Culture of silence

February 19, 2013

American companies are at war, but don’t ask them why. They won’t tell. They’re besieged not by one another, but by hackers who target their intellectual property and confidential information. Just how deep this cyberwar goes is largely unknown to all but the companies being targeted. That’s because they are staying silent in an effort to not aggravate the countries in which they are being hacked. China is the site of the most cyber-aggression, and in many instances, the biggest opportunity for many businesses. Companies are turning the other cheek in an attempt to turn another check.

If the companies are not talking, how do we know it’s happening? Because the U.S. government has noticed.  On Tuesday, The New York Times ran a piece highlighting the link between anti-U.S. cyberattacks and the Chinese military.  In the Washington Post last week, word leaked that the United States has put out a National Intelligence Estimate that “identifies China as the country most aggressively seeking to penetrate the computer systems of American businesses and institutions to gain access to data that could be used for economic gain.”

This is the front in the U.S. cyberwar that we’re not winning. We know the U.S. does fine when it comes to its sovereign cyber-warfare, waged on a state-to-state platform.  Take Stuxnet — the US/Israel initiative to destroy Iranian nuclear centrifuges through a complex cyberattack (not to mention an odd follow-up that purportedly blasted AC/DC’s ”Thunderstruck” at odd hours). But when it comes to corporate sabotage and espionage, the United States is far less experienced than China. Blame free-market capitalism: The U.S. government does not intervene on the private sector’s behalf to obtain information that would benefit the economy. China, however, is far more adept at this because of its use of state capitalism (a system in which the state uses markets to create wealth that can consolidate its hold on power).

Yes, Obama announced some cyber-security proposals in his State of the Union address. But any broad initiative to combat corporate cyber-espionage will have to come from corporate entities themselves.  So why haven’t we heard about such efforts? Swaths of companies are getting hit, as the leaked elements of the National Intelligence Estimate imply, but they fear losing business from the world’s second-largest economy and its largest trader (in terms of value of goods and services sold).

We’ve seen at least one company push back against China’s repressive policies in the past: Google famously moved its Chinese searches to a Hong Kong URL so it could avoid Chinese Web censorship. But Microsoft saw Google’s exit as an opportunity.  Referring directly to Google’s decision to leave, Microsoft’s chief research and strategy officer proclaimed, “Microsoft is committed to stay.” Google has paid a price: Its share of search in China is down from about a third to somewhere around 5 percent, lagging far behind its Chinese competitor, Baidu, which controls the majority. Baidu, of course, has close ties to the Chinese government.

The New York Times took a stand too.  After publishing a piece on then-Prime Minister Wen Jiabao’s secret wealth in October, the Times was bombarded by cyberattacks. Instead of keeping quiet, it retaliated by reporting on the attacks themselvesThe Washington Post and the Wall Street Journal spoke out in a similar fashion.

The business models of Google and these publications revolve around freedom of information. For other businesses, the cons often vastly outweigh the pros. That might help explain why Coke said nothing after it was hacked in 2009. After Coke tried to buy a Chinese juice company for $2.4 billion, hackers took internal documents about the deal, which, as Bloomberg writes, “would have been the largest foreign takeover of a Chinese company at the time.” (The story also claims that several other companies, including Chesapeake Energy, have been hacked but have said nothing.)

While it was well after the fact, Coke did admit to the hackings once the story broke in late 2012, but it tried to minimize the importance of the breach. That late admission is still much better than the approaches of many other companies. If anyone is able to take on China and bring about change, it would be an industry leader willing to make clear that it will not do business with a regime determined to undermine it. But there’s another concern: Not only does Coca-Cola fear lost business, it fears competitors might step in to fill the gap.

The best way to combat cyberattacks would be for dominant multinationals to coordinate with their closest competitors to draw attention to the problem and apply some pressure. If Coca-Cola and PepsiCo were to wage a mutual initiative, we would see far more progress. The same would go for Boeing and Airbus – or any other hegemon that teamed up with its closest competitor(s) —  if they could collaborate on a united front. If the companies themselves don’t want to go out on a limb, they could get industry associations to do it for them. For the pressure to be truly successful, it will need to be a concerted, coordinated effort among the companies getting hacked. With their backing, the Obama administration can remind the private sector that even though they may not agree on domestic issues, international trade and fairness, they’re well aligned.

In October, Secretary of Defense Leon Panetta claimed that a future cyberattack on critical U.S. infrastructure could cause a “cyber Pearl Harbor.”  On top of the potential for a catastrophic blockbuster event, attacks on American companies are already being waged every minute of every day.  It’s time for those companies to collaborate and pool their influence.

This column is based on a transcribed interview with Bremmer.

