Skip to content

The funding crowd

23 February 2018
by Guest author

Balázs Gyimesi, OECD Observer

©Shutterstock

“Every crowd has a silver lining,” said P.T. Barnum, America’s “greatest showman”. For businesses, Barnum’s play on words is especially true: crowds are becoming something of a motherlode of funding for small and medium-sized enterprises (SMEs). With bank lending declining, smaller businesses are looking for alternative ways of financing. Thanks to the world wide web, they can now solicit funds not just from banks and professional investors, but from virtually anyone with internet access. This approach can take different forms. Besides crowdfunding (where many individual contributions–usually sourced online–make up the funding), examples include online invoice financing (where SMEs, for instance, can borrow online against unpaid invoices) and peer-to-peer lending activities (online services that match lenders with SME borrowers). Together, these funding opportunities constitute the online alternative finance market.

Click to enlarge

The volume of alternative financial instruments has generally increased in recent years. Looking at changes between 2013 and 2016, however, it is clear that the development and size of the alternative finance market varies greatly between countries. China is by far the largest market for online alternative financial instruments, expanding exponentially from US$5.6 billion in 2013 to US$243.28 billion in 2016. In comparison, the total market volume of the online alternative finance industry in the US amounted to only US$34.5 billion in 2016, despite a steep rise from US$4.4 billion in 2013. The European alternative finance market, on the other hand, has stayed well below the volume of the US and the Chinese markets, having raised US$2.1 billion in 2016 and only US$0.3 billion in 2013. The UK alternative finance industry has volumes well above that of the other EU28 countries combined, having raised over US$5.6 billion in 2016.

With rising volumes, alternative instruments increasingly complement traditional sources of financing, and this has called attention to the need for a regulatory framework for crowdfunding. In crafting regulation, however, governments should keep in mind how crucial online alternative finance is to businesses. With bank lending on the decrease, every small business needs its silver lining.

OECD (2018), Financing SMEs and Entrepreneurs 2018: An OECD Scoreboard, OECD Publishing, Paris. http://dx.doi.org/10.1787/fin_sme_ent-2018-en

Trust in parliament

1 February 2018
by Guest author

Balázs Gyimesi, OECD Observer

House of Commons of the United Kingdom ©AFP PHOTO/PRU/HO

“Sail, sail thy best, ship of democracy, […] With thee Time voyages in trust,” wrote American poet Walt Whitman in his poem “Song of democracy”. But do we trust democracy to take us in the right direction? In European countries, there is a clear relationship between how satisfied we are with democracy and how much we trust its most important institution–parliament. Believing that our elected representatives will act in our best interests is crucial to maintaining the legitimacy of democracy.

People who are more satisfied with democracy are also those who trust their assembly of elected representatives more. Switzerland and the Nordic countries, Denmark, Norway and Sweden, show the greatest satisfaction with democracy and highest level of trust in their parliament, whereas southern and eastern European countries such as Italy, Portugal and Slovenia trust their elected representatives less and are less satisfied with democracy overall.

Interestingly, Europeans trust parliament less than the legal system, and even the police, according to the European Social Survey.

But the nature of parliament is also that the voting public can keep it in check and change it completely, as elections from France and the US have demonstrated. Parliaments, in turn, know that while it is their job to discuss, contradict, argue, agree and oppose, they must do so in the public interest. Clearly, parliament can be vital in promoting better policies for better lives–the OECD Observer was launched by the Secretary-General 55 years ago in large part to inform parliaments of the organisation’s policy work. Today, with the Global Parliamentary Network, the OECD actively engages with members of parliament from around the world by providing them with analysis, data and expert opinion. It also creates a rather special space for MPs to hear about each other’s experiences and learn from them. After all, listening is fundamental to building trust. It is the wind in the sails of Walt Whitman’s democracy.

OECD (2017), How’s Life? 2017: Measuring Well-being, OECD Publishing, Paris. http://dx.doi.org/10.1787/how_life-2017-en

OECD Global Parliamentary Network, http://www.oecd.org/parliamentarians/

European Social Survey, http://www.europeansocialsurvey.org/

Flood watch on the river Seine: A return to 1910?

