Paul Smalera

Think right now about your home bookshelf. If yours looks like mine, it contains odds and ends, comic books you’ve saved for years, books mailed to you or bought on a street corner, your own collection of dog-eared titles, some old yearbooks. Now think about the privacy of your own home and the few legal ways in which that privacy can be violated: an emergency response, a crime, a public health crisis. Imagine if once a year you had to open your door to a copyright agent who could scan your library for content that you have not paid for, add up your violations, and send you a bill. Imagine if the agent came by once a week, or even once a day. Imagine that the agent found a picture of the nerdy kid from high school in your yearbook and explained that that kid copyrighted his likeness, so you’ll have to either pay up or destroy his high school photo.

This is the world that content companies want to create. Legislation they have proposed in the U.S. and around the world — SOPA, PIPA and ACTA — would open the Internet’s house to any agent.

Artists and big companies often warn us of the opposite of this problem — the idea that the Internet is a lawless space where content is pirated, stolen and shared recklessly, costing them billions of dollars in lost revenue and shrinking the incentives for artists to produce new works. After all, if they can’t be paid fairly for them, why bother?

But not being able to monetize media doesn’t mean you have to obsessively limit it. As the content companies see it, the bookshelf described above is the data stream heading into your house, and they, specifically those who create music and video, are demanding that governments consent, more or less, to let them tap the wires. SOPA and PIPA are currently on hold, but ACTA, whose provisions are almost as enveloping, is taking root all over Europe, though not without protests.

Amazingly, governments around the world, including the Obama administration, resisted making ACTA’s text public. American politicians said the provisions the U.S. was agreeing to enforce were “national security secrets.” Ironic, then, that the Internet should be open for inspection, but the inspectors’ marching orders shouldn’t.

When the text was eventually leaked, reportedly by EU officials, the measures didn’t quite allow copyright agents to search your house, but they weren’t too far off. One particularly draconian provision allows for border searches of iPods and other electronic devices — not for terrorism prevention, but for theft of intellectual property. I suppose this means that if you were planning on partying to Danger Mouse’s The Grey Album or Girl Talk’s All Day on your Cancun vacation, you had better burn it to a CD and stuff it into your underwear, lest the Border Patrol decide to take your Genius Mode for a whirl.

According to a recent study on SOPA, 52 percent of Americans support penalties of some sort for illegal downloading, but only 36 percent support the provisions for enforcing copyright protection that SOPA allowed. If there were clearer proof that Americans, and indeed people around the world, could be convinced to pay for content if the system were fair, friendly and flexible, Apple or Amazon would have already created it. Which, actually, maybe they have.

Among the serious issues lawmakers and content providers should tackle is fair use. The copyright enforcement systems proposed in recent laws nearly make it a crime even to listen to music that hasn’t been paid for. One thing the music business must do is stop squeezing startups that become successful. As Spotify has accelerated its growth, its royalty payments to the recording industry have, by one measure, eclipsed those of terrestrial radio. If Neil Young is right and piracy is the new radio, music labels should be hoisting the Jolly Roger, not tearing it down.

If the music industry would focus its attention on creating a clearinghouse that allowed for affordable music sharing and discovery through digital tools, it could still save itself. The book publishing industry, which had to wait for the invention of e-ink to get serious about digital, is arguably further along. It at least has begun supporting limited “lending” of books and has even enabled social bookmarking and other similar features. At the same time, the book industry has won some battles against Amazon, regaining its right to set the price of its content in Amazon’s Kindle store.

During a recent panel discussion on copyright, Reddit founder Alexis Ohanian talked about the need for the content industry’s scarcity-based pricing model to be superseded by something more attuned to our digital times — something that makes sense not just for businesses but for artists and consumers too. The problem is, the models the industry has proposed far too often resemble the type of intrusive interrogations by state agents one would expect to find in a totalitarian state rather than an open society.

Content creators and artists openly worry about the power of the Internet to rob them of compensation — which, for many, is their incentive to keep creating. What they ought to worry about are the incentives their proposed laws are creating — incentives not only for artists but also for consumers and distribution networks — to abandon altogether their high-walled, authoritarian compensation and copyright enforcement models. Where one castle crumbles, a thousand wildflowers may bloom.

