Time to embrace artificial intelligence

Brexit freedom and AI; the diffusion of tech; CPTPP opportunity; illegal migration; respectable conspiracy theories; insufficient investment; grooming gangs; remembering a Tory titan

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.

You can find more about what we think on Twitter here and here.

Best wishes, Nick and Gavin

Towering columns

In The Times, Juliet Samuel says Britain should use its Brexit freedom to get on with the opportunities of artificial intelligence:

Into this frenzy of innovation, enter governments. Last week, Italy’s data protection agency banned ChatGPT until further notice… Even tech industry bods are trying to stuff Schrödinger’s cat back in the bag. More than a thousand, including Elon Musk and Apple’s co-founder Steve Wozniak, recently called for a six-month “pause” in AI development to allow for new “safety protocols”. Even supposing this could be achieved (it can’t), does anyone genuinely think government bodies like the EU can revise relevant legislation in the time available? GDPR took seven years to develop. Yet until Brussels can do so, the use and development of AI in Europe will exist in a legal twilight zone. In the long run, this simply means the technology will be deployed illegally without any safeguards, as Italy will soon discover.

Fortunately, although the UK is currently subject to GDPR and in theory bound to keep it by some very flimsy trade deal clauses, our government is largely free to revise the regulations to suit the real world. In practice, this means developing a regime that lets businesses, government bodies and charities, both large and small, adopt this powerful technology while obeying new rules for its use and paying severe penalties for breaking them. The current system, which views data purely as a personal asset, must change to accommodate the fact that data is in fact most valuable as a collective asset and that we all stand to gain massively from its use.

Its use does need to be governed, however. For example, no body should be able to outsource critical functions to AI, such as assessing insurance claims, calculating tax owed or marking exams, without retaining a way to check the results. Biases and inaccuracies should be frequently assessed. And it ought to be transparent when and how AI is being used in sensitive roles.

At The American Conservative, Michael Lind says industrial strategy requires the diffusion of technology - and that requires the state to step in:

At each stage a different division of labor is appropriate. In the early phases of the industrial revolution, individuals such as James Watt and Alexander Graham Bell were important in the invention phase. By the time of Thomas Edison, in the second industrial era, large laboratories inside corporations or funded by them were necessary for breakthroughs. Increasingly, basic research in science and technology in areas from rocket technology to biotechnology is so expensive that only the deep pockets of governments of large nations like those of the United States and China can fund them. 

In the innovation phase, the initiative shifts to entrepreneurs backed by venture capital… In the information age, individuals such as Steve Jobs and Bill Gates commercialized and found new uses for computer technology originally developed in the invention phase for military purposes with Pentagon funding by research universities and large corporate labs such as Xerox’s XPARC and ATT’s Bell Labs.

But government plays a role once more in the diffusion of new technology – the next phase of development of what Schumpeterian economists call a “technoeconomic paradigm.” The early adoption and modification of innovative technologies often occurs in industries that are naturally concentrated with large firms possessing deep pockets, such as manufacturing and telecommunications. It is a much greater challenge to apply new technology to boost productivity growth in “laggard” sectors. These sectors are often labor-intensive and dominated by many small firms subjected to fierce competition. Their low profit margins do not permit them to engage in the kind of private, internal “product and process” R&D that large corporations can afford.

In The Daily Telegraph Ambrose Evans-Pritchard says British accession to CPTPP kills the idea we might rejoin the EU - and presents a great opportunity:

The EU’s neo-colonial ambitions have reached obvious limits. Its share of global GDP will drop to 14.6pc this year. It is losing roughly one percentage point every three years. Europe will remain a valuable market. Its regulatory apparatus will punch above its weight for a while yet…

The tide is already receding over digital data. Japan, Singapore, and Korea are embarking on their own soft-touch regimes rather than swallowing the EU’s rule-heavy GDPR (General Data Protection Regulation) – a nightmare for small business. 

The CPTPP has a “trade-driven” philosophy. Its chapter on small business is designed to promote easy access to information for start-ups and hi-tech firms, rather than seeking to restrict it. The pact reduces the burden of rules of origin in cross-border commerce to the absolute minimum with self-certification and paperless trade, unlike the bureaucratic overkill of the EU’s customs regime - sheer torture for small British exporters trying to ship goods across the Channel…

Britain’s pro-Brussels camp has always ridiculed UK’s Pacific tilt as grandstanding, an implausible attempt to put flesh on the bones of Global Britain. The Pacific is far away and the volumes are trivial. The canonical ‘gravity’ model of trade is solemnly invoked, even though it has less traction in the digital age. We are told that the CPTPP can never be a swap for lost EU trade. But it is not intended to be a swap. It is better understood as a direct challenge to the EU’s protectionist trade doctrines. It is an attempt to assert a rival Peelite doctrine of open global trade. It is a bid to seize intellectual leadership as the paralysed World Trade Organisation enters its agonies.

