Creeping Toward Dystopia

May 25, 2023 ROBERT SKIDELSKY

Amid the growing excitement about generative AI, there are also mounting concerns about its potential contribution to the erosion of civil liberties. The convergence of state intelligence agencies and surveillance capitalism underscores the threat that artificial intelligence poses to the future of democracy.

LONDON – With investors pouring billions of dollars into artificial intelligence-related startups, the generative AI frenzy is beginning to look like a speculative bubble akin to the Dutch tulip mania of the 1630s and the South Sea Bubble of the early eighteenth century. And, much like those episodes, the AI boom appears headed for an inevitable bust. Instead of creating new assets, it threatens to leave behind only mountains of debt. 

Today’s AI hype is fueled by the belief that large language models like OpenAI’s newly released GPT-4 will be able to produce content that is virtually indistinguishable from output produced by humans. Investors are betting that advanced generative AI systems will effortlessly create text, music, images, and videos in any conceivable style in response to simple user prompts. 

Amid the growing enthusiasm for generative AI, however, there are mounting concerns about its potential impact on the labor market. A recent report by Goldman Sachs on the “potentially large” economic effects of AI estimates that as many as 300 million jobs are at risk of being automated, including many skilled and white-collar jobs. 

To be sure, many of the promises and perils linked to AI’s rise are still on the horizon. We have not yet managed to develop machines that possess the level of self-awareness and capacity for informed decision-making that aligns with most people’s understanding of intelligence. This is why many technologists advocate incorporating “moral rules” into AI systems before they surpass human capabilities. 

But the real danger is not that generative AI will become autonomous, as many tech leaders would have us believe, but rather that it will be used to undermine human autonomy. Both “narrow” and “general purpose” AI systems that can perform tasks more efficiently than humans represent a remarkable opportunity for governments and corporations seeking to exert greater control over human behavior. 

As Shoshana Zuboff notes in her 2019 book The Age of Surveillance Capitalism, the evolution of digital technologies could lead to the emergence of “a new economic order that claims human experience as free raw material for hidden commercial practices of extraction, prediction, and sales.” The increasingly symbiotic relationship between government and private-sector surveillance, she observes, is partly the result of a national-security apparatus “galvanized by the attacks of 9/11” and intent on nurturing and appropriating emerging technologies to gain “total knowledge” of people’s behavior and personal lives.

Palantir, the data-analytics company co-founded by billionaire investor Peter Thiel, is a case in point. Thiel, a prominent Republican donor, reportedly persuaded former US President Donald Trump’s administration to grant Palantir lucrative contracts to develop AI systems tailored for military use. In exchange, Palantir provides intelligence services to the US government and other spy agencies around the world. 

In “A Voyage to Laputa,” the third part of Jonathan Swift’s Gulliver’s Travels, Captain Gulliver comes across a floating island inhabited by scientists and philosophers who have devised ingenious methods for detecting conspiracies. One of these methods involves scrutinizing the “diet of all suspected persons,” as well as closely examining “their excrements,” including “the color, the odor, the taste, the consistence, the crudeness or maturity of digestion.” While the modern state-surveillance apparatus focuses on probing emails rather than bodily functions, it has a similar objective: to uncover plots and conspiracies against “public order” or “national security” by penetrating the depths of people’s minds. 

But the extent to which governments can spy on their citizens depends not only on the available technologies but also on the checks and balances provided by the political system. That is why China, whose regulatory system is entirely focused on preserving the political stability and upholding “socialist values,” was able to establish the world’s most pervasive system of electronic state surveillance. It also helps explain why China is eager to position itself as a world leader in regulating generative AI. 

In contrast, the European Union’s approach to regulation is centered around fundamental human rights, such as the rights to personal dignity, privacy, freedom from discrimination, and freedom of expression. Its regulatory frameworks emphasize privacy, consumer protection, product safety, and content moderation. While the United States relies on competition to safeguard consumer interests, the EU’s AI Act, which is expected to be finalized later this year, explicitly prohibits the use of user-generated data for “social scoring.” 

The West’s “human-centered” approach to regulating AI, which emphasizes protecting individuals from harm, contrasts sharply with China’s authoritarian model. But there is a clear and present danger that the two will ultimately converge. This looming threat is driven by the inherent conflict between the West’s commitment to individual rights and its national-security imperatives, which tend to take precedence over civil liberties in times of heightened geopolitical tensions. The current version of the AI Act, for example, grants the European Commission the power to prohibit practices such as predictive policing, but with various exemptions for national-security, defense, and military uses. 

