Responsible Wealth Review (English)

Investing on the right side of global change

RESPONSIBLE

WEALTH REVIEW A Private Wealth Council Publication

0RIVACY 4HE 0RIVATE 7EALTH #OUNCIL

A forum for responsible private wealth ownership.

Erik Brenninkmeijer in dialogue with council founder Fritz Kaiser.

4HE $RIVERS OF 'LOBAL #HANGE An overview from Al Gore.

³4HE 7ORLD IS ANYTHING BUT FLAT´

Beatrice Weder di Mauro on the economic future after seven fat years and a crisis on the financial markets.

'ROWING UP WITH THE )NTERNET

The generational divide on privacy. By Jonathan Zittrain

(OW MUCH PUBLICITY CAN PERSONAL SECURITY ENDURE

Stephan Lechner on the current state of a cherished civil right.

!MERCIAN PRIVACY VS %UROPEAN ³0RIVATSPHiRE´ Thomas Kleine-Brockhoff and Antje Kuchenbecker analyze a transatlantic dilemma.

³3PACES FOR 0RIVACY ARE %SSENTIAL´

Roger de Weck in dialogue with Hereditary Prince Alois of Liechtenstein on the strategic direction of the Principality of Liechtenstein.

June 2008

0UBLISHER &RITZ +AISER 0RIVATE 7EALTH #OUNCIL 0¾UGSTRASSE 6ADUZ &,

0UBLISHER´S %DITORIAL

Privacy, like freedom, is an important fundamental right and a pillar of our society. A professor of sociology told me that it was an achievement of humanity which led us out of savagery and into civilization. Be that as it may, the protection of privacy continues to be a basic right.

It is embedded in the constitutions of many countries of the Western world. The institution of bank secrecy is one of the ways this right is expressed.

For quite some time now, little by little, the Orwellian nightmare of the ‘transparent man’ has been turning into accepted reality for the public at large. For years, The United States Treasury Department and the CIA have been monitoring the flow of funds through the Swift bank clearing system in Brussels under the guise of fighting terrorism. Secret services are blatantly snooping in our private databases. Politicians, facing empty state coffers and reproachful of bank secrecy, recklessly demand that protection of the private sphere be lifted, to allow them to pursue tax payers. Constant video surveillance is considered to afford protection, biometric passports are thought to be fashionable, and millions of young people are broadcasting the most intimate details of their lives on the web without a second thought.

Is the right to privacy becoming obsolete?

Where will the development of the Internet take us? It has opened up so many fascinating possibilities over the past 10 years – and brought along a frightening kind of transparency at the same time. How can we preserve a modicum of privacy in a world that changes at breakneck speed?

We have addressed these issues in the Private Wealth Council and shared ideas with experts and opinion leaders. Not surprisingly, we found that wealthy people in particular intend to defend their right to privacy. The reasons are as diverse as they are legitimate. A businessman wishes to use his trade secrets to his competitive advantage. Affluent people want to protect themselves against corruption, envy, theft, or kidnapping. Families want to be able to enjoy their private sphere in peace.

In this first issue of the Responsible Wealth Review, you will find out more about how the Private Wealth Council came into being and what our goals are. It focuses on the key issue of privacy. Contributions from several distinguished authors will provide you with an assessment of where this fundamental right stands today. Perhaps you will find some useful information or ideas about how you can safeguard your privacy with a clear conscience.

I look forward to your opinions and comments on the Private Wealth Council or about this issue.

Fritz Kaiser Publisher fritz.kaiser@privatewealthcouncil.org

Responsible Wealth Review – June 2008

RESPONSIBLE

Investing on the right side of global change

WEALTH REVIEW 0UBLISHER´S %DITORIAL

Privacy, like freedom, is an important fundamental right and a pillar of our society. Is this fundamental right becoming obsolete? Several distinguished authors have contributed to an assessment of the current status of this debate. page 1

³7E ARE LOOKING FOR A FORMULA FOR ³2ESPONSIBLE 7EALTH´´

Fritz Kaiser is the founder of the Private Wealth Council and Erik A. Brenninkmeijer has been a member since the Council’s inception-. Since then, the two have been sharing ideas about what responsibility in society and in business can mean and what it can accomplish. page 4

2ETURN TO NORMALCY

The world has seen seven fat years and a period of extraordinary liquidity.

The crisis in the financial market has put an end to these exceptional circumstances, and because there is nothing to stop the laws of economics, we are threatened with a situation we know well from the past: the return of inflation, higher volatility, and perhaps even a new kind of protectionism, according to Beatrice Weder di Mauro. page 8

7HEN PRIVACY WAS LOST

Private and public are the two spheres that form the foundation of humankind, invented by classic Greek philosophy and rediscovered in the Age of Enlightenment. Modern society is rooted in the balance between these two spheres and now threatens to destroy it. Historical essay by Kurt Imhof. page 16

³3ACRI½CING CLAIMS TO PRIVACY´

According to leading American privacy researcher Alan F. Westin, the private sphere is a human right. However, a young and globally networked Internet generation attaches more value to freedom of communication than to the individual’s right to privacy. page 22

4HE FORCES DRIVING GLOBAL CHANGE

Al Gore developed a list of nine Drivers of Global Change for the Private Wealth Council Meeting held in early summer 2005 in Bad Ragaz, Switzerland. He discussed these predictions with the Council participants. An interesting list of mega trends. page 26

Responsible Wealth Review – June 2008

June 2008

'ROWING UP WITH THE )NTERNET

The fact that young people are readily accepting an openly accessible online environment has little to do with carelessness and a lot with the need for controlled autonomy. The differences between public and private identity are about to dissolve anyway, according to Jonathan Zittrain’s predictions. page 32

0RIVACY IN HOW MUCH PROTECTION STILL EXISTS

No longer very much: the breathtaking spread of information technology, the privatization of government-run services, modern methods of combating crime and the globalization of data transfer are eroding the private sphere, according to the analysis of data protection expert Stephan Lechner. page 36

!MERICAN 0RIVACY VERSUS ³%UROPEAN 0RIVATSPHAERE´

In the United States, one’s home is regarded as the core of personal privacy.

Its boundaries are defined not by the state, but by the right to freedom of speech. The European legal tradition, on the other hand, proposes a right to informational self-determination, guaranteed by the government. Thomas Kleine-Brockhoff and Antje Kuchenbecker address a Trans-Atlantic dilemma. page 44

3PECIAL CASE !SIA

Personal assets are increasingly flowing into Asia. The favorable fiscal environment and remarkable economic growth have turned the region into a magnet for investors from all over the globe, concludes Sameena Ahmad. page 52

³4HERE MUST BE SPHERES OF PRIVACY´

The Principality of Liechtenstein has traditionally been an oasis of privacy. Is this an out-dated concept in the open-information society, or, on the contrary, the key to the country’s future? Hereditary Prince Alois of Liechtenstein reflects on the questions of Roger de Weck. page 56

0RIVACY ¯ A GLOBAL AND INTERDISCIPLINARY DEBATE

On January 28, 2008, the Private Wealth Council met in Vaduz for a lively and impassioned discussion about privacy, the state of this civil right around the world, and the consequences for wealthy families. Photographic impressions of workshops. page 60

Responsible Wealth Review – June 2008

³7E ARE LOOKING FOR A FORMULA FOR ³2ESPONSIBLE 7EALTH´´ &RITZ +AISER IS THE FOUNDER OF THE 0RIVATE 7EALTH #OUNCIL AND %RIK ! "RENNINKMEIJER HAS BEEN A MEMBER SINCE THE #OUNCIL´S INCEPTION 3INCE THEN THE TWO HAVE BEEN SHARING IDEAS ABOUT WHAT RESPONSIBILITY IN SOCIETY AND IN BUSINESS CAN MEAN AND WHAT IT CAN ACCOMPLISH -R +AISER YOU ESTABLISHED THE 0RIVATE

7EALTH #OUNCIL IN $AVOS IN 9OU -R "RENNINKMEIJER ARE A CO FOUNDER AND A SOURCE OF INSPIRATION 7HAT MOTIVATED EACH OF YOU TO TAKE ON THIS COMMITMENT

Fritz Kaiser: If you are responsible for personal assets, either your own, as a trustee, or as a family advisor, you have to ask yourself at some point what this responsibility means and how you can live up to it. My intent was to discuss this issue with like-minded, interesting people. During the World Economic Forum in Davos, the idyllic, plain wooden building at Schatzalp proved to be an inspiring backdrop for this.

their investments may or may not have a positive effect on the long-term development of a company. These are decisions of great consequence because, let’s not forget, that in addition to the government, it is private individuals who create jobs and wealth and thus cause a society to advance. Just think about the many small and medium-sized companies built up by private businesspeople with money they no longer need for their everyday lives. These people who invest their personal assets are important drivers of social development and it is largely due to them that the standard of living has improved so much in recent decades. $O YOU BELIEVE THAT WEALTHY PEOPLE HAVE

Erik A. Brenninkmeijer: Fritz Kaiser is the one who deserves credit for establishing the Council. He invited me and others to join.

To me, the appeal, first as a client and then as a participant, is that the issue of ‘Responsible Wealth’ is the critical factor in any investment activity. )S THIS THE PHILOSOPHY OF A TRADITIONALLY ENTREPRENEURIAL FAMILY

Brenninkmeijer: My interest certainly has something to do with the fact that we have been in business for six generations, but any investor should be aware that they have to decide where to invest their money. As a result, they have direct control over whether Responsible Wealth Review – June 2008

A SPECIAL RESPONSIBILITY AND INFLUENCE ON SOCIETY

Kaiser: Yes, but not only. The issue of responsibility is multi-faceted. During one of our Council meetings, we asked ourselves a fundamental question: ‘What does the responsibility of wealthy private individuals actually mean?’ We reached the following conclusion: everybody is responsible for him or herself, for his or her family, for society, our environment, our world. Admittedly, it sounds pretty simple, and it applies to all people, wealthy or not. However, if you have capital, you can achieve more. And, looking at it from this angle, if you as an investor want to do something useful, you will find out very quickly

that it is not so easy to do the right thing. And the more you get involved, the more questions come up.

We live in a complex world which is changing rapidly, both in a positive and in a negative sense, and we want to understand what is happening. We observe the global drivers of change, which are all connected, to help us make right decisions that are sustainable in the long term. One of the mottos of the Council is: ‘To navigate on the right side of change.’ This is where we want to be with our investments – on the right side of change.

%RIK ! "RENNINKMEIJER IS THE #HAIRMAN OF :UG BASED #OFRA (OLDING

!RE THERE SIMILAR PRIVATE ORGANIZATIONS LIKE THE

&RITZ +AISER IS THE %XECUTIVE #HAIRMAN OF +AISER 2ITTER 0ARTNER 'ROUP AND FOUNDER OF THE 0RIVATE 7EALTH #OUNCIL

0RIVATE 7EALTH #OUNCIL WHOSE PURPOSE IT IS TO COMBINE SUSTAINABILITY AND SOCIAL RELEVANCE IN THEIR INVESTMENTS

Brenninkmeijer: On a private level, I am not aware of anything comparable. Churches, of course, have been asking for many years how private wealth can be handled responsibly and how ethical needs can be satisfied with investments. There are these negative lists of industries in which a responsible investor may not want to get involved: weapons, for example, tobacco or alcohol. But a generally valid, a global concept even, for responsible and sustainable investments does not exist to my knowledge. This is what we are exploring with our work in the Private Wealth Council.

Kaiser: I have not found a comparable ‘club’ either. This is why I eventually launched this initiative. Some of us are members of the World Economic Forum; others are involved in family office networks. What sets us apart is that we view the world through the eyes of people who are responsible for personal assets. We observe major developments and

trends from precisely this point of view. Ultimately, it is about securing and increasing the private wealth of responsible people for the long-term.

(OW MUCH PROGRESS HAVE YOU MADE SINCE THE THINK TANK WAS ESTABLISHED IN THE YEAR

Brenninkmeijer: The term ‘think-tank’ for the Council is somewhat misleading, because it conjures up an image of people who think all day long, do research and write profound papers. This is not how it was or is. If we had Responsible Wealth Review – June 2008

taken this approach, we may have progressed a great deal further by now, but the Council meets only sporadically and has remained free-floating. This is probably the reason why we began to realize what our actual objective is over a period of time: finding a generally valid formula for what we refer to as ‘Responsible Wealth’.

Kaiser: And along with it, a formula for a ‘Responsible Investor’ who wants to know what needs to be considered in investment decisions so as to be on the right side of change in the long term. We are currently working with a task force on developing ‘principles and a decision filter for responsible investors’. We will discuss this during our next Council meeting.

4HE 0RIVATE 7EALTH #OUNCIL IS A PLATFORM WHERE

SHARP MINDS INTERESTED IN THIS ISSUE MEET 7HO IMPRESSED YOU THE MOST

Brenninkmeijer: Al Gore, former Vice President of the United States, is a fascinating and electrifying speaker, and his appearance two years ago left a charismatic impression.

He is, without a doubt, a man of vision. An idealist. But I was just as impressed by David Blood, the Managing Partner of the joint investment firm of Gore and Blood, Generation Investment Management. Blood, compared to Gore, is a quieter individual. When he makes investment decisions, he must meet self-imposed sustainability goals and generate profit at the same time. .OT AN EASY GAP TO BRIDGE

Brenninkmeijer: Indeed, it isn’t. An example: In view of the foreseeable global waResponsible Wealth Review – June 2008

ter shortage, it may be problematic, for reasons of sustainability, to invest in a company which uses a lot of water for its processes.

Businesses with a lower than average or negligible water consumption would be preferable.

This reflects the theory of ‘positive screening’ of investment potentials. At the same time, an investment manager must and can still generate the expected returns.

(AVE THESE KINDS OF ENCOUNTERS AFFECTED YOUR OWN INVESTMENT PRACTICES

Brenninkmeijer: If you’re asking whether we have revised our own guidelines, I have to say no. One of the reasons I am involved in the Council with great interest is that I hope we will discover a universally applicable formula to this question. As Fritz Kaiser said, ‘to invest on the right side of change’ is what this is all about. My activities in the Council have consequences insofar as we try to look even further into the future when we make investment decisions. In every investment we make, we strive to assess the possible consequences for the three ‘Ps’: people, profit, planet.

Kaiser: As far as I’m concerned, there have been several exciting personalities over the past few years with impressive contributions. In 2005, Al Gore developed a list of nine drivers of global change for our Council, and we discussed these with him during a twoday workshop. This was really an exceptional experience. Josh Lerner of Harvard University was remarkable on the issue of ‘Private Equity’, and Naill Fergusson, also a professor at Harvard, told us the story of how the Rothschilds developed their wealth. In Davos, Paulo Coelho offered us insight into his personal perceptions about the influences of all

things female, while Professor Beatrice Weder di Mauro, a macroeconomist on Germany’s Council of Economic Experts, recently enlightened us on the reasons for the subprime crisis.

To me, as a collector of contemporary art, the discussion with Simon de Pury, Sam Keller of Art Basel, and other art experts and collectors was particularly interesting, of course.

4HE MAJOR TOPIC OF THIS FIRST ISSUE OF Âł2ESPONSIBLE

7EALTH 2EVIEW´ IS ³0RIVACY´ 7HAT DOES THIS MEAN TO YOU PERSONALLY !ND WHAT IS IN STORE FOR US

Brenninkmeijer: I am rather pessimistic. I wonder whether we have not been fighting a noble battle of retreat in this case for quite some time. In retrospect, we will probably find later on that the Western democracies were at the zenith of personal freedom in the eighties. Two decades ago, civil rights had been well entrenched, and the electronic means to uproot them were not yet available.

On that score, the world was still intact immediately prior to the Internet revolution. Since then, technology has developed a capacity for deprivation of individual freedom, which is irreversible.

