Privacy activists have convinced Americans that their personal information is under attack, according to sociologist Amitai Etzioni. As a result, he says, policymakers sometimes place privacy ahead of more pressing concerns such as public health and safety.

In his latest book, "The Limits of Privacy" (Basic Books, 1999), Mr. Etzioni argues that there is a "paradox" in the privacy debate, with the principle of privacy often being "privileged over the common good."

Government experts should be able to unscramble encrypted messages sent by people suspected of being terrorists, he says, and babies should be routinely tested for HIV whether their mothers consent or not. Too many potential safeguards-like a system of national identification cards, which many European countries use-are brushed aside in the United States for privacy reasons, he contends.

Mr. Etzioni, 70, is university professor at George Washington University in Washington, D.C. He has taught at Harvard and Columbia universities, was a senior White House adviser, and is the founder of a social philosophy, communitarianism, which affirms that a good society seeks balance between individual rights and societal prerogatives.

In a recent interview with Jennifer Kingson Bloom of American Banker, Mr. Etzioni discussed how his beliefs about privacy apply to banking.

Are U.S. banks making their best efforts to safeguard customers' privacy?

ETZIONI: Yes, but I don't think the banks have made nearly as strong a case as they should letting the public know this. They should be telling the world that privacy is not all gone, that there are new and powerful defenses.

If you are John Q. Public and you don't spend a lot of time tracking these things carefully, you keep hearing a drumbeat that privacy is lost. I don't hear anyone like the banking community coming and saying, "No, it's not all down the river-to the contrary, I provide you with a hard new technology." Banks should be saying, "When we transfer funds, we use top- of-the-line encryption, therefore your privacy is very well protected."

They need to reassure the public not by spreading warm words-though that wouldn't hurt either-but by giving chapter and verse, assuring the public that they're much better protected than the public thinks. It's more of a public relations issue than a legislative issue.

Banks-more than any other institution but the government-depend on trust, and if people's trust is broken, it's very difficult to rebuild it. The diamond is cracked, so to speak. By making it clearer that it's very far from all lost, we would be way ahead of the game.

How has the Internet changed the terms of the privacy debate?

ETZIONI: I like to think about it like an arms race, where on the one hand there are new weapons of attack on privacy, but there are also on the other hand new defense weapons.

People often talk about the end of privacy, and there have been headlines about the death of privacy. Even though there are new tools of attack, we should not disregard the tools of defense, the most important of which is hyperencryption, which banks use a lot. This is a stronger privacy than we had 10 or 20 years ago, because even the government cannot crack top-of-the-line encryption, which is what we use.

Another technology that is going to serve as a privacy protection is biometrics. I think this is going to move very fast now that the cost of the scanners has come down. With biometric identification, it will be much more difficult to steal your identity.

Will the public protest biometric identification?

ETZIONI: All these matters are controversial the first time around, and then we rapidly adjust to them. One has to take a bit of a breather before one runs for cover every time there is a fuss.

When the story came out that Intel and Microsoft had put (traceable serial) numbers into a computer, there was an enormous to-do and a storm of protest. Then the Melissa virus came, and it turned out that the same guy who ran a campaign against Microsoft ended up using that number to catch the hacker. For good or bad, we very quickly come to terms with these technologies, and they surely should not be judged by the first fuss.

U.S. businesses are opposed to the European Union Data Protection Directive, which requires companies doing business in some European countries to ask consumers' permission to collect information about them. Is the directive good policy?

ETZIONI: There is a lot of hot air about it. They passed the data protection laws-notice they avoid using the term "privacy"-and I don't think they implement them. If they did implement them, half of commerce in Europe would come to a stop.

We do this often. We pass a law to please half the political spectrum, then we don't enforce it to please the other half. I wrote an article on the European directive and I called everybody I knew in Europe, and I couldn't find anyone who was ever asked by the industry anything. It is at the moment a hot issue, and it is especially important to institutions like banks that have international branches.

I'm not sure if it's technically possible to limit secondary use of information for benign purposes, like targeting advertising for shoes or chewing gum-or even mutual funds or bank accounts. That does not trouble most of us.

