The Outer Circle (The Counterpoint Trilogy Book 3) (30 page)

Lahaina, USA

Aulani liked their new neighbors, a quiet couple that moved into a small house on their cul-de-sac near Lahainaluna Farm back in October. She was the first person on the street to greet them, as they were just start to unload the rental minivan.

“Hi, I’m Aulani. I live there,” she pointed to the house across the street.

“Hi, Aulani, nice to meet you. I’m Ann,” the woman extended her hand for a handshake, “and this is my husband, Mark. How old are you?”

Ann looked really old, even older than Aulani’s mom, and Aulani’s mom was already thirty. Aulani knew that because they had her mom’s birthday party only two months ago. Many people came – even Aulani’s father, who now lived with his other family in Kahului on the other side of the island. Aulani liked how Ann looked and dressed: short blond hair with red streaks in it, beautiful open smile, big gray eyes, and a light skin not yet darkened by Hawaiian sun. She was dressed simple and elegant, in a white patterned shirt and dark-blue slacks.

“I’m already seven,” Aulani declared proudly. “I go to the Princess Nahienaena Elementary School. It’s three blocks away and I walk there all by myself.”

“Well, you are a big girl,” smiled Ann. Her husband Mark stopped unloading the van and looked at Aulani. He was even older than Ann, hair already greying, posture slightly stooped. But Mark’s eyes were very kind and Aulani immediately liked him.

“Are you here for a vacation?” asked Aulani. She knew that most people came to Maui for vacation, but their street was poor and far away from the beach. As a matter of fact, no vacationers ever came here.

“No, we’re going to live here,” replied Ann.

That made Aulani happy. Then Aulani’s mother came out and told her to stop bothering people that had work to do.

But Aulani came to visit the new neighbors the next day... and the next... and the one after that. Ann and Mark always seemed happy to see her. They settled in, bought furniture and a used car. Aulani couldn’t figure out what they did, spending much of their day with computers and books. Aulani’s mother got used to the new neighbors. Actually, she found them very convenient as free babysitters and tutors, which helped on a cashier’s salary, especially since the child custody checks from Aulani’s father didn’t always show up. That’s how it came about that Aulani was spending more and more of her time at the house across the street. Aulani thought it a bit strange that Ann was helping her with math while Mark helped with English; she thought it should have been the other way around. But then, they were a bit strange. Nice, but different. Their strangeness came across in the way they looked at each other as if not believing they were here, in the way they gently touched each other as if each was made of porcelain.

Sometimes Ann and Mark took Aulani to the beach. Usually, it was a bit of a routine: they would drive a few minutes north on Honoapiilani Highway, turn left onto Kaanapali Parkway and park at the Whaler’s Village, then slowly walk up the Kaanapali Beach to the Black Rock. Then, in some strange ritual, Ann and Mark would sit on the edge of the Black Rock for some time with Mark’s arm around Ann's shoulders, while Aulani would be allowed to crawl around. But they would always buy Aulani ice cream, so as far as she was concerned they could be strange to their hearts’ content.

Today, they went to the Black Rock again. But there was a slight change: they were holding each other much tighter, with Mark’s right arm around Ann’s shoulder squeezing her into his side, while his left hand was gently massaging her stomach.
Well, they are a bit weird, but they’re harmless, typical haole
, thought Aulani while finishing her chocolate vanilla ice cream.

After Aulani’s mother called her for dinner, David turned to Maggie:

“Did you feel him kicking tonight?”

“Not in the last couple of hours,” replied Maggie. Seeing a worried expression on David’s face, she laughed:

“Oh, don’t be silly! It’s been only four months. Don’t worry, your son is moving. I have a sense he’ll be a troublemaker.”

“Of course, if he takes after his mother!” laughed David.

They went into the backyard of their small house. This was the reason they rented it: one could see the ocean from here. The sun was setting into the water.

“Listen to the silence,” said Maggie. “Listen to the quiet.”

David sat next to her and lowered his head into Maggie’s lap while hugging her.

“I am happy,” he said. “I am content.”

“You can relax now,” she replied, moving her fingers through his greying hair. “I will guard your rest. Your son will arrive in time.”

The people described in this book are fictional. But most of the historical events and characters have been reproduced faithfully. This
Commentary
is intended to help the reader distinguish between fact and fiction.

Cryptocurrency

In the story, the “sharing economy” operates on the foundation of a cryptocurrency called “D-coin.” It is modeled on the bitcoin and other blockchain-based cryptocurrencies currently in existence, such as XRP, nextcoin, mastercoin, bitshares,
etc.
One can debate the pros and cons of such systems and their potential, especially given the rather colorful history of bitcoin. But it is certain that blockchain-based systems provide decentralized trust and anonymity, can operate outside of the government’s oversight, and have no central point of vulnerability. Such systems can enable direct person-to-person exchanges, bypassing the banking middlemen. As such, they are arguably a powerful building block for an “alternative” economy.