Kaiser: Privacy to me is part of civilization. It represents values, such as respect and trust, and it is a fundamental pillar of human culture. For example, I respect privacy of correspondence in my home. I do not read letters addressed to my wife, and I don’t read my children’s journals. I would like to preserve my own personal space where I am unobserved and I let others have this kind of privacy as well.

In most European countries, privacy is a constitutional personal right. In the USA,

this is no longer the case. Due to technological progress – especially the development of the Internet and the methods of government executive bodies, secret services, police, and even tax authorities – the right to privacy these days is like a house built on sand.

I still have hopes that the ‘transparent man’ will not become totally transparent.

I know, of course, that we are often secretly photographed or filmed, and that anybody who surfs in the Internet, leaves his or her own DNA behind, which Google, for example, would ultimately have to hand over if requested by the authorities. I also know that people can spy on my personal computer today, without me knowing it, and we all know that our whereabouts can be traced at any time through our cell phones, and that bank and credit card transactions make our life largely transparent. ‘Big Brother is watching you.’ It’s a reality – and Big Brother is getting smarter and smarter.

All these developments cannot be stopped, and we have to learn to deal with this new reality. I am adapting to it, and I am continuously learning how to preserve an important piece of privacy for myself. I would hope that young people will also think about this and that we will be able to convey to them the value of privacy. They communicate playfully on YouTube and Facebook and know no taboos on the Internet. We have to tell them that human resources managers are also surfing the Internet and observe them there before they have their first job interview.

Responsible Wealth Review – June 2008

2ETURN TO NORMALCY 4HE WORLD HAS SEEN SEVEN FAT YEARS AND A PERIOD OF EXTRAORDINARY LIQUIDITY 4HE CRISIS IN THE ½NANCIAL MARKET HAS PUT AN END TO THESE EXCEPTIONAL CIRCUMSTANCES AND BECAUSE THERE IS NOTHING TO STOP THE LAWS OF ECONOMICS WE ARE THREATENED WITH A SITUATION WE KNOW WELL FROM THE PAST THE RETURN OF IN¾ATION HIGHER VOLATILITY AND PERHAPS EVEN A NEW KIND OF PROTECTIONISM ACCORDING TO "EATRICE 7EDER DI -AURO In 2005, Thomas L. Friedman, powerfully eloquent commentator for The New York Times and three-time Pulitzer Prize winner, wrote a book about globalization under the witty title ‘The World is Flat.’ But is it really?

Is the world flat? I have my doubts. There is no question that globalization has an effect on the global economy, and I would like to take this opportunity to add a few thoughts on the topic of ‘Globalization, the state of the world and the most recent accident in the financial markets.’*

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To get to the point: we can honestly say the world is in good shape. At least it was until recently. International trade has grown at an impressive pace in the past five decades, and even if we take a longer term view, the picture is quite favorable (see illustration ‘World Trade

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Responsible Wealth Review – June 2008

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Responsible Wealth Review – June 2008

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Growth 1870-1998’, page 8). In our immediate past, we can look back at (almost) seven fat years. We live in an integrated world. Internationalization of capital and commerce has increased significantly and led to excellent and stable growth rates worldwide. This includes the emerging markets above all. For the first time in history, these countries did not just tag along in a phase of global growth; they were actually drivers of growth (see illustration ‘High Growth’, page 8). The fitness of emerging nations, neck-on-neck with the industrialized world, resulted in record low inflation levels during this period (see illustration ‘Low Inflation’, top left). Volatility across a number of asset classes was low and getting lower (see illustration ‘Low Volatility’, bottom left). This phenomenon turned into a favorite field of research among economists: was the low volatility of stocks, interest rates and even currencies caused by a temporary fluke of nature or was it a stable situation? And these fat years, were they an unexpected lucky coincidence or a permanent structural aggregate state of globalization? One thing is clear, however. From a macroeconomic standpoint, the scenario I have just described portrays the state of the world in the past seven years – but does this mean it is flat?

)) /F BORDERS DISTANCES AND BALANCES

Borders and distances have doubtlessly lost relevance in the process of globalization, but, from an economic point of view, have borders disappeared? Have distances become irrelevant as far as trading intensity is concerned? Let me give you a small example to prove that this is not the case. The city of Basel is situated on the Rhine at the border between Switzerland and Germany. The city of Zurich

Responsible Wealth Review – June 2008

on the Swiss side and Freiburg in Breisgau on the German side are located at about the same distance from Basel. If borders and distances had become obsolete, Basel would have to be economically tied to the same degree on both sides. However, the exchange of capital and goods with Zurich is far greater, which demonstrates that in terms of the economy, borders also represent obstacles. Distances also continue to significantly affect economic activity, as evidenced, for example, by export sales. A nation such as Germany exports just under half as many goods and services to the tiny country of Switzerland as it does to the U.S. market, which is much further away and disproportionately larger (see illustration ‘Germany’s Exports’, top right). Trading is still most active among neighboring countries.

This is a natural law of economics.

Can we derive from this that the world, while not flat, is at least increasingly flattening out? Are rich and poor countries leveling out? To answer this question we need to look at an extended period of time (see illustration ‘Worldwide Income Gaps’, bottom right). If we take the last 150 years as a gauge, it is obvious that global income disparity has been widening significantly. For a long time, up until around the year 1900, the income differentials within individual nations remained relatively stable. Then – as a consequence of industrialization – the markets in some nations grew faster than in others; the income disparity between individual countries increased, the gap between rich and poor opened up. And yet, a lot has happened in the past twenty years (see illustration ‘The Income Parade’, page 12). The per capita gross domestic product in most nations rose. Since 1980, China and India, in particular, have grown considerably and in the process, the quality of life of

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approximately 60 percent of the world population has improved. A comparison between the openness of a nation’s economic system and the gross domestic product of these same national economies also clearly demonstrates that open markets lead to greater wealth.

Responsible Wealth Review – June 2008

In view of low volatilities in the global economic system and high growth rates in recent years, Alan Greenspan, longtime head of the US Federal Reserve, talked about ‘the great moderation’, suggesting the existence of a new and beautiful economic world. The laws of economics, of course, have never ceased to be in force. The only thing that was unusual and novel was an incredible liquidity in the system, fueled not least by the highly expansive monetary policy of the U.S. central bank.

Furthermore, in the recent past, the newly industrialized countries and developing nations invested their currency reserves in U.S. dollars and thus contributed to the stability of the system (see illustration ‘Developing Countries, Savers Among Nations’, bottom left).

While emerging markets such as China have tucked away billions of dollars since 2004, the U.S., in particular, is increasingly living on credit – amounting to around 800 billion dollars in debt per year since 2004. All this leads to a global imbalance which can be interpreted in two ways: China and Japan are saving too much, while America consumes too much – or vice versa, depending on one’s point of view.

In any event, the United States argue that they are forced to take on the role of customers of the world, because others are socking away their cash (see illustration ‘Global Imbalance’, bottom right). This kind of discussion is not productive, however.

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Responsible Wealth Review – June 2008

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On the other hand, it seems obvious today that consumption in the United States was clearly unsustainable. The gap between gross indebtedness and savings of private households in the USA has been widening at an alarming rate since the early nineties (see illustration ‘Indebted Private Households in the USA’, top left). Until 2006, Americans expected real estate prices to continue going up, and for a long time they felt secure as they watched property values increase by 10% to 12%. Added to this, the U.S. financial industry created incentives to turn this growth in property values into cash to channel it to consumption.

This phenomenon of creeping indebtedness of private households is by no means limited to the United States (see illustration ‘National Debt Around The World’, bottom left).

This is the macroeconomic view showing the relationship between liquidity glut and credit expansion and the resulting imbalance. It formed the macroeconomic breeding ground for the subprime crisis.

An economist seeking to answer this question will look at three key aspects: consumption, investments and export. There is much to support the assumption that we are about to enter a phase of fundamental change.

Global risk factors are rising and, according to global economic growth forecasts, the risks of a downturn are increasingly weighted higher than the chances of an upside. Another thing that appears quite obvious is that emerging markets such as China and India have turned into the drivers of global growth (see illustration ‘Drivers of Global Growth’, opposite).

Based on this, I see two mega-trends for the future: existing imbalances will soften some-

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what and level out. We have already reached the end of what Greenspan called ‘The Great Moderation’. In the process of these changes, we will see higher savings rates in the USA while consumption in the rest of the world will intensify. The dollar will remain weak for the foreseeable future, and its position as the dominant international currency will further deteriorate as a result. Energy and raw material prices could remain high even if demand slows down. These trends are accompanied by higher volatility and the return of inflation and could harbor the risk of a new protectionism worldwide.

The world has not become flatter, but a few fat years always stir up hope that the world might have changed: that high current account deficits would not have to be reduced, that high liquidity would not lead to rising asset and/or consumer prices, that risks have been diversified and overcome due to innovations in the financial markets, and that economic cycles are a thing of the past. Until we hit the next bump in the road and return to normalcy.

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A MEMBER OF THE 'ERMAN #OUNCIL OF %CONOMIC %XPERTS

AND RESEARCH AF½LIATE AT THE #ENTER FOR %CONOMIC 0OLICY 2ESEARCH #%02 IN ,ONDON 0REVIOUSLY SHE WORKED AS AN ECONOMIST AT THE )NTERNATIONAL -ONETARY &UND )-& AND AT THE 7ORLD "ANK IN 7ASHINGTON Responsible Wealth Review – June 2008

7HEN PRIVACY WAS LOST 0RIVATE AND PUBLIC ARE THE TWO SPHERES THAT FORM THE FOUNDATION OF HUMANKIND INVENTED BY CLASSIC 'REEK PHILOSOPHY AND REDISCOVERED IN THE !GE OF %NLIGHTENMENT -ODERN SOCIETY IS ROOTED IN THE BALANCE BETWEEN THESE TWO SPHERES AND NOW THREATENS TO DESTROY IT (ISTORICAL ESSAY BY +URT )MHOF The most brilliant and most important invention in human history, without a doubt, is the separation of human nature into a private and a public sphere. It is what separates man from beast; it offers a path leading out of savagery and into civilization. Democracy, enlightenment, reason, and even our modern free market economy all fundamentally depend upon an intact balance between the personal and the public. Developed and cultivated over centuries, even through the darkest times in our history, it appears acutely threatened now in the 21st century. Our modern information and knowledge society strives for total transparency, a dominant force that renders the subtle power play between private and public ineffective. A look at history reveals that an extraordinary achievement is being dismantled by this process: if you understand where it all began, you will sense what could soon be lost. As we travel back in time, we will catch a glimpse of what the future might bring because the future began long ago, and we are threatened with a descent into savagery.

) 0OLIS !THENS OR WHAT HUMANITY OWES TO THE 'REEK ARISTOCRACY

The separation between the private sphere and the public sphere goes back to the Athens of Pericles in the 5th century BC. The reason we know about it is because Aristotle described the time of Pericles one century later. It is the most important separation that mankind has invented. Private and public both relate to dif-

Responsible Wealth Review – June 2008

ferent lifestyles. The core of the private sphere was equated with ‘oikos’, the estate of wealthy citizens, while the core of the public sphere was equated with ‘agora’, the town square of Athens.

The private sphere represented the ‘realm of the imperative’, where everything revolved around the reproduction of the species, especially work, food, and sexual intercourse. Within this realm of the imperative, there were few differences between man and animals. After all, animals also need to reproduce. This is why the Greeks considered tyranny in their private sphere to be justified, particularly because slaves, women, children, and servants only existed in this realm of the imperative – in the private sphere. The public sphere, on the other hand, was viewed as the ‘realm of freedom’. This realm of freedom was where free speech reigned and anybody could freely express their thoughts. Just like oikos, the estate outside the city walls, the public sphere also had its specific social locale: ‘agora’, the town square of Athens, the ‘realm of freedom’.

For the ancient Greeks, this realm of freedom existed only because man is different. It was what separated man from animals (which only lived in the realm of the imperative), because man possessed language. The fact that people have language was proof of their uniqueness.

Animals possess no language because they are all the same, and thus do not need one. The distinctiveness of people and their ability to communicate using language, however, were also prerequisites for the capacity to learn from others – a requirement for the meaning of life and

0HOTO 0ETROS 'IANNAKOURIS +EYSTONE

for reason, or logos. This is the ground out of which the most powerful and most important non-religious utopia of mankind has grown.

When people are able to communicate freely, they are capable of reason, which means they have the ability to define their society, their history and their destiny. ‘Tyrannis’ and oligarchy, on the other hand, appeared to be barbaric forms of power to the ancient Greeks because both systems treated society like a private oikos. Therefore, they believed that democracy, in the sense of harmony between the masses (on the basis of insight), was the only feasible

societal structure for free citizens. This utopian historical concept is the reason we now enjoy some of the most vital civil and human rights, all of which are built upon freedom of speech, freedom of the press, and the right of assembly. At the same time, the ancient Greeks understood that there needs to be a balance between the realm of the imperative and the realm of freedom. If a legitimate citizen can develop reason within the realm of freedom, the realm of the imperative, the oikos, will also benefit from the insights of free thought and free speech. As a result, the public sphere becomes civilized,

4HE CORE OF THE PUBLIC SPHERE 4HE !CROPOLIS IN !THENS

Responsible Wealth Review – June 2008

music, fine arts, concerts, and the theatre were highly valued, in essence: the intellectual middle class with a high regard for politeness and )) %NLIGHTENMENT OR THE RENAISSANCE superior reasoning. Offspring had to be introOF A POWERFUL UTOPIAN BELIEF duced with care into this environment and thus This utopia of emergence from self-imposed had to meet superior educational standards. immaturity (Immanuel Kant, 1724-1804) was This kind of sociability appears to be posrevived during the Age of Enlightenment in sible only if the participants are in command the 18th century. Enlightenment philosophy of their emotions and conduct themselves acwas greatly inspired by classic Greek philoso- cording to the Kant imperative. Above all, this phy and makes the same distinction between meant keeping a purely market-driven compublic and private spheres. Therefore, this petition in check to prevent the destruction early vision forms the foundation of modern of the members of this social fabric. Middle society. The Enlightenment movement clas- class associations also tried to control ecosified the public sphere, i.e. the free exchange nomic competition, which jeopardized social between legitimate citizens, culture and the intercourse by accepting only one member of private sphere under nature. Freedom of com- any one profession. Naturally, this type of somunication made people civilized and reason- ciability and the mimicked politeness of noable, while the private sphere remained the bility was also reflected in the architecture of area of reproduction of the species and where their homes. Living rooms, for example, were human emotions found expression. Free citi- part of this sphere of social interaction bezens stepped out of their private sphere to take tween public and private. Behind the living part in the public exchange of ideas, educate rooms was the sphere of intimacy, carefully themselves and return to the realm of the pri- protected and taboo at that time in history. vate, which, as a consequence, became civilized According to this classic middle class soluand enlightened as well. The private sphere tion of striking a balance between the public was therefore tied to responsibilities and vir- and private spheres and placing social intertues acquired in the public sphere (specifical- course in between, political life resided in the ly in enlightened societies). In particular, this public sphere where superior reasoning was meant shaping the principles of personal life expected to win. Therefore, the public sphere so that they might become general law. This re- was everybody’s concern and could not be inquired education and culture. The Kant imper- timate. At the core of the public sphere, in the ative ultimately means that individual freedom parliament, was where civil rights had to be is limited only by the theory that one’s freedom developed – the rights that must follow the should not restrict the freedom of others. A principle of freedom, where one’s freedom did high esteem for education and a belief in this not interfere with the freedom of others, and responsibility defined middle class society in where, at the same time, reason led to the hapthe 19th and 20th centuries, which was strict- piness of mankind. The intermediate sphere ly divided into the public and private spheres. of sociability was intended to foster culture Between these two spheres was the realm of and solidarity between people. It could not social interaction where literature, classical be that the raw powers of human emotions savagery is eliminated from the public sphere and reduced in the private sphere.