Amid the fierce competition for technological supremacy, governments’ ability to develop and deploy intrusive technologies poses a threat not just to companies and political regimes but to entire countries. This malign dynamic stands in stark contrast to optimistic predictions that AI will bring abouta “wide array of economic and societal benefits across the entire spectrum of industries and social activities.” 

Unfortunately, the gradual erosion of countervailing powers and constitutional limits on government action within Western liberal democracies plays into the hands of authoritarian regimes. As George Orwell presciently observed, a state of perpetual war, or even the illusion of it, creates an ideal setting for the emergence of a technological dystopia.

FrankenTech

April 19, 2023, Central European University

LONDON – In Mary Shelley’s novel Frankenstein, or The Modern Prometheus, scientist Victor Frankenstein famously uses dead body parts to create a hyperintelligent “superhuman” monster that – driven mad by human cruelty and isolation – ultimately turns on its creator. Since its publication in 1818, Shelley’s story of scientific research gone wrong has come to be seen as a metaphor for the danger (and folly) of trying to endow machines with human-like intelligence.

Shelley’s tale has taken on new resonance with the rapid emergence of generative artificial intelligence. On March 22, the Future of Life Institute issued an open letter signed by hundreds of tech leaders, including Tesla CEO Elon Musk and Apple co-founder Steve Wozniak, calling for a six-month pause (or a government-imposed moratorium) in developing AI systems more powerful than OpenAI’s newly released CHatGPT-4. “AI systems with human-competitive intelligence can pose profound risks to society and humanity,” says the letter, which currently has more than 25,000 signatories. The authors go on to warn of the “out-of-control” race “to develop and deploy ever more powerful digital minds that no one – not even their creators – can understand, predict, or reliably control.”

Musk, currently the world’s second-richest person, is in many respects the Victor Frankenstein of our time. The famously boastful South Africa-born billionaire has already tried to automate the entire process of driving (albeit with mixed results), claimed to invent a new mode of transportation with the Boring Company’s (still hypothetical) hyperloop project, and declared his intention to “preserve the light of consciousness” by using his rocket company SpaceX to establish a colony on Mars. Musk also happens to be a co-founder of OpenAI (he resigned from the company’s board in 2018 following a failed takeover attempt).

One of Musk’s pet projects is to combine AI and human consciousness. In August 2020, Musk showcased a pig with a computer chip implanted in its brain to demonstrate the so-called “brain-machine interface” developed by his tech startup Neuralink. When Gertrude the pig ate or sniffed straw, a graph tracked its neural activity. This technology, Musk said, could be used to treat memory loss, anxiety, addiction, and even blindness. Months later, Neuralink released a video of a monkey playing a video game with its mind thanks to an implanted device.

These stunts were accompanied by Musk’s usual braggadocio. Neuralink’s brain augmentation technology, he hoped, could usher in an era of “superhuman cognition” in which computer chips that optimize mental functions would be widely (and cheaply) available. The procedure to implant them, he has claimed, would be fully automated and minimally invasive. Every few years, as the technology improves, the chips could be taken out and replaced with a new model. This is all hypothetical, however; Neuralink is still struggling to keep its test monkeys alive.

While Musk tries to create cyborgs, humans could soon find themselves replaced by machines. In his 2005 book The Singularity is Near, futurist Ray Kurzweil predicted that technological singularity – the point at which AI exceeds human intelligence – will occur by 2045. From then on, technological progress would be overtaken by “conscious robots” and increase exponentially, ushering in a better, post-human future. Following the singularity, according to Kurzweil, artificial intelligence in the form of self-replicating nanorobots could spread across the universe until it becomes “saturated” with intelligent (albeit synthetic) life. Echoing Immanuel Kant, Kurzweil referred to this process as the universe “waking up.”

But now that the singularity is almost upon us, Musk and company appear to be having second thoughts. The release of ChatGPT last year has seemingly caused panic among these former AI evangelists, causing them to shift from extolling the benefits of super-intelligent machines to figuring out how to stop them from going rogue.