25 January 2018
by Guest author

Charles Baubion, OECD Directorate for Public Governance, and Clara Young, OECD Insights

©Laurent Kalfala/AFP

It has been a wet winter in Paris and the River Seine is rising fast: 2 cm, or about an inch, every hour. This will bring the Seine to a little over six metres, as measured by the Austerlitz monitoring station or, as Parisians will tell you, up to the thighs of the Le Zouave statue on the Pont de l’Alma (our photo). That’s how high it got in 2016. Already, several major roadways along the river banks have been flooded over, while the city authorities are issuing warnings, not just in Paris, but in several French cities. How bad can it get?

The 2016 flood caused more than €1billion worth of insured damage, two deaths, and severe disruptions to the transport system. Well over 17,000 people were forced to leave their homes. While upper parts of the river catchment suffered significant damage, Paris itself was spared.  If the water had gone 25 cm or 10 inches higher, it would have been a large-scale crisis, authorities said. There is no room for complacency, and even if the peak this time is officially expected to be reached in the next few days, everyone is monitoring the rainfall closely.

Before 2016, floods in Paris occurred on average every 20 years. The Seine has not significantly overflown since 1955, the high-water mark being the great flood of 1910. At 8.6 m on the Austerlitz scale, the river turned Paris into Venice that winter. In its 2014 Review of Risk Management Policies: Resilience to Major Floods in the Seine Basin, the OECD estimated that a flood of the same magnitude today would cost France between €3 and €30 billion.

The OECD made 14 recommendations on how the Paris region could boost flood resilience and emergency preparedness in the review. More than half of these have been put in place says the follow-up report, released this week, but a better integration of flood risks into urban policies is still being held up by governance and financing difficulties.

Decentralisation and the consolidation of greater Paris into the Grand Paris Metropolitan Authority can open up co-operation on flood management in new administrative structures. The Grand Paris Metropolitan Authority should work closely with local authorities in the Seine basin to define a global, long-term flood strategy for the region.

A flood-resilience framework would give coherence to initiatives such as a charter to design resilient neighbourhoods and a serious rethink of areas within the flood plain that are currently earmarked for densification. Priority could be given to upgrading protective dykes and quay walls along the river as well as critical infrastructure vulnerable to flooding. It could spur storm preparedness for businesses, even small ones, so that they can keep going even as the waters rise. Examples from the reconstruction of a resilient New Orleans after Hurricane Katrina, or New York after Sandy, could inspire Paris to build up its own resilience before disaster hits.

All of this requires money of course and this week’s report finds that available flood prevention funding is still not enough. For the past 20 years, there has been talk of developing flood water storage–marshlands and an artificial lake–at La Bassée, upstream from Paris. It would be able to take in 55 million cubic metres of water but costs an estimated €600 million. To fund this and other flood resilience projects, the government needs to develop a more ambitious, long-term and holistic strategy co-ordinated with anybody who benefits from flood protection, whether it be network operators, enterprises or local authorities. Even individual citizens in what is one of the richest regions in Europe could do their part by paying a flood prevention tax. Local authorities could explore cutting-edge financial mechanisms to fund initiatives, such as green bonds.

In 2024, Paris will host the Olympic Games. With its ambition to produce 55% less carbon emissions than the 2012 London Olympics, Paris hopes to stage the greenest games in history. If it manages to incorporate flood risk into its planning now, the Olympic Games will be high and dry.

References and links

For further information, please contact Charles Baubion, Risk Management Policy Analyst at the OECD.