It is not my intent to dive into gory details of blockchain technology. For those interested,
The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order
by Paul Vigna and Michael Casey is a good introduction. Numerous startups and significant investments into blockchain systems make it likely that cryptocurrencies may indeed become one of the disruptive technologies a few years down the road.

Is America an Oligarchy?

This was one of many such headlines after a published study “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizen” by Martin Gilens from Princeton and Benjamin Page from Northwestern.

The study did prove what many already knew: money talks; elites have a disproportionate influence in Washington and dictate policies that do not necessarily benefit the majority.

To quote:

“The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence .... When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose.”

They have also found that the positions of powerful special interests groups are usually different from the preferences of average citizens. It’s a small group of very high income individuals that shape our policies – to their benefit. This is what Gilens and Page called “Economic Elite Domination.”

Does this make us an oligarchy? The definition of oligarchy is “a form of government in which power is vested in a few persons or in a dominant class.” If we aren’t there, then we are close. Not sure we even needed a scientific study to prove it, but here it is:
http://scholar.princeton.edu/sites/default/files/mgilens/files/gilens_and_page_2014_-testing_theories_of_american_politics.doc.pdf

Alternatives to Western Economic and Financial Systems

The story referred to SOFI (Russian Equivalent of SWIFT) and a Shanghai-based New Development Bank (NDB). As of the time of writing, these initiatives are in progress.

The NDB was formed in 2014 by China, Russia, India, Brazil and South Africa, with $100 billion in capital. It is based in Shanghai and is scheduled to start operating in 2016.

In 2014, some of the Western powers threatened to cut off Russia from the SWIFT banking transaction system.
[1]
During the
same year, the Central Bank of Russia (CBR) launched a new SWIFT-style payment service aimed at moving away from Western financial dominance.
[2]
It was also reported that China and Russia are discussing a new interbank system to replace SWIFT.
[3]
In March of 2015, additional reports emerged that China’s International Payment System (CIPS) will be launched before the end of the year.
[4]
So, while the “SOFI” in the story is imaginary, the emergence of non-SWIFT banking network(s) from China and Russia appears to be fairly likely.

It is expected that in 2015 India and Pakistan will become full members of the Shanghai Cooperation Organization (SCO) that currently includes China, Russia, and four other Asian countries. With that, the SCO – that China is positioning as a non-Western inter-regional economic and financial cooperation block – will encompass the vast majority of Asia and close to half of the world’s population.

Inequality and Shrinking Middle Class

The American middle class that once was more than half of the country’s households has declined to about 40% of the households, mostly due to many falling into poverty. It is projected to continue to decline. Median income has been falling since it peaked in 1999. This is happening despite a growing economy and rising profits – because an increasingly larger share of the wealth flows to the top, especially the upper 0.1%.

In 2014, Emmanuel Saez and Gabriel Zucman from National Bureau of Economic Research published
Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data
.
[5]
Wealth concentration was high early in the 20
th
century, fell for fifty years, and started rising again thirty five years ago. While the relative wealth of the top 0.1% tripled, the share of the bottom 90% was cut almost in half. By 2012, these lines intersected: the top 0.1% of the US households had as much wealth as the bottom 90%. The top 0.01% – only 16,000 families – have more wealth than the bottom 130 million families.

Also in 2014, Michael Porter and Jan Rivkin from Harvard Business School published their
The Economy is Doing Half Its Job
study.
[6]
They found a troubling divergence in the American economy: while large companies and a minority of highly-skilled individuals prosper, small businesses and middle-and lower-class individuals are struggling. Their conclusions are blunt: such a divergence is not sustainable.

As mentioned elsewhere in the commentary, extreme economic inequality is proven to lead to political inequality, or “oligarchization” of the political order. Similar, although not as extreme, trends appear in other developed countries. The global inequality is getting worse.
[7]
The last time such wealth disparity existed was during the 1925 – 1937 period. We all know the upheaval that followed. Perhaps it’s no accident that many hedge fund managers are buying airstrips and farms in remote places, thinking that they need a getaway.
[8]

How will the emerging Internet-based and robotics technologies affect the rising inequality? Past industrial revolutions disrupted existing economic models but benefited societies in the end. However, there is no guarantee that the outcome of the ongoing technological revolution will be the same. Unlike in earlier economies, in the digital age even a small relative advantage often leads to an absolute domination – “winner-takes-all” markets. So far, the result has been acceleration of inequality: in just the past ten years, the wealth share of the top 0.1% jumped over 50% while that of the bottom 90% dropped by 25%.
[9]
Technology is bringing about a very different world and the question is whether we’ll adapt our policies to benefit everyone or continue with the status quo where more and more people lose ground and face a possibility of another upheaval. Erik Brynjolfsson and Andrew McAfee raise these issues, and warn of consequences of not taking action, in their bestselling
The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies
, with their website found at
http://www.secondmachineage.com/
.