Responsible Wealth Review – June 2008

0HOTO 0HOTOPRESS !RCHIV +EYSTONE

0RIVATE BECOMING PUBLIC 0HOTOGRAPHERS STAGING REALITY $ATED CA

and the market destroy this convivial environment. Behind this sphere is the sphere of private industry, and even farther back is the sphere of intimacy and secrecy. The particular interests of private industry are not to dominate the public sphere, nor to be able to destroy sociability. The sphere of intimacy represents the innermost core of privacy. It is where emotions that are not part of the public sphere, of social interaction, or of private industry reside.

cally its revolutions from the threshold of the modern age to democracy and a constitutional state, newspapers, which had been in existence since the 16th century, became political instruments and thus the voice of political parties. In other words: the classic media did not pursue commercial interests; they addressed the citizens and took parliamentary debates out into the public. These media broadened the public sphere beyond the discussion of national movements, the societies of education and enlightenment, and the parties. This ))) 4HE DESTRUCTION OR LOSS OF MIDDLE was the only way that national societies could CLASS INNOCENCE evolve in which a sense of community and a Many factors have contributed to the civic national awareness could develop, even breakdown of a strict separation between the among strangers. These media were owned public and private spheres. The most impor- by political parties and associations and lattant, however, is the detachment of the media er, with the rise of consumer advertising, folfrom this social milieu. In the course of the En- lowed the so-called forum media. Their ownlightenment, with its periodicals and specifi- ers were publishing families who were part of Responsible Wealth Review – June 2008

the urban elite, which is still the case today as far as quality newspapers are concerned. Once the media were taken out of this social context, they became businesses whose chief purpose was to turn a profit. They no longer addressed an audience of citizens. They targeted media consumers, thereby altering the contents of the media. The process of complete transformation of the media took place over the past 30 years and radically changed the contents of the media. Intimate, personal aspects, character features, lifestyles, scandals and conflicts revolving around individuals have been brought out into the public because the primary channels of public communication, the media, have been privatized. However, there is a fundamental difference between this kind of privacy and sociability: the social standards of discretion are in direct conflict with the business principles of the tabloid format of newspapers and television. These business principles focus on disseminating intimate details through the media.

As a result, both the private and public spheres have been destroyed. What this means, however, is that superior arguments, and thus reason, are repressed in the public sphere, because more and more personal and intimate aspects influence the debate surrounding universal concepts. Personal, and to an even greater degree, manufactured intimate secrets of politicians and business leaders are not suitable for public discourse. We can take note of character descriptions and judgments, scandals, and home stories, but – just like matters of pure taste – they fail to invite intelligent dialogue. Superior arguments and reasoning take a backseat to the character and charisma of politicians and industry leaders. Conviction by argument is substituted by positive or negative feelings about an individual. At the same time, Responsible Wealth Review – June 2008

the private sphere as a safe haven for social interaction is also eroding. Responsible actions give way to an environment where everybody is at war with everybody else. Economic competition conquers social interaction and fully commercializes all leisure activities.

)6 4HE FUTURE OR WHEN THE PRIVATE SPHERE IS PUBLIC

Let me give you some perspectives about this fundamental change in the content of public communication caused by the privatization of the public sphere and the publication of privacy: s 7HERE POLITICS IS CONCERNED IN THIS DAY AND age, we have a horse race-type of journalism, which focuses on the personal performance of candidates and their skills of displaying their personality, while overshadowing general political issues. s 0OLITICAL QUESTIONS ARE INCREASINGLY DECIDed on the basis of like or dislike of a candidate. s -ORAL QUESTIONS SUCH AS SEXUAL HARASSment, smoking, eating habits, any kind of abuse and political correctness, have become political. We are experiencing a moral tsunami in public communication. s 7E ARE SEEING THROUGHOUT %UROPE THAT MOSTly, but not exclusively, right-wing popular movements attract attention and win elections with highly emotionalized campaigns focusing on the behavior of foreigners and their religious orientation, on criminality, which is closely associated with immigrants, and on the behavior of the political and industrial elite, which betrays the people – they systematically talk about a new political class. But that’s not all: The leaders of these right-wing movements are emphasizing all over Europe that the socially un-

derprivileged must be transparent, i.e. they +URT )MHOF have to reveal absolutely everything involvIS 0ROFESSOR OF 3OCIOLOGY AND ing their livelihood to the public authori*OURNALISM AT THE ties in order to receive social benefits. It has 5NIVERSITY OF :URICH

3WITZERLAND AND become increasingly common practice for (EAD OF THE #ENTER the authorities to hire ‘social investigators’ FOR 2ESEARCH ON THE to dissect the personal life of such people.

0UBLIC 3PHERE AND 3OCIETY ÂłFyG´ It is patently obvious that this emphasis of public scrutiny on personal lifestyles will weaken the right to privacy as a whole because left-wing populists will use the same argument to make the wealthy transparent. sults. Failure to deliver will trigger the next s 3CANDAL AND CONmICT MONGERING n MORAL cycle with a new CEO, another story, and the questions – are the yardsticks that such company will be rebuilt yet again. populist movements apply. s )T IS NECESSARY TO lGHT THESE PROCESSES 4HE s /NE OF THE MOST INTERESTING EFFECTS IS THE public sphere in leading nations is in dispersonalization of the economy. The econmal shape. Quality reporting and interestomy these days is covered just like politics. ing journalistic debates are on the decline In earlier times, coverage would focus on an and the moral tsunami of personal attacks organization. Now, as a result of the personholds sway. Meanwhile, the remaining globalization and privatization of public comally important quality newspapers are in munication, the CEO, rather than an ordire straits. The NZZ, SĂźddeutsche Zeitung, ganization or a company, is at the focus of Frankfurter Allgemeine, Le Monde, The attention. The reputation of the CEO carries Guardian, The New York Times, The Washmore weight than the name the company has ington Post, and others are not only the built over time, and therefore reputations are central voice of the public sphere, many do much more volatile, simply because the repnot have a viable business models. It should utation of a person is more fragile than that be very clear to anybody now – including of an organization. In the process, the CEO the strongest defenders of market power – becomes a charismatic role model, which that allowing the public sphere to be purein turn, causes a company to be reinvented ly market driven is the wrong approach. every time a new CEO takes over. A charisWe need quality media in order to survive matic role is bound by social rules forcing our western lifestyle, have rational politics the player of the role to embark on an enand sensible citizens. In other words: we tirely new direction. Every charismatic leadare experiencing the most crucial market er has to say: ‘Forget the past. I will lead you failure in public communications. And in into a bright new future.’ But this period of the face of the most crucial market failure taking a new direction in conjunction with in the public sphere, combined with moral the pseudo-religious talents of the head of a tsunamis and identical content throughout company is of brief duration. Shareholders, the media world, we need to think about fianalysts and the media demand quick renancing models for quality media.

Responsible Wealth Review – June 2008

³3ACRIFICING CLAIMS TO PRIVACY´ !CCORDING TO LEADING !MERICAN PRIVACY RESEARCHER !LAN & 7ESTIN

THE PRIVATE SPHERE IS A HUMAN RIGHT (OWEVER A YOUNG AND GLOBALLY NETWORKED )NTERNET GENERATION ATTACHES MORE VALUE TO FREEDOM OF COMMUNICATION THAN TO THE INDIVIDUAL´S RIGHT TO PRIVACY 0ROFESSOR 7ESTIN IS 'OOGLE THE BIGGEST THREAT TO INDIVIDUAL PRIVACY

Alan F. Westin: Google, as such, is no threat to privacy. Google is a driver of the benefits that we now see on the Internet. But we’re in the middle of working out what the new rules of privacy should be in a Google world.

7HAT ARE THE BIG ISSUES THAT DETERMINE THOSE NEW RULES

Westin: There is a dramatically new level of self-disclosure, especially among the young.

There has never been a medium like the Internet that allowed people to communicate so freely with anywhere in the world. It causes people to put forward an enormous amount of information about them.

7HAT MAKES PEOPLE WILLING TO SHARE INFORMATION

WITH STRANGERS ON SITES LIKE &ACEBOOK OR -Y3PACE

Westin: It’s generational. Today, young people are growing up very comfortable with a world of communication. Technology, not privacy, shapes the way this generation thinks about communicating. Privacy experts keep warning that employers or law enforcement can look at what they’ve put up there. But right now, people are choosing communication as a benefit over privacy as a right.

(AVE NEW TECHNOLOGIES GENERALLY BENEFITED

PEOPLE´S PRIVACY /R HAVE THEY UNDERMINED IT Responsible Wealth Review – June 2008

Westin: Both. First, technologies like wiretapping and big computers served organizations, but rarely individuals. With the arrival of the PC, mobile phones, and then the Internet, we have a shift. Technology empowered individuals and gave them many privacy options with encryption.

7HAT IS PRIVACY

Westin: Often privacy is described as something very elusive. But it is not. Privacy means that each person has to decide for themselves how much they reveal, to whom, and when. I describe four states of privacy: solitude, intimacy, reserve, and anonymity.

(OW IMPORTANT IS PRIVACY TO YOU PERSONALLY

Westin: To me, privacy is extremely important. I don’t have a profile on Facebook. I want to always be able to manage what I disclose about myself. That is the heart of privacy.

7HY IS IT IMPORTANT FOR HUMAN BEINGS TO BE ABLE TO CHOOSE WHAT IS BEING DISCLOSED ABOUT THEM

Westin: We all need downtime. We need to be out of sight and hearing of others in order to recapture ourselves, to be reflective, to manage our whole set of life choices. It would be extraordinarily harmful to individuals not to have solitude as a dimension of privacy.

Then there is a close link between privacy and discrimination. Society decides what information it will use in order to decide what rights,

,EADING PRIVACY RESEARCHER !LAN & 7ESTIN

0ROFESSOR %MERITUS OF #OLUMBIA 5NIVERSITY

.EW 9ORK

benefits, and opportunities we get, as consumers, as citizens, and as employees.

9OU STARTED YOUR RESEARCH ON PRIVACY IN THE EARLY S 7HAT KEPT YOU INTERESTED IN THE TOPIC FOR OVER FIVE DECADES

Westin: Historically, every society that had a reputation for liberty had privacy protection. Challenging privacy, threatening privacy, and overcoming privacy were always tools of authoritarian regimes. So privacy is part of the history of liberty, which is something that I’m profoundly interested in.

9OUR FIRST BOOK ON THE SUBJECT CAME OUT IN

5NITED 3TATES ! YEAR LATER 2ICHARD .IXON WAS ELECTED 5 3 PRESIDENT (OW IMPORTANT WAS OR IS .IXON FOR PRIVACY RIGHTS

Westin: He is the Godfather of privacy. I used to give speeches in the late 1960s and early ’70s, and I would talk about all the new issues of privacy. People would always say, ‘Yeah, but that’s all hypothetical. Who’s going to collect and use this information against anybody?’ With Watergate, Nixon dramatized the issue of collecting and misusing informa-

0HOTO 3TEFAN &ALKE

SHORTLY AFTER THE CIVIL RIGHTS MOVEMENT IN THE

tion. Without Watergate, we never would’ve been able to pass the Privacy Act in 1974.

7ATERGATE DROVE PRIVACY LEGISLATION IN THE 5NITED 3TATES 7HAT WAS THE DRIVER IN %UROPE

Westin: It was the Nazi/Fascist memory Responsible Wealth Review – June 2008

that drove first Sweden, and then Germany, and finally the EU to appreciate that privacy is a human right.

(OW DO %UROPE AND THE 5NITED 3TATES DIFFER IN THEIR APPROACH TO PRIVACY RIGHTS

Westin: The European tradition is much more geared to explicit rules and regulation.

The United States has much more of a laissezfaire tradition. We say, ‘Show me the harm. If there’s no harm, let people do it’. ! PART OF YOUR RESEARCH IS TO STUDY PRIVACY RIGHTS OF WEALTHY INDIVIDUALS 9OU STRESS THAT THE RICH

AND FAMOUS ARE ENMESHED MORE AND MORE IN AN ALL PERSUASIVE DATA COLLECTION 7HY IS THAT

Westin: It’s one of the paradoxes of privacy. At one level, when it comes to what people have to reveal in order to get government services or commercial advantage, it’s the poor, and even the middle classes that have to disclose things about themselves. The rich don’t typically have to worry about this. On the other hand, from the earliest times on, what the wealthy and the famous are doing has always been of enormous interest. The rich and the powerful can build enclaves for themselves with private homes, private communities, and private jets; but they are so much a target of the public’s desire to know what they’re doing, how they spend their money, what kind of hairdo they have, and so forth.

7HAT CAN THE WEALTHY DO TO PROTECT THEMSELVES

Westin: They need to keep up with what’s being said about them, and what’s being shown about them. People now have services that track all that, and some of them give them a tool to reply.

Responsible Wealth Review – June 2008

4HERE´S ANOTHER STRUGGLE THAT THE WEALTHY FACE

WHICH IS BETWEEN AN INDIVIDUAL´S PRIVACY AND

THE GOVERNMENT´S INTEREST TO COLLECT AND SHARE INFORMATION ON PEOPLE´S FINANCES (OW DO YOU RESOLVE THAT STRUGGLE

Westin: Ever since the middle ages in Venice, the wealthy were able to find ways to manage their money outside the official government systems. Private banking and private fund exchanges have been tools of the wealthy since the early days of accounting and financial systems. And we still have Swiss bank accounts and the Cayman Islands accounts. So there are tools by which the wealthy can, to some extent, keep their transactions private.

"UT SOMETIMES GOVERNMENTS WANT TO INTERFERE

Westin: The public has certain rights to know if money is being used in a way that impacts the economic system, security, and the political process. So we need to define what is legitimate to keep private. This has to be done on a case-by-case basis.

-ORE AND MORE GOVERNMENTS WANT TO SHARE INDIVIDUALS´ INFORMATION AMONG EACH OTHER (OW CAN WE PROTECT PRIVACY RIGHTS IN THAT CASE

Westin: We don’t have a world government.

We have nation states. We have different traditions, different legal systems, and different financial arrangements, country by country.

Money moves globally, and there’s a desire to create a norm for sharing information between governments. Without trying to find a magic bullet, these often have to be on a caseby-case basis. In which the issue is, ‘For what purpose does a government want to know about the financial affairs of individuals in another nation state?’

)T MOSTLY CONCERNS TAX ISSUES (OW DO YOU SOLVE

THE CONFLICT BETWEEN A GOVERNMENT THAT DOESN´T WANT TO LOSE TAXPAYERS AND AN INDIVIDUAL´S RIGHT TO PRIVACY

Westin: Historically, taxes have always been a privacy-bearing issue. The government wants your money for taxes, and it will have the authority, either of the dictator or of the democracy, to legitimize taxes and use them for the right purposes. Individuals have always felt, ‘That’s my money, I made it through my brains, and through my wits, and I should only have to give up the least that’s necessary.’ That’s an enduring tension.

!LAN & 7ESTIN IS 0ROFESSOR %MERITUS OF 0UBLIC ,AW AND 'OVERNMENT AT #OLUMBIA 5NIVERSITY

WHERE HE TAUGHT FOR YEARS (E IS CONSIDERED THE FOREMOST EXPERT ON PRIVACY AND HAS ADVISED MANY GOVERNMENTS AND COMPANIES AROUND THE WORLD "ORN IN

HE EARNED HIS "! IN POLITICAL SCIENCE FROM THE 5NIVERSITY OF &LORIDA HIS ,, " FROM (ARVARD ,AW 3CHOOL (E IS THE AUTHOR OR EDITOR OF BOOKS !S INTERVIEWED BY 0ETER (OSSLI

A FREELANCE JOURNALIST LIVING IN .EW 9ORK

(OW DO YOU RESOLVE IT

Westin: Case by case. There seems to be a great economic and social advantage in having more fluid movements of money below the threshold of disclosure. But when it’s abused, when it’s felt that too much of these transactions are illegitimate, or that the government is not able to get what it needs in order to fulfill its governmental function, then it will move against it. )S MONEY THE MOST SENSITIVE INFORMATION THAT PEOPLE WANT TO PROTECT

Westin: I’ve done many surveys over the last 40 years, and the two areas that are always the most sensitive are financial and health information. In many ways, financial information is seen as revealing everything about you.