But to the degree that information can be used to find out about your HIV status, for instance, or whether you take an antidepressant, and to the degree that it is used for firing people, then we get into very dangerous territory. In one case, a bank called the loan of someone who had cancer.

I think that type of activity will backfire against everybody. It is going to make citizens rise up in arms-and once they do that they are not very subtle, they may not distinguish between these kinds of data. And it will greatly reduce the trust we have in financial institutions.

I don't think banks should take it lightly when personal information is used beyond the standard marketing of consumer goods-and I include in consumer goods financial products.

In modern bank call centers, if you as a customer call to find out your balance, a pop-up screen might appear in front of the service representative saying that you have a child of college age, and suggesting you be offered an educational loan or some other product. What do you think about information being used this way?

ETZIONI: In the example you gave, if somebody uses information about me to market a product, I can simply say "No." It would bug me for a second. But a minute later I would say, maybe I would have not thought about (the product) otherwise.

But if I find out that information is used to fire me or to call in a loan-perhaps because you're using medical information and somebody knows I'm sick-then I think you're going to get an enormous backlash. The difference is when the actions being taken are severely to my disinterest, and marginally to the benefit of the bank.

In your book, you argue that strong measures should be taken to ensure the privacy of medical records, and you point out that at least one credit bureau is selling medical information. Do you think the credit bureaus use information responsibly?

ETZIONI: The credit bureaus at least have some mechanism in place whose purpose is to make sure that the information is used for legitimate purposes. The credit bureaus say that when you buy this information from them, you make a contract, agreeing that you use it for certain purposes.

But when it comes to the Internet, there are brokers who specialize in selling financial information, and they have no such convictions. I think they need to be reined in, but I'm not sure necessarily by the government. I could see a voluntary, industry-enforced standard that would protect us all better than we are being protected now.

Do you do on-line banking, or put your credit card number on the Internet to buy things?

ETZIONI: No, but then I am old-fashioned. I'm too aware that Internet messages zoom around the world into God-knows-who's computer, and are very easily retrievable. They're much more open than phone lines.

I know with my credit cards that I have a contract and the maximum loss is $50. I don't know what happens if I send money over the Internet and it gets lost. I didn't look into it. Until USA Today did a story about it recently, I wasn't even aware that Internet banking was flourishing.

Many people I know will not give their credit card numbers on the Internet-they don't trust the Internet-and not completely without reason. That feeling could spill over into a general feeling about financial institutions (if personal information is abused), and I think everybody would be the loser.

Do you favor the use of smart cards, either for stored value or as repositories for medical information?

ETZIONI: No to the first use, and yes to the second.

If I use my credit card, why do I need another card? I agree with what my two-penny sociology tells me, that if you market something for which there is no need, you will not find a purchaser. I am happy at the speed at which my credit card works, and I would not want a smart card for that purpose.

But smart cards could be extremely useful. In my chapter on medical records, I basically argue we should introduce them. If I have my medical records in my smart card, then instead of all the information being in everybody's computer, I have it in my pocket. Until I turn my card over to the person, they will not have access to it.

I'm all in favor of them, but you see, it's not enough that they make sense. They have to be marketable, and unless we find a way out there that people will see the need and you will not mobilize enormous resistance, I don't think they are going to come into play. I haven't heard yet from the public that it would be really attractive to them.

When you talk about medical information, you raise a host of issues. The one thing that makes it politically intolerable-and my wife is a physician- is that a doctor does not want other doctors routinely to see what they did. Because of lawsuits, because of incompetence, the notion that your medical record in effect becomes visible to anyone you want to show it to- I'm not surprised it's not taking off.

Have you gotten much heat from the views expressed in your book?

ETZIONI: This is my 19th book, and I thought it was about as controversial as it gets-ID cards and such. I was thinking of temporarily leaving the country when it was published.

So far, I got the most raves I ever got. The tone they all strike is that this is a balanced book, it's not extreme, and that it's what we need, something sensible in the middle. So maybe it came out just in time, when people from both extremes got tired of shouting at each other and they're looking for some kind of a middle ground.u

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