Sheldon Whitehouse: Cybertheft Is [May Be] Biggest Transfer of Wealth in History

In an attempt to scare Congress into passing the cybersecurity legislation they failed to pass last year, Sheldon Whitehouse scheduled a hearing on cybersecurity today. In the hearing — and in this op-ed he penned with Lindsey Graham — he repeated a claim he has made before: cybertheft may be the biggest “illicit” transfer of wealth in history.

Almost every facet of American life is threatened when intruders exploit our cyber-vulnerabilities. And the risk is not from China alone. Foreign governments such as Iran and terrorist groups such as al-Qaida seek to worm into national infrastructure and threaten catastrophe here at home. Foreign agents raid companies, stealing plans, formulas and designs. Foreign criminal networks take money out of banks, defraud consumers with scams and sell illicit goods and products, cheating U.S. manufacturers. It may be the greatest illicit transfer of wealth in history. [my emphasis]

I think in the hearing itself, Whitehouse wasn’t as careful to always use that word “might.”

The greatest illicit transfer of wealth in history.

Don’t get me wrong: cyberattacks of all sorts are a real threat. They cost consumers a great deal of inconvenience and, at times, lots of money. They cost defense contractors far more (though of course, some of that is built into our model of defense). They cost sloppy companies as well.

But the biggest illicit transfer of wealth in history?

Ignore recent unpunished giant transfers of wealth in the wake of the financial crisis, which the Senate Judiciary Committee has largely ignored.

I guess the reason I find this so stunning is all the obviously huge transfers of wealth it ignores that were part of slavery and colonization.

Were those licit?

Those were, like Chinese or Iranian or Russian cyberattacks on the US, examples of states (and private entities) taking advantage of vulnerabilities elsewhere. They were certainly considered legitimate at the time, because Europeans got to write the history of colonization, and because they made up claptrap about “civilization” to justify it. But from a distance they look more like the kind of exploitation states often engage in if they’ve got an obvious advantage over another state or organization.

All that’s not to say Montezuma shouldn’t have resisted the Spaniards. That’s not to say we shouldn’t defend against cyberattacks.

But what really makes the US so vulnerable to cyberattacks are 1) that we’re so reliant on the Internet and 2) we’re so reliant on intellectual property (indeed, the very claim that cybertheft is the biggest transfer of wealth relies on a certain understanding of IP as wealth that itself depends on a legal infrastructure that is contingent on our relative world power). And also that so much of our critical infrastructure and IP holders are in private hands and therefore much harder to demand diligence from. That is, our vulnerability to cyberattacks is in part a fragility of our own bases for power (a vulnerability that will probably end up being less lethal than the fact that the immune systems of indigenous peoples hadn’t been exposed to European diseases).

Also, this entire discussion — which danced around the question of an international regime that might limit such attacks — completely ignored the StuxNet attack, the fact that a nation as vulnerable as we are pushed the limits of the offensive capability first. One of the witnesses (I think FBI Assistant Director Jonathan Demarast) even suggested that if our government were chartered to attack the private sector (cough, Echelon) of other countries we’d be damn good at it too — as if our attacks on the public infrastructure of Iran doesn’t count.

I get the value of a good fear campaign (I wish Whitehouse would fearmonger more in his regular addresses on climate change). But there’s fearmongering and there’s absurdity. And I think suggesting that cybertheft is worse than the stealing of entire continents is the latter.

14 replies
  1. Dead Last says:

    It is the largest theft in the same way they calculate the street value of drug busts.

    “If Disney’s John Carter was illegally downloaded 33 million times, and people in NYC pay $20 to see a movie, then the loss to society is $660 million. This is one of the biggest heists ever!!! Something must be done, or our children will have no future worth living!”

  2. orionATL says:

    well, there was all that american folding money transferred by the pallet load in c-130’s to .. well , to somebodies in iraq.

    and then thered was the transfer of possibly hundreds millions of dollars from the cia to hadmeed karzai and other afghani leaders.

    not to mention the transfer of billions upon billions in military equipment to entities in iraq and afghanistan – oh, and israel.

    doesn’t that count?

    but my favorite is the extraordinary transfer of wealth from the citizenry and our society to the top few leaders in dozens upon dozens of american corporations – transfers of wealth by the billions per year for doing no more for our society than sitting in the ceo’s chair.

  3. Badtux says:

    By “illicit” undoubtedly he means “illegal”. Since what the banksters did has been (retroactively) legalized, hard to call that an “illicit” transfer of wealth by that definition. Similarly, slavery and other such transfers of wealth were similarly legal back when they happened.