China’s Ambitions and China – Russia Connection

China’s ambitions to become a superpower to rival and eventually overcome the United States are well known, as are their plans to make the Renminbi the reserve currency of the world. These issues have been extensively referenced in
The Great Game
.
[10]
The importance of the US dollar’s reserve currency status can’t be overstated, as it requires other countries to carry the US dollars for international transactions and puts the US into the enviable position of being able to print dollars to pay for tangible goods from abroad. By the same token, both China and Russia expressed desire to remove this advantage from the US by creating trading exchanges based on other currencies.

Since
The Great Game
’s publication, China has continued promoting use of the Renminbi in global commerce, both by making it one of the five top payment currencies of the world
[11]
and by concluding multiple bilateral currency swap agreements and establishing Renminbi hubs outside of China.
[12]

The future China – Russia alignment was hypothesized in both
The Great Game
and
The Metronome.
[13]
This trend has accelerated in 2014, partly driven by geopolitical tensions between Russia and the West and the conflict in Ukraine. A $456 billion gas deal, cooperation on advanced weapons, high-speed rail, satellite navigation systems, large infrastructure projects, Chinese investments in Russia, the already-mentioned Shanghai Cooperation Organization – they all point to this major Eurasian alliance taking shape quickly.
[14]

China has been solidifying its claims to the South China Sea and the East China Sea, conducting land reclamation projects, planning airstrips and harbors,
etc.
One motivation is vast energy resources in the area.
[15]
[16]
But there is also expressed desire to establish these waterways as “Chinese” and put an end to the American domination of the area.

This, in turn, coincides with the Chinese long-stated plans for Taiwan’s “reunification.” This is the most likely flash point for the US – China conflict. In describing Chinese plans for taking Taiwan and the US possible response; some of the references used for this aspect of the book include:
“The Chinese Navy: Expanding Capabilities, Evolving Roles,”
http://www.amazon.com/dp/1478268875
, 2012

“Air-Sea Battle,” Center for Strategic and Budgetary Assessment,
http://csbaonline.org/publications/2010/05/airsea-battle-concept/
, 2010

“Hard ROC2.0: Taiwan and Deterrence Through Protraction,” Center for Strategic and Budgetary Assessment,
http://csbaonline.org/publications/2014/12/hard-roc-2-0-taiwan-and-deterrence-through-protraction/
, 2014

Surveillance

Some of you may have seen
The Minority Report
directed by Steven Spielberg.
[17]
In the year 2054, criminals are apprehended before they have a chance to commit a crime and people’s movements are continually tracked in order to advertise to them and keep them under surveillance. While
pre-crime
does not look feasible anytime soon, potential for the constant surveillance has almost arrived. As alluded here, the surveillance has both business (“to sell you things”) and security (“to make sure you don’t do bad things”) components. But these components are not entirely separate as businesses routinely share the information they collect with the government:
“Thousands of technology, finance and manufacturing companies are working closely with U.S. national security agencies, providing sensitive information and in return receiving benefits that include access to classified intelligence...”
[18]

“
Microsoft
has collaborated closely with US intelligence services to allow users' communications to be intercepted, including helping the National Security Agency to circumvent the company's own encryption...”
[19]

And many more.

Anything you do with Google-provided services (search, e-mail, maps, etc.) will be combined into targeted advertising. This is not to single out Google – all companies are trying to collect as much information about you as they can. Google just happens to be, by and large, better at it.

The government snoops on phone, email and text records of virtually every US citizen – with the forced cooperation of US telecommunications companies. The PBS program
United States of Secrets
describes how the government spies on its citizens and how technology companies feed into the dragnet.
[20]
According to some of the NSA technologists interviewed by PBS, it was possible to protect the privacy of the citizens by anonymizing the data – however, the NSA chose not to do this.

In 2007, there were estimated 30 million surveillance cameras in the US. The number is certainly much higher now.
The size of the smart surveillance and video analytics global market is estimated at $13.5 billion in 2012; it’s expected to reach $39 billion by 2020.
[21]
But now, we are coming to the Age of the “Internet of Things,” where internet-connected devices will monitor every aspect of the environment. By 2024, the setting of this story, there will be billions of internet-devices that people wear or have in their homes. Iris scanners, as portrayed in
The Minority Report
, are being built into inexpensive devices including smartphones.
“See-through-clothing” terahertz imaging, which is already familiar from airport security checkpoints,
is coming to police scanners near you.