Study Shows Cybertheft Really Isn’t the Greatest Transfer of Wealth in History

I’ve long mocked the claim — often wielded by people like Sheldon Whitehouse and Keith Alexander — that cybertheft is the greatest transfer of wealth in history. Sure, cybertheft might be big. But bigger than colonization? Bigger than slavery?

But a new study shows that it is just a fraction of what cyber-boosters have been claiming: $25 to $100 billion rather than a $1 trillion.

The study does still show it is costly — leading to the lost of 508,000 jobs a year. And the study didn’t account for something else I often harp on: the unknown role of Chinese hacking into weapons programs in degrading the effectiveness of those programs.

Still unknown, for example, are the unseen costs of military cybertheft, said Mr. Lewis. “A lot of the cost overruns in some of our big programs are because they had to rewrite the code after the Chinese got in—and the real damage won’t appear until we see how weapons actually perform,” he said.

The study also did not calculate the effect of cybertheft on American competitiveness, which seems like a significant issue.

Ultimately, though, this is a problem that should be fought without the bluster. It is real. It is a threat, in large part, to private companies that don’t pay their fair share in taxes. How we combat that problem should account for those factors.

4 replies
  1. selise says:

    maybe alexander and whitehouse are including the cost (to others) of usa cybertheft?


    actually seems like another case of fear propaganda with a corporate purpose (like environmental “terrorists,” animal rights “terrorists,” etc).

    (not sure, but may disagree on the jobs & tax issues though)

  2. lefty665 says:

    Gen Keith will not admit that his security agency/command failed to protect our national security on his watch.

    He casts it as just money, but huge money, to admit the problem since he can no longer avoid it. That is how he distracts attention from his failure to achieve his sec mission.

    Hey, look over here Congress, all you guys really care about is money, and this is big money, why it’s the biggest money in history. Pay no attention that our weapons systems will be pretty much useless if we get into a conflict with the Chinese. By the way, I need more money and more domestic control and intrusiveness to keep you safe. It’s hard work, but someone has to do it for mom, apple pie and flag.

  3. Saul Tannenbaum says:

    The claim that cybertheft is the largest illicit transfer of wealth in history is absurd on its face.

    But, having spent a lot of time understanding claims for the economic damage for alleged copyright infringement, I’ve learned to take absolutely nothing at face value.

    Here’s what the report actually says about job losses:

    The effect of malicious cyber activities on jobs needs further work. The Commerce Department estimated in 2011 that $1 billion in exports equaled 5,080 jobs.3 This means that the high end estimate of $100 billion in losses from cyber espionage would translate into 508,000 lost jobs. While this translates into a third of a percent decrease in employment, this is not the “net” loss as many workers will find other jobs. The real concern might be if the lost jobs are in manufacturing or other high paying sectors. If workers displaced by cyber espionage do not find jobs that pay as well or better, the victim country would be worse off. The effect of cyber espionage may be to move workers from high paying blue-collar jobs into lower paying work or unemployment.

    (Emphasis mine)

    I’m really dubious about this claim. It strikes me as a really big leap to equate cybertheft loss to exports. This isn’t offshoring, where a company takes an economic activity that generates $1 billion in exports and moves it to Asia.

    And, of course, cyberthreats have led to the rise of the cybersecurity industry, which is an economic activity that creates jobs, too. One estimate (take this with a big grain of salt) is that the cybersecurity industry is a $93 billion industry in the US. That means the $100 billion in losses is offset almost entirely.

  4. lefty665 says:

    What’s wrong with this picture?

    NSA can geo locate me and my mother when we call or email, and have content if they want it. But neither NSA or Cyber Command had any idea where their Chinese counterparts hung out? Nor do they seem to have been interested in tracking packets while the Chinese camped out on contractor networks, in some cases for years.

    Contractors can be fat, dumb, lazy and money grubbing cheap, but NSA ain’t any of those things. They are very bright folks, and this is squarely in their mission.

    What we are hearing does not fit well with what we know. What’s the dog that’s not barking?

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