Unlike Google’s search engine, which presents users with a list of links, ChatGPT can answer questions fluently and coherently. Recently, a philosopher friend of mine asked ChatGPT, “Is there a distinctively female style in moral philosophy?” and sent the answers to colleagues. One found it “uncannily human.” To be sure, she wrote, “it is a pretty trite essay, but at least it is clear, grammatical, and addresses the question, which makes it better than many of our students’ essays.”

In other words, ChatGPT passes the Turing test, exhibiting intelligent behavior that is indistinguishable from that of a human being. Already, the technology is turning out to be a nightmare for academic instructors, and its rapid evolution suggests that its widespread adoption could have disastrous consequences.

So, what is to be done? A recent policy brief by the Future of Life Institute (which is partly funded by Musk) suggests several possible ways to manage AI risks. Its proposals include mandating third-party auditing and certification, regulating access to computational power, creating “capable” regulatory agencies at the national level, establishing liability for harms caused by AI, increasing funding for safety research, and developing standards for identifying and managing AI-generated content.

But at a time of escalating geopolitical conflict and ideological polarization, preventing new AI technologies from being weaponized, much less reaching an agreement on global standards, seems highly unlikely. Moreover, while the proposed moratorium is ostensibly meant to give industry leaders, researchers, and policymakers time to comprehend the existential risks associated with this technology and to develop proper safety protocols, there is little reason to believe that today’s tech leaders can grasp the ethical implications of their creations.

In any case, it is unclear what a pause would mean in practice. Musk, for example, is reportedly already working on an AI startup that would compete with OpenAI. Are our contemporary Victor Frankensteins sincere about pausing generative AI, or are they merely jockeying for position?

Can Governments Still Steer the Economy?

Mar 28, 2023 ROBERT SKIDELSKY

Inflation and growth rates are increasingly determined by global events over which national policymakers have no control. Instead of clinging to the illusion that they can control the uncontrollable, governments should use fiscal policy to protect their most vulnerable citizens from disruptive external shocks.

LONDON – In 1969, the British financial journalist Samuel Brittan published a book called Steering the Economy: The Role of the Treasury. At the time, it was still widely assumed that the United Kingdom’s economy was steerable and that the Treasury (which was still in charge of monetary policy) was at the helm.

Back then, the Treasury’s macroeconomic model, which calculated national income as the sum of consumption, investment, and government spending, effectively made the budget the regulator of economic performance. By varying its own spending and taxation, the Treasury could nudge the UK toward full employment, real GDP growth, and low inflation. Subsequent models, influenced by the monetarist and New Classical revolutions in economic theory, have since reduced the state’s capacity to intervene. Yet the belief that governments are responsible for economic performance still runs deep. 

The UK’s recent budget announcement is a case in point. When presenting his budget to Parliament this month, Chancellor of the Exchequer Jeremy Hunt sought to reassure lawmakers that the government is on track to tame inflation, reduce debt, and boost economic growth. Hunt even went so far as to present detailed predictions for each of the next five years. As he put it, “We are following the plan, and the plan is working.” Yet, it has long been clear that inflation and growth depend on global trends over which the British chancellor has no control. 

The fact is that international finance, technology, and geopolitics rule out any possibility of “steering” the UK economy. While these variables were regarded as stable (or at least predictable) parameters of national policymaking as late as the 1990s, today all three are considered a source of exogenous shocks – unpredictable or unexpected events – with the potential to spoil any budget forecasts. 

No UK policymaker, for example, predicted the global financial meltdown caused by the 2008 collapse of Lehman Brothers. Likewise, no one can foresee the repercussions of the recent failure of Silicon Valley Bank and Credit Suisse, especially in an era when every possible effect of every disruptive economic event is amplified on social media. And with heightened geopolitical tensions threatening global supply chains, the models on which policymakers like Hunt rely are becoming increasingly obsolete. 

Specifically, the relationship between fiscal and monetary policy is veiled in mystery. The reigning economic model assumes that controlling inflation is a necessary and sufficient condition for macroeconomic stability, and that inflation is primarily caused by budget deficits, or “governments printing too much money.” With that in mind, the government outsourced the task of steering the economy to the Bank of England in 1997, while the Treasury remained in charge of balancing the budget over a five-year forecast period and reducing net debt to a sustainable level.

