-Analysis-
The detention of Telegram CEO Pavel Durov in France for refusing to cooperate with the police has sparked intense debate about the balance between freedom and security and the responsibilities of a business. The police believe that because Durov refuses to moderate content in the platform’s chats and groups where scammers operate, drugs are distributed and child pornography and terrorist propaganda are spread, then he is an accomplice.
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But another important question has been swept under the rug: Why should businesses be doing any of this at all?
While traveling in Japan, I was impressed by the operations of a railroad crossing: the barrier closes, 5 to 10 seconds pass, the train hurtles past and the barrier rises before the last car has even gone by. Remembering the hundreds of hours spent at railroad crossings in Russia, I wondered who decided, and why, that the significantly longer intervals before and after Russian trains cross are worth the loss of millions of hours a day in traffic jams at intersections.
If drivers were asked to vote on how long the delay should be between the time a train arrives or passes and the moment the barrier is lowered or raised, they would not choose the current intervals. They are the ones who lose their time and are also those most willing to ignore a negligible (that is, a fraction of a percent) increase in the risk of dying in an accident to avoid this.
But there are many railroad crossings, and for certain officials in charge of transport and safety, the risk is much greater. Not of dying, of course, but of getting into trouble. The drivers pay the cost of officials avoiding this risk.
No choice
If the option existed, I would fly on planes where passengers are allowed to board five minutes before departure without screening. For me, a slight increase in the risk of dying in a terrorist attack is not worth wasting hundreds of hours a year in airports. I would even be willing to pay extra for such tickets to make up for the airline’s heightened cost of insurance and the additional salary for the crew (such pilots and stewards could easily be found).
Yet we do not have alternative flights and airports for people who are not afraid of terrorists. Someone else decided how much I should be paying for the risk of a terrorist attack.
As someone who flies a lot to unusual countries with a Russian passport, I have learned from personal experience that it is much easier to get through passport control when boarding than the control upon arrival. Airlines have repeatedly refused to let me board a flight despite all my documents meeting the requirements of the destination country.
The system is only effective when the one who bears the risks pays for them and determines their price.
This situation has arisen for a simple reason. Bureaucracy, which is supposed to serve public interests, has shifted the risks (and therefore the costs) of deporting illegal migrants to airlines, which by their nature serve private rather than public interests. Excessive bureaucratic red tape could create political risks for any government and, at least in theory, be limited by public discontent.
When this duty is shifted to the airline, responsibility is blurred, and risks and benefits are distributed asymmetrically. It is obvious what the airline will choose when the choice is between paying the costs of my (hypothetical) deportation or my inconvenience due to a canceled trip. It is much more willing than the bureaucracy to pay with public inconvenience to reduce its financial risks.
Tax farming was once a common practice. A private financier paid the state a fixed sum, and then, at his own discretion, squeezed as much as he could out of taxpayers. This allowed the state to solve two problems at once: the corruption of officials and the buildup of public discontent.
It took centuries for the government to recognize the numerous downsides of this practice, and another century to repeat it in precisely the opposite fashion: farming out not income, but possible losses to businesses. The system is only effective when the one who bears the risks pays for them and determines their price. When separating these two matters, one must be prepared for unpleasant side effects.
What can be done?
The system’s costs are optimized if risk reduction is paid by the one who bears it. If the risk bearer shifts the costs of their reduction to others, then the system’s costs increase uncontrollably. There are three ways to act:
First, allow citizens and businesses to decide for themselves how much they are willing to pay to reduce their risks. Where to invest, where to eat, and at what risk level they are willing to travel. In most cases, that is enough. Even considering the recent mass botulism poisoning, most Russians would not willingly pay more than what the regulatory costs of doing business would add to reduce that risk.
The second way to act is through insurance. In cases where the risk is distributed and there is no possibility of personalizing it, it must be sold on the professional market. Many questions — about what fire safety measures should be installed in a building, whether a skyscraper project will withstand an earthquake, what treatment facilities are ecologically sufficient for a given factory — can be decided not by an official, but by an insurance company, which will be obliged to compensate victims for damage from a fire or pollution from its own money at a pre-established rate.
Bureaucratic regulations never keep up with life and technological progress.
The insurance company can define how the cost of insurance will change if certain security measures are taken. When people, on the one hand, are responsible with their money, and on the other, want to earn money, they will not impose requirements that unnecessarily increase costs; however, they can force a businessman who wants insurance to do something that an official would not make them do unless it is written in the rules. Bureaucratic regulations never keep up with life and technological progress.
I would happily insure the risk of my deportation from anywhere as long as I don’t have to constantly explain visa rules to airlines.
Finally, the state itself must do something. In cases where the risk is of a systemic public nature, be it tax evasion or terrorist activity, the state is obliged to implement targeted countermeasures on its own, rather than transfer the costs of reducing its own risks to banks and airports.
These are truisms, and books have been written about them. However, the bureaucratic logic is exactly the opposite. Why give the bread-and-butter duties of fire inspection to some business, yet somehow responsibility for terrorists, illegal migrants or money laundering is safer and easier to shift to a business?
