one to a zero in cyber space, they are running the risk of being exposed.

ROSE: It gets harder to say one thing and do another without being called on it, as it were. Does that affect some actors more than others?

LARKIN: It's just one of the realities of transparency is both that it's a double edged sword, and it doesn't affect everyone equally when it comes to accountability. So transparent technology is leading to more transparency, but whether or not that leads to direct accountability by the government leaders in question is... It depends. And so for example, the United States and the United Kingdom, or any other democracy that generally adheres to its own laws or to international norms, generally speaking will modify their behavior once some sort of malfeasance or wrongdoing has been exposed.

ROSE: Since the article went to press, the Panama papers have been released, with a leak of documents from a law firm showing all sorts of people investing in tax havens there. Is that an example of the kind of thing that you're talking about?

LARKIN: Absolutely, because although I focused a lot in the paper on the various types of technology that reveal secrets and things that governments prefer to keep secret, you can't deny just the insider threat that we saw with Snowden, that we saw with WikiLeaks, and the technology does also enable the movement of very large amounts of data. Apparently the Panama papers is the largest leak of all time, and so absolutely that's part of this trend, because even if you can see when satellites are coming over and hide your activity, or you can otherwise defeat these various other sensors and social media trends that can reveal malfeasance or government activities, you still have to worry about somebody who's an insider, whether for political or for monetary reasons, decide to reveal your secrets.

ROSE: Is the United States more hypocritical than others, and does the revelation of the actual state of affairs in the world that technology and leaks will produce, will that hurt America especially?

LARKIN: Right. I think there's a very good argument to be made that the United States... That our rhetoric and our reality match up pretty well. That what we do and what we say, for the most part, are consistent.

ROSE: That we're actually less hypocritical than a lot of other countries.

LARKIN: Right. That is certainly the position I would take. However, the threat of transparency, if you wanna call it that, also means that it can undermine strategies that rely on secrecy, even if they're perfectly legitimate. If we establish a new safe house in a foreign country, if we send a spy across a border, if we fly an aircraft into an airfield that it's never been to before...

ROSE: If we listen in on Angela Merkel's phone.

LARKIN: Exactly. Any of these things can be revealed, and they can be revealed very quickly. So for anyone, whether their actions are legitimate or illegitimate, if the strategy relies on secrecy, these trends, these technology trends, are something they're gonna have to take into account.

ROSE: So the American attitude towards transparency is sorta like... I think it was Saint Augustine towards chastity in which he prayed, "Lord, make me chaste, but not yet."

[chuckle]

ROSE: Is that sorta the American attitude towards transparency?

LARKIN: There are certainly areas where the US Government operates, military operations or sensitive diplomatic or intelligence relationships, where of course we would prefer to keep those secret, and in many cases they're more affective if they are kept secret. But those are not inconsistent with our values, they're just operational realities that some things you don't wanna talk about in public.

ROSE: Does the new age of transparency help states or non-state actors, or does it affect everybody equally?

LARKIN: I think it is the biggest benefit to the weaker actors in international relations. And they could be smaller states who can't afford big intelligence services, they could be non-governmental organizations like Human Rights Watch, they can be think-tanks or just individual citizens or bloggers. Because they have access to so much information at low cost or even for free, that they just simply wouldn't have had access to before. And the United States actually has the other challenge, is that we build this tremendous intelligence infrastructure that is very focused on gathering secrets through classified means, and so now we have to figure out how to take advantage of this fire hose of open information and to seamlessly integrate it into our more conventional and traditional ways of doing intelligence and collecting secrets.

ROSE: So in some ways, the processing and analysis function is now even more necessary because the raw amount of data coming in is just obscenely huge.

LARKIN: It is, absolutely. And we face that challenge on the classified side with the number of airplanes and satellites and everything else that we operate, but the amount of data created in social media on a daily basis or any other of these open sources is absolutely huge. And somehow we have to combine those two and take the best of both to, in the case of the intelligence community, answer our national leadership's questions.

ROSE: Do you expect fewer surprises down the road?

LARKIN: No. No, I don't. Because the international realm will still be a contest between various state and non-state actors, and everyone will use all this information to their advantage. But what I do see is that states will have to act a little more... They will have to assume that they're acting in daylight, that they're not able to keep everything close to their vest. Ultimately, the cards will be put on the table pretty quickly.

ROSE: Colonel Sean Larkin, thank you very much.

LARKIN: Thank you.

O’CONNOR: That was Gideon Rose in conversation with Col. Sean P. Larkin.