7HY IS PRIVACY ON HEALTH INFORMATION IMPORTANT TO US

Westin: It is closely linked to discrimination. If my health status is known, then my employer may take actions against me. Insurance companies would use it to either deny me

a policy, or to rate it very highly. In addition, many health conditions are stigmatizing. )N WHAT WAY HAS CHANGED PRIVACY

Westin: Dramatically. The struggle has been how to make the tradition of limits on government search apply to a world in which cell phone traffic, Internet traffic, and money movement are used by terrorists. The public wants it both ways. They want the government to have the power to go after terrorists, but they also are very nervous about the government monitoring e-mail traffic and listening to telephone conversations. We need to find the right limits and to put safeguards in place.

We might have to give up some of our privacy rights to remain safe.

7HAT WILL BE THE BIG ISSUES IN PRIVACY RESEARCH IN THE NEXT COUPLE OF YEARS

Westin: The Internet is and will be the big driver of privacy issues. We need to educate people as to how important it is that they set their privacy norms and rules when they use the Internet.

Responsible Wealth Review – June 2008

4HE FORCES DRIVING GLOBAL CHANGE !L 'ORE DEVELOPED A LIST OF NINE $RIVERS OF 'LOBAL #HANGE FOR THE 0RIVATE 7EALTH #OUNCIL -EETING HELD IN EARLY SUMMER IN "AD 2AGAZ 3WITZER LAND (E DISCUSSED THESE PREDICTIONS WITH THE #OUNCIL PARTICIPANTS !N INTERESTING LIST OF MEGA TRENDS

'LOBAL %NVIRONMENTAL #RISIS

'LOBAL WARMING

– Climate disequilibrium; disruption of favorable, stable balance in areas selected for habitation and agriculture during previous 10 000 years – Stronger, wetter, more destructive storms – Reorganization of precipitation patterns: increased overall global precipitation as evaporation from oceans increases, but sharp decreases in some regions; higher percentage falls in large storm events (2 inches or more in 24 hrs); higher percentage of rain compared to snow; earlier spring melting and runoff; faster evaporation of soil moisture; more floods and more droughts simultaneously – Water shortages: contamination of fresh water supplies; strip mining of deep aquifers – Melting of glaciers and ice sheets: multimeter sea-level with displacement of tens of millions; growing risk of 7+ meter rise this century; risk of freshening of north atlantic slowing Gulf stream and causing sudden cooling in Northern and Western Europe – Radical changes to boundaries of ecological niches for animals and plants: redistribution of species range and habitat; invasive species; growth and spread of insect populations; disease vectors increased (ticks, mosquitoes, etc.) – Microbial redistribution to higher latitudes and higher altitudes (due to warmer temps, warmer nights, milder winters and fewer days with frost) Responsible Wealth Review – June 2008

– ‘Runaway’ greenhouse risk growing $ESTRUCTION OF OCEAN PRODUCTIVITY

– Strip-mining of ocean fisheries – Acidification of oceans – Radical change in salinity distribution; freshening of Arctic and North Atlantic, higher salinity in tropical oceans – Loss of coral reefs and dependent species – Impact of shipping on biodiversity (alien species, translocation, antifouling paint, waste dumping, etc.) ,OSS OF TROPICAL FORESTS AND WETLANDS AND THE

CONCENTRATIONS OF BIODIVERSITY LOCATED WITHIN THEM

$ESERTI½CATION OF DRYLANDS

– Rate of desertification increasing – Displacement of populations (i.e., refugees from desertified Chad moved into Darfur) – Increased dust storms, esp. off Gobi and Sahara %XTINCTION CRISIS EQUAL IN MAGNITUDE TO THE THREE PREVIOUS GLOBAL EXTINCTION EVENTS MILLION

MILLION AND MILLION YEARS AGO

– Loss of biodiversity worldwide; loss of diversity at a genetic level; consequent loss of ecosystem resiliency ,OSS OF TOPSOIL PRODUCTIVITY AND CONSEQUENT IMPACT ON AGRICULTURAL OUTPUT

$EGRADATION AND LOSS OF VAVILOVIAN CENTERS OF GERM PLASM AND GENETIC DIVERSITY OF FOOD CROPS !IR POLLUTION IN CITIES 0ERSISTENT LONG LIVED TOXIC WASTE BUILD UP

'LOBAL %NERGY 4RANSITION

0EAK OIL ¯ MORE EXPENSIVE TO REPLACE RESERVES

– Unstable prices – OPEC pricing power returns – Intensified geopolitical competition for access to reserves; geopolitical instability – More costly to extract oil from existing reserves, talent squeeze – Energy security in the context of carbon constraints 2ACE TO DEVELOP COST EFFECTIVE RENEWABLE ENERGY

SOURCES AND ³CLEANER´ VERSIONS OF ALL ALTERNATIVES TO OIL AND COAL INCREASED PREFERENCE FOR NATURAL GAS %F½CIENCY AND CONSERVATION

0OPULATION $EMOGRAPHICS

1UADRUPLING OF 7ORLD´S POPULATION IN LAST

YEARS FROM TO BILLION STABILIZING AT BILLION WITHIN THE NEXT YEARS BUT MOMENTUM STILL DISRUPTIVE

'ROWING DISPARITY OF WEALTH BETWEEN DEVELOPED AND DEVELOPING COUNTRIES AND WITHIN BOTH DEVELOPING AND DEVELOPED NATIONS DESPITE LARGE OVERALL INCREASE IN WEALTH AND PRODUCTIVITY

– Global poverty commands growing attention – ‘Bottom of the pyramid’ markets emerge 5RBANIZATION AND PROLIFERATION OF MEGA CITIES MILLION PRINCIPALLY IN LESS DEVELOPED NATIONS

#ARBON CAPTURE SEQUESTRATION

– Doubling of urban space worldwide in next 30 years

#ARBON TRADING SOARS AS +YOTO GOES INTO EFFECT

-IGRATION

'LOBAL ENERGY POLICY RESPONSE #ARBON TAXES 0RESSURE FOR REDESIGN AND RE ARCHITECTURE OF ALL

– Explosive growth from developing countries is pushed and pulled into the declining population vacuum of the developed countries – Xenophobia and threat to democratic pluralism

SYSTEMS AFFECTING LARGE SCALE ENERGY USAGE

2EFUGEE CRISES

.UCLEAR RENAISSANCE PUSHED BY GOVERNMENTS AND RESISTED BY UTILITIES

– Stateless populations – Environmental refugees – Cultural and ideological friction

0RESSURE FOR ³CLEAN COAL´ ¯ ESPECIALLY IN 5 3 AND

,ONGER LIFE SPANS AND SMALLER FAMILIES

2ESOURCE NATIONALISM ON THE RISE

– Graying and population decline (ex-immigration) in developed nations – Higher health and pension expenses – Gender equalization, earlier puberty and marriage disequilibrium

#HINA

3OCIAL AND CULTURAL TRANSFORMATION

Responsible Wealth Review – June 2008

9OUTH BULGE DRIVES POLITICAL INSTABILITY IN KEY AREAS WHEN EMPLOYMENT OPPORTUNITIES LAG

3AUDI DEMOGRAPHICS AND IMPLICATIONS FOR OIL PRICES

'ENETIC MODI½CATION OF HUMANS ANIMALS AND

– – – – –

AND POLITICAL INSTABILITY IN THE REGION

0ANDEMICS

()6 !)$3 4" AND MALARIA !NTIBIOTIC RESISTANT STRAINS OF ONCE CONTROLLED DISEASES RE EMERGE

– Mutated ‘superbugs’ %MERGENCE OF ³NEW´ DISEASES

3CIENTI½C AND 4ECHNOLOGICAL (YPER 2EVOLUTION

PLANTS

Genetically-based medicine Cloning Trait selection and augmentation Life extension Blurring of boundaries between species and between life and machines

2APID SPREAD OF SUPER COMPUTING

– Systems re-engineering empowered by supercomputing – Information replaces matter as principal source of most economic value

– SARS, Avian flu, etc.

!RTI½CIAL INTELLIGENCE

0LANT AND ANIMAL PANDEMICS

2OBOTICS

– Bee mites, ‘Sudden Oak Death’, etc. – Monoculture of crops increases vulnerability

.ANOTECHNOLOGY -OLECULAR RE ENGINEERING AND NEW MATERIALS SCIENCE

.EUROSCIENCE AND BEHAVIORAL MANIPULATION %MERGENCE OF NEW FAR MORE PRECISE UNDER STANDINGS OF ³(UMAN .ATURE´

0ROLIFERATION OF WEAPONS OF MASS DESTRUCTION -ULTIPLE SUCCESSIVE DISRUPTIVE NEW TECHNOLOGIES AS YET UNKNOWN

Responsible Wealth Review – June 2008

#OMMUNICATIONS (YPER 2EVOLUTION

– Ubiquitous broadband internet: Explosion of access to knowledge; emergence of selforganized on-line communities, organizations and centers of economic and political power – Ubiquitous computing: explosion of access to processing power; low-cost 3rd world terminals; open source software enabling rapid development of high powered, highly efficient information gathering and processing technology at low cost – New/alternative infrastructures for citizens’ communications at a low cost. Increased exploitation of spectrum for ubiquitous terrestrial and satellite wireless – Opening up of PC and mobile communications device infrastructure outside dominance of gate-keeping mega-corporates – ‘X-Internet’ connecting billions of imbedded sensors and devices: rapid growth of surveillance, location-tracking and personal transparency/ loss of privacy

Values disequilibrium and perceived loss of meaning – Constriction and degradation of the ‘Public Forum’ Decline of participatory dialogue – Low entry barriers for print replaced by high entry barriers for mass distribution of video – Until Internet is robust enough for real-time, mass distribution of full-motion video – Consolidation of ownership and control Weakening of enlightenment-based governance – Rule of reason loses ground to raw power – Enhanced vulnerability to ultra-nationalism, tribalism and totalizing ideologies Rise of propaganda and information strategies – Citizen resistance; collaborative filtering and reputation-based peer rating of information sources

4ELEVISION REPLACES PRINTED TEXT AS DOMINANT MASS MEDIUM

– Satellite TV opens closed cultures; cable and satellite proliferate channels – Reading of newspapers and magazines declines sharply, but not books: electronic text surges in popularity and blogs become a major new force in culture and politics; a text renaissance? Advertising shifts from paper publications to Internet search – Social and political disequilibrium accompanies transition from print to television: disintermediation of elites; cultural disequilibrium and loss of traditional patterns

Responsible Wealth Review – June 2008

'LOBALIZATION

)4 EMPOWERED REDISTRIBUTION OF WORK AND INVESTMENT

– Hemorrhaging of highly paid skilled jobs in wealthier nations – Surplus of all manufactured goods at lower prices – Rapid but highly uneven growth in emerging markets – Threat to free-trade consensus 2ISE OF #HINA AND )NDIA

– Redistribution of Asian power relationships – Enhanced competition for global resources – Crack-down on corruption 3IMULTANEOUS EMERGENCE OF SUPRA NATIONAL ENTITIES

%5

.!&4!

ORGANIZATIONS ETC AND

74/

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poor lose patience with inequality of income and lifestyle – African crises (civil wars, hyper-corruption, rapid industrialization and social chaos, HIV/Aids, famine, drought, etc.) command global attention and focus – Emergence of unstable ‘Post-national entities’ 2ISE OF FUNDAMENTALISM AS DISRUPTIVE FORCE AND AS ORGANIZING PRINCIPLE

– Islamic fundamentalism: threat to secular regimes; threat of ‘clash’ with the West; threat of support for terrorism; Sunni v. Shia conflict – Christian fundamentalism – Hindu fundamentalism – ‘Market fundamentalism’ 3PREAD OF DEMOCRACY $EARTH OF EFFECTIVE GLOBAL GOVERNANCE

#ATALONIA 1UEBEC .UNAVUT +URDISTAN !CEH

ETC

– European throes of integration, expansion and governance: monetary union without fiscal coordination creates transition crisis; national identities strengthened by xenophobic reaction to immigration flood, esp. muslims (with Turkey’s application pending); lower wages in expansion countries seen as economic threat – Re-emergence of separate identities within post-colonial nations created after World War I and World War II – Strengthening of national autonomy in former Soviet Republics – Re-organization of Latin American nations as IT-empowered indigenous majorities find their voice and political influence; and as Responsible Wealth Review – June 2008

7AR

4HREAT OF NUCLEAR EXCHANGE STILL EXISTS )NTRACTABLE CIVIL WARS PERSIST

– Congo/Kinshasa, Sudan, Colombia, Sri Lanka, etc.

0ROLIFERATION OF 7-$ 4ERRORISM

– – – –

‘Dirty nukes’ Stolen or black market nukes Bio-weapons Surface to air missiles

!L 'ORE IS THE FORMER 6ICE 0RESIDENT OF THE 5NITED 3TATES UNDER 0RESIDENT "ILL #LINTON ENTREPRENEUR AND A PROMINENT ENVIRONMENTAL ACTIVIST (E ALSO STARRED IN THE !CADEMY !WARD WINNING DOCUMENTARY ON THE TOPIC OF GLOBAL WARMING

³!N )NCONVENIENT 4RUTH´ 'ORE WAS AWARDED THE .OBEL 0EACE 0RICE TOGETHER WITH THE )NTERGOVERNMENTAL 0ANEL ON #LIMATE #HANGE

– Cheap, laser-guided smart weapons – Cyber-terrorism /VER REACTION TO TERRORISM %MPIRES OF THE MIND SPIRIT

3HORT 4ERM 4HINKING AND ,ACK OF 6ISION

3YSTEMIC FAILURE TO FOCUS ON FUTURE CONSEQUENCES OF PRESENT DECISIONS AND POLICIES

– ‘Operating the planet like a business in liquidation’ – The ‘Tragedy of the global commons’ 5NSUSTAINABLE BORROWING CONSUMPTION AND WASTE GENERATION

3TAKEHOLDER

CAPITALISM

TRANSPARENCY ON THE RISE

ACCOUNTABILITY

AND

– Commons-based peer production may emerge as a driver of economic change – Bottom of the pyramid investing emerges alongside sustainable and responsible investing – Growing understanding of systemic risk of sustainability – Internalizing of externalities by business and investment

– Twin deficits – Asian creditors of US (particularly China) play larger role – Risk of sudden exchange-rate consequences 3HORT TERM INVESTMENT HORIZONS CREATE UNSUSTAIN ABLE PATTERN

– 100% annual portfolio turnover in average Mutual Fund – More Mutual Funds than stocks – Entire market is ‘Short’ instead of ‘Long’ – Failure to invest in the future )NCOMPLETE MEASUREMENT OF VALUE INACCURATE PERCEPTION OF RISKS AND OPPORTUNITIES

-ISALIGNMENT OF INCENTIVES FOR INVESTORS AND MANAGERS

2EFORM IS BREWING Responsible Wealth Review – June 2008

'ROWING UP WITH THE )NTERNET 4HE FACT THAT YOUNG PEOPLE ARE READILY ACCEPTING AN OPENLY ACCESSIBLE ONLINE ENVIRONMENT HAS LITTLE TO DO WITH CARELESSNESS AND A LOT WITH THE NEED FOR CONTROLLED AUTONOMY 4HE DIFFERENCES BETWEEN PUBLIC AND PRIVATE IDENTITY ARE ABOUT TO DISSOLVE ANYWAY

ACCORDING TO *ONATHAN :ITTRAIN´S PREDICTIONS

The values of privacy are in transition.