At CapX, Blair Gibbs argues that while the Rwanda deportation plan is necessary, “downstream responses are totally insufficient” to fight illegal immigration:

First, we need to concentrate Whitehall resources on the ground and have proper local join-up in Kent. Whether this is Dover or somewhere else, we need co-located teams of police, border force, migration caseworkers and judges, ideally working out of a dedicated government site. The Immigration Minister’s office should be based there, and the Home Secretary should visit every fortnight.

This facility wouldn’t be a pop-up, but should be future-proofed as a permanent Whitehall presence because this issue will require a local footprint for at least the next decade. A group of specialist immigration judges should be rostered to work from a dedicated asylum court that is open at night and at every weekend to swiftly hear cases (if need be we can boost their pensions to compensate).

Second, especially given the lack of dedicated accommodation ready to make the Government’s deterrent policy work, we need better monitoring. It seems incredible that we seem so relaxed about the numbers absconding. Once deportation to Rwanda is an imminent prospect, keeping tabs on Channel migrants will be even harder, and they will have every incentive to disappear into the underground economy, never to be seen again.

On Quillette, Christopher Snowdon examines the rise of the respectable conspiracy theory:

Conspiracy theories in general are low status… they are a way for the marginalised and uneducated to feel superior and perceptive. And yet there are a number of baseless conspiracy theories that are considered to be almost a given in high-status discourse. In Britain, there is no stigma attached to people who believe that the Conservatives are planning to privatise the NHS. You have nothing to fear from claiming that the Russian government somehow brought Brexit about…

They come and go, these upper-normie conspiracy theories, but no one’s reputation is damaged by propagating them. Tom Watson was recently elevated to the House of Lords despite having been the figurehead of a deranged movement aimed at “exposing” a nonexistent VIP paedophile ring at the heart of government… [The same] claims were also energetically promoted by the tub-thumping radio presenter James O’Brien. O’Brien is LBC’s equivalent of GB News’ Neil Oliver, muttering darkly about the deep state. The difference is that Neil Oliver is widely considered to be a risible figure as he stares at the viewer with dark-session energy and outlines his latest paranoid beliefs about the New World Order. O’Brien, on the other hand, has been described by the New Statesman as “the conscience of liberal Britain” and has over a million followers on Twitter…

Conspiracy theories are, in every sense, for losers. When your side is losing in ways that you find inexplicable, extraordinary explanations become appealing. The centrists and the sensibles who hold high-status opinions went a long time without losing, but in the past decade have suffered several major defeats. At the same time, conspiratorial thinking has entered the mainstream like never before. Is this a coincidence? A conspiracy theorist would say that there is no such thing as a coincidence and, in this instance, they would be right.

Wonky thinking

In Cutting the Cuts, published by the Resolution Foundation, Felicia Odamtten and James Smith show that Britain is a low-investment country, and argue that public investment needs to increase:

On an internationally comparable basis, UK public investment has averaged 2.5 per cent of GDP this century. This is low compared to peer economies and estimated optimal levels; it is also visible in poor outcomes, and is ultimately unsustainable. The average OECD advanced economy has seen public investment of 3.7 per cent of GDP a year since the turn of the century, nearly 50 per cent more than in the UK. As with total investment, this low public investment norm is persistent: we have been in the weakest third of OECD countries for three in every four years this century (14 out of 19 years). Had we seen OECD average levels of public investment over those two decades, we would have invested around £500 billion more (in 2022 prices). Our levels of public investment are not just lower than other countries, they are also lower than might be expected given the role that public investment has in boosting private-sector output. Based on crosscountry studies of that effectiveness, governments should be investing around 4.5 per cent of GDP.

Public investment is for a purpose, and the lack of it has clear consequences. It has, for example, affected our health, with UK hospitals having fewer beds than all but one OECD countries, and fewer MRI machines than all but four. It has held back our economy, through poor transport links and significant congestion: UK workers spend more time commuting than those in all but two OECD countries. And it has affected how much housing we can enjoy, and how much we pay for it: the stock of affordable homes relative to the number of families has fallen by around 40 per cent since the 1980s.

Such low investment is not sustainable. Combining low investment with fairly normal borrowing levels and repeated economic shocks has meant steep declines in public sector net worth – the most comprehensive measure of what governments own and owe – which has fallen by more than 50 per cent of GDP over the past two decades. Indeed, public sector net worth has not just fallen – it is actually negative with the Government’s liabilities larger than its assets (at around 90 per cent of GDP), with only one other country (Portugal) for which comparable data exists managing to do worse.