The combination of BOE independence and fiscal discipline was supposed to assure markets that politicians would not go on spending sprees. But, given that the BOE has been printing as much money as politicians want since the start of the COVID-19 pandemic, the separation between fiscal and monetary policy has become largely fictional, along with the stability and prosperity it was said to ensure. 

Hunt should have looked to US President Joe Biden for more creative economic thinking. Biden’s Inflation Reduction Act, which includes $370 billion in clean-energy subsidies, is based on an almost-forgotten macroeconomic idea known as the balanced-budget multiplier: higher public spending can be paid for by raising taxes on the rich. Biden’s stated policy is still to balance the budget, but this approach would enable him to do so while boosting spending, rather than adopting the sort of austerity policies UK governments continue to pursue. 

Biden’s economic policy represents a welcome return to the old Keynesian view that aggregate demand matters. By contrast, Hunt’s plan to boost economic growth depends entirely on remedying so-called structural (or supply-side) deficiencies. 

The UK’s puzzling labor shortage underscores the inadequacy of the British government’s approach. The number of unemployed people is 1.3 million, and millions more working-age Britons are not employed or actively seeking work. Yet many businesses are struggling to find workers, with job vacancies jumping to 1.1 million. Hunt’s answer is to increase incentives for the “economically inactive” to rejoin the labor market. But in practice, he is encouraging people to apply for jobs that do not exist. 

The reason is that despite supply bottlenecks in sectors such as retail, hospitality, and agriculture, the economy as a whole is experiencing a deficiency of aggregate demand. Given that the British economy has still not recovered to its 2019 level, and that consumption has fallen while the population has grown by 1.7 million between 2020 and 2023, this should not come as a surprise. Yet, the government’s latest budget makes no mention of boosting aggregate demand for labor, either on the consumption or the investment side. 

In late 2020, former UK Prime Minister Gordon Brown and I proposed a scheme whereby the government would guarantee a job and/or training to anyone who could not find work in the private sector, at a fixed hourly rate not lower than the national minimum wage. This, we argued, would be the quickest way to boost aggregate consumption in the economy without resorting to complicated forecasts about the size of the output gap. As John Maynard Keynes once said, “Look after unemployment, and the budget will look after itself.” 

On the investment side, Hunt announced the creation of 12 investment zones free from the burdensome regulations that supposedly stifle entrepreneurs’ “animal spirits.” In concentrating on these supply-side measures, however, Hunt has missed an opportunity to beef up two nascent publicly-financed investment institutions: the UK Infrastructure Bank, which was set up in June 2021 to provide finance for projects to tackle climate change and support local economic growth, and the British Business Bank, created in 2014 to fill the financing gap for small businesses. By enhancing public investment, the government could improve business expectations and divert investment from speculation to critical green-energy projects and regional development. 

At a time of global turmoil and heightened uncertainty, the national budget’s primary purpose is not to steer the economy to the point of imagined stability. Rather, policymakers must use fiscal policy to protect the least well-off from disruptive external blows and to achieve maximum strategic autonomy in a world that is spinning out of control.

Speech on the Spring Budget Statement 2023

My Lords, I join other noble Lords in paying tribute to the remarkable maiden speech of the noble Baroness, Lady Moyo. It was very thoughtful and thought provoking, and I very much appreciated her reference to me—she will have a great future here.

The Budget was crafted in the shadow of disruptive world events over which the Chancellor has little or no control, but it is by its effectiveness in tackling or responding to those events that I think this Budget will be judged. The three killer apps—as one might call them—are global finance, technology and geopolitics. The global banking crisis of course caused the depression of 2008-09. The recent collapse of SVB shows, as the noble Lord, Lord Fox, noted in this House on Tuesday, what a huge proportion of our tech industry depends on finance from a single foreign bank whose solvency in turn depends on fluctuations in interest and bond rates. That is one element of huge fragility in our system.

As for technology, it simply speeds up the operation of every single movement in the economy, whether beneficial or destructive. We know about geopolitics, which threatens all our supply chains and the future of the global economy. So those three elements are really beyond the control of a Budget or a Chancellor and, together, they make the world economy more dangerous, more unstable and more uncertain.