Many have noted an age-driven gap in attitudes about privacy perhaps rivaled only by the 1960s generation gap on rock and roll.

Fifty-five percent of online teens have created profiles on sites like MySpace. Twice as many teens as adults have a blog. Interestingly, while young people appear eager to share information online, they are more worried than older people about government surveillance. Some recognize that their identities may be discovered online, even with privacy controls.

A large part of the personal information available on the Web about those born after 1985 comes from the people themselves. They impart reams of photographs, views, and status reports about their lives, updated to the minute. Friends who tag other friends in photographs cause those photos to be automatically associated with everyone mentioned – a major step toward a world in which simply showing up to an event is enough to make one’s photo and name permanently searchable online in connection with it.

Worries about this phenomenon can be split into two categories. The first is explicitly paternalistic: children may lack the judgment to know when they should and should not share their personal information. As with other decisions that could bear significantly on their lives – signing contracts, drinking, or seeing movies with violent or sexual content – perhaps younger people should be protected from rash decisions that facilitate Responsible Wealth Review – June 2008

infringements of their privacy. The second is that people might make rational decisions about sharing their personal information in the short term, but underestimate what might happen to that information as it is indexed, reused, and repurposed by strangers. Both worries have merit, and to the extent that they do we could deploy the tools of intermediary gatekeeping to try to protect people below a certain age until they wise up.

This is just the approach of the U.S. Children’s Online Privacy Protection Act of 1998 (COPPA). COPPA places restrictions on operators of Web sites and services that knowingly gather identifiable information from children under the age of thirteen: they cannot do so without parental consent. The result is discernable in most mainstream Web sites that collect data; each now presents a checkbox for the user to affirm that he or she is over thirteen, or asks outright for a birthday or age.

The result has been predictable. Kids quickly learn simply to enter an age greater that thirteen in order to get to the services they want.

To achieve limits on the flow of information

/N PUBLIC EXHIBIT &EELINGS DISPLAYED AT 3TREET 0ARADE :URICH

0HOTO 'EORGIOS +EFALAS +EYSTONE

Responsible Wealth Review – June 2008

to kids requires levels of intervention that so far exceed the willingness of any jurisdiction. The most common scheme to separate kids from adults online is to identify individual network endpoints as used primarily or frequently by kids and then limit what those endpoints can do: PCs in libraries and public schools are often locked down with filtering software, sometimes due to much-litigated state requirements.

A shift away from the generically reprogrammable personal computer and towards ‘information appliances’ that are controllable by their vendors could greatly lower the costs of discerning age online. Many of these appliances – mobile phones, iPods, video game consoles – could be initialized at the time of acquisition with the birthdays of their users, or sold assuming use by children until unlocked by the vendor after receiving proof of age. This is exactly how many mobile phones with Internet access are sold, and because they do not allow third party code they can be much more securely configured to only access certain approved Web sites.

These paternalistic interventions assume that people will be more careful about what they put online once they grow up. And perhaps even those who are not more careful and later regret it have still exercised their autonomy in ways that ought to be respected. But the generational divide on privacy appears to be more than the higher carelessness or risk tolerance of kids. Many of those growing up with the Internet appear not only reconciled to a public dimension to their lives – they are famous for at least fifteen people online – but eager to launch it. Their notions of privacy transcend the traditional privacy plea to keep certain secrets or private facts under control.

Instead, by digitally furnishing and nesting Responsible Wealth Review – June 2008

within publicly accessible online environments, they seek to make such environments their own.

MySpace – currently the third most popular Web site in the United States and sixth most popular in the world – is evocatively named: it implicitly promises its users that they can decorate and arrange their personal pages to be expressive of themselves. Nearly every feature of a MySpace home page can be reworked by its occupant, and that is exactly what the users do, drawing on tools provided

by MySpace and outside developers. This is generativity at work: MySpace programmers creating platforms that can in turn be directed and reshaped by users with less technical talent but more individualized creative energy. The most salient feature of privacy for MySpace users is not information secrecy so much as autonomy: a sense of control over their home bases, even if what they post can later escape their confines. Privacy is about establishing a locus which we can call our own without undue intervention or interruption – a place where we can vest our identities.

That can happen most directly in a particular location – ‘your home is your castle’ – and, as law professor Margaret Radin explains, it can also happen with objects. She had in mind a ring or other heirloom, but an iPod containing one’s carefully selected music and video can fit the bill as well. Losing such a thing hurts more that the mere pecuniary value of obtaining a fresh one. MySpace pages, blogs, and similar online outposts can be repositories for our identities for which personal control, not secrecy, is the touchstone.

A 1973 U.S. government privacy report observed: ‘An agrarian, frontier society undoubtedly permitted much less personal privacy than

a modern urban society, and a small rural town today still permits less than a big city.

The poet, the novelist, and the social scientist tell us, each in his own way, that the life of a small-town man, woman, or family is an open book compared to the more anonymous existence of urban dwellers. Yet the individual in a small town can retain his confidence because he can be more sure of retaining control. He lives in a face-to-face world, in a social system where irresponsible behavior can be identified and called to account. By contrast, the impersonal data system, and faceless users of the information it contains, tend to be accountable only in the formal sense of the word. In practice they are for the most part immune to whatever sanctions the individual can invoke.’ Enduring solutions to the new generation of privacy problems brought about by the generative Internet will have as their touchstone tools of connection and accountability among the people who produce, transform, and consume personal information and expression: tools to bring about social systems to match the power of the technical one. Today’s Internet is an uncomfortable blend of the personal and the impersonal. It can be used to build and refine communities and to gather people around common ideas and projects. But it can also be seen as an impersonal library of enormous scale: faceless users perform searches and then click and consume what they see. Many among the new generation of people growing up with the Internet are enthusiastic about its social possibilities. They are willing to put more of themselves into the network and are more willing to meet and converse with those they have never met in person. They may not experience the same divide that Mark Twain

observed between our public and private selves: ‘We are discreet sheep; we wait to see how the drove is going, and then go with the drove.

We have two opinions: one private, which we are afraid to express; and another one – the one we use – which we force ourselves to wear to please Mrs. Grundy, until habit makes us comfortable in it, and the custom of defending it presently makes us love it, adore it, and forget how pitifully we came by it.’ Photos of students’ drunken exploits on Facebook might indeed hurt their job prospects – but soon those making hiring decisions will themselves have had Facebook pages. The differential between our public and private selves might be largely resolved as we develop digital environments in which views can be expressed and then later revised.

Our missteps and mistakes will not be cause to stop the digital presses; instead, the good along with the bad will form part of a dialogue with both the attributes of a small town and, as John Perry Barlow calls it, a ‘world where anyone, anywhere may express his or her beliefs, no matter how singular, without fear of being coerced into silence or conformity.’ Such an environment will not be perfect: there will be people who wish to retract their private embarrassing moments and who cannot.

But it will be better than one without powerful generative instrumentalities, one where the tools of monitoring are held and monopolized by faceless corporate and government databanks anticipated and feared from the dawn of the computer age.

*ONATHAN :ITTRAIN IS AN !MERICAN 0ROFESSOR OF )NTER NET 'OVERNANCE AND 2EGULATION AT /XFORD 5NIVERSITY

AND A CO FOUNDER OF THE "ERKMAN #EN TER FOR )NTERNET 3OCIETY AT (ARVARD ,AW 3CHOOL 4HIS TEXT IS AN EXCERPT FROM HIS BOOK ³4HE &UTURE OF THE )N TERNET AND (OW TO 3TOP )T´ WHICH WAS PUBLISHED IN !PRIL

Responsible Wealth Review – June 2008

0RIVACY IN HOW MUCH PROTECTION STILL EXISTS .O LONGER VERY MUCH THE BREATHTAKING SPREAD OF INFORMATION TECHNOLOGY THE PRIVATIZATION OF GOVERNMENT RUN SERVICES MODERN METHODS OF COMBATING CRIME AND THE GLOBALIZATION OF DATA TRANSFER ARE ERODING THE PRIVATE SPHERE ACCORDING TO THE ANALYSIS OF DATA PROTECTION EXPERT 3TEPHAN ,ECHNER

Data protection is a term that means something to everyone, even though it does not – legally speaking – include every form of information security, but is restricted to the protection of personal data. In the Federal Republic of Germany, the so-called right to self-determination over personal data has even been formally recognized as a basic right since the census ruling[1] by the Federal Constitutional Court in 1983, although there is not a single explicit mention of it in the Basic Law. Nevertheless, every citizen has the constitutional right to decide where, and to what extent, their personal information is stored.

As a consequence of the growing use of large computers and electronic data processing, European legislators began to set up a legal data protection system comprising various institutions, laws and decrees in the 1970s, and this was ultimately harmonized in 1995 by European Union directives for this purpose[2].

Even in 2008, the essentials of the current data protection regulations still correspond to the original ideas dating from the 1970s, but there have been radical changes in this field due to the deployment of information and communication technology in the intervening years. As a result of inroads made by computer-based software systems into virtually all major areas of life, data protection has long since ceased to be confined to the application area of large computers in data processing centers.

In the modern environment, however, the fundamental principles of data protection are Responsible Wealth Review – June 2008

not always easy to reconcile with other requirements, so large numbers of exceptional arrangements have come into being over the years, significantly diminishing the original strength of data protection. Interestingly, although public discussion on the matter sometimes becomes heated, the citizens involved are often totally unaware of this fact.

-ODERN TIMES ÂŻ DATA PROTECTION IN

The basic philosophy of data protection in Europe is the so-called ‘ban on processing with reservation of permission’: the processing of personal data is basically prohibited unless it is explicitly permitted due to the data protection law or another legal regulation. This approach was originally selected to establish data protection as a force that should be taken seriously, but it has been severely eroded over the years by countless legal stipulations and ‘other legal regulations’. One particularly surprising fact is that in certain cases, lower-ranking legal arrangements such as works agreements between company managements and works councils are also interpreted as ‘other legal regulations’ within the meaning of the Federal Data Protection Law, so they may enable the processing of personal data in the industrial sector, even though such processing was originally prohibited.

Over the last 20 years, the weakening of data protection that has come about has essentially been influenced by four trends which have also played a significant part in social change. As

well as the aforementioned spread of information technology and telecommunication (ITC), these are: s THE PRIVATIZATION OF GOVERNMENT RUN SERvices; s MODERN METHODS OF COMBATING CRIME AND s THE GLOBALIZATION OF INTERNATIONAL DATA transfer.

4HE SPREAD OF )4#

In addition to the Internet protocol and the World Wide Web, a factor which has contributed to the first trend (the breathtaking spread of information and communication technology) is the concealed use of ‘embedded’ software in integrated circuits present in many systems.

From telephones to cars, extensive software packages can now be found in most technical systems, and many of these products were certainly not viewed by the legislators as being relevant to data protection at the outset.

This spread is based on the technical possibilities for miniaturization offered by semiconductors where, according to Moore’s Law[3], storage capacity on the same area is doubled approximately every 12 to 18 months. Over the last 20 years, the industry sectors which offer miniaturized or virtualized products of this sort have shown such strong development that many of the technologies that are commonplace today did not even exist when data protection legislation was first launched: HTML-based Web sites, publicly available search engines for wide-ranging electronic research, digital photography, cell phones, PDAs (organizers), satellite-aided navigation systems, DVDs and USB memory sticks – all of these only became mass-produced products after 1990. As is to be expected, new technologies of this sort afford extensive opportunities for the processing of personal data: according to the German Federal

Data Protection Law (BDSG/FDPL)[4], this processing already starts with acquisition or storage, and it includes electronic information of every sort that allows conclusions to be drawn about the personal or factual circumstances of an affected party. This means that data protection issues have made their way into most private households, companies, schools, authorities and institutions in Europe.

0RIVATIZATION

The second trend, which has entailed substantial changes for control based on data protection law, is the privatization of governmentrun services at the end of the twentieth century.

Passenger data in the privatized travel sector[5], consumption data in the private energy supply market, patient data in the privatized healthcare sector and connection data from private telecom providers are no longer exclusively in public ownership since the disappearance of former state monopolies. Increasing privatization has also been accompanied by a weakening of direct government control. In a privatized environment that is making rapid technical advances and which – unlike state monopolies – cannot be controlled by clear service regulations, there is sometimes extensive leeway for the interpretation and implementation of legal data protection provisions in each individual case. Particularly in the case of new business models in the Internet and telecommunications sector, there is often (as yet) no specialized legal commentary which might simplify a decision in borderline cases. For example, a veritable jungle of contract wordings has developed for consent to the use of mobile telephony data, so that customers long since ceased to be able to understand which risks they were accepting as a result of which decisions. In any case, regulations on individual cases can only Responsible Wealth Review – June 2008

be described very generally in the BDSG/FDPL and the subordinate decrees. If there are doubts as to whether data processing is permissible in certain cases, the interests of the processing party (the company) quite simply have to be weighed up against the interests of the affected party (the customer). To be sure, this is often a difficult decision for a company data protection officer, even though they are not bound by the law as regards their assessment of the content of a case.

)NTERNAL SECURITY

The third trend, which has mainly had political effects on data protection, is the modernization of methods to combat crime. To improve internal security and to protect against international terrorism since the attacks of September 11, 2001, in particular, many legal regulations have been introduced throughout the world which restrict the basic right to self-determination over personal data. The ‘Great Bugging Attack’ on private homes which was the subject of controversial public debate in Germany and was finally introduced in 1998, to be restricted again in 2004[17],[18],[19], the exchange of passenger data for flights to the USA[5] and the European Directive[16] at the start of 2008 regarding the storage of connection data for telecommunications and Internet providers are just a few prominent examples. In some cases, the national implementation of such requirements proves to be a real balancing act between internal security and the constitutionally guaranteed basic right to self-determination over personal data. Already in March 2008, the Federal Constitutional Court severely restricted access by the investigative authorities in Germany to stored connection data, contrary to the legal regulation[17] – on the other hand, the duty of extensive storage continues to apply.

Responsible Wealth Review – June 2008

Without wishing to go into details about the work of investigative authorities here, it must also be pointed out that telecommunications monitoring has now become an essential element of crime-fighting in almost all industrialized nations. The number of telecommunications monitoring measures has increased continuously in Germany over recent years[9], and the annual number of inquiries by investigative authorities to telephone companies about customer data has been in the tens of thousands since the end of the 1990s. Moreover, uninvolved third parties also fall within the scope of monitoring if they have or have had telephone contact with monitored suspects, and – in keeping with the classical style of investigations – other people with whom these third parties have been in contact are also investigated. Even an indirect relationship with a person contacted by a suspect (who may be innocent) can lead to processing of extensive personal data by the investigative authorities.

