Banking crisis averted?

Credit Suisse fiasco; damning Met report; dystopian AI; migration and welfare; keeping the Elgin Marbles; rational optimism; are Tories catching up?; Dutch populist poll win; Johnson before Parliament

We think conservatives need to talk more and get better at sharing ideas. So here we share the best newspaper columns, policy reports and books that will stimulate thinking and promote new ways of doing things.

The Conservative Reader is published every Friday lunchtime, so please do look out for it. And expect plenty of content about the things we think make conservatism such a compelling body of thought: identity and belonging, community and commitment, market economics, national resilience and good government.

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Best wishes, Nick and Gavin

Towering columns

In The Times, Juliet Samuel says major reforms are needed to banking to avoid future taxpayer-funded bailouts:

What reforms would make the system more stable? Broadly, two types. The first relates to how conservatively banks run their balance sheets. Given there are large slices of bank activity that governments simply won’t allow to fail, such as payments and deposits, we ought to require banks to finance these divisions safely so their activities can continue even in extreme conditions. If governments are really not prepared to let customers lose any deposits, no matter how big they are, they need to make banks play it ultra-safe with them.

The second type of reform required is structural. Essential activities should be financed separately from the parts of the business that make the bank money (investing, borrowing and lending) but which are inessential to the wider economy. If these two types of activity were untangled it would be easier to let the non-essential part go bankrupt. We would be much closer to abolishing bailouts once and for all.

We would be closer, but there would still be one element missing. That element is the willingness of us — voters and politicians — to take some level of risk in order to stop banks free-riding on taxpayers.

And in The Telegraph, Roger Bootle says the Credit Suisse fiasco was far from unforeseeable:

You cannot say that there haven't been warnings of problems ahead. Many commentators have argued that interest rates were kept too low for too long and that this would sow the seeds of the next financial crisis.  Let us hope that last week’s financial worries will blow over. If they don’t, we can expect the central banks to step in powerfully with liquidity support and perhaps with lower interest rates. But they shouldn’t take rates all the way down to near-zero, let alone into negative territory, as was contemplated here not long ago.

Yet with public debt ratios so high, there is a limit to how much support looser fiscal policy can provide. This means that every effort should be made to boost the economy without spending much public money by reforming the tax system to improve incentives and relaxing the burden of regulation on the real economy.

When the financial system has become misaligned there is usually no easy way out of it. The lesson of the financial crisis and the current situation is that it is better not to get into this position in the first place.

We need strong ethical boundaries for AI development to avoid a dystopian future, argues Rana Foroohar in the Financial Times:

One thing we already know is that AI could allow bad actors to pose as anyone, anywhere, anytime. “You have to assume that deception will become far cheaper and more prevalent in this new era,” says Weyl, who has published an online book with Taiwan’s digital minister, Audrey Tang. This lays out the risks that AI and other advanced information technologies pose to democracy, most notably that they put the problem of disinformation on steroids.

The potential ramifications span every aspect of society and the economy. How will we know that digital fund transfers are secure or even authentic? Will online notaries and contracts be reliable? Will fake news, already a huge problem, become essentially undetectable? And what about the political ramifications of the incalculable number of job disruptions, a topic that academics Daron Acemoglu and Simon Johnson will explore in a very important book later this year.

One can easily imagine a world in which governments struggle to keep up with these changes and, as the Harvard report puts it, “existing, highly imperfect democratic processes prove impotent . . . and are thus abandoned by increasingly cynical citizens”.

But on his Substack, James Pethokoukis says being shackled to the Precautionary Principle may hold the West back:

The China piece of this may be the most important. No American policymaker wants to be in the position of President Eisenhower when the Soviets successfully launched the Sputnik satellite in 1957. And such a technological surprise would be far more significant if it involved China not only taking a clear AI lead but also developing the first human-level artificial general intelligence.

…A more pro-progress approach to invention and innovation is the Proactionary Principle. It views risk first as an opportunity for learning and improvement, rather than a threat to be avoided or minimized. If you’re too safe, you might be sorry! Here’s one definition: “Encourage innovation that is bold and proactive; manage innovation for maximum human benefit; think about innovation comprehensively, objectively, and with balance.” The Proactionary Principle keeps the concept of opportunity cost — the cost involved in any decision consists of the sacrifices of alternatives required by that decision — front of mind in decision-making.

An example: The Human Genome Project was a massive scientific endeavor that aimed to map and sequence the entire human DNA. It was launched in 1990 and completed in 2003, despite many ethical and social concerns about the implications of such knowledge for human dignity, privacy, identity, health, and diversity. The project was driven by the Proactionary Principle of advancing human understanding and potential through genetic research.

Patrick O’Flynn shows on his Substack that migrants are disproportionately occupying Britain’s depleted social housing stock:

[I]t cannot be a good idea to import people from other nations to take up social housing in the UK ahead of our own citizens. And given all we hear from the pro-mass migration zealots about the alleged economic boon provided, one would expect to find a very low take-up rate for social housing among migrant groups.

Yet this turns out not to be the case. Figures from the Oxford Migration Observatory show that the proportion of foreign-born UK residents living in social housing is actually slightly higher overall than for UK-born citizens, 17 per cent compared to 16 per cent.