The end of secrecy isn’t just affecting government targets. Sometimes governments or the leaders are the target. On April 15, for example, Süddeutsche Zeitung published a series of leaked documents detailing the financial maneuvers of more than 200,000 offshore companies. Known as the “Panama Papers,” these documents also revealed some shady, if not necessarily illegal, business dealings by high-profile politicians, including British Prime Minister David Cameron.

As Henry Farrell, Associate Professor of Political Science and International Affairs at George Washington University’s Elliott School of International Affairs, argues in his piece, “The Panama Papers and Thomas Piketty,” the exposure of these tax havens has highlighted the hypocrisy of prominent politicians and officials. Farrell argues that the leak has given credence to the argument made by the French economist Thomas Piketty made his blockbuster book, Capital in the 21st Century: namely, that most people remain unaware of the full extent of economic inequality. As leaks like the Panama Papers increase public awareness of the fact that many leaders aren’t paying their taxes, Farrell and Piketty warn that the outrage could transform politics.

Foreign Affairs’ editor Nikita Lalwani spoke with Henry Farrell to learn more.

Nikita Lalwani: At first glance, the Panama Papers look a lot like other big leaks such as that of US Army soldier Chelsea Manning or the former NSA contractor Edward Snowden. Yet, you argue that the best comparison is not to these leaks, but to Thomas Piketty's book, Capital in the 21st Century. What insight does his book provide into the Panama leak? 

Henry Farrell: Well really what I think he provides is a very different way for thinking about how information might have consequences for international politics. Because, if you read Piketty's book properly, really what he is trying to do is he's trying to bring together all of this data in order to bring about political change. People do not realize how great inequality is. They do not realize how much money is being hidden and occluded in these obscure arrangements. And if they did then a new politics might be generated. Maybe the Snowden leaks and other leaks which are more concerned with national security might be less relevant and thinking instead about its consequences for our knowledge of inequality and the ways in which new kinds of arrangements allow people to effectively conceal their wealth internationally.

LALWANI: So far, would you say that the Panama leak has transformed politics? And if so, will it continue to do so?

FARRELL: No, I would not say that the Panama leaks have transformed politics. I think they have had very interesting initial consequences. But what the long term reverberations of those are, I think that there's a good chance that there will be some substantial consequences. But we're probably talking about periods of months to years before we're able to figure that out. Because really what you would expect to see is not so much an instant revolution as a result of this, but instead the mobilization of new political forces.

LALWANI: So what would these new political forces look like?

FARRELL: I think Iceland is a very important instance where you saw, effectively, the major figures within the government effectively having been involved in some kind of an arrangement which involved the kinds of shell companies being set up. But, again, you're going to have to wait until the next election to see if this gets manifested in a real change. You see little bits and pieces in countries like the United Kingdom where, for example, Cameron seems to have gotten caught up indirectly in some of this.

But, in another sense, the most important and the most interesting over the longer term might be places like Russia where you expect that many of the elite have been taking advantage of these kinds or arrangements and where, on the one hand, information control is such that this has not had any short term political consequences. But, on the other hand, one might expect that if there is continuing bad news on the economic front that this might be something which might help mobilize people over the longer term.

LALWANI: And what sort of time frame are you talking about?

FARRELL: Probably over a time frame of a couple of years. These are very, very complex forms of information. Their consequences for politics remain to be seen. But certainly that is the bet that Piketty has been making in his book. This is a test driving of his argument that if people really know how much is actually happening out there, how much inequality there is and how that inequality is hidden, that in itself can help to generate some new politics.

LALWANI: Piketty's research is motivated by a belief that the true extent of economic inequality is invisible. Why is it so important to make wealth visible? How is it that that will drive change?

FARRELL: Well, I think that his argument is that one of the reasons why wealth gets away with being invisible is precisely because we don't know much about it. That is, if there were forces which revealed wealth to us and people really realized how rich the truly rich are, that that could, in itself generate some important forces pushing back against.

LALWANI: As you argue, Mossack Fonseca is not the only law firm setting up shell corporations to help people avoid taxes, and shell corporations are just one small part of a much larger system designed to hide people's wealth, so what other concrete steps need to be taken before Piketty's vision is realized?

FARRELL: If Piketty's full ambitions were to be realized, we would see this becoming a major mobilizing force in domestic politics in big and important countries, that has not happened yet. And whether or not that happens over the medium term, as I say, there are some pressure points you would expect to see perhaps being pushed, but whether that happens in the longer term I think is still an open question. What I think one might see in the shorter term might be for example, so let's say further squeeze on tax havens, further efforts by countries such as United States of America to use various extraterritorial means to put pressure upon banks and other financial entities which help to launder this wealth. And also, and this is quite important, efforts by the United States to try and to clean up its own shop.