Read the report at http://www.keepeek.com/Digital-Asset-Management/oecd/governance/preventing-the-flooding-of-the-seine-in-the-paris-ile-de-france-region_9789264289932-en#.Wm7cyE3rvIU

Read the press release “Further improvements needed to manage major flood risk in Paris and Seine basin” at http://www.oecd.org/newsroom/further-improvements-needed-to-manage-major-flood-risk-in-paris-and-seine-basin.htm

OECD (2014), Seine Basin, Île-de-France, 2014: Resilience to Major Floods, OECD Publishing, Paris.
http://dx.doi.org/10.1787/9789264208728-en

Read “Small Business Storm Preparedness” at https://static1.squarespace.com/static/50dcbaa5e4b00220dc74e81f/t/   523d9e21e4b0019d4f5b07e9/1379769889160/RedHookStormPreparednessPlan.pdf

Read “What if Paris flooded” in the OECD Observer at http://oe.cd/2bZ

 

Green budgeting can spur governments to improve our planet’s bottom line

19 January 2018
by Guest author

Ronnie Downes, OECD Budgeting & Public Expenditures Division

©Charlotte Moreau

Ever hear of triple-bottom line accounting? This is what businesses use to go beyond the usual financial balance sheet to ensure their accounts reflect environmentally and socially responsible profits and loss. Shareholders and clients increasingly want companies to be clean and responsible in their business practices, to such an extent that it can affect their stock value.

But what about government? Shouldn’t public finances also follow such quality criteria so that we can hold our politicians to account and ensure our tax money is taking care of the environment?

In our view, budgeting is not a “neutral” reporting exercise, but one of the most effective ways of making sure that public money is put to work properly, and that policies are actually helping governments to achieve important goals, like fighting climate change and cutting pollution, for instance.

“Green budgeting” aims to use the budget–taxes, spending and policy co-ordination–to assess and promote the alignment that is essential to meet environmental goals. For example, green budgeting shows financial outlays that have positive climate change impacts, and highlights tax policy choices that must be confronted as fuel is “decarbonised”­, whittling away a major source of government revenues.

Many large private corporations employ the triple-line accounting championed by the likes of the Global Reporting Initiative, an independent organisation, to measure overall company performance according to not only traditional profit and loss, but social responsibility to people, and environmental performance as well. But the public sector has been slow to do the same. This will have to change. The climate change targets we have set in the Paris Agreement, Aichi Biodiversity Targets and the United Nations’ Sustainable Development Goals require that governments know what portion of their budgets is moving their countries towards reaching these targets and what portion is hindering it, and to craft their policies accordingly.

With the backing of France and Mexico, OECD Secretary-General Angel Gurría announced the green budgeting initiative at the One Planet Summit in Paris in December 2017, along with a call for meaningful carbon pricing.

French president Emmanuel Macron welcomed the initiative enthusiastically: “We are launching the “Paris Collaborative on Green Budgeting” within the framework of our zero-emission objective,” he said at the global climate financing summit. “Analysis of the budgets of OECD countries furthers transparency, and I thank Angel Gurría for his contribution to this framework. The work of the OECD will enable budget presentations launched by a group of pilot countries. Obviously, we will be contributing with presentations that show how the budget each year is distributed according to climate objectives.”

The OECD has brought together a cross-disciplinary group of environmental, tax, budget and fiscal affairs experts who will partner with countries to help them assess and improve their budgets and fiscal policies for climate resilience. Among other things, green accounting looks at how subsidies that are harmful to biodiversity or which push the planet’s carbon emissions output compare with resources the government puts in these two areas. The Collaborative will analyse how coherent fiscal policies are with developing low-emissions, sustainable strategies. And, taking inspiration from the OECD’s work on “gender budgeting”­­, which determines how budgets impact gender equality, it will promote environmentally-sensible budgeting.

The OECD will work with countries to set a new global agenda for green budgeting with agreed-upon definitions, and common methods, guidelines and tools to bring about sustainable public finance flows. Tools include those that track the impacts of decarbonisation and carbon pricing on fossil fuel use and tax revenues in each country, and voluntary “green budget statements” to show the environmental credentials of the annual budget.

Companies adhere to triple-line accounting because it shows the true cost of doing business. Likewise, by knowing the environmental costs and benefits incurred in serving its citizens thanks to green budgeting, governments will be better able to raise the planet’s bottom line.