PHOTO: Protesters opposed to anti-piracy legislation gather to demonstrate against the Stop Online Piracy Act (SOPA) being considered by Congress, at City Hall in San Francisco, January 18, 2012. REUTERS/Robert Galbraith

Online privacy doesn’t exist. It was lost years ago. And not only was it taken, we’ve all already gotten used to it. Loss of privacy is a fundamental tradeoff at the very core of social networking. Our privacy has been taken in service of the social tools we so crave and suddenly cannot live without. If not for the piracy of privacy, Facebook wouldn’t exist. Nor would Twitter. Nor even would Gmail, Foursquare, Groupon, Zynga, etc.

And yet people keep fretting about losing what’s already gone. This week, like most others of the past decade, has brought fresh new outrages for privacy advocates. Google, which a few weeks ago changed its privacy policy to allow the company to share your personal data across as many as 60 of its products, was again castigated this week for the changes. Except this time, the shouts came in the form of a lawsuit. The Electronic Privacy Information Center sued the FTC to compel it to block Google’s changes, saying they violated a privacy agreement Google signed less than a year ago.

Elsewhere, social photography app Path was caught storing users’ entire iPhone address books on their servers and have issued a red-faced apology. (The lesser-known app Hipster committed the same sin and also offered a mea culpa.) And Facebook’s IPO has brought fresh concerns that Mark Zuckerberg will find creative new ways to leverage user data into ever more desirable revenue-generating products.

This is the way we’re private now. It’s ludicrous for anyone who loves the Internet to expect otherwise. How else are these services supposed to exist — let alone make any money? Theft or misuse of private user data is a crime, certainly. But no social web app — not one — can work without intense analytics performed on the huge data sets that users provide to them voluntarily (you did read the terms of service agreement…right?).

And the issue compounds when people connect one site to another. By linking their Twitter to their Facebook to their Google+ to their Foursquare to their Zynga to their Instagram to their iOS, users are consolidating their lives, and in the process making them more attractive to marketers. While Facebook, Twitter and other services have made attempts to warn users about hitting the “connect” button, many of us hit that button with reckless abandon, without a thought of who’s slavering on the other side.

The reason social media and digital information companies want that data is because of what we refuse to give them: money. No one wants to pay for the privilege of chatting with their friends or using a coupon, and to this day, no one has to: Go ahead, ring their doorbell or pick up the free coupon book from your front stoop. But if you want to chat using Facebook or Gmail, or you want to buy a groupon for an 80 percent-off Botox service, you will have to tell those companies who you are. And those companies will use that information to tailor their offerings to you, increasing your value as a user and a customer. They will slice their data sets into a million different pieces and show those pieces to people — advertisers — who will pay them money for the privilege of using their service. They’ll use it to get to you.

This is an update on an old media model. Magazines and newspapers for decades could only guess at the readership of their product and the demographic of their customers. But now social and new media demand to — and can — know exactly who you are before they agree to let you use their free services. Even email newsletter services like the increasingly hot Thrillist – which might innocuously start you on their service by asking only for your simple email address — deploy click trackers, pixel trackers and other online data-gathering techniques to start to put together a picture of you as a user, both individually and in aggregate. A deceased magazine like Spy could only dream of that kind of intel.

Without such strategies, social web companies like these couldn’t exist. Every user has a choice when it comes to privacy, sure. But the second people sign up for Gmail, Facebook, Mint or Gilt Group, they have reaffirmed their willingness to be a mouse that the cats will chase. And these cats need mice. Otherwise they will starve. So they do their best to hide their intentions. Indeed, as a longtime and well-known advocate for the transformative power of technology recently told me, true believers like Mark Zuckerberg actively stake out radical positions on privacy, then talk about them as if they were natural or normal. It’s not too much different from the political process, where the best way to effect a shift in society is to present it as if it were a fait accompli and then expend energy actually moving the levers of power toward the shift rather than wasting time arguing with people about the implications.

That’s what the last five years have been about. Mark Zuckerberg, for example, wanted a collection of all our Facebook actions called an Open Graph to be part of our lives. Now, lo and behold, it is.