LALWANI: So since the Panama leaks, Piketty has written that it will be important to sanction groups or individuals who don't disclose their financial information. To what extent do you think that making sure there are concrete consequences for violating these rules? How important will that be?

FARRELL: It will be important. There are two or three different ways in which this is going to happen. One is effectively big powers and here primarily is the United States, perhaps to a lesser extent the European Union, are seeking to use extraterritorial means in order to put pressure on financial entities which are engaged in shielding people's assets. And here, these are one very clear example of this happening a few years ago in Switzerland where the US effectively through some, shall we say, robust reinterpretations of various aspects of US taxation law effectively started to target Swiss banks and really I think managed to have at least a moderately significant impact on this.

Second, we might expect to see more efforts being taken in order to try and squeeze some of the jurisdictions which have been engaged in this kind of behavior, and here, we look at places like the Cayman Islands, we look at the Channel Islands in the United Kingdom, we look at the Isle of Man, which are all effectively offshore dependencies to the United Kingdom which have been able to turn themselves into tax havens, and we might expect to see these being squeezed. And the third and I think the toughest step politically is to see some of the large countries, big countries which have been benefiting inordinately from this financially and here, the United States and the United Kingdom are the two key actors looking to clean up their own act.

LALWANI: The Panama Papers have obviously had a much larger effect in Europe so far than they have in the United States. But the New York Times has just revealed that at least 2,400 American clients used Mossack Fonseca to hide their wealth overseas. Do you think the leak will have a significant impact over the long term on American politics?

FARRELL: Probably not in the same way as in Europe because if you look at the people whom New York Times revealed, and there's a story, I think, behind why the New York Times was so late behind the bull on this... If you look at the people, these are not people who are household names. Instead, they are rich individuals who effectively apparently want to shield their assets from the US tax man.

I think that we're not gonna see the same kinds of politics being generated within the United States, certainly not in terms of popular politics. But I do think that it is very, very likely, and the New York Times very strongly implied this, that we're going to see some possibility of action by the tax authorities in order to take action against at least some of the individuals who are named in the Panama Papers. There are at least some smoking guns within that and nobody wants to be on the wrong end of the IRS when the IRS has you in their gun sights.

LALWANI: To what extent are revelations like the Panama leak driving political movements such as the one that has coalesced around Democratic presidential candidate Bernie Sanders?

FARRELL: I don't think they're having a very major impact. My sense is that there's a general disgust in the United States with the perception that many large financial institutions came away very well from the financial crisis which they helped to precipitate. And so I think that there's a general sense of disgust about this. Certainly the Panama Papers add some unfortunate optics to this, but I suspect that it does not have a major impact in changing people's minds who are not changed already.

LALWANI: Five years down the line and the ideal world that's envisioned by Piketty and by you, what would that look like? What sorts of policies would be in place?

FARRELL: I think that the best you can expect are slow, grudging, and gradual adjustments. I think that the ideal world which Piketty is pointing towards is a world where there's a much higher degree of transparency across different jurisdictions and in effect in which it is far far harder for individuals to conceal the amount of wealth that they have, and that this would in turn help to generate a politics which might reverse some of the trends which he sees as potentially being in this rating in the longer term.

I think that he also very clearly acknowledges that this is to some degree a utopian ambition on his part, and I suspect that he will be very, very happy to settle for 'half a loaf'. What that half a loaf might involve might be much greater sharing and transparency and cooperation between taxation authorities. We have seen some steps towards this through the OECD. It would be nice to see the US cooperating in terms of providing information to other jurisdictions in the way that it prefers other jurisdictions to cooperate with it. One would expect to see financial institutions beginning to treat illicit concentrations of wealth with some of the same degree of suspicion that they treat money which might potentially be associated with terrorism. So, that would be I think a half a loaf solution, which would be somewhat better than what we have today in which, of course, people would still be determined to minimize their tax burden.

LALWANI: Henry Farrell, thank you so much for talking to us.

FARRELL: My pleasure. Thank you very much.

O’CONNOR: That was Nikita Lalwani talking with Henry Farrell.

Though Piketty’s promised transformation has yet to arrive, the leak of the Panama Papers has already had a significant impact on the politics of a number of countries. Sigmundir David Gunnlaugsson — the prime minister of Iceland, which has only just recovered from the 2009 financial crash — was forced from office on April 6th, mere days after the leak suggested that he and his wife owned an offshore company that was created in order to dodge taxes at home. For an update from Reykjavik, I spoke with Thorgils Jonsson, a journalist and author of “Arctic Mutiny: How the Panama Papers Upended Icelandic Politics.”

O’CONNOR: Thorgils, thank you so much for joining me today.

