Editor’s note: This is the second of a three-part serialization of Michael S. Hyatt’s blockbuster new expos?, “Invasion of Privacy: How to Protect Yourself in the Digital Age.” Look for part 3 tomorrow.

You are being tracked by just about anyone who thinks he can sell to you, steal from you or control you. This includes government agencies and big businesses; banks, credit reporting agencies and other financial information resellers; insurance companies, pharmacies and other health-related organizations; political and extremist groups; local retail outlets and marketers; employers and fellow employees; spouses, ex-spouses and potential spouses; lawyers and private investigators; and even common criminals, hackers and practical jokers.

This is not merely an Internet problem. It is true that technological progress in data storage and data transfer has made it possible for others to monitor you more easily and to gather your personal information more speedily. It is also true that communication over the Internet has brought about new ways in which you can be scrutinized. These problems are real.

Nevertheless, the issue is not the Internet per se. Even if you don’t use a computer, your activity is still being tracked, and your identity is vulnerable to those who wish to learn about you for whatever reason. In 1989, long before the Internet was a reality, a stalker was able to find and kill “My Sister Sam” sitcom star Rebecca Schaeffer by using motor-vehicle registration records in California.

Advances in technology are only making the problem worse. We are being tracked with increasing efficiency. We are being tracked more affordably. And we are being tracked more uniformly as various institutions share information with one another.

Many different groups offer rationales for why we need to expect all our personal information to be available to whoever wants it. The two main legitimate proponents of the panopticon are business interests and various government agencies. But professional criminals also benefit from this situation.

Here’s an overview:

Within the law: The corporate perspective

Businesses obviously want to gain new customers and keep the customers they have. To do this, they need information. It is the fuel that drives modern industry. The more information a business has about a prospect or a customer, the more likely it can meet that customer’s needs or shape its promotions to appeal to those needs.

The information about a customer is called a “profile.” It contains both demographic and psychographic data – not only who the person is but also what he does and why he does it. As a business collects more and more data about its customers, it soon discovers that such data are an asset that can be sold on the open market. Businesses now routinely sell customer profiles to anyone who will pay for them. This has become a big problem in some industries, such as financial services. As a result of deregulation, one company can offer a full range of financial services: banking, insurance, investment brokerage and direct marketing. Thus, the lure of “one-stop shopping” allows a single company to know a customer ‘s entire financial situation.

This information can be, and sometimes is, used to exploit the customer. For example, U.S. Bancorp in Minnesota sold the personal account information of its customers to a telemarketing company for over $4 million plus a 22 percent commission on whatever sales were generated from the database. As the Minnesota attorney general’s office reported:

“[U.S.Bancorp] provided MemberWorks Inc. with the following information for its customers: name, address, telephone numbers of the primary and secondary customer, gender, marital status, homeownership status, occupation, checking account number, credit card number, Social Security number, birth date, account open date, average account balance, account frequency information, credit limit, credit insurance status, year-to-date finance charges, automated transactions authorized, credit card type and brand, number of credit cards, cash advance amount, behavior score, bankruptcy score, date of last payment, amount of last payment, date of last statement, and statement balance.”

Above the law: The government’s perspective

In our society, government is responsible for punishing criminals, protecting citizens and preventing crimes – and for any number of other services. The government has used this as a rationale for all sorts of information gathering and surveillance. We are constantly being tracked by Big Brother through a variety of means – birth certificates, tax forms, motor vehicle registration, marriage certificates, voter registration, property records, court records, arrest records, divorce records, death certificates and on and on.

Even where the government is entrusted to protect privacy, it does not reliably do so. Laws protecting privacy are helpful only if they are obeyed and enforced. For instance, an Ohio public school sold information to a bank about some of its students, enabling the bank to solicit business from the parents – despite the fact that it is illegal for public schools to provide such information to anyone without the parents’ consent.

Casual record keeping and failure to comply with the law are just part of the problem. Various government projects systematically invade our privacy. The National Security Agency (NSA), for example, has developed Echelon, a comprehensive spy network that monitors communication around the world. The Treasury Department has formed FinCEN, a network for retrieving personal financial information in real time. The FBI is now deploying Carnivore, a program that intercepts and reads e-mail on a mass scale.

Of course, many would not argue with the government’s desire to protect us by stopping violent crime before it happens or to prevent money laundering, drug trafficking, tax evasion and so on. But what happens when government agencies invade our individual rights? We are losing our privacy to the government, and in the process, we are falling under its control.

More and more we find that we must simply depend on unaccountable government agencies not to violate our rights.

Outside the law: The criminal perspective

The government and even some private industries consider access to our personal information an important way to prevent, detect and solve crimes. But even if that were true, a concern is that the information superhighway is not restricted to authorized drivers. Criminals can, and do, use the panopticon to gain the information and control necessary to exploit others. In other words, the very means that the government and businesses employ for security purposes can actually lead to crime.

Perhaps the most egregious example of this sort of “safety equals vulnerability” equation is the ubiquitous Social Security number and its use in stalking and identity theft. As we saw with Amy Boyer, the Social Security number is a magic key that gives stalkers access to almost any other information they wish to have. (The other key is the target’s name plus date of birth.) The Social Security number – which predators can get through theft, fraud or hacking – also allows identity thieves to impersonate their victims, putting them into debt and committing other crimes under their names. The information superhighway, so efficient at spreading information, ruins the reputation of victims of identity theft; reports are spread to credit and law enforcement agencies of debts the victims never incurred and crimes they never committed.

Victims report that both police and credit officials often treat them as perpetrators. One victim wrote: “I sent them a signed statement. Then they wanted a notarized statement so I sent them that. Then they wanted copies of my driver’s license and my passport or Social Security card. After I would send each item, they would demand more and more. I didn’t want them to have copies of my driver’s license or passport. I felt they were careless in letting anyone open an account in my name, and I didn’t feel safe giving my personal information to them. It took three years before they finally removed the negative rating they had placed on my credit. I couldn’t buy a car or get a student loan, and I was in school. I was considered guilty until proven innocent. Finally they removed it, but only because I called them for the thousandth time and lost it over the phone.”

When 19-year-old Sarah learned that she was being accused of trying to cash stolen checks, she did not understand how it could have happened. Her purse had been stolen 10 days earlier, but everything had been returned to her. Later, it occurred to her family that their car had been stolen the previous year, and Sarah’s license had been inside the car. However it had happened, Sarah’s identity had been stolen. Using false identification based on Sarah’s Social Security number and possibly other information from stolen credit cards or checks, someone was now able to pass herself off as Sarah and use her identity to commit other crimes.

Even though Sarah had testimony corroborating her whereabouts, and even though she did not look like the woman posing as her, the police put more trust in the identification than in eyewitness testimony or any other evidence and insisted on pressing charges. For over six months, Sarah’s family had to endure these criminal accusations. A judge finally dropped the charges, but not before the family had had to incur the expense of an attorney, and not before her mother was forced to see a specialist to treat a painful case of lockjaw that resulted from the stress of watching her daughter’s name dragged through the mud.

Lest you think that Sarah’s is an isolated case, be aware that identity theft is an increasingly common crime, one that feeds off the environment of surveillance in which we live.

Tomorrow: Is technology the problem?

Read Part 1: Why personal secrets are no more

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Purchase Hyatt’s book, “Invasion of Privacy: How to Protect Yourself in the Digital Age.”

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