Aug 28, 2007

Microeconomic Espionage: Incentives and Disincentives

A new study from the Research Institute for European and American Studies (RIEAS).

Microeconomic Espionage: Incentives and Disincentives. (40-page PDF)

[An] important difference is that between economic intelligence-espionage and business intelligence-espionage – the latter refers to the collection and analysis of information from a company, usually multinational, against another company. If those companies collect information by using clandestine means, the accepted term is industrial espionage. While industrial espionage is conducted by an entity of private sector, economic espionage is conducted by the government of a state by using its secret agencies against either governmental entities of another state (coined as macroeconomic espionage), or against private companies, usually multinationals, in order to support its indigenous companies (coined as microeconomic espionage).

According to the FBI (Federal Bureau of Investigation), economic intelligence-espionage refers to the case where the secret services of a state collect economic intelligence, while industrial espionage has to do with the collection of economic information by private companies.

Economic espionage has three distinct dimensions:

The first, macroeconomic espionage, refers to the use of secret agencies on behalf of a state’s government in order to obtain intelligence concerning the world economic developments and activities with the ulterior purpose the advancement of its strategic interests. In its basic form, macroeconomic espionage assists the political leadership of a state to conduct its internal and external economic policy with the optimum results. In 1949, Sherman Kent, the father of U.S. intelligence analytical domain, who had full knowledge of the value of macroeconomic espionage, asserted that intelligence services should track the current world economic developments as well as foreign economic doctrines and theories. Moreover, they should watch the supplying part of the armed forces, the development of new crops and methods of agriculture, changes in farm machinery, land use, fertilizers, and reclamation projects. Also they should pay close attention to the development of new utilities and the extensions of those already established, as well as to changes in the techniques and implements of distribution, new transport routes and changes in the inventory of the units of transportation. But, most importantly, in the atomic age, they must follow new discoveries as far as natural resources are concerned, especially those used in order to build nuclear weapons.

According to the second dimension, which is the topic of our interest in this essay, microeconomic espionage, the government of a state via its secret agencies is involved in the collection of intelligence in order to assist a company (usually a multinational), creating by that way a collaboration between government and company whose goal is to prevail over one’s opponents in the international economic arena.

The third dimension of economic espionage is economic counterintelligence. Randall M. Fort defines this term as "the identification and neutralization of foreign intelligence services spying on the U.S. citizens or companies and stealing information and/or technology for use within their own countries". Thompson Strong expresses the view that "the objective of the counter-C.E. [Competitive Espionage] operation is to make the C.E. investment ineffective or possibly too great in cost, at least perceptually". Samuel Porteous characterizes counterintelligence as not only a very important function of the secret services, but also the less controversial. According to his definition of the term, "a nation's counter-intelligence service simply seeks to advise government about and report on the activities of foreign intelligence services or their surrogates engaging in clandestine activities directed against their state’s economic and commercial interests."

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