Today, we straddle two extremes — the offline and the online. Each comes with its own expectations and realities of what privacy is. Offline, your thoughts and actions are your own. Online, sharing one thing leads to a spiral effect where you are soon sharing everything. Offline gives us privacy, that near-mystical quality of ownership that we covet. Online gives us the extreme power of social tools, allowing us to glide around the formerly linear data of our existence. Want your private Rolodex? Fine. Want your location-aware, instant-coupon, friend-tagging iPhone app? That’s fine too. But on the Internet, you don’t get to have both. There is no longer any middle ground. As in politics, the Internet has become a place for extremists.

Photo: People wear masks during the “Freiheit Statt Angst” (Freedom instead of Fear) protest calling for the protection of digital data privacy in Berlin, September 10, 2011. The masks were handed out by the organizers who asked participants of the rally to wear them for the media to symbolise what call the individual’s right to remain anonymous on the internet. REUTERS/Thomas Peter

Facebook shouldn’t pay its users. Its users should pay to own Facebook.

“Facebook was not originally created to be a company,” founder Mark Zuckerberg wrote in his letter to investors announcing the IPO of his already hugely successful and profitable company. “It was built to accomplish a social mission — to make the world more open and connected.”

Facebook has succeeded wildly, despite internal admonitions that its “journey” is only 1 percent finished. Journalists have latched onto Zuckerberg’s statement that Facebook wants to “rewire” the way the world works. In a world of thousands of self-anointed “social media experts,” only Zuckerberg can claim to have basically invented what the world thinks of as social media. He has etched himself into the timeline of human innovation.

Pity then, that Zuckerberg hasn’t turned his talents or attention toward Facebook’s financial underpinnings. After all, an IPO? How ho-hum can he get? If Mark really wants to accomplish his social mission with Facebook, he should share the company’s ownership with the people who helped him create it. Not just his Harvard contemporaries. Not just the programmers. Not even just the venture capitalists.

I’m talking about us. All of us. The users. Facebook should be a user-owned, user-managed company, run for the benefit of users. For the Facebook, by the Facebook. The company should be a cooperative.

Before I explain further, let me lay out the case in four simple points:

1. Facebook won’t necessarily get rich as a public company. LinkedIn, the grown-up social network, IPO’d last year, but is now down from its initial price after having had a big pop on its first days of trading. Zynga and Groupon, meanwhile, lost ground on their IPO prices as soon as they hit the markets. Tech journalism might work itself into a froth over a company’s earnings potential, but the broader market is still confused as to how to price these companies.

2. Distractions. Every story from now on is going to be less and less about Facebook’s incredible technology and more about how its stock is doing. Facebook’s social mission will be obscured by its profit motive.

3. Who’s being rewarded here? The whole point of an initial public offering is for a company to raise money by selling shares in the open market. An important secondary point is that the IPO provides liquidity to existing shareholders, making it far easier for them to trade and take profits (and losses) on what they own. Big banks underwrite IPOs — they go get the high-rolling, qualified investors and get them to commit millions of dollars to buy into the offering, collecting copious fees for themselves in the process, not to mention getting first crack at shares for their own products and funds. In short, everyone in an IPO process gets their beak wet except for the people who give the company its profits — its users. That might be fine for a car company, an iPhone company, or even a search engine company, but social media exists to connect users to companies and each other in unprecedented and previously impossible ways. Shouldn’t finance be one of them? That leads to…

4. Why not share the company itself? It’s fine to talk about technology’s power to change the world if you’re the one who’s going to profit from it. But this isn’t really a change: In fact it looks like a highly conventional way to run what everyone says is supposed to be a very transformative company. Facebook needed a gestation period, and its incredible growth in that period made it very special. The moment its IPO is over, it becomes one of a herd.

That’s why it should become a nearly one-of-a-kind company for the technology sector: a co-op. Invented in England in the 1840s, the co-op is a company organizational structure where membership is voluntary but members have democratic control and economic participation and in turn are supposed to act with concern for their community — in this case Facebook. Businesses of all kinds — for-profit and otherwise — are run through the co-op model, or variations of it.

