Since terrorists and drug lords take advantage of anonymity of cash, Jonathan Lipow argues for a transition from cash to smart cards or other digital solutions:
Jonathan Lipow, Turn In Your Bin Ladens
From a technical point of view, such an initiative is entirely feasible. The trick is to lower the cost of making transactions to the point where even the smallest payments can be executed efficiently. For example, a Twitter application known as TwitPay allows you to use your cellphone and a PayPal account to transfer money. In Kenya, a mobile banking system known as M-Pesa allows six million people to execute small payments using SMS messages.
Unfortunately, cellular-based systems are unsuitable as a complete replacement for physical money, particularly in the developing world. Cellphone coverage doesn’t yet extend to many rural regions or small urban centers; in addition, such systems remain too vulnerable to cybercrime and power grid or mobile service disruptions.
A better approach would be to use smart cards with biometric security features, like the Universal Electronic Payments System. In South Africa, the technology company Net1 now distributes social welfare grants to almost four million people. It’s simple: with a battery-operated, point-of-sale device akin to a credit-card terminal, money is transferred from one person’s card to another; during the process, the cards download and record each other’s transaction records.
Every few days, employees from the payments system head out to the villages and make their own money transfers, downloading the transaction histories of the cards they come into contact with, which contain the histories of the cards they interacted with, and so on. That data is then downloaded into the company’s mainframe, as a way of monitoring the flow of funds across the cards.
Best of all, the system can function offline and off the power grid, providing a secure means of payment under all conditions and without any geographic limitations. And the incremental cost of executing a transaction via this system is essentially zero. It is a promising model for the global economy.
In a cashless economy, insurgents’ and terrorists’ electronic payments would generate audit trails that could be screened by data mining software; every payment and transfer would yield a treasure trove of information about their agents, their locations and their intentions. This would pose similar challenges for criminals.
And Big Brother would know how much you are spending on cigarettes, booze, dirty magazines, and betting with your bowling team.
I will leave aside the obvious — the ubiquity, convenience and flexibility of paper money — and the more philosophical questions of the benefits to society that anonymous money brings, for a moment, although I think these are the right points to discuss.
What about the costs of transitioning to a smartcard-system system of this sort? At least with cell phone-based approaches people generally have pay phones already. But if billions of people are coaxed to switch to smartcards to buy their daily bread, won’t it cost a fair bit to get up and running? Like hundreds of billions of dollars?
And who does such a system benefit? Not the part-time sex worker, trying to make ends meet in a down economy. Not the bellman at the airport, whose tips might disappear after the transition to cards. Not the homeless guy I gave $2 to the other day, or the busker playing guitar in the train station. Or the Green Peace folks collecting coins at the park.
The ones that benefit are the those selling the cards and the readers. And the policy-makers who want to see the flow of cash to find — supposedly — drug lords and terrorists, but secretly want to know everything about everybody.
But this is the argument for pervasive surveillance again. In the name of security and safety, they say we should all accept the intrusion of the government into our private lives so that the state can be protected from its enemies. After all, they say, if we aren’t doing anything illegal, why should we care? What have we got to hide?
But we have the right to privacy in our doings. We don’t have to say why we want privacy: it is our right.
And the shadowy doings at the margins of people’s lives are exactly the point of privacy. The man funneling money to a child born to his mistress without his wife’s knowledge, or a woman loaning money to her brother without her husband knowing: they want anonymous cash. The rich golfer that takes a woman not his wife out on the town has a right to privacy, even if a narrow-minded and moralistic society doesn’t think so.
We have known for years — decades — that pot is no more (and perhaps less) dangerous than alcohol, but the laws are slow to change. And in the meantime, millions of people are buying pot. At some point in the near future, the prohibition will end, and it will then become a regulated and taxed commodity, like alcohol. In the meantime, people slip into the shadow world to buy a bag. And they are justified, since laws that are enacted without regard to science and health — that are ideological and repressive — are illegitimate, and the people have the right to run around them.
Historically, tyrannical governments have attempted to raise taxes to unsupportable levels, and cash money could change hands without the government being aware: the gray economy. While today’s government may not be engaged in this sort of economic control, the use of traceable digital money would certainly be the sort of economic foundation a tyranny would want.
The advocates of total intelligence as a way to catch the bad guys are going down the wrong path. To counter the drug lords, we simply have to make pot legal. And if we contort our free and open societies to counter terrorists’ use of cash, they have won.
This is similar to the ‘security theater’ that goes on in our airports: where techniques that do not work are employed to convey a sense of security, and unobtrusive techniques that do work — like the Israelis’ airport security — are not used because of the politics around ‘profiling’. In order to meet some hypothetical threat from terrorists, our personal privacy and free movement are held hostage. At what cost? Who benefits from all the back scatter scanners being bought?
I maintain that cash is a prerequisite of a free society. If the authorities start rounding up all the money, and begin distributing smartcards, it’s time to rally in the streets.
Cash is not a metaphor for freedom, it is a requirement of freedom. A strong society that accepts human nature without moralizing will always have anonymous cash. Only totalitarian governments — where everything not expressly required is illegal — would want to monitor the flow of every cent.
Technically, it would be possible to design and deploy anonymous digital money, just like we could be encrypting all telephone calls. But governments always want to reserve the right to listen in on our conversations secretly, so the phone systems are inherently insecure. But cash predates the notion of modern nation states, and even our modern currencies are unbugged.
We shouldn’t let the government be a party to every transaction, gift, or exchange we engage in. And if we let them, they will want to, and once they get that ability, we might never be able to go back.