Thorgils Jonsson: Yeah, thanks for having me.

O’CONNOR: So I was wondering if you can give us an update on how things are going in Iceland after the Panama Papers.

JONSSON: Well, we're in kind of interesting junction here where the ruling parties, the Progressives and the Independence Party went their separate ways, because the Progressive Party, which is the party of the Prime Minister, they have been sliding in the polls recently and are polling at their lowest numbers for many years, while the Independence Party has actually been gaining ground and is now in the joint top of the polls with the Pirate Party. So it seems like the... After the revelations of the Panama Papers, that the Independence Party is kind of immune, although they had their Chairman and Finance Minister revealed to be implicated with an offshore company and also their Minister of the Interior. It doesn't seem to matter to their voters at least because they have actually been climbing in the polls.

O’CONNOR: So why do you think it is that Gunnlaugsson took the fall, but the Independence Party seems to be immune to these charges?

JONSSON: Gunnlaugsson just recently came back from a hiatus and held a roaring speech at a meeting with party leaders. He was quite adamant that the whole thing had been a set-up to get to the Progressive Party. Historically, the Independence Party has always been the largest party in Iceland so they have their... Quite a large share of steady followers, while the Progressive Party has always been smaller. The Progressive took a very aggressive stance against the foreign creditors and reaped handsomely in the last election, where they carried about 25%. So I think you are seeing that the extra votes they got in the last election has been eradicated and also some of their steady followers have been "leaving the ship", if you could say so in the last polls.

O’CONNOR: And in terms of the transparency issues that came up as a result of the Panama Papers, do you feel like there's a lasting impact on Icelandic political culture about the private dealings of their public officials?

JONSSON: Of course, it was always frowned upon, but it was always... It was never a... It was revealed to be so common that the common Icelander was really just shocked and appalled by how everybody seemed to be doing it. Everybody in the business community and, of course, many in the political community. I think we've seen now that the Panama Papers revelation really, really opened the eyes of the Icelandic people to what kind of... Just how common it was for the business people and even politicians to be dealing with such entities. And quite frankly, I just think the everyday Icelander is fed up with these kinds of shady dealings. And from now on, it will be a measuring stick for both politicians and business people alike whether they have been implicated with companies like this.

O’CONNOR: And why do you think that it might have more of an impact in Icelandic politics than we've seen in the UK or elsewhere?

JONSSON: Well, after the crash of 2008, which hit Iceland like almost no other... Almost no other nation, we saw erosion of trust. Absolute erosion of trust to the business class and the political class. And frankly it was just so fragile that they just can't... They can't afford to do anything and then the Icelandic people will just react really, really hard as they did this time around when, up to I think 22,000 people gathered in the center of Reykjavik to protest these whole dealings and how the politicians seemed to be implicated in it.

O’CONNOR: But do you believe that Icelanders are optimistic about their political future or are they pessimistic, would you say?

JONSSON: The Icelanders, as in many, many other Western countries, the trust towards public institutions is at an all-time low, of course. But I do believe that with every cycle as we've had for these past few years, first with the crash and then with the Panama Papers, I think the Icelandic people really realizes that they can have an impact. Slow and steady, yes, maybe. But if we have all the information available, then we can actually go out into the streets and protest and make our demands be heard and actually be acted upon, as they did this last time around with calling the early election. So, yes, I think, I wouldn't say roaringly positive, because there's still a belief that the politicians are kind of useless. But I believe that with each and every one of these cycles we see a kind of a purge where, now we know this is going on and we can actually do something about it, and they won't try it again.

O’CONNOR: So how has the Pirate Party emerged or fallen flat as a political alternative within Iceland?

JONSSON: the Pirate Party had great success in the polls before and after the Panama Papers were revealed where they were measuring up to 43% of the votes. But for the last couple of weeks, they have been losing a little bit of ground. They're now polling at around 30%, similar to what the Independence Party is polling in. But they seem to be losing ground to the Left-Green movement which is on the far left of the Icelandic political sphere. So it will be very interesting to see what happens with them. Because they, of course, they are a small party, although with three parliamentarians right now. But in the light of their popularity now, they'll have to put together a list of candidates that are feasible to the voters to realize these numbers that they have been getting in the polls. I think we will be experiencing some interesting times in Icelandic politics for the next couple of months.

 O’CONNOR: The new age of transparency, it seems, is already changing our world. Just as governments are finding it easier to spy on domestic and foreign targets, they are also becoming targets themselves. This process will only accelerate — and as it does, the political upheaval is likely to grow.

That’s all for this week. We’ll be back in two weeks with another episode. Until then, go ForeignAffairs.com for more, and tell us what you think of the show on iTunes.

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