• There is the Park Slope Food Coop, a crunchy place where 16,000 members (disclosure: I am one of them) buy groceries at just enough of a markup over wholesale to cover expenses (about 17 percent, making many items far cheaper than in other stores). They also run and staff the store, with the help of just a few paid employees.
• There is the San Remo, one of the most luxurious apartment buildings in Manhattan, where prices are in the tens of millions for a single apartment, and as in thousands of other co-op buildings, residents share the cost of maintenance and retain control over key property decisions.
• Then there is banking and insurance company USAA and mutual fund firm Vanguard, models for highly sophisticated financial services businesses that are run according to co-op principles and are highly successful and respected businesses.

But all of the businesses above use the co-op model’s social nature as secondary to their main business. For Facebook, social is the business.

Facebook wouldn’t be forgoing its fundraising if it abandoned its IPO and became a co-op. When I joined the Park Slope Coop, I had to pay a $25 membership fee and a $100 investment, the latter of which is refundable should I ever leave. In Facebook’s virtual community, its 845 million users could easily pay a small sum — say $5 in the U.S. and some locally adjusted equivalent in other countries — to become an owner. Some of that money would be used to buy out existing stock owners and set up the new management model — it would still have Zuckerberg as CEO with a management team, but with the same one vote that every other member has. Over time, if Facebook’s owners keep the cost of becoming a member as low as possible without in any way starving the site for cash, Facebook could even become the world’s first trillion-dollar company — just in a way no one has ever previously imagined.

Users who invested would earn the right to help govern the company. If it sounds unwieldy to let hundreds of millions of users govern a site, well, it may be at first. But as Zuckerberg himself will attest, his engineers are hard at work helping users connect to each other in ways previously impossible. Facebook already offers voting tools, organization pages, recommendation links, polling, etc. With the help of a management team and committee structure, it would be pretty easy to let members assign themselves to committees and shape Facebook into the community they want it to be. Besides, if there’s one person in the world not allowed to use the excuse that this undertaking would be too technically complex, it’s Mark Zuckerberg.

Zuckerberg may chafe at the idea that hundreds of millions of users are suddenly in control of his company, but think of a sample proposal. Say a user wants Facebook to give 10 percent of its income to charity.

1. She creates a new page and persuades her friends to follow it. The page holds the pro and con discussions of the proposal.
2. After hitting a certain threshold of followers, the page makes the Revenue Committee agenda, where a subcommittee is assigned to study its feasibility and write a summary about the proposal’s impact on Facebook, including how it would affect the bottom line.
3. The committee then votes on the summary — if it’s approved, it goes into a general Facebook meeting, where the entire user base gets to vote. The beauty of this is twofold. First, only the best ideas percolate to the top; propose anything crazy, and it’s simply going to languish. Second, with Facebook’s technology, there need not be a formal meeting time — the proposal exists just like any new Facebook alert. If a user feels strongly about a proposal, he can even buy a targeted demographic ad!

As the site’s leader, the famously controlling Zuckerberg would still retain quite a large chunk of control in that he’d have to implement the strategy and actually make it work, and one would think that if he explained why a given proposal wasn’t a great idea, his words would carry great weight.

But ultimately the site would belong to the users, not a tiny management team. When Zuckerberg eventually decides to hang up his keyboard and retire, the company would not face the cult of personality problems that Apple did during Steve Jobs’s protracted illness — it would simply persevere.

In the meantime, Facebook would have plenty of capital to pay its engineers, thanks to its owners’ contributions. In good years, it could return dividends to members or explain to them that it was better to bank the money for future investment or rainy-day funds. In tough times, it could first ask members for low-interest loans before turning to the capital markets, perhaps using a Kickstarter-like platform to fund specific initiatives in the company. In other words, this is a model compatible with capitalism and competition, not a replacement for those things. The whole system fits almost perfectly with Zuckerberg’s investor letter saying that Facebook doesn’t “build services to make money; [it makes] money to build better services.”

Facebook will probably never be governed this way. Too many early investors simply stand to get too rich. But if Facebook is not to be a co-op, that means social networking — and all of the truly incredible tools, culture, community and change that its visionaries claim will change the way the world is wired — will really just reinforce the highly stratified and imperfect way the world works today.

Mark, put your money where your mouth is; after all, you already have more of it than you will ever need. If Facebook was truly built to change the way people relate to their world, that change should begin with how people relate to Facebook.