References and further reading

Read www.oecd.org/env/cc/one-planet-summit-paris-collaborative-on-green-budgeting-december-2017.htm

OECD (2017) Investing in Climate, Investing in Growth, http://oe.cd/g20climate

OECD (2015) Recommendation of the Council on Budgetary Governance, http://oe.cd/UA

OECD (2016), Effective Carbon Rates: Pricing CO2 through Taxes and Emissions Trading Systems, OECD Publishing, Paris, http://oe.cd/2bz

For more on the Global Reporting Initiative today, see www.globalreporting.org and read Massie Robert Kinloch (2001), “Reporting on sustainability: A global initiative”, OECD Observer No 226/227, Summer, http://oe.cd/wbO

Rice and risks in the Mekong River Delta

16 January 2018
by Guest author

Robert Akam and Guillaume Gruere, OECD Trade and Agriculture Directorate

©Christoph Mohr/Picture Alliance/DPA/AFP

The wet and verdant expanse of the Mekong Delta’s rivers and farms is a veritable rice bowl for the world. Not only do the region’s paddies produce half of Viet Nam’s rice crop yearly, the country is the world’s third largest rice exporter, with 17% of world exports of paddy rice, the vast majority of which is produced in the Mekong River delta.

But the natural wealth of the great delta belies serious risks which people living in this fragile, low-lying ecosystem now face. Quite simply, the abundant freshwater that defines this region is coming under threat.

In recent years, saline water has started to encroach further inland from the ocean, to such a degree that farmers in some areas of the delta now speak of a “salty season”. Some have even had to change from growing rice to farming shrimp which can cope in the now brackish water. Local communities are increasingly turning to pumping groundwater for irrigation, aquaculture and drinking water, but this only accelerates the salinisation. Pumping also causes land subsidence and depletes underground water supplies, reducing water security for future generations.

Meanwhile, sea levels are expected to rise in the region by 45-75 cm by 2090. This is a major threat to a part of the world which on average is less than two metres above sea level. A rise in the sea level of only 30 cm could see the loss of nearly 200 000 hectares of rice cultivation.

These risks are compounded by extensive dam-building along the river’s length and the development of sand mining. Together these activities severely impede the flow of the sediment that supports fish and shrimp farms and replenishes soils in the delta lost to erosion.

The economic risks are significant, and not just for Viet Nam. How long will it be possible to maintain rice production given the ongoing damage to the ecosystem? And at which point will the impact of these water risks begin to affect global markets?

The Mekong Delta is one of a number of localised agricultural regions in the world that face acute water risks, which we have identified as water-risk “hotspots” that require a targeted policy response. These water risks are not only the result of climate change but involve a range of factors,including farming itself, that cause water shortages, floods and degradation of water quality, all of which threaten agricultural production.

Click to enlarge

Our projections of future water risks suggest that China, India and the United States will be the three countries where agricultural production will be the most severely affected globally. Water stresses in the hotspot regions of northeast China, northwest India and the southwest United States alone would result in price increases of 5-8% globally for certain commodities, such as cotton, maize and wheat, and cause significant shifts in their trade too. Our analysis identifies Viet Nam as facing the world’s fourth highest water risks for rice production.

In the face of water risks, how can we safeguard agricultural production and our food security? Targeted adaptation and co-ordination will be key here. Farmers can shift production–as is already taking place in the Mekong delta–or improve their agricultural practices, such as changing when in the year they plant crops or adopting new and adapted rice varieties. At the same time, agro-food companies could work with farmers to improve their practices, such as by providing them with saltwater monitoring systems, or by encouraging rainwater collection as a supply of freshwater in place of groundwater during the dry season.

In parallel, governments must focus their attention and efforts on hotspot regions by tailoring existing policy instruments and introducing new measures that directly address water risks, while ensuring their actions complement those of private actors. They also need to strengthen market and trade relationships at the national and international levels to dilute price effects and ensure regional impacts are contained. This response would be supported by efforts at the international level to share information about water risks to reduce the spread of indirect impacts.