Following the announcement of new policies to take on grooming gangs - and the response by many on the Left to deny that ethnicity has been a factor in many grooming gang crimes - we recommend the 2014 report by Alexis Jay, and the 2015 Report of Inspection of Rotherham Metropolitan Borough Council by Louise Casey. The latter found:

In Rotherham, the phenomenon of CSE emerging from the late 1990s onwards concerned a majority of white, female, adolescent or teenage victims and a majority of Pakistani heritage adult male perpetrators. Early concerns raised about CSE by youth workers and others had also repeatedly mentioned taxi drivers.

This predominant involvement of Pakistani heritage men was certainly the view of all those who Inspectors spoke to who had been close to operational work around street grooming and CSE in Rotherham in the previous 15 years. Victims shared this view. Our review of case files and strategy meetings held about perpetrators and victims as well as other information we came across, confirmed that perpetrators were usually described as being Pakistani men. This was a matter of fact.

However the wider culture in Rotherham we have described meant that from the outset the added dimension of the ethnic background of perpetrators was an awkward and uncomfortable truth which, in the view of the inspection team, affected the way that the Council (and the police) dealt with CSE… Staff perceived that there was only a small step between mentioning the ethnicity of perpetrators and being labelled a racist.

Book of the week

Following the death of Nigel Lawson this week, we recommend Lawson’s memoir, The View From No.11. Here, Lawson argues that macroeconomic policy is the tool to hold down inflation, and it is the hard yards of microeconomic reform that lead to growth - in other words the very opposite of the post-war consensus. But Lawson also makes clear that while he supported a radically simpler tax system, deficit-funded tax cuts are dangerous and foolhardy:

For any given level of public spending, the ideal way of achieving lower marginal rates is not through fiscal drag (or, as the Americans call it, bracket creep) or even by switching to indirect taxes. It is by eliminating privileges and exemptions of all kinds. A good tax system should be broadly based, with low tax rates and few tax breaks. The reason for this is not merely the avoidance of economic distortions, although that itself is important. There is also the practical point that tax breaks are inevitably abused as methods of tax avoidance, which means that the general level of taxation has to be still higher to bring in the required revenue. Moreover, the granting of one tax break inevitably increases the political pressures for others.

The higher rates we inherited when we took office in 1979 were frequently not paid. The well-heeled and well-advised took great pains to avoid liability through the perfectly legal use of tax shelters of one kind or another; and the tax avoidance (its practitioners liked to call it “tax planning”) industry flourished as never before. Needless to say, reducing or eliminating tax breaks is never popular with those who benefit from them. Reform plans here and abroad have foundered on this rock more than once. But the principle is clear: as somebody once said, “If you want the Government off your back, you have to get your hand out of its pocket.”

So long as this approach is persevered with there is a virtuous circle to be had. Reducing or eliminating tax breaks provides increased revenue which can be used to bring down tax rates. Lower tax rates themselves reduce the value of tax breaks. So it is then a little easier to reduce the privileges that remain. This in turn releases more money to reduce tax rates. So just as high tax rates tend to bring with them high tax breaks, lower tax rates go hand in hand with lower tax breaks. Moreover, as high marginal tax rates are brought down, taxpayers will be less inclined to pay expensive accountants to devise complex schemes to reduce their liability or to seek remuneration in non-cash forms. These are among the reasons why a reduction in high marginal tax rates can lead in practice to a significantly smaller loss of revenue than the simple arithmetic would suggest.

This is the true virtuous circle. Some critics have confused it with another kind of virtuous circle promoted by some wishful thinking ultra-Keynesians - and ultra-supply-siders. This is the notion that tax cuts, without any spending cuts or substitute source of revenue will so stimulate the economy that the Budget balance will improve, enabling further tax cuts to be made, and so on. In fact, of course, long before anything like that could happen, the economy would be subject to massive inflationary pressures, and interest rates would have to be raised or tax policy reversed at the cost of severe recession. While excess demand can occur by inadvertence, this spurious kind of virtuous circle was emphatically not part of my thinking.

Quick links

Voters do not rate Keir Starmer, despite Labour’s poll lead.

The SNP chief executive - Nicola Sturgeon’s husband - has been arrested.

British scientific research might not be as strong as we believe.

Industry is now outpacing academia in artificial intelligence research.

The number of businesses experiencing supply-chain disruption is falling.

Briefings for Britain has published a myth-buster on the CPTPP trade deal.

The Equality Act will be changed to protect biological women in same-sex spaces.

The Government has bought a barge to house 500 migrants.

The average American now has the same healthy life expectancy as a resident of Blackpool, the town with the lowest life expectancy in England.