PHOTO: An employee works on a computer at the new headquarters of Facebook in Menlo Park, California, January 11, 2012. REUTERS/Robert Galbraith

Twitter’s announcement this week that it was going to enable country-specific censorship of posts is arousing fury around the Internet. Commentators, activists, protesters and netizens have said it’s “very bad news” and claim to be “#outraged”. Bianca Jagger, for one, asked how to go about boycotting Twitter, on Twitter, according to the New York Times. (Step one might be… well, never mind.) The critics have settled on #TwitterBlackout: all day on Saturday the 28th, they promised to not tweet, as a show of protest and solidarity with those who might be censored.

Here’s the thing: Like Twitter itself, it’s time for the Internet, and its chirping classes, to grow up. Twitter’s policy and its transparency pledge with the censorship watchdog Chilling Effects is the most thoughtful, honest and realistic policy to come out of a technology company in a long time. Even an unsympathetic reading of the new censorship policy bears that out.

To understand why, let’s unpack the policy a bit: First, Twitter has strongly implied it will not remove content under this policy. If that doesn’t sound like a crucial distinction from outright censorship, it is. Taking the new policy with existing ones, the only time Twitter says it will ever remove a tweet altogether is in response to a DMCA request. The DMCA may have its own flaws, but it is a form of censorship that lives separately from the process Twitter has outlined in this recent announcement. Where the DMCA process demands a deletion of copyright-infringing content, Twitter’s censorship policy promises no such takedown: it promises instead only to withhold censored content from the country where the content has been censored. Nothing else.

To be sure, that’s censorship of a kind, but compared to the industry censorship even Americans have long lived with — take the Motion Picture Association of America, which still censors films based on dubious standards of taste and morality — it’s positively enlightened. And it never permanently destroys or pre-empts content, the way the MPAA does.

Further, for a country to censor content, it has to make a “valid and properly scoped request from an authorized entity” to Twitter, which will then decide what to do with the request. Twitter will also make an effort to notify users whose content is censored about what happened and why, and even give them a method to challenge the request. According to Twitter’s post, a record of the action will also be filed to the Chilling Effects website. The end result of a successful request is that the tweet or user in question is replaced by a gray box that notifies other readers inside the censoring country that the Tweet has been censored:

They’re gray boxes of shame alright, but not for the user, or for Twitter. It’s instead a bright signal to a country’s online citizens that their government is limiting their free speech. While the Egypt uprisings were powerful and in some part powered by Twitter, I can easily imagine a world where a censored tweet becomes the ultimate protest symbol; one that unfortunately deprives the protesters of content, but sends the message to protesters that their worst fears are right, and they ought not give up their fight.

The press organization Reporters Without Borders has sent a letter of protest to Twitter chairman Jack Dorsey, which is surprising considering the power of the gift that Dorsey has just given them. While some reporters get themselves on the ground to report from say, Syria, nothing can stop others in the U.S. or any other country from following the tweets of Syrian protesters, even if the Syrian government requests and is granted censorship of tweets within that country.

That’s the second important note: Twitter has made no mention of disabling users’ ability to tweet or of deleting a user because their tweets have been censored. Syria or some other country may choose to take down its communications grid or try to block access to Twitter, but short of such an action, it can’t stop tweets from reaching the outside world under this policy. In fact Twitter has strengthened its case to remain online in countries where free speech is threatened, possibly providing protesters with a valuable tool that would otherwise have been preemptively shut down.

If a government does engage in a cat-and-mouse game of blocking access, remember that nowhere else is the playing field more level between authorities and insurgents than online. Workarounds for Twitter blocks already exist, such as proxy servers that spoof the identity of users and their country of origin, and alternative access points (APIs) to reach the Twitter service.