Just as with our case studies in northeast China, northwest India or the southwest United States, public and private actors in the Mekong delta are now taking the first steps to mitigate agriculture water risks in the region, as discussed at the first Asia Pacific Economic Cooperation (APEC) Meeting of Water Resource Authorities on “Challenges for food security in a context of climate change”, in Viet Nam in August 2017.

These efforts need to be intensified in a strategic and co-ordinated manner, as we argue in Water Risks Hotspots for Agriculture, to ensure that they effectively reduce the risks for future generations. With the right policies and approaches, not only can food production in hotspots such as the Mekong delta and other farming regions be preserved, but people’s livelihoods and the great ecosystems we rely on can also be secured.

References and further reading

The report findings were presented during a OECD: Green Talk Live webinar on 18 October 2017, the recording of which is available at: https://www.youtube.com/watch?v=BYX6sUk6DFI

OECD (2017), Water Risk Hotspots for Agriculture, OECD Publishing, Paris.http://dx.doi.org/10.1787/9789264279551-en

USDA Foreign Agriculture Service (2012), VIETNAM: Record Rice Production Forecast on Surge in Planting in Mekong Delta, Commodity Intelligence Report, December 12 2012. https://ipad.fas.usda.gov/highlights/2012/12/Vietnam/

An overview of the OECD’s work on water use in agriculture can be found here.

(References updated on 18 January 2018)

Acknowledgements

The blog was inspired by presentations given by C. Krittasudthacheewa (Stockholm Environment Institute), Nguyen Hieu Trung (University of Can Tho), Le Duc Trung (Viet Nam National Mekong River Committee) and Harro Stolpe and Katrin Broemme (Ruhr-University of Bochum, Germany) at APEC’s First Meeting of Resource Authorities in Can Tho, Viet Nam, August 18-19 2017.

People, trust and government: Getting the measure

4 December 2017
by Guest author

Lara Fleischer, OECD Statistics Directorate

Jean-Jacques Rousseau and The Social Contract ©Leemage/AFP and ©Alamy

Is trust between people and their governments crumbling? What the great philosopher Jean-Jacques Rousseau called the social contract, whereby free citizens voluntarily agree to concede authority to the state in their own interest, could be in question. The OECD’s How’s Life? 2017 report finds that only 38% of people in OECD countries say they trust their government. In 2006, this figure was around 42%. Why is there such a “disconnect” between citizens and their elected representatives?

The 2008 crisis is often blamed and could well be a factor. Indeed, trust has fallen by more than 15 percentage points in Greece, Portugal, and Spain–some of the OECD countries hardest hit by the crisis. They have also have seen the largest falls (or smallest growth) in household income and earnings since 2005, as well as some of the largest increases in long-term unemployment. By contrast, in Germany, Poland, and Slovak Republic, which are some of the countries where trust has increased the most, the average resident is generally better off than they were in 2005.

Click to enlarge

Nevertheless, the trust issue goes beyond the Great Recession and there is more to it than simple economics. In the US, where opinion polls measuring confidence in federal government go back to the late 1950s, trust has been consistently falling over the long term.

There may be other sources for the disconnect between citizens and their government. How’s Life? shows that the political class does not always reflect the people it serves. In the 11 OECD countries for which data is available, manual, agricultural and service workers make up 44% of the working population, but only 13% of legislators. Politicians are much more likely to have had a professional or senior management career. Not surprisingly, people might feel politicians are out of touch with their daily lives and unable to understand their basic struggles, from the cost of living to their need for quality public services. Additionally, How’s Life? finds that more than half of OECD residents consider corruption to be widespread in their government.

Deep and chronic distrust of government impedes the smooth and stable functioning of institutions. For one thing, this is bad for economic activities that require the confidence of investors and consumers.