…It strikes me that British governments could tackle this ludicrous situation in two ways. The first would be to ensure that we stop importing impoverished economic migrants to do low-paid work and ensure that only those with high-salary job offers get to move here. The second is to legislate for some form of citizen preference in the allocation of council and housing association properties.

Wonky thinking

Baroness Casey published a damning report on behavioural standards and internal culture at the Metropolitan Police:

Of course I accept that so many police officers go to work for the right reasons. They are committed to public service, and I thank them for that. But policing needs to accept that the job can also attract predators and bullies – those who want power over their fellow citizens, and to use those powers to cause harm and discriminate. All of British policing needs to be alive to this very serious risk. It needs to keep them out when they try to get in, to root them out where they exist, and to guard against the corrosive effects that their actions have on trust, confidence and the fundamental Peelian principles of policing by consent.

I am unconvinced that police forces are fully alive to that risk, nor that the Met fully understands the gravity of its situation as a whole. If a plane fell out of the sky tomorrow, a whole industry would stop and ask itself why. It would be a catalyst for self-examination, and then root and branch reform. Instead the Met preferred to pretend that their own perpetrators of unconscionable crimes were just ‘bad apples’, or not police officers at all. So throughout this review, I have asked myself time and again, if these crimes cannot prompt that self-reflection and reform, then what will it take?

In a report for Policy Exchange, The Elgin Marbles: Keep, Lend or Return?, Sir Noel Malcolm argues that the British Museum should not lend precious antiquities to a country that does not recognise its legal and valid ownership of those objects:

Greece was recognised as independent state in 1832, and in April of the following year the last units of the Ottoman army left the Acropolis. It is easy to say that if only Elgin had known, in 1801, that the departure of the Ottomans was just 32 years away, he could have forborne from rescuing the Marbles in the way that he did. But of course he did not know that; and besides, it is not as if those intervening decades were free of risks to the Parthenon building. During the initial revolt in 1821, Greek forces used artillery and mortars to shell the Acropolis; ‘for a time, 30 mortar bombs were lobbed into the Acropolis every day, including one timed to coincide with Muslim evening prayers.’

In 1826-7, when the tables were turned and it was the Greeks who were the defenders, the Ottoman besieging force bombarded the Acropolis for just under a year; in the month of August 1826, for example, the Ottoman artillery fired 2,120 cannon balls and 356 bomb and howitzer shells. According to St Clair, at one point the leaders of the Greek defending force apparently threatened that, if they did not receive support from the rest of Greece and from Europe, they would blow up the Parthenon in a symbolic act of self-immolation. In the event, the Erechtheion was largely demolished by the bombardment, but the Parthenon, although ‘battered’ and scarred in many places, suffered no major structural harm; whether some of the sculpted stones removed by Elgin would have been damaged had they still been in place is hard to say, but it must be regarded as very likely.

Book of the week

We recommend Matt Ridley’s The Rational Optimist: How Prosperity Evolves. Despite present crises and rising pessimism, Ridley reminds us to focus on the big picture - the world is getting better:

Since 1800, the population of the world has multiplied six times, yet average life expectancy has more than doubled and real incomes has risen more than nine times. Taking a shorter perspective, in 2005, compared with 1955, the average human being on Planet Earth earned nearly three times as much money (corrected for inflation), ate one-third more calories of food, buried one-third as many of her children and could expect to live one-third longer. She was less likely to die as a result of war, murder, childbirth, accidents, tornadoes, flooding, famine, whooping cough, tuberculosis, malaria, diphtheria, typhus, typhoid, measles, smallpox, scurvy or polio. She was less likely, at any given age, to get cancer, heart disease or stroke. She was more likely to be literate and have finished school. She was more likely to own a telephone, a flush toilet, a refrigerator and a bicycle. All this during a half-century when the world population more than doubled, so that far from being rationed by population pressure, the goods and services available to the people of the world have expanded. It is, by any standard, an astonishing human achievement.

…The rich have got richer, but the poor have done even better. The poor in the developing world grew their consumption twice as fast as the world as a whole between 1980 and 2000. The Chinese are ten times as rich, one-third as fecund and twenty-eight years longer-lived than they were fifty years ago. Even Nigerians are twice as rich, 25 per cent less fecund and nine years longer-lived than they were in 1955. Despite a doubling of the world population, even the raw number of people living in absolute poverty (defined as less than a 1985 dollar a day) has fallen since the 1950s. The percentage living in such absolute poverty has dropped by more than a half - to less than 18 per cent…The United Nations estimates that poverty was reduced more in the last fifty years than in the previous 500.

Quick links

Boris Johnson told MPs he did not knowingly mislead Parliament over “Party-gate”.

The Government won a major vote on the Windsor Framework.

The Tories have cut Labour’s lead from 23pts to 10pts, according to one poll.

Two-thirds of voters think stopping small boats is “very” or “fairly” important.

There are now 140,000 pupils severely absent from school.

120 lawyers will refuse to prosecute climate protestors who break the law.

International law firms will be allowed to return to India.

An 81-year-old Tory councillor has been suspended for objecting to “Pride sex flags” on Facebook.

The populist Dutch farmers’ party came first in provincial and Senate elections.

Liberal women are more likely to suffer mental health problems.

Muslims are four times more likely to live in overcrowded homes.