'LOBALIZATION

The last major trend is the globalization of data transfer. While there has been a harmonization of the level of data protection due to the European Union’s Data Protection Directive, despite the different national laws on internal security in the European region, there is still a serious difference with regards to the handling of the transfer of personal data to the USA. The legal regulation which is usual for EU member states is replaced by the so-called ‘Safe Harbor Regulation’[6]. This principle was created and agreed upon between the EU and the US governments in order to legalize the data transfer to the US which was already in existence but which could have been prohibited after the EU Data Protection Directive came into effect. It consists of optional self-monitoring by those

0HOTO 0RESTON +ERES !0 53 .AVY +EYSTONE

organizations or companies which commit to unapproved data processing are mainly to conform to basic principles for the processing be feared from consumer protection assoof personal data. But companies which are not ciations, the affected parties themselves or, in the ‘Safe Harbor’ are not excluded from data where a claim has been made public, from processing: the relevant principles state that a public opinion and the resultant loss of imdata transfer to US organizations which have age. not joined the ‘Safe Harbor’ is possible, but it s /RGANIZATIONS OUTSIDE THE 3AFE (ARBOR MUST has to be based on exceptions such as the congenerally obtain the consent of the affected sent of the affected party or must otherwise party in order to have a legal basis for probe protected by additional security measures cessing data. For this reason, many service (such as contractual agreements)[6]. However, agreements contain consent clauses for the this formulation merits closer consideration processing of personal data – examples inin terms of the possibilities for processing perclude the mobile telephony sector, Internet sonal data: providers, the Pay TV sector or the use of s 53 ORGANIZATIONS WITHIN THE 3AFE (ARBOR Payback cards. The relevant consent clauses may process personal data and are not are generally drawn up in advance and are subject to strict official control. The imoften described as ‘privacy clauses’ (or daplementation of self-monitoring (which is ta protection clauses), but this is deceptive: merely optional) is left up to the organizasigning entails approval for frequently untions themselves, and sanctions in case of necessary processing of the relevant usage

)NTERNAL SECURITY 4ERRORIST ATTACK ON THE 7ORLD 4RADE #ENTER IN .EW 9ORK

3EPTEMBER

Responsible Wealth Review – June 2008

data for the purposes of the provider, so the personal data usually enjoy better protection if the customer does not sign the socalled ‘data protection clause’. Essentially, protection against unintentional consent by the party concerned to the use of their personal data depends on that party having a sound awareness of security and the courage to delete optional clauses from the agreement. This is possible to a large extent in Europe because the provision of a service cannot be made dependent on the processing of personal data which are not required for it. s /RGANIZATIONS OUTSIDE THE 3AFE (ARBOR CAN also ensure data processing without obtaining consent from the party involved in additional ways (e.g., through general agreements and also by other security measures which are not specified in further detail).

This creates a wide range of possible exceptions in order to legalize the processing of personal data which is, in principle, not necessary.

Nevertheless, it must be clearly stated that the unauthorized processing of personal data definitely entails risks even in the USA, because the public reacts sensitively to the subject of privacy in spite of all the restrictions related to national security. Just recently, the illegal inspections of the personal data of the Presidential candidates which took place at the end of March 2008, generated a considerable response in the press (and led to some dismissals)[7].

Claims for compensation under civil law are also asserted on a significantly higher scale by affected parties in the USA, which additionally increases the economic risk of a violation of data protection. The principle of data protection self-control based on the market economy in the form of the Safe Harbor regulations should Responsible Wealth Review – June 2008

not therefore be described as ineffective, but should be understood very well. In the USA, certain cases of data protection violation can definitely lead to economic losses for the perpetrator which far exceed the moderate fines that are customary in Europe.

The same ambivalent picture of data protection is also apparent at a global level. The UN’s data protection principles[8] dating from 1990 are extensive and their content includes worthy principles such as the legality of processing, the correctness of the data and access for persons with a justified interest. However, clause 6 of the UN principles also includes ‘the power to make exceptions’ which, on closer inspection, is defined as follows: ‘Departures from principles 1 to 4 may be authorized only if they are necessary to protect national security, public order, public health or morality.’

This wide-ranging phrasing has also been selected intentionally to prevent data protection from becoming a protective shield for criminal activities. A wide variety of exceptional regulations – the term ‘morality’ alone can certainly be interpreted in many ways – therefore mean that the fundamental ban on processing is formulated less strongly than it is established in public awareness, even at the level of the United Nations.

#ASE EXAMPLES FROM THE PRIVATE SECTOR

Outside of the investigative sector too, however, extensive data are acquired and processed in an entirely legal manner, but, in some cases, without any real awareness on the part of the person involved, and the individual right to self-determination over personal data is further weakened by various legal agreements.

For example, the laboriously negotiated pas-

0HOTO %VERETT #OLLECTION +EYSTONE

senger data agreement[5] between the EU and the USA not only covers names, travel data, frequent flyer information, travel agencies and air ticket numbers, etc. but also includes the following phrases which release a wide range of imprecisely defined data for transfer and processing: – all available contact information – all available payment and charging information – all baggage information It is obviously difficult to demarcate terms of this sort and this opens up extensive leeway for the processing of personal data. Personal data are also stored legally in entirely different areas of international travel which are somewhat unexpected for those affected: for marketing reasons, telecommunications operators send short welcome messages to foreign customers who appear in the mobile telephony network as new users. To prevent sending multiple messages to the same number (after the device is switched off briefly, after leaving the reception zone or after changing briefly to a different network), an electronic list of all border crossings has to be kept temporarily by the mobile telephony operator in question. With

appropriate security, this is permitted by data protection law, but under the exceptional legal regulations described above, it is perfectly possible for investigative authorities to access extensive cross-border movement profiles of this sort, and even for marketing departments to do so in the worst-case scenario when a customer gives consent in error.

Without the general public being aware of it, the legal processing and use of personal data has become established on an extensive scale due to the trends described above and the gradual erosion of the data protection provisions which were originally introduced in a very consistent manner.

'LOBALIZING DATA TRANSFER 4ELEPHONE OPERATORS

UNDATED PHOTOGRAPH

0ROTECTIVE MECHANISMS AND RECOMMENDATIONS

Electronic data processing has the obvious advantage that data can be copied almost at will. Unfortunately, this also makes subsequent control virtually impossible once personal data have fallen into the wrong hands (even for only a short period). The basic principle is therefore a sound awareness of security, which is also one of the best means of protection against the abuse of personal data.

Responsible Wealth Review – June 2008

Due to the spread of Internet portals such as Facebook and MySpace[10],[11], a trend towards publishing personal data is emerging, especially among young people, but it is virtually impossible to foresee the long-term consequences of such information release: even now, companies are searching young applicants’ Facebook pages for signs of unreliability (for example, a daring admission of drunk driving on a past occasion is certainly not expedient for someone applying to be a courier service driver), and a new Internet business sector is now specializing in deleting negative statements and admissions by its customers from the relevant online sources. Of course, it must be noted that data of this sort posted on the Internet are by no means bound to be true, and in some cases, the affected person is not even the originator of the information about them available on the Internet.

Another sure way of preventing the processing of personal data is to prevent the acquisition of such data. Registrations on the Internet, participation in prize games, registration for bonus programs, free subscriptions to services or voluntary replies to surveys should be assessed in the full knowledge that once approval is given, professional address dealers assemble extensive profiles from the information they receive for legal sale on the free market. Significant parts in the evaluation of such profiles have been played for years by professional data fusion (collating data from various sources), data warehousing for overview and evaluation purposes, and data mining to search for specific information. Let us mention in passing that for a long time, all these evaluation methods have been carried out on a fully automatic basis by specially designed application programs, rather than manually – the size of the relevant market is estimated as at least 12 billion Euro[12]. Before releasing personal data Responsible Wealth Review – June 2008

which may not be required, one’s own benefit should always be weighed against a complete loss of control.

Finally, the use of anonymization or pseudonymization concepts can also be recommended. Anonymization aims for a status where there is no traceability to the end user or a reference used by him, whereas pseudonymization allows the use of ‘alias’ names and profiling, but does not allow a conclusion to be drawn about the natural person. Several different portals for anonymous Internet usage came into being towards the end of the 1990s[13],[14], but since then legislators have imposed limits on the totally anonymous use of Internet or telecommunications services; in most countries, they have stipulated registration with the provider and have to some degree obliged the anonymizing Web sites to register their users – a concept that clearly contradicts the idea of anonymity. Even in the case of those anonymization concepts which still exist and which do not require registration, it is impossible to totally exclude access to the Internet addresses and usage profiles which may nevertheless be available at a central point, so avoidance of data is better than data anonymization in cases of doubt.

In the long term, data protection will continue to be caught between the conflicting interests of self-determination over personal data and national security in democratic societies.

(Data protection sometimes plays a somewhat secondary role in other types of society, due to their very nature.) Technological progress, the increasing privatization and virtualization of companies and business models, together with modernized methods of combating crime and the global exchange of data will continue to be strong trends in the future. Counteracting the effects of such trends with sustainable concepts will continue to be one of the key challenges as

regards the legal and technical protection of personal data. Informed handling of personal data by citizens and a critical and prudent approach to releasing such data to electronic or electronizable media are major steps towards establishing a good balance between individual basic rights and the protection of the general population. A certain mistrust of potentially unnecessary data acquisition and the use of common sense to assess its necessity would certainly be advisable for every individual in order to deal with the sensitive area of conflict between data protection and the need for data in an increasingly complex legal and technological environment.

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Responsible Wealth Review – June 2008

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Western countries consider the privacy of their citizens to be sacrosanct. Its protection may be the foundation of individualism itself.

Without our privacy, declared the American lawyer and legal expert Charles Fried more than 35 years ago, we lose ‘our very integrity as persons.’ By insisting that there are personal boundaries that the state may not overstep, writes legal critic Jeffrey Rosen, the liberal state ‘expresses its respect for the inherent dignity, equality, individuality, interiority and subjectivity of the individual.’ This reflects the core of democracy. Unlike totalitarianism, democracy does not force its citizens to sit in a glass house. Under totalitarianism, every expression is public. The exposed citizen is transformed from a subject into an object.

Democracy, on the other hand, offers space for seclusion and privacy.

Accordingly, citizens on either side of the Atlantic react adversely whenever they see their privacy threatened – which they do all the time, as polls repeatedly have shown.

George Orwell’s ‘1984’ horror vision of a synchronized society with a ministry of truth is an ever-present backdrop to the debate about the difficult balance between security and freedom.

The question, however, of what exactly must be hidden before the eyes of others in order to protect the individual as the column of a democratic society, is highly controversial. One reason might be the diverse ideas Responsible Wealth Review – June 2008

about what precisely defines the boundaries of the untouchable intimate sphere. At the same time, it is remarkable and strange how perceptions of privacy differ here and across the Atlantic. James Whitman, legal comparatist and law professor at Yale University, even speaks about ‘two Western cultures of privacy’. A review of the relevant publications shows a clear pattern: the place of residence shapes the perspective. Authors on either side of the Atlantic consider their own legal community to be on its way directly to the sun.

Grounded in the values of the Enlightenment, each author’s community strives to best protect personal data and privacy rights, whereas on the other side of the Atlantic the attempts to do so still leave something to be desired.

Americans and continental Europeans are equally convinced that the others have some catching up to do.

+EEPING UP ONE´S CREDIT HISTORY IS A LIFE LONG TASK

Europeans who come to the United States are disturbed by the behaviors of the natives. For them, publishing personal details about the private lives of politicians feels like a coarse violation of privacy rights. In their eyes, it is not only distasteful but also simply illegitimate to showcase juicy details of a politician’s sexual life, as in the case of former President Bill Clinton after his affair with an intern. To Europeans, the insistence on trans-

parency for companies and managers’ salaries seems bizarre. They find it irksome that employers can search about their employees email accounts. They are shocked that personal files can easily be passed on, and that personal medical data is less protected than in the Old World.

Europeans constantly complain that Americans do not accept the importance of protecting consumer privacy. In this respect, they see their home countries as especially far ahead of the United States. Very few can comprehend why a new home owner is bombarded by dozens of offers to refinance, and why all banks seem to be perfectly well informed about the just-closed loan and credit deal. Information about salary, personal debt and even assets are often only a double-click away, enabling fundraisers to spy easily on their prospects like detectives – to the amazement of Europeans.

But nothing agitates the inhabitants of the old continent more than the local custom of credit reporting. Throughout their lives, Americans have to prove their credit worthiness through timely and regular payments. As if in school, their payment behavior is graded and grades are frequently updated. The higher the grade, the cheaper the credit. Almost every car dealer can, without much effort, check a customer’s credit report. The majority of Europeans consider this an intrusion on one’s privacy. Why should any car dealer be able to access such sensitive personal financial data, especially if the customer has never defaulted on his debts? As Whitman remarks, Europeans feel that American law ‘seems to tolerate relentless and brutal violations of privacy in all areas of law.’ For ‘sensitive Europeans’, a tour through American law must feel like a visit to the ‘latrines of Ephesus.’

)N %UROPE !MERICANS SEE RELICS OF THE SURVEILLANCE STATE

But the same is true vice versa. Americans who travel to Europe quickly discover habits of the natives, which to them seem to be equal violations of privacy. Americans complain in Europe that they can’t obtain credit reports, thereby losing access to cheaper loans. For them it is clear that credit offices boost transparency, making loans more accessible and lending more secure. ‘It’s pretty predictable, who the people are, who would like to block that information,’ says Howard Beales of George Washington University. ‘It’s the people, who don’t pay their bills.’ In order to protect its privacy rights, Europe risks ‘the damage and destruction of an important economic segment’ and, with it, the economic wellbeing of many, asserts Beales.

Americans see European limitations on collecting personal data as a competitive disadvantage. ‘If marketers can learn more easily what my preferences are, they can provide me more easily with goods and services I seek’, says Whitman. ‘Trafficking in consumer data lowers transaction costs.’ The ‘efficiency of the market’ is enhanced – to the benefit of consumers.

That Europeans are willing to sacrifice an efficiently organized market for data protection may, in the end, be acceptable from an American perspective. But that governments meddle with a parents’ choice of baby names is unthinkable to them. Why, Americans ask, are inspectors allowed in France or Germany to enter the sanctuary of democracy, one’s own home, just to look for unregistered televisions? When inhabitants of a country have to register their whereabouts with the police and carry an identity card, Americans sense relics of the surveillance state. They also find Responsible Wealth Review – June 2008

0RIVATE SPHERE OF DEMOCRACY 3TATUE OF ,IBERTY ON ,IBERTY )SLAND

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it troublesome that, in Germany and France, telephone wiretapping happens ten to thirty times more often than in the United States.

4HE STATE AS A POTENTIAL INTRUDER

Nothing, however, confuses Americans more than the attitude toward nudity in public. Are genitals not considered to be the most private body parts in Europe? Why people in the English Garden in Munich feel the desire to strip off their clothes is beyond their grasp.

Also, Americans are simply astonished that it is still common among European men to urinate in public. Where is the protection of privacy in public places? At the end of their tour through European law, Americans rarely recognize the Old World as the mother of all privacy protection, as Europeans like to see themselves.

The American perception of the right to privacy (including data protection) originates in the idea of liberty, which developed in the 18th century (privacy as liberty). Its conceptual core is the right to be left alone. The state is always seen as the potential ‘intruder number one’. This is the reason why the constitutional rights of liberty were designed as a protection against the state. The American ideal of small and limited government is rooted in the concern that an overpowering state is willing and able to assault the individual.

Jeffrey Rosen writes in ‘The Unwanted Gaze – The Destruction of Privacy in America’, that the limited government on which classic liberalism insists is ‘the best way of respecting the dignity and equality of the individual’ – even in the age of cyberspace.

The American Constitution does not include a basic right to privacy protection, nor have the interpretations of the Supreme Court proclaimed such a right. The renowned essay

Responsible Wealth Review – June 2008

of Louis Brandeis, who together with Samuel Warren demanded ‘The Right to Privacy’ in 1890 in the Harvard Law Review, did not have the desired legal effect. Even after Brandeis joined the Supreme Court, he was unable to prevail. In 1928, the Supreme Court was addressing a case called ‘Olmstead vs. United States’, which Brandeis would have loved to utilize in order to finally establish the ‘right to privacy’ he had posited 38 years ago. But he failed to convince the majority of justices to support his cause. Roy Olmstead was convicted for alleged conspiracy to violate the National Prohibition Act by unlawfully possessing, transporting, and selling alcohol. Evidence was provided by wiretapped telephone conversations. Olmstead unsuccessfully challenged his conviction by arguing that the use of evidence of wiretapped private telephone conversations amounted to a violation of the Fourth and Fifth Amendments. The Olmstead case is considered a great victory for those who opposed continental European notions of privacy protection.

4HE PRIVATE HOME AS THE CITADEL OF THE PROTECTED SPHERE

The American version of privacy protection is based on the Bill of Rights. In respect to marriage and reproduction, family and the upbringing of children, Americans can expect a sensible sphere of privacy. The right to remain anonymous is also indisputable, as is the right to join political groups without notifying the state about one’s membership.