But distrust is bad for democracy, too. The social contract is a two-sided coin. Good governance  requires active citizen participation, but what we are seeing instead are people who are disengaging from traditional forms of politics. Voter turnout across the OECD has been steadily declining, and more so among people that are already the least well-represented in public life. How’s Life? shows that younger people and those with lower incomes are less likely to go to the polls:  self-reported voter turnout is 14 percentage points lower for people in the bottom income quintile compared to those in the top quintile, and turnout for people aged 65 or more is around 17 percentage points higher than among youth aged 18-24. The trouble is that this disaffection gives the elderly, the more educated and the wealthy a greater political say compared to the rest of the population. This has affected the way people vote as well: in Europe, distrust of institutions has gone hand-in-hand with a rise in voting for non-mainstream, populist parties.

That said, voting is the most traditional form of civic engagement, and new types of activism (think of hashtag campaigns, the Occupy or Black Lives Matter movements) have been emerging.  However, there is little evidence on whether groups on the margins have shifted to these to make their voices heard. Tellingly, How’s Life? notes that only one in three people in the OECD feel they have influence on what the government does. This feeling is even weaker among the less educated and less wealthy.

The first step in addressing the trust crisis is to monitor data regularly, analyse trends and identify what is needed to strengthen and restore trust. But, with the exception of Australia, Canada, and New Zealand, trust measurement does not have a long tradition in official statistics and is not collected frequently enough or in a way that is internationally comparable.

One reason trust has not been part of statistical offices’ standard repertoire is its inherent intangibility. If you ask a person through a questionnaire whether they trust their government, is their answer good enough in terms of statistical quality?

The newly released OECD Guidelines on Measuring Trust offer international recommendations on collecting, publishing and analysing trust data to make it easier for national statistical offices to do so (Besides trust in institutions, the guidelines also focus on trust in other people, which is a key element of social capital.) On the question of statistical quality, the guidelines provide evidence about the validity and reliability of trust data. It examines non-response rates, the relationship between self-reported trust measures and other proxies such as experimental behavioural indicators, and the consistency of results across surveys and over time. They conclude that we are indeed only at the beginning of fully understanding measures of trust in institutions, but that existing evidence of their statistical quality is encouraging. In order to answer remaining questions, more official data on trust and their potential determinants should be collected.

The guidelines feature five different question modules, with a core module that can readily be inserted into household surveys measuring trust in Parliament, the police and the civil service.

The guidelines are designed to build the evidence base needed to restore trust. Left unchecked, the growing alienation between people and institutions will feed the disengagement and frustration we are now witnessing in some countries.

What is your view? Do you trust your government? What do you suggest should be done to win the public’s trust back?

 

References and links

OECD (2017), OECD Guidelines on Measuring Trust, OECD Publishing, Paris.
http://dx.doi.org/10.1787/9789264278219-en

OECD (2017), How’s Life? 2017: Measuring Well-being, OECD Publishing, Paris.
http://dx.doi.org/10.1787/how_life-2017-en

Algan, Yann et al., (2017) “The European Trust Crisis and the Rise of Populism”, Brookings Papers on Economic Activity,  Washington, DC. www.brookings.edu/wp-content/uploads/2017/09/4_alganetal.pdf

“AI: Intelligent Machines, Smart Policies”: three conference takeaways

15 November 2017
by Guest author

Clara Young, OECD Public Affairs and Communications Directorate

Listening to the radio this morning, I heard a story about a former FBI agent who had come out of retirement to reopen a very old case: who tipped off the Gestapo to Anne Frank’s whereabouts? There have been two investigations into the circumstances leading up to the arrest of the young diarist and her family on 4 August 1944 in Amsterdam, but this newest attempt is using artificial intelligence (AI). “The artificial intelligence programme will be able to make connections and associations of dates, persons and locations that would take a human investigator a minimum of 10 years to come up with,” lead investigator Vince Pankoke told the Canadian Broadcasting Corporation (CBC).

Artificial intelligence can solve the most intractable of puzzles. But with it come many new, possibly more intractable, questions. At a recent OECD conference “AI: Intelligent Machines, Smart Policies”, researchers, economists, policymakers, advisors, and labour and corporate representatives came to grips with the vastly different landscape AI is beginning to create. With their algorithmic ability to navigate through the noise of big data, machine-learning AI robots are commonplace in biotech labs. They formulate scientific hypotheses, devise and conduct experiments, and analyse test results, probing deeply and around the clock. AI can pilot vehicles, determine what your car insurance premium should be, detect malicious cyberactivity, improve medical diagnoses through image recognition like radiography and ultrasonography, and even compose music.