    Personally, I’d say that fraud is fraud is illicit whether legalized or not, but that’s me, not Sheldon…

  4. orionATL says:

    personally, i think senator whitehouse is full of shit – and knows it. this is just scare-tactics 101 for congressional “leaders”

    unless you count in internet criminal fraud and theft of money and assets, most of the info acquired is, in the first instance, information, which may or may not be immediately transformable into wealth.

  5. omphaloscepsis says:


    “all that american folding money transferred by the pallet load in c-130′s to .. well , to somebodies in iraq.”

    Ah, yes, or another reason why it was called “The Green Zone”.

    A lot of numbers and a few pictures in this summary from Henry Waxman:

    My favorite is the elderly guard on pg. 6 — your tax dollars secured by Barney Fife.

    The numbers for cyber theft are quite large, though part of that may depend on how you keep score.

    Here’s a non-cyber transfer, or maybe non-transfer — the Tax Gap. The name the IRS uses for taxes due that aren’t paid. Their current estimate is about $450 B a year, or nearly half a trillion. A big number relative to the national debt.

    My personal candidate for a big illicit transfer would be the siphoning of pension plans in the 1980s and 1990s, with corporate takeovers followed by declaring that the inherited pension plan was “over funded”. Where did the money go? Not to the retirees.

  6. Chris Harries says:

    It would be interesting to discover the extent of the, completely legal, transfer of funds to the Whitehouse Senatorial campaign by the victims (if they have any resources left) of the shocking thefts that he reports.

    My guess is that, given the enormous plunder in the hands of the pirates they will simply buy up Congress so that their unprecedentedly profitable depredations are uninterrupted.

    These are sad times for honest men.

  7. joanneleon says:

    Man, the guy seems good on a lot of things, and then this?

    What is this, rotating villain?

  8. Sail On Sailor Sail On says:

    The FBI has long been searching for a way to bypass the Fourth Amendment of the usa Constitution which they have claimed makes their job difficult, increasingly so in the information age. Previously the FBI just broke the law and hoped it would not get caught, now the agency wants a patina of legality to cover its transgressions against liberty.

    Despite the introduction and continued re-authorization of the PATRIOT Act the FBI still claims it does not have enough power to police American politics and stop crime.

    But as the Boston Marathon Bombing demonstrated, the FBI just builds massive databases of potential suspects until the databases are so large they can’t be managed, then the FBI misses clear warnings and after the attack occurs the FBI blames the screw up on a lack of power in order to secure more resources and authority. Rinse and repeat. Apparently it works.

  9. orionATL says:


    thanks for comment and cite.

    yours was a fine addition to the chronical of all the money being sucked out of the productive (labor and capital equipment) sectors of the american economy.

  10. scribe says:

    It’s just a case of whose ox is being gored.

    Rhode Island in colonial days was quite wealthy, the trickledown result of the triangular trade in slaves, sugar and molasses/rum. That gets taught, to the extent it is taught, in school history classes with the wink-and-nod that, “yeah, it was wrong, but it was profitable.”

    In slightly later days, there was good old Samuel Slater. You might remember him, though he’s a major hero still in some corners of New England – mostly the old cloth mill towns. Recall, he is famous and a hero not for having invented something, but rather because he was blessed with a photographic memory and mechanical skill. He spent some time working in a British cloth weaving factory and put his time there to good use (the pay sucked) by memorizing how the machines were put together and worked. At the time, the British loom and weaving machinery were the best anywhere by far and exporting them, any part of them or their plans was banned.

    So that thief of intellectual property, no, enterprising young man Slater slipped away from his job (at the time, workers in England were more or less bound to their jobs like serfs and quitting could be prosecuted criminally) and came to Massachusetts where he promptly took his stolen IP and created an entire industry, much to the detriment of the English industry.

    In today’s terms, using his exceptional hacking skills he hacked the anti-theft protections, copied the source code, took the stolen property across national borders and reverse-engineered the product to compete with the true owners, all in contravention of the law in the true owners’ country.

    And let’s not even talk about how many publishers here made lots of money printing bootleg editions of Dickens’ works – while he was touring the US giving lectures and gathering material – without paying Dickens a cent of royalties.

    Theft of IP is not new; it’s just that now, in a country which makes nothing, it’s the only valuable property we still have. It’s also one of the quicker ways in poor countries for someone to get rich.

  11. P J Evans says:

    They also were into smuggling and privateering. Their neighbors called the place “Rogues’ Island”. (Ancestors from RI. AFAIK, the worst any of them did was counterfeit money – badly.)

    Also, I had a Spanish-English dictionary printed in 1839 in Philadelphia, with a preface talking about the ‘late Peninsular war’. Pirated English work, clearly, but thy didn’t really have international copyright law at the time.

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