Finally, reputation matters. Twitter has engendered much goodwill in the tech and international communities by its sterling behavior in both worlds. This is the company that put off a server upgrade to keep the tweets flowing from the Iran uprising in 2009, at the request of the U.S. State Department. It’s a company that’s managed to play by the rules while also leveling the playing field of communication as no other service has since Alexander Bell’s telephone. There’s nothing about this announcement that smacks of any change in policy or attitude; rather it seems like an honest attempt to abide by country-specific rules of law, while also exposing the power of those laws to citizens in countries where freedoms have been abridged. (Forbes as an example, mentions it is illegal to insult a French bureaucrat. One can imagine the uprising in France if the government tried to censor a Tweet insulting Sarkozy or one of his ministers, which would presumably lead to a rapid re-writing of that law.)

As long as no country can ever make a claim to censor a tweet on a worldwide basis, that tweet will exist somewhere on Twitter’s servers, and someone will be able to see it. By laying down clear rules for country-specific censorship, Twitter has implicitly stated that no government, company or individual has the power to eradicate a tweet it doesn’t like from the face the Earth. Twitter has laid down the rules by which it will hold countries accountable, and by which it will hold itself accountable, at least when it comes to censorship.

They are so fair as to be without precedent, and if they are violated, the world presumably will be able to see the hypocrisy in an instant. That’s a maturity that many — governments, corporations, and yes, sniping tweeters — have rarely shown when it comes to censorship or privacy policies. (Hello, SOPA, PIPA, ACTA, DMCA, Facebook and the rest!)

Besides, if Twitter were as evil as its critics would have us believe, would we be able to see the results of the ongoing #TwitterBlackout? If we are living in a world where corporations have more power than government, I’ll take that level of transparency from a new media company, every day.

By Paul Smalera

Welcome to the new world of volatility, globalization and a host of emerging markets. Merrill Lynch Chief Investment Officer Lisa Shalett and Eurasia Group President Ian Bremmer tell me, Reuters' Deputy Opinion editor Paul Smalera, their views on how best to navigate today's economy. To learn more about the report, including Bremmer's analysis of debtor nations and creditor nations, and the tremendous GDP growth among developing world nations in recent years, watch the video below. To read the entire report, check out ML.com.

Ian Bremmer sat down with Reuters' Paul Smalera to discuss President Obama's plans to boost the American economy. Watch here:

Felix Salmon Paul Smalera, you're the king of all media!

Paul Smalera Well yes, I suppose I am.

Felix Salmon First you post a piece about how Slate should spin itself off to some VCs

And now we've gone and done a video too!

So, I threw lots of very sensible objections at you

Paul Smalera Indeed you did.

Felix Salmon And at the end of the whole thing, I assume that you inwardly conceded that I was right

You're really just trolling, right? You're not actually serious.

Paul Smalera Ha! You assume incorrectly!

This is no Swiftian Modest Proposal, Felix.

I really do think Slate needs to tap into the cash, talent and ambitions of the tech economy in order to have a shot at making it another 15 years.

Felix Salmon And you honestly think that someone out there thinks that they can make VC-type returns by investing in Slate?

Paul Smalera I think if the Washington Post co. can spin Slate off with the right leader at the helm, the angel investors of Silicon Valley and Alley can be convinced there are less bad options than Slate out there for their money.

Arrington should do it!

He's got $20 million in the CrunchFund and no editorial control over a media platform.

Felix Salmon Perfect!

I can just imagine David Plotz working for Mike Arrington. A match made in heaven!

Paul Smalera Ok, maybe I'm being a little Swiftian with that one.

Felix Salmon It's creative destruction, baby

By Paul Smalera
The opinions expressed are his own.

By Paul Smalera
All views expressed are his own.

The Washington debt ceiling debate over these past months was the throwing open of the doors to the democratic slaughterhouse — let’s please not ever complain again about not being able to watch the sausage get made. Though our media window onto the killing floor surely contributed to the S&P’s downgrade of U.S. debt, that’s not an entirely bad thing, as I’ll explain in a moment.

The preemptive downgrade of U.S. debt breaks a disturbing ratings agency pattern: Too-late downgrades from S&P and the other ratings agencies in the cases of Bear Stearns, Lehman Brothers, AIG, Greece and Ireland among many others. In the econoblogosphere, reliably hind-sighted ratings-agency downgrades, whether of sovereign debt or a teetering company’s bonds, have come to be something of a dark joke. It’s overdue that S&P got itself back into predictive rather than reactive mode. Yet the company’s sovereign debt committee surely chose the wrong target in U.S. Treasuries and broke the late-downgrade pattern for all the wrong reasons.