But will such tremendous computational and learning capacities upend human society? Stuart W. Elliott, who is Director of Board on Testing and Assessment at the US National Academy of Science, observes that AI currently has literal and numerical levels that are as good as if not better than 89% of adults in OECD countries. What implications does that have for competition in the labour market? How can policy makers and legislators plan for the magnitude of labour disruption automisation will bring?

Another conference takeaway is the need for transparency in AI decision-making. When software is making decisions on whether, for example, a driverless car should swerve away from an oncoming bicyclist and hit a pedestrian on the sidewalk, or if a job applicant should be hired or rejected, people should be able to look at the chain of reasoning leading up to an AI decision. There is also the concern that the algorithms in AI software distort natural biases implicit in data. For instance, Science reported that tests have shown that machine learning software absorbs societal racial biases in data, and makes stereotyped associations between European American names and positive or pleasant terms, and African-American names and negative or unpleasant terms. A related study showed that job applicants with European American names were 50% more likely to be accorded an interview by AI software.

But perhaps the biggest preoccupation at the conference is the data conundrum. In a forthcoming OECD interview, Dudu Mimran, CTO of Telekom Innovation Laboratories and Cyber Security Research Center at Ben-Gurion University in Israel, described the current data environment as the “…Wild West with all companies collecting any data”. Data is used to train artificial intelligence, and the more of it the better. But do we always know where it is coming from? And, who owns it? Digital advisor to the Estonian government Marten Kaevats stood up during a panel discussion and said, “The people own their own data.” In embracing digitalised government so early on, Estonia may be considered as a leader on data issues. Its citizens’ health and tax records are online, protected by a closed blockchain system. Online voting was introduced in 2005. But outside such digitally advanced regimes, most people do not know where their personal data reside, how it is being used, and whether its integrity is being safeguarded. One example of data carelessness is the discovery in 2016 that the UK’s National Health Service had given Google-owned AI company DeepMind access to the healthcare data of 1.6 million patients without adequately informing them.  

Safeguards exist against such errors. These include the 1980 OECD Privacy Guidelines revised in 2013, the EU’s General Data Protection Regulation, which comes into effect in 2018, and the 2016 signing of the US-EU data protection “Umbrella Agreement” which governs data-sharing in criminal investigations. But, AI raises potentially new and specific privacy risks that may not be covered by these data protection regulations and agreements.

In the case of Anne Frank, the data surrounding her and her family’s capture is 73 years old. Privacy is no longer an issue. For the rest of us, however, the ever-broadening and creative reach of data mining requires vigilance.

References and links

Bohan, John (2017), “A new breed of scientist, with brains of silicon”, Science. See: www.sciencemag.org/news/2017/07/new-breed-scientist-brains-silicon.

Hodson, Hal (2016), “Revealed: Google AI has access to huge haul of NHS patient data”, New Scientist. See https://www.newscientist.com/article/2086454-revealed-google-ai-has-access-to-huge-haul-of-nhs-patient-data.

Elliott, Stuart W. (2017), “Artificial intelligence and the future of work and skills: will this time be different?” at: https://www.oecd-forum.org/channels/722-digitalisation/posts/21601-artificial-intelligence-and-the-future-of-work-and-skills-will-this-time-be-different.

European Commission (2016), “Signing of the ‘Umbrella’ Agreement: A major step forward in EU-U.S. relations”, Brussels. See: http://ec.europa.eu/justice/newsroom/data-protection/news/160602_en.htm.

Caliskan, Aylin; Bryson, Joanna J.; Narayanan, Arvind, “Semantics derived automatically from language corpora contain human-like biases”, Science, 14 Apr 2017: Vol. 356, Issue 6334. See: http://science.sciencemag.org/content/356/6334/183.