PHOTO: An employee walks past the logo of Google in front of its former headquarters, in Beijing June 2, 2011.


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What’s good for the goose….

If China wants cyber-war, then give it to them, and in spades. I should think the NSA more than capable of taking on the Chinese, if they could just take some time off from spying on U.S. citizens.

The U.S. government doesn’t have to intervene on the private sector’s behalf, but why not disrupt the Chinese economy as payback, and publish what we get on…WikiLeaks! Wouldn’t that be both fitting and ironic?!?

Posted by Andvari | Report as abusive

Given all the hi-tech that US corporations shipped to China for free in exchange for cheapo labor and quick super-profits for the bosses, the Chinese would be silly NOT to use this technology for all purposes they find appropriate, including espionage.

Posted by UauS | Report as abusive

ou are now watching the slow death of the “Free Internet” that we enjoyed for a while. Though I have enjoyed it for those years, I can see that it is becoming anarchy and extremely dangerous to society as it is today. It must be control and the only level feasible is at a national level right now anyway.

Posted by tmc | Report as abusive

The new “Cold War”? Chinese political officer asks “What will the Americans do next?” Intelligence officer says “How can the Military Industrial Complex best cash in? That is what they will do next.”
The United States of Corporate America was shaped to defeat the Soviet Union. It will not defeat Globalization.

Posted by tmc | Report as abusive

The “Internet” really is no longer that. It is made up of pieces of many nations infrastructure. In the US, corporations own much of that infrastructure. This country needs to understand that that is truly what it has become. A critical piece of our nations infrastructure that is actually physically “tied” to a global infrastructure. We can no long afford to treat it as a consumer retail product.

Posted by tmc | Report as abusive

It makes sense for American companies to keep mum. Cyber spies, like other spies, typically lack visibility into how their victims are impacted by the information collected, when espionage is discovered. Too much blabbing may actually help the spies by telling them when they have hit and when they have missed. American companies don’t have to keep mum to each other, and they don’t have to keep mum to U.S. government espionage agencies. But they should keep mum to the press and other members of the public. Loose lips sink ships, etc.

Posted by Bob9999 | Report as abusive

I can’t prove it, but by reading many articles, it seems the worst of cyberwar is directed from… the US Government!

I treat everything… EVERYTHING as being read by someone other than the intended audience!

Posted by HappyGoLucky1 | Report as abusive

Everybody bandies about the term “American comanies”.

In their ignorance they don’t realize that any corporation, based anywhere, consists of a group of business people organized under a corporate charter, that always says the same thing:

The purpose of the corporation is to further the interests of the shareholders, and nobody else. Certainly not the interests of the American government, nor the interestes of the American people. How could it be otherwise?

The business world is a jungle. Only the most intelligent and ruthless companies tend to survive. How could it be otherwise?

Of the companies newly incorporated in America, or any country even, typically 95% fail to survive to 5 years of age. Business is a jungle.

American corporations, like Apple, for example, are often owned in large chunks by billionaires from Saudi Arabia, China, or Russia. Their corporate papers were filed in an American city, but some of the largest owners are not America.

American companies like Apple routinely outsource jobs to foreign countries, openly betraying the American working class.

A large portion of the high level executive positions in so-called “American companies” like Apple are held by foreigners. They routinely import many, if not most of their main engineer workforce from foreign countries, like China and India, under the H1B visa program. A larger and larger portion of their products, produced overseas, are being sold in overseas markets.

Do you think they care about looking after Americans?

The bottom line is that so-called “American companies” are legally required by their charters to pursue the interests of their shareholders (many of the largest being Russian oligarchs or Saudi princes) BEFORE the interests of their employees, and certainly before the interests of the American government of the American schools or the American people.

Posted by AdamSmith | Report as abusive

> AdamSmith: …that’s why the American working class has the elected officials called Government…
The reason why I believe that Bush will have been the worst president in American history until this country seizes to exist, is that the two unpaid wars he started on false premises made the American economy sink and the American working class feel betrayed from both sides: corporations and the Government. (This is why there is so much ‘gloom and doom’ going on around this country nowadays.) Coincidentally, this happened at the very moment when China and Russia were both ready and able to take full advantage of our weakness.
As someone who has a first-hand experience with both systems, I don’t believe that China (or Russia, for that matter) can be called a “state capitalism”, because this definition is contradictory. Capitalism implies market and market implies freedom, but consolidation of power prohibits freedom.
In my opinion, what China and Russia have is what I call a “spurious capitalism”, a system that mimics traits of a real free market capitalism, but only those traits that, in the end, work in the interests of ruling elites, including the ones which make the masses “happy enough” to be tolerable to a status quo. ©

Posted by UauS | Report as abusive