The ratings agency’s decision reads like nothing other than a fit of pique towards the government institutions and American people that had come to blame it as a prime enabler of the global financial crisis. The agencies, as my colleague Christopher Whalen just wrote, “prostituted themselves and their special position of trust with respect to mortgage-backed securities and exotic derivatives.” To get a little more anatomical, executives at the ratings agencies churned out AAA ratings on CDOs and other risky debt — debt that their analysis should have shown to be junk-bond quality at best — because they risked losing business if they were too critical. (Call it the, “every John is the best lover ever” theory of credit rating.)

The S&P’s biggest blunder here is that the U.S., thanks to the debt deal everyone hates, will continue never missing a debt payment. A close second is that even if the U.S. had run out of borrowing power, Timothy Geithner and the Treasury Department surely had a “Plan B” that would’ve prioritized debt payments to avoid a default, probably for at least a few more months before its cash-on-hand situation became truly dire.

But the real reason the S&P was wrong to downgrade the U.S. is because what we all just witnessed in D.C. was, as the famous quote goes, the sausage being made. It was an open, democratic process. The Tea Party Republicans who blocked more moderate debt ceiling legislation are duly-elected representatives who were fighting hard for their constituents and beliefs, however radical. It may frustrate moderate or liberal voters to no end that Tea Party governance appears to be little more than obstruction, but that’s been the prerogative of minorities in divided governments for centuries. In the end, as analysts conceded, they were brutally effective in swaying the Obama administration and Senate Democrats much closer to their preferred, fiscally constrictive debt ceiling deal. Since when are political compromises supposed to be pretty?

While Americans, and indeed the world, would’ve surely preferred a smoother debt deal, our divided viewpoints on the country’s proper economic direction forward produced the only deal that all sides could begrudgingly sign onto. And that’s how democracy is supposed to work. What S&P downgraded then, as it admitted when it tossed out its own $2 trillion error and went full speed ahead, was the democratic political process and the representative form of government as it currently exists in the U.S. (Aside: Has the S&P boxed itself into reaffirming its rating based on the results of every national election from here on out?)

When investment banks and insurance companies presented unified fronts and financial pressure on ratings agencies in demanding AAA, the agencies willfully acquiesced. But when the U.S. government, in unprecedented fashion thanks to the 24×7 media climate, opened its doors on the strife, division and battling that goes into shaping the single largest component of the GDP, well, the ratings agencies would respectfully request that democracy get its PowerPoint slides in better shape next time.

While the debt ceiling debate was painful to watch, it was the delivering on of a promise that President Obama made as a candidate with regards to the health care debate. He promised to hold negotiations over that legislation in the clear light of day, and never did. In the debt ceiling debate, the political players had little choice but to throw open the slaughterhouse doors. If we didn’t like what we saw, it’s now up to us as voters to change things for next time. But sunlight has lit up the political process as never before. It’s no one’s fault but its own that the S&P seems to prefer the boardroom or the backroom to the family room when it comes to keeping the nasty bits of governance out of sight.

I’m reminded of Joel Salatin, a farmer chronicled by Michael Pollan in “The Omnivore’s Dilemma.” Salatin  has a slaughterhouse on his radical, which is to say, highly traditional, farm. It’s an open-air shed — no walls, lots of sun, nowhere to hide what happens there. His customers can even come by and watch the proceedings. Government food regulators were extremely squeamish when it came to his methods — why not use a traditional slaughterhouse with a cow-sized hole at one end and an idling tractor-trailer at the other? Why grow meat outside the industrial system at all? In his own book, “Everything I Want To Do Is Illegal,” Salatin writes, “The stronger a culture, the less it fears the radical fringe. The more paranoid and precarious a culture, the less tolerance it offers.”

Not only have we seen the radical fringe of fiscal politics, we’ve seen, in the S&P downgrade, the fear of the radical fringe of open, sincere dialogue around issues like the national debt. But thanks to debt ceiling debate, everyday Americans know more about the precariousness of our fiscal situation and the power of voting for their elected officials than ever before, and not a moment too soon. For that alone, the U.S. deserves a big upgrade.