No other clause is as important as the Fourth Amendment, offering protection against random searches or seizures. The private home becomes the citadel of the protected sphere. As distance increases from one’s home, protection decreases. At the same time,

0HOTO )"! !RCHIV +EYSTONE

Responsible Wealth Review – June 2008

the coverage of the Fourth Amendment is restricted by the First Amendment, which guarantees the freedom of speech. Each attempt to confine the right to freedom of speech, even if it is for the noble cause of privacy protection, is met with deep suspicion by American society. During the past 30 years, even companies have been able to assert the idea that their freedom of speech counts more than the privacy rights of individuals. This constitutional set-up clearly creates a constellation of tension between freedom of speech and freedom of the press on one side and the protection of privacy on the other. Sometimes it is the freedom of opinion and the freedom of the press itself that threaten the individual, writes Whitman.

On this basis, America has decided not to prohibit the distribution of information (as many European countries do), but to protect its citizens from its consequences. In the United States, ‘personal information was never treated like a property right’, states Beales.

Thus, a right to informational self-determination – as for instance in Germany – has never developed. Instead, the legislator strives to make the consequences of data transfer tolerable for the individual, which has led to a patchwork of disparate laws with sometimes narrow definitions of protection. The probably best-known example is the Video Privacy Protection Act of 1988, which was passed by Congress in the wake of the controversy that arose when Judge Robert Bork’s video rental records were released during his Supreme Court nomination hearings. The Act prohibits a video rental or sales outlet from disclosing information concerning what tapes a person borrows and buys, or releasing other personally identifiable information without the informed, written consent of the customer.

Responsible Wealth Review – June 2008

&REEDOM OF PERSONAL SELF REALIZATION

In Europe, this legislation is often described as incomplete, though it is consistent with the American idea of the state. As Jeffrey Rosen writes, a liberal state respects the fact that each individual has some precious interior space. But the state should not go beyond the passive role of refraining from violating the dignity and privacy of its citizens.

It should also be prohibited from using its power to punish citizens for violating one another’s dignity and privacy. ‘This may encourage a degree of surveillance and exposure far greater than the indignities it seeks to avoid’, states Rosen. Except in extreme cases, norms are more suited to protect privacy than law.

According to this perception, Europe’s data protection authorities are more dangerous than helpful. The American concept encourages citizens to fight out their disputes among themselves. In extreme cases they can be subject to tort law. ‘In Europe the first line of defense against private wrongdoing is the state, writes Joel Reidenberg of Fordham University, ‘in the U.S. our instinct is more liberal: let private actors sue each other.’

The intellectual godfathers of these ideas are Immanuel Kant, who shaped the concept of ‘negative freedom’, and the intellectual historian Isaiah Berlin, who extended this concept in his essay ‘Two Concepts of Liberty’.

According to Berlin, ‘negative freedom’ is understood as freedom of the individual from governmental force. The Constitution contains the state and limits its access to citizens, so that the individual is free to pursue personal self-realization. The government is reduced to its core competencies and does not develop normative standards about how its citizens should lead their lives. If, on the other

0HOTO +EYSTONE

hand, the state utilizes its power and enforces its goals for the well being of its citizens, Berlin speaks of ‘positive freedom’. This type of freedom is often found in societies in which the government plays a more prominent role, for example in communitarian and socialist societies.

The establishment of data protection agencies in Europe and Canada follows the concept of ‘positive freedom’. They are meant to help the individual control their name and reputation, which in Germany is called ‘the right to informational self-determination’.

Individuals need to be protected against unintended public exposure and should be enabled to determine themselves what to expose and disclose to others. Humiliation and defamation, damage and indignity are combated (‘Privacy as dignity’). This concept has prevailed on the old continent over centuries and goes back to the age of feudalism, when noblemen wanted to shield their dignity and their private lives from the eyes of high society. Since then, a battle has been fought against this class privilege. It has been so successful over centuries that nowadays the

0RIVACY IN %UROPE 1UADRIGA ATOP THE "RANDENBURG 'ATE IN "ERLIN

Responsible Wealth Review – June 2008

former noble privilege is a universal right.

But it cannot hide its origin.

%UROPEANS FEAR EXCESSES OF THE MEDIA

Since the invention of new technologies for data processing, the old continent has armed itself with new laws and institutions.

The first comprehensive data protection law was enacted in 1970 in Hessen, Germany. A Swedish law followed in 1973 and a German federal law in 1977. In 1981, the European Union adopted a data protection convention.

The European Commission’s Privacy Directive of 1995 raised the universal claim to regulate the data transfer of the business community even with third party countries. The Wall Street Journal commented that Europe aimed at becoming ‘the privacy cop of the world’. In 2000, the right of comprehensive personal data protection was included in the Charter of Fundamental Rights of European Union and, in 2004, became part of the European Constitution.

European laws are mainly directed against intrusions from the state. Whitman explains that Europeans see their privacy threatened first and foremost by two factors: ‘Excess of the free press and excess of the free market.’

This is the reason behind the Trans-Atlantic dispute over privacy protection. When in doubt, Americans tend to value free speech and free markets over privacy. The different perceptions of government and power determine the understanding of data and privacy protection. The European approach rather prefers to err on the side of caution and to forego any potential benefit the data might could have in the future, writes Dorothee Heisenberg, professor at Johns Hopkins University, in her book ‘Negotiating Priva-

Responsible Wealth Review – June 2008

cy. The European Union, the United States and Personal Data Protection’. The European conception of freedom follows a simple dictum: If there is nothing, there is nothing to be abused.

Not surprisingly, Europeans are piqued when Americans claim that their desire for data protection arises from wounded pride, disdain for the free market, and a lack of respect for the freedom of speech. Germans and other Europeans respond to such accusations by pointing to the lessons learned after the Nazi dictatorship. Ever since, the entirety of Europe has erected high walls against intrusions by the state into the personal sphere.

By 1950, the Council of Europe had enacted a human rights convention, guaranteeing the right to privacy, family life, home and correspondence. The census verdict of the German Supreme Court in 1983 referred to a claim, which protested against the data-acquisitiveness of the government, not of the private sector. Here the American criticism ignores the critical impetus towards government in the way of continental European thinking.

4HE )NTERNET AS A REMORSELESS RECORD KEEPER

The technological revolution of the Internet has provoked new questions. It has vastly extended the areas of our personal lives that can be monitored and recorded, and offers almost endless opportunities to collect and store personal data. Everyone who shops in cyberspace, pays a parking ticket online, or uses a dating service leaves digital footprints in Google’s master memory. The boundaries between private and public life become blurred. One’s own four walls are no longer a clear boundary for the private sphere. Today, computers are portable offices. Private emails

are sent from the office account; a company’s laptop is used at home for private purposes.

The Internet is not only a market and work place; it is also a discussion forum, a self-help group, confessional and gossip club. Never before in history has it been possible for John Q. Public to present himself to a worldwide audience and communicate with people all over the globe. In chatrooms, blogs and on sites like facebook.com, people are willing to share their most intimate details. Often they forget what a remorseless record keeper the Internet is. Somebody’s entry may, on occasion, haut the subject of the remark.

Naturally, many Europeans want to control the legal sphere for the Internet by means of their legal traditions. They are looking for ways to assert the right to informational selfcontrol in the global cyber world. Americans are more hesitant. Perhaps this is because they were significantly involved in the invention of the Internet. Or perhaps this is because it is part of their intellectual tradition to favor freedom of speech over privacy protection when a choice must be made. This tradition becomes troubling, however, when government data officials start working with private data collections. While such actions used to be illegal, there is much evidence that they have happened since September 11, 2001.

The attacks on Washington and New York taught Americans that there is a fine line between freedom and abuse. The Bush administration reacted in the same year by passing a package of laws to fight terrorism, the Patriot Act, which allow unprecedented interventions into privacy. The administration expanded the FBI’s authority to demand personal records from Internet providers, telephone companies, and public libraries without prior court approval and without notifying the

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person concerned, replacing these traditional mechanisms with National Security Letters (NSL). The Patriot Act was immediately criticized as violating the constitutional principle of the separation of powers and the right to freedom of speech. By the end of 2003, the Attorney General declared that the law enabling the access of library records had never been utilized by prosecutors. Since then, it has been modified by an amendment. As America’s intellectual tradition endeavors to keep the Internet largely unregulated, while protecting the individual’s home against the government, the future does not look bright for the Patriot Act. Europeans, however, will continue working on their packages of laws of informational self-determination. And both Americans and Europeans will keep feeling superior to the other, because the place of residence determines the perspective.

Responsible Wealth Review – June 2008

3PECIAL CASE !SIA 0ERSONAL ASSETS ARE INCREASINGLY žOWING INTO !SIA 4HE FAVORABLE ½SCAL ENVIRONMENT AND REMARKABLE ECONOMIC GROWTH HAVE TURNED THE REGION INTO A MAGNET FOR INVESTORS FROM ALL OVER THE GLOBE

CONCLUDES 3AMEENA !HMAD

‘The hills are high and the Emperor is far away.’ This phrase, used in times past by local Mandarins to explain why they ignored orders from Beijing, may prove an apposite marketing slogan for Asia’s private bankers today.

All around them, the privacy that lies at the heart of their business is under attack.

Stolen client details from a bank in Liechtenstein, one of Europe’s biggest tax havens, have been bought by tax inspectors across the developed world. The UK has recently and controversially tightened up its tax rules for ‘nondomiciled’ individuals, requiring them to give extensive details of their offshore holdings or submit to a ÂŁ30 000 annual tax charge in order to shield offshore income. The Organization for Economic Cooperation and Development (OECD) is stepping up pressure on ‘uncooperative tax havens’ such as Monaco while Switzerland imposed a withholding tax on some accounts held by European Union citizens four years ago. The US, meanwhile, is campaigning for ever stricter laws to combat money laundering and terrorism finance.

Attitudes in Asia are still a little different.

These days, of course, no serious wealth management professional defends secrecy – as distinct from privacy – on the part of his or her clients. But whereas the tax authorities in Europe sometimes appear to conflate the two terms, Asia’s bankers, while not tolerating the former, continue to jealously guard the latter. ‘A client’s right to privacy is ingrained in our DNA,’ says Kathryn Shih, head of wealth manResponsible Wealth Review – June 2008

agement for the Asia-Pacific region at UBS, though she points out that the bank routinely carries out due diligence on a new account and has to disclose certain information to local governments and regulators. ‘Confidentiality is the biggest issue for our customers,’ concurs a relationship manager at a large European bank in Hong Kong.

Some (particularly Europeans) seek it in order to avoid paying tax, but many (often Asians) want to keep a low profile in order to avoid threats of extortion, kidnapping or persecution by the media. Others simply regard it as wise not to advertise their success to either their families or to the public – until a few years ago, becoming a millionaire in mainland China was as likely to get you arrested as lionized. In all cases, a trusted private banker seeks to help. ‘There are many ways to protect privacy,’ argues Ms Shih, without breaking the rules. Examples include setting up trusts or private investment companies; or indeed a family office that can administer a patriarch’s entire fortune, down to setting up its own private mutual funds.

%XPLOSION OF WEALTH IN !SIA

Regional governments are intensively competitive when it comes to attracting money and are thus supportive of their wealth management industries. While they have stepped up their fight against money laundering, given global fears over terrorism, Hong Kong and Singapore have retained favorable bank-

ing secrecy laws in the face of considerable pressure from the European Union, which has sought information about EU money flows. To date, however, local banks in Hong Kong, for instance, do not even have to disclose if they serve a particular client unless a court order forces them to reveal it. In fact, since Singapore strengthened its laws in 2000, banks that handle private banking transactions there have had to move their data centres back to the city state just as commercial arms have outsourced such functions to India. ‘Twenty years ago, Switzerland was regarded as a safe haven for those trying to conceal their assets,’ says one Hong Kong-based private banker. ‘Now our clients see Singapore and Hong Kong offering the same benefits with lower fees and more flexible services.’

The favorable fiscal environment in many Asian countries is another attraction, both for local and overseas investors. Income tax rates in Singapore and Hong Kong are low by international standards and neither levies tax on capital gains, interest or dividend income.

Naturally, neither taxes offshore deposits.

Hong Kong also abolished estate duty some years ago. And Singapore has introduced very flexible trust legislation as well as setting up a wealth management institute to train up more private bankers. Both cities as well as Japan and, increasingly, other Asian countries, boast established legal frameworks and political stability.

No wonder then that more and more international funds have been flowing into the region, especially from Europe, joining an explosion of local Asian wealth. Deepak Sharma, head of Citigroup private bank’s international operations, places three Asian cities among the top six global wealth management hubs – Singapore, Hong Kong and Tokyo (still

a predominantly domestic market) join London, New York and Geneva in his reckoning.

Singapore’s growth, in particular, has been spectacular with assets under management in private banks soaring from $50 billion in 1998 to $300 billion in 2007, while the number of such banks has doubled from 20 to 42.

That makes the city the world’s second largest wealth management centre, albeit still far behind Switzerland, with an estimated $1.7 trillion in assets.

Strict confidentiality, low taxes and supportive governments are, however, not the only or even the main reasons for the spectacular expansion of Asia’s wealth. For global wealth owners, the region’s rich seam of investment opportunities is a compelling reason to send money east. ‘People are investing in Asia more because of the opportunities in the region, than because of tax havens,’ says Ms Shih. ‘More and more people are realizing that it is best to pay taxes’.

2EMARKABLE ECONOMIC GROWTH

High net worth individuals (HNWIs) – commonly defined as those with $1m or more of investible assets – are eager to tap into Asia’s exponential growth. This applies not only to US and European clients seeking to diversify their portfolio, but increasingly to local business people who once considered it their main financial goal to get their money into a safe currency. ‘Ten or 15 years ago, when an Indian made his first million, he would ask ‘how do I send it out of the country?’’ says Mr Sharma. ‘Now he asks ‘how do I invest it at home?’’ Banks are increasingly able to offer such opportunities via new, structured products. Citigroup, for instance, recently helped some American private clients to invest directly into Chinese A-shares, Responsible Wealth Review – June 2008

which are generally reserved for local citizens.

The other big driver of assets in the region is Asia’s own incredible growth, spurred by increases in local gross domestic product and market capitalization. At the end of 2006, there were 2.6m HNWIs in Asia-Pacific controlling wealth worth some $8.5 trillion, according to the most recent figures from Capgemini and Merrill Lynch in their 2007 Asia Pacific Wealth Report. Lower the threshold from $1m to $100 000 and assets under management in Asia in 2006 amounted to $10.6 trillion with another $11.9 trillion held in Japan, calculates Boston Consulting Group.

Both studies recorded an asset growth in double digits and the higher up the scale, the faster the growth – so ultra-HNWIs, those with $30m or more to their name, saw their financial holdings expand by more than 12% while the wealthy population of Singapore and India each grew by over 20%.

0RIVATE BANKER SHORTAGE

Such break-neck growth brings its own challenges. The biggest problem facing private bankers in Asia is the lack of human talent. Stories abound of banks stealing relationship managers from each other by offering to double salaries and pay huge ‘golden hellos’.

Part of the problem is that, in Asia unlike Europe, private banking has only recently gained a reputation as a serious career – one that demands not just charm to hand-hold temperamental clients but real financial skills. Bright young things considering a career in banking, would still choose an investment bank, particularly given the still poorer salaries in private banking. ‘The pool of wealth managers in Asia is still very small,’ says UBS’s Ms Shih.

‘One of the biggest advantages of Switzer-

Responsible Wealth Review – June 2008

land is the deep pool of talent. The industry there is over 100 years old. Young people leave school and train up to be wealth managers.

