«The Security Economy

The Security Economy « Recent years have seen security take a prominent place on the political and corporate agenda. Organised crime, terrorism, disruption of global supply chains, The Security computer viruses – all have played a role in raising people’s awareness of the risks they face in today’s world. Economy The result has been the emergence of a USD 100 billion market for security goods and services fed by growing demand from governments, businesses and private households. With globalisation and technological progress continuing at a rapid pace, the security economy is expected to expand further in the years ahead. New identification and surveillance technologies such as biometrics and radio frequency ID are coming on stream, and satellite-based monitoring is set to play an ever greater role. How large are the potential economic costs of major disruptions to transport systems and information networks? What is the overall cost of tighter security? Are there trade-offs between higher levels of security and economic efficiency? What are the future implications for society of the growth of surveillance in terms of its impact on privacy and other democratic liberties? This report tackles those and many other questions critical to the security economy of the 21st century. The Security Economy OECD's books, periodicals and statistical databases are now available via www.SourceOECD.org, our online library. This book is available to subscribers to the following SourceOECD themes: Science and Information Technology General Economics and Future Studies Ask your librarian for more details on how to access OECD books on line, or write to us at [email protected] www.oecd.org ISBN 92-64-10772-X 03 2004 03 1 P -:HSTCQE=VU\\WY: 2000 The Security Economy ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT Pursuant to Article 1 of the Convention signed in Paris on 14th December 1960, and which came into force on 30th September 1961, the Organisation for Economic Co-operation and Development (OECD) shall promote policies designed: – to achieve the highest sustainable economic growth and employment and a rising standard of living in member countries, while maintaining financial stability, and thus to contribute to the development of the world economy; – to contribute to sound economic expansion in member as well as non-member countries in the process of economic development; and – to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations. The original member countries of the OECD are Austria, Belgium, Canada, Denmark, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The following countries became members subsequently through accession at the dates indicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996), Korea (12th December 1996) and the Slovak Republic (14th December 2000). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention). Publié en français sous le titre : L’Économie de la sécurité © OECD 2004 Permission to reproduce a portion of this work for non-commercial purposes or classroom use should be obtained through the Centre français d’exploitation du droit de copie (CFC), 20, rue des Grands-Augustins, 75006 Paris, France, tel. (33-1) 44 07 47 70, fax (33-1) 46 34 67 19, for every country except the United States. In the United States permission should be obtained through the Copyright Clearance Center, Customer Service, (508)750-8400, 222 Rosewood Drive, Danvers, MA 01923 USA, or CCC Online: www.copyright.com. All other applications for permission to reproduce or translate all or part of this book should be made to OECD Publications, 2, rue André-Pascal, 75775 Paris Cedex 16, France. FOREWORD Foreword The security industry is a large and expanding area of economic activity. Spurred on by the perception of rising crime, the threat of terrorist attacks and increasingly free movements of goods, capital and people, there has been a swell in government, corporate and consumers’ budgets for security goods and services in recent years. This development promises to have far-reaching economic and societal implications over the longer term. The challenge for policy makers is how to meet the apparent need for greater security without unduly impeding economic efficiency and citizens’ rights in liberal societies. In mid-2003, I spoke with a number of senior officials of OECD member countries about exploring the phenomenon of the “new security economy”. It was clear to me that the overall concept was not fully understood, as it was really a convergence of new trends in our societies. Ever higher performance technologies are providing tools for new goods and services in our economies, including the monitoring, storing and instant retrieval of large data and information sets. Larger relational databases linked to computational capacity are creating new possibilities for the tracking and control of information about goods and services – and about people and the global environment itself. Equally clearly, national security issues were likely to prove an important factor in focusing the interest of governments and the private sector. What we wanted to do in the International Futures Programme was to offer a platform to discuss the future of the security economy, its components and its drivers, both in the private and in the public sector. A first step was to develop a framework for the concept itself. To provide the necessary input at an early stage, we produced a scoping document defining and outlining the type of issues that were emerging from this convergence of technologies and new security needs. We then proceeded with the design of the Forum meeting itself, on the basis of which we invited the presentations and papers. We held the Forum on December 8, 2003 in the Paris Headquarters of the OECD. The meeting consisted of four sessions. The first reviewed the social, economic and institutional drivers behind the rising demand for security and sketched out the trends and developments likely to determine its future scale and direction. The second session looked at the supply side, outlining the state of the art in several key technologies in identification, authentication and surveillance and exploring their likely development over the next ten years or so. The third examined the longer-term economic implications of the emerging security economy. It addressed key trade-offs in the coming years between greater security on the one hand and economic efficiency on THE SECURITY ECONOMY – ISBN 92-64-10772-X – © OECD 2004 3 FOREWORD the other, and explored the roles that governments and the private sector might play in helping to resolve these trade-offs. The fourth and final session considered the mid- to long-term implications for society of the growing use of security technologies. More specifically, it was about the future of the “surveillance society” and what can be done to guide the development and utilisation of identification and monitoring technologies along avenues that society regards, on balance, as generally most beneficial. Barrie Stevens designed and organised the meeting, and contributed the report’s first two chapters. Jack Radisch conducted the initial scoping of the concept and issues. Research assistance was provided by Marit Undseth, and logistical support by Concetta Miano. Randall Holden edited this volume. The book is published under the responsibility of the Secretary-General of the OECD. Michael W. Oborne Director, Multi-Disciplinary Issues, OECD International Futures Programme 4 THE SECURITY ECONOMY – ISBN 92-64-10772-X – © OECD 2004 TABLE OF CONTENTS Table of Contents Chapter 1. The Emerging Security Economy: An Introduction by Barrie Stevens ...................................................................... 7 Chapter 2. Factors Shaping Future Demand for Security Goods and Services by Barrie Stevens ...................................................................... 17 Chapter 3. Biometrics by Bernard Didier...................................................................... 35 Chapter 4. RFID: The Concept and the Impact by Steve Hodges and Duncan McFarlane ................................. 55 Chapter 5. Tracking by Satellite: GALILEO by René Oosterlinck................................................................... 77 Chapter 6. Security Products: Inside the Italian Electronic Identity Card by Alfio Torrisi and Luigi Mezzanotte ...................................... 91 Chapter 7. Assessing the Economic Trade-offs of the Security Economy by Tilman Brück........................................................................ 101 Chapter 8. Surveillance Technologies: Trends and Social Implications by David Lyon ........................................................................... 127 Annex: List of Participants.................................................................. 149 THE SECURITY ECONOMY – ISBN 92-64-10772-X – © OECD 2004 5 ISBN 92-64-10772-X The Security Economy OECD 2004 Chapter 1 The Emerging Security Economy: An Introduction by Barrie Stevens OECD Secretariat, Advisory Unit to the Secretary-General

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