Russia’s invasion of the Crimea could push the country into a sharp recession. Yet Moscow’s war on Internet freedom should spook investors even more. It risks long term damage to Russia’s economy, according to a recent report by Dalberg. President Putin should change course and support a free and open Internet before it’s too late.
Russia ranks poorly in global indexes of Internet freedom due to widespread censorship of online content and repeated violation of users’ rights, including criminal prosecution for blog posts critical of the government. Earlier this month, the Russian government took some of its boldest steps yet and blocked the independent news site of chess-champion and opposition figure Garry Kasparov as well as the very popular blog of well-known anti-corruption activist Alexey Navalny.
Internet restrictions accelerated following Vladimir Putin’s return to the presidency nearly two years ago. Moscow passed its “Internet blacklist law” in July 2012 that empowered Russian prosecutors to block websites that contain extremist materials and/or content harmful to children without a court order. That law has since been abused to block local news websites, religious websites, blogs on LiveJournal, and other publications that run afoul of the Kremlin.
In December 2013, Russian lawmakers added content that promotes rioting, racial hatred, or extremism, including “public events held in violation of the public order,” (e.g. public protests, etc.) to the list of materials that can be blocked without a court order. President Putin’s own Committee on Human Rights denounced it as likely infringing upon the Russian constitution. And at least one technology industry group in Russia fears the law will be used by provocateurs to post objectionable comments on websites to trigger their blocking by prosecutors.
Putin recently pushed through several new laws to enhance his government’s Internet surveillance powers, too. One law requires website owners and operators – ranging from Facebook to local Russian blogs – to archive all data from all users of their websites for six months, provide it to the government, and inform Russian security services every time a new user starts using their site or “exchange[s] information.” Taken literally, this law would place crippling compliance burdens on websites located in Russia and abroad (the law specifically states the foreign websites with Russian users are covered) while threatening hefty monetary penalties for violations. A second law limits online money transfers in Russia, which are the lifeblood of many businesses in addition to civic movements and campaigns.
Russia also directs pro-Kremlin groups to engage in Distributed Denial of Service (DDoS) attacks against websites, pays commentators to post propagandistic content, and hijack blog ratings. It uses other forms of pressure, such as commitment to psychiatric facilities, to silence online critics and drive them out of Russia. And authorities routinely abuse surveillance platforms to access users’ email and data for political purposes (the state has direct access to phone-company and ISP servers through local control centers).
These attacks on an open Internet not only undermine Russian democracy but also the country’s economy. A newly-released Dalberg study highlights five ways that a free and open Internet – one in which users can freely choose which platforms and services to use and what content to create, share, and access — stimulates economic growth.
First, it is easier for users to access the Internet if it is open, which promotes Internet businesses. Second, a free Internet correlates with larger volumes of e-commerce, especially online banking, which often represents new economic activity instead of mere replacement of in-person transactions. Third, multinational companies are more likely to invest in countries with unencumbered Internet access. Fourth, a free Internet encourages innovation, which in turn, drives economic growth. Fifth and last, an open Internet promotes better quality education, institutions, and social capital, important hallmarks of a dynamic economy.
Conversely, Internet restrictions, such as those implemented by Russia, inhibit economic growth in several ways. First, they reduce investor confidence by creating uncertainty and risk, which in turn reduces investment. Second, they hamper Internet business by requiring expenditures for compliance (e.g. purchasing hardware, installing software, retaining lawyers to fight frivolous charges, etc.) instead of value-added pursuits, such as hiring more employees, investing in research and development, etc. Third, they limit the availability of information that would otherwise catalyze innovation or stimulate economic growth. Fourth, these restrictive measures impede collaboration within and across borders, thereby making it more difficult for individuals and organizations to generate new ideas for products and/or services. Last, limitations create fear and mistrust among Internet users, which depresses online commerce and constrains the market place of ideas.
The economic costs of Russia’s war on Internet freedom will be particularly acute because it is alienating younger Russians. Russians between the ages of 18 and 29 strongly believe in a free and open Internet while Russians above the age of 50 do not. In fact, Russia has the largest generation gap worldwide in terms of societal views on Internet freedom. Moscow should take note of this trend because Russia’s economy will increasingly rely on its youth to generate growth as the country’s population ages.
As emerging markets grapple with important decisions about how and whether to regulate the Internet, Russia can ill afford to deprive itself of this vital engine of economic growth. Many countries are wisely embracing the transformative nature of the open Internet without which global e-commerce and cloud computing are not possible. Russia risks being left behind if it continues its attacks on Internet freedom, which pose an even greater long term risk to the Russian economy than Moscow’s ill-advised military foray in Ukraine.
Source:
http://www.forbes.com/sites/elisugarman/2014/03/27/russias-war-on-internet-freedom-is-bad-for-business-and-the-russian-economy/