In Asia until recently, wealth management was a side issue for a bank.’ Initiatives such as Singapore’s Wealth Management Institute, opened by the government two years ago and offering masters degrees in private banking, are designed to combat this shortage as will in-house training, but all this will take time to have an effect.

Meanwhile, existing bankers need to upgrade their skills as their customers’ demands become more sophisticated. Private bankers point to a dramatic shift of wealthy clients’ money into highly sophisticated financial assets as opportunities open up in once-closed economies like India and China. Alternative assets including private equity, hedge funds, commodities and real estate structures are particularly popular and now represent around a third of an ultra high net worth client’s total portfolio against perhaps just 5% a few years ago.

Add in the complexity, typical within wealthy Asian families, of managing money invested across many jurisdictions with different tax rates and currencies, and the need for financially literate private banking advisors is obvious. ‘Today’s wealth managers need skills in financing, in investment advice, in private equity, in real estate, in hedging and risk management. It is a very complex situation,’ says Citigroup’s Mr Sharma.

He points, too, to a new kind of private banking client. Whereas the privately wealthy in Asia were once almost all business entrepreneurs owning factories or running IT companies, increasingly they are coming out of finance, having started hedge funds or private equity groups. To serve these sophisticated

clients, advisors have been recruited from law firms and the capital markets and corporate finance departments of banks. For now, competition for staff will remain as fierce as the battle for clients themselves.

5NFAVORABLE DEMOGRAPHIC DEVELOPMENT

A further significant difficulty is that many Asian markets still have their own restrictions. China remains off-limits for many big names and even those, such as UBS, that have managed to buy into a local brokerage there, cannot offer a full suite of products. Ms Shih says that her team is not allowed to offer derivatives to mainland clients and can only sell rupee-based products in India. While ‘we continuously lobby the governments’ to make more changes, she contrasts this with the wide product range and deep pool of liquidity on offer in an established private banking centre such as Switzerland.

The region’s relatively young population currently is also masking the future shape of the wealth management industry in Asia. Retirement products have not been much of a focus as yet, but that is set to rapidly change given the unfavorable demographic profiles of Japan and China in particular. By 2021 there will be only six workers per retiree in Asia, compared to 10 today – and the ratio will shrink from 4:1 to 2:1 in Japan, according to Asian Demographics and McKinsey. For bankers, of course, this represents an opportunity to sell their clients a whole new range of pension and investment products, as does the inter-generational shift of wealth from retiring entrepreneurs to their children.

There are many reasons, therefore, why Asia’s wealth has grown rapidly, why this trend is likely to continue and why the region

3AMEENA !HMAD IS 4HE %CONOMIST´S !SIA "USINESS #ORRESPONDENT

BASED IN (ONG +ONG

will continue to be an attractive home for at least a part of the fortunes of the world’s wealth owners. There is no doubt that financial scrutiny will increase. As Citigroup’s Mr Sharma puts it: ‘The regulatory environment and the flow of information will become more transparent – that is part of globalization.’ Asia, however, crouching far away behind the hills, is likely to remain a safer place than most.

Responsible Wealth Review – June 2008

³4HEREIN LIES IN MY OPINION A GREAT CHANCE FOR THE FUTURE OF ,IECHTENSTEIN IF WE SUCCEED IN GIVING THE ISSUE OF PRIVACY PROTECTION A BROADER DEFINITION ´

(EREDITARY 0RINCE !LOIS OF ,IECHTENSTEIN

³4HERE MUST BE SPHERES OF PRIVACY´ 4HE 0RINCIPALITY OF ,IECHTENSTEIN HAS TRADITIONALLY BEEN AN OASIS OF PRIVACY )S THIS AN OUT DATED CONCEPT IN THE OPEN INFORMATION SOCIETY

OR ON THE CONTRARY THE KEY TO THE COUNTRY´S FUTURE (EREDITARY 0RINCE !LOIS OF ,IECHTENSTEIN REžECTS ON THE QUESTIONS OF 2OGER DE 7ECK Roger de Weck:

9OUR (IGHNESS WE ARE IN YOUR

HOME 4HIS #ASTLE ÂŻ PROMINENTLY VISIBLE FROM AFAR

BUT ALSO A PLACE FOR PRIVATE RETREAT ÂŻ SYMBOLIZES

THE TOPIC OF OUR DISCUSSION PRIVACY AND SPHERES OF PRIVACY 4HE 0RINCIPALITY CARRIES YOUR NAME YOU CARRY THE NAME OF YOUR COUNTRY 4HE BALANCE

BETWEEN PUBLIC REPRESENTATION AND PRIVATE LIFE IS NOT EASY TO ACHIEVE (OW DO YOU ½ND AND MAINTAIN AN EQUILIBRIUM

Hereditary Prince Alois of Liechtenstein: Those who are in the public eye have no choice but to be aware of their prominence. Nevertheless, my family and I have always made a substantial effort to preserve our privacy. That is not always easy. We achieve it – let me say it with a wink – by being as boring as possible. For example, we avoid, as far as practical, social events where certain media are present. Moreover, we live in a small country where the residents also value their privacy. That’s probably in the blood of the Alemanni people. As such, mutual respect in matters of privacy has proved good for everyone over the decades that my family have lived here.

4HESE DAYS EVEN THE "RITISH 1UEEN USES 9OU4UBE ÂŻ THE SELF BROADCASTING FORUM ÂŻ AS A COMMUNICATION CHANNEL #OULD YOU IMAGINE DOING SOMETHING SIMILAR YOURSELF

My family has a website from which one can download rÊsumÊs or photos of the family members; that can hardly be avoided these days. If we don’t post this kind of information on the web ourselves, then others will do it for us. However it is important that we choose carefully which

information to make publicly available. On our homepage, one can find transcripts of political speeches that I have given and even a family tree, but no details about personal interests or preferences. As a rule of thumb: Those who don’t play the game can better protect their privacy. And the opposite is also true: Those who become the star of a soap opera can almost never discard the role.

9OU ARE REFERRING TO OTHER ROYAL FAMILIES

Not only. The television is full of soap operas and these make a perfect case study for how private matters become of public interest. The pattern in these series is always the same: the viewer identifies with one of the characters and desperately wants to know what happens to this person in the next episode. It is exactly this cycle of increasingly open domains, the invasion of privacy, that one must break as a public person. In the end, people can control how often and where they make appearances, and whether they want to see a new photo of themselves in the paper every week. The level to which privacy can be protected depends primarily on one’s own behavior. Once something has been published and is in the media system, it cannot be taken out again. /N ONE HAND THE NEED FOR EFFECTIVE PROTECTION OF PRIVACY IS GROWING ON THE OTHER EXHIBITIONISM IS RUNNING RAMPANT (OW DO YOU EXPLAIN THIS CONTRADICTION

The need for privacy protection has certainly always existed, but especially in times Responsible Wealth Review – June 2008

(EREDITARY 0RINCE !LOIS OF ,IECHTENSTEIN IS THE ELDEST SON OF 0RINCE (ANS !DAM )) AND 0RINCESS -ARIE /N !UGUST 0RINCE (ANS !DAM )) APPOINTED (EREDITARY 0RINCE !LOIS HIS PERMANENT REPRESENTATIVE FOR EXERCISING THE SOVEREIGN POWERS DUE TO HIM IN PREPARATION FOR HIS SUCCESSION TO THE THRONE 3INCE !UGUST THE (EREDITARY 0RINCE HAS THUS BEEN PERFORMING BOTH NATIONALLY AND INTERNATIONALLY THE DUTIES OF (EAD OF 3TATE OF THE 0RINCIPALITY OF ,IECHTENSTEIN

when totalitarian regimes were at their peak. It is certainly no coincidence that bank secrecy came to the fore in the Principality of Liechtenstein and in Switzerland when in surrounding nations the people were suppressed by fascism. Today, the desire for privacy protection is growing again.

More and more people are aware how much personal information is available on the Internet – a downside of the technology revolution. Additionally, there is widespread recognition that state institutions such as tax authorities have an increasing amount of access to individual information on citizens. Since the attacks on the World Trade Centre in New York and the ensuing global fight against terrorism, the search for the right balance between data exchange and data protection is back on the agenda.

The exhibitionism you mentioned, I find difficult to explain. I can only assume that it results partly from the fact that many young people today do not interact via letters, telephone calls and personal meetings, but over the Internet. They communicate quite openly with each another in chat rooms. In the process, they probably are not even aware that this information is at least indirectly visible for third parties and that, based on the data in the net, complete personal profiles can be set up. )S THE DISTINCTION BETWEEN THE PERSONAL AND PUBLIC SPHERE BECOMING SO COMPLETELY BLURRED THAT A

NEW EPOCH IS BEGINNING IN WHICH PRIVACY IS LOSING MEANING /R DOES THE FUTURE BELONG TO YOUR

0RINCIPALITY WHICH SEES PRIVACY AND PROTECTION AS TWO SIDES OF THE SAME COIN

Whenever something gets out of kilter, it always takes time before a new equilibrium is found. Every society learns bit by bit how to live with new media and technology, whose progress is sometimes faster than that of humans. Today will presumably require new mechanisms to proResponsible Wealth Review – June 2008

vide the level of privacy protection to which every member of society is entitled. The question is, what kind of contribution can Liechtenstein make in this regard? In our country, we have a strong culture of privacy protection – well above and beyond finance and tax issues – that is commonly associated with Liechtenstein. Therein lies, in my opinion, a great chance for the future of Liechtenstein: If we succeed in giving the issue of privacy protection a broader definition. The government, and also numerous participants in the Liechtenstein financial centre, are clearly thinking more and more in this direction. As a result of the increasing international data exchange related to the fight against terrorism, state regulatory structures are becoming all the more important.

They must help to prevent the transfer of personal data that is of no use in combating terrorism.

Liechtenstein is in the process of further refining these mechanisms.

(OW EXACTLY

I’ll give you an example. In most countries, the public administration collects personal information and gives it directly to investigative authorities in other countries. In Liechtenstein however, in practically every case, a judge must rule whether personal data can or must be transferred. All the same, we will be simplifying the procedure because in some critical situations it is essential that the data transfer is completed quickly. A procedure that has to be processed at various levels of court is becoming unrealistic in such cases. This puts judges in danger of having to make a quick decision, similar to in cases of a search warrant. Nevertheless, it is a big difference if a completely independent person such as a judge is additionally required to decide if a significant invasion of personal privacy is justified or not. For Liechtenstein, it could become a kind of trademark that in every application for

legal assistance, a judge rules on the transfer of personal data, but at the same time, the applications are processed faster than in most other countries. $OES YOUR COUNTRY WANT TO SET STANDARDS IN ALL

AREAS OF PRIVACY PROTECTION ÂŻ FOR EXAMPLE ALSO IN MEDICINE FOR THE PROTECTION OF PATIENT DATA

In principle, it is important that small countries like Liechtenstein develop strengths that larger countries don’t have and make the most of them. The larger a country is, the more laborious it becomes to reconcile the strategic agendas of the various lobbyists and interest groups. That makes focussing on a single topic such as privacy very difficult. On the other hand, in a small country like Liechtenstein, the state can act much more decidedly on such an issue, enforce the respective laws and show the citizens that it is in everyone’s interests. By all means, it is perfectly conceivable that Liechtenstein could also pave the way for protection of privacy in the area of medicine: discreet medical examiners and administration of health data in Liechtenstein – why not?

-AY ) DESCRIBE A UTOPIA 4HE UTOPIA OF A

,IECHTENSTEIN WHERE TELEPHONE CONVERSATIONS

CANNOT BE INTERCEPTED 4HE ,IECHTENSTEIN )NTERNET PROVIDER DOESN´T DISTRIBUTE CLIENT DATA TO THIRD

PARTIES 4HE ,IECHTENSTEIN CREDIT CARD COMPANY

GUARANTEES ANONYMITY OF BUYER BEHAVIOR !ND

INTERMEDIARIES VOUCH FOR THE PROTECTION OF PRIVACY

NOT ONLY FOR ½NANCIAL TRANSACTIONS BUT IN ALL AREAS OF LIFE )S THIS UTOPIA OR A REALISTIC STRATEGY

In this magnitude, it is a pure utopia, in my opinion. For example, a small country such as ours cannot disconnect itself from the surrounding telecom network, and it is to be expected in any case that secret services everywhere can and do eavesdrop. In the age of mobile phones, comprehensive privacy for personal telephone con-

versations can no longer be guaranteed. To me however, it is indisputable that Liechtenstein can guarantee significantly stronger protection of privacy in certain areas than other countries.

Nevertheless, one must be aware that when privacy is invaded, it is not necessarily technology that has failed, but usually people. Generally, it is not a hacker that makes confidential bank-data public, but rather an employee from within the bank. Absolute security doesn’t exist anywhere. )N ,IECHTENSTEIN DISCRETION IS A VIRTUE 4HE FREE

UN CHECKED žOW OF INFORMATION IS HOWEVER

AN INDISPENSABLE PRE CONDITION FOR THE PROPER

FUNCTIONING OF DEMOCRACY SOCIETY AND MARKETS

2OGER DE 7ECK IS A 3WISS PUBLISHER

FORMER EDITOR IN CHIEF OF THE 3WISS NEWSPAPER ³4AGES !NZEIGER´ AND THE 'ERMAN WEEKLY ³$IE :EIT´ (E IS THE 0RESIDENT OF THE &OUNDATION "OARD OF THE 'RADUATE )NSTITUTE OF )NTERNATIONAL 3TUDIES IN 'ENEVA AND VISITING PROFESSOR FOR THE %UROPEAN 'ENERAL AND )NTERDISCIPLINARY 3TUDIES #OLLEGE OF %UROPE IN "RUGGE

"ELGIUM AND 7ARSAW 0OLAND

4HOSE WHO RAISE DISCRETION TO THE LEVEL OF AN

INSTITUTION RUN THE RISK THAT IT WILL BE ABUSED /N THE OTHER HAND THOSE WHO MAKE AN EXHIBITION OF

THEMSELVES AS IS BECOMING COMMON INJURE ONE

OF THE MOST VALUABLE THINGS IN HUMAN LIFE AND

RELATIONSHIPS THE SPHERE OF INTIMACY AND PRIVACY 7HERE DO YOU DRAW THE LINE BETWEEN TRANSPARENCY AND DISCRETION

Democracy, society and the economy need transparency. But it is just as clear that there must be spheres of privacy for them to function properly. They require both. The crucial issue is the answer to the question: What is the legitimate sphere of privacy? To rule on that is a formidable challenge. For example: Information is vital in the fight against terrorism – but where do we cross the line when collecting personal data? And how can a citizen get incorrect information removed from the system once it has been stored? In the so called ‘information-age’, that is extremely difficult; almost impossible. It is thus more important than ever before that citizens are cautious when giving out their personal data, and that they treat information with a healthy degree of scepticism and seek it from a variety of sources before forming an opinion.

Responsible Wealth Review – June 2008

0RIVACY ¯ A GLOBAL AND INTERDISCIPLINARY DEBATE /N *ANUARY

THE MEMBERS OF THE 0RIVATE 7EALTH #OUNCIL MET IN 6ADUZ FOR A LIVELY AND IMPASSIONED DISCUSSION ABOUT PRIVACY

THE STATE OF THIS CIVIL RIGHT AROUND THE WORLD AND THE CONSEQUENCES FOR WEALTHY FAMILIES 0HOTOGRAPHIC IMPRESSIONS OF WORKSHOPS

Responsible Wealth Review – June 2008

%DITOR IN #HIEF 2ENm ,~CHINGER ,~CHINGER 0UBLISHING :URICH $ESIGN AND 2EALIZATION ""& "ASEL 0HOTOGRAPHY /LIVER "ARTENSCHLAGER 3TEFAN &ALKE +EYSTONE 4RANSLATION #O4EXT :URICH 0RINTED BY 7ERNER $RUCK "ASEL 0RINTED ON &3# CERTI½ED PAPER