The Minister, in introducing the Statement, stuck closely to the forecasts—but how does she explain the ludicrous divergence in the OBR’s forecasts on inflation and growth between October/November 2022 and March 2023, or the divergence in forecasts between the Treasury and the Bank of England? The noble Lord, Lord Willetts, pointed out that these different models factor in different things, but which of the factorings lead to an outcome that we can have faith in? You factor this, you factor that. What is going on is that all the models used are inadequate. They have become inadequate in the face of large structural breaks which have been occurring in the economy as a result of Covid-19 and the war in Ukraine. They are models which are still optimising around some long-forgotten equilibrium.

I am not sure that we have a better model, but it limits the confidence that we can have in these forecasts. They are trotted out almost as truths. The Chancellor said, “We will grow by” X, Y or Z per cent in the next three years, but what he meant was that the OBR model says that those will be the growth rates—and that is not a satisfactory basis for building confidence.

The speed-up of model obsolescence represents a huge break from the past. We were brought up to believe that short-term forecasts were relatively reliable—after all, how much could change in six months?—and that the longer ones were less reliable. Now, however, both are unreliable. It has infected both the short-term and long-term forecasts. The Treasury is not steering the economy—that phrase was the title of one of Sam Brittan’s great books. The economy is being tossed around by the world economy from one place to another, and that is not going away any time soon. These destructive events have wreaked havoc with the macroeconomic rules so laboriously constructed in the 1990s and 2000s, in particular that of the separation of fiscal and monetary policy, which was the architectural triumph of the Blair-Brown years.

What is it like today? What is the state of that separation today? The fact is that it has been fatally undermined. The Bank of England has been stoking up inflation when it was set up to do the exact opposite. It has been given a green mandate that conflicts with its inflation mandate, and no one knows exactly what the relationship is between fiscal and monetary policy. It has become hopelessly fuzzy, as we found out on the Economic Affairs Committee when we interviewed the Governor of the Bank of England. The whole relationship is shrouded in fictions that no one is meant to penetrate. That is not the basis for giving confidence in macroeconomic policy. In fact, the confidence has been withheld.

“Our plan is working”, said the Chancellor. What plan? To reduce inflation? To get growth? To reduce the inactivity rate? To achieve energy security? He must realise that any improvements that have been recorded since he became Chancellor, or in the last two or three months, are not due to anything the Treasury has done but result from what has been going on in the world economy. There have been beneficial developments, particularly what has happened to energy prices.

A remarkable thing about Budget making today is what it says about markets, media and policy networks. If you analyse it, you will find that there is actually very little difference between the Truss-Kwarteng and the Sunak-Hunt Budgets; the first just came at slightly the wrong time, that is all. Now, things have got a bit better. These are Budgets that depend on five-year forecasts; you cannot say that the difference of a month or two in the presentation of a Budget should have caused such panic in the market—unless, of course, no one had any real confidence in the long-term forecasts on which the Budgets were made.

At one time, there were things called “Budget leaks”. You were not meant to reveal what was in the Budget. In fact, the Chancellor of the Exchequer in 1947 resigned because of a Budget leak. Now, Budget leaks are routine; they are sort of trailers in which the Treasury lays out what it is going to do. What about the opportunities for speculation, for example, that that might give rise to? No one thinks about that any more. You have to make the newspaper headlines.

The Chancellor might have taken advantage in his Budget to display the beginnings of a coherent framework. There is one such framework—it is a very old model; no one knows about it any longer—called the balanced budget multiplier. That approach underpins the Biden Administration’s $738 billion Inflation Reduction Act, which was passed into law last year; I do not think that the Chancellor referred to it in his speech. It is based on an intelligent combination of extra investment and higher social spending to be paid for by higher taxes on the rich and the very rich. Split roughly half and half between tax and spending increases, the combined effect is forecast to secure—again, one has to make the point that it is a forecast—a cumulative reduction in the federal fiscal deficit of about $300 billion over five years. It may not happen—it probably will not—but at least there is a mechanism in it which suggests that it could happen. What we do not have in the present enthusiasm for the policy working is any mechanism or theory which gives you confidence that what the Chancellor is doing will achieve what he wants it to do.

I will make two final points—I am sorry that I have gone on a bit—about where we are in the cycle. It is very difficult to assess what is happening in the labour market; the noble Lord, Lord Bridges, talked about this. On the one hand, we have a very high inactivity rate of about 7 million altogether, which is usually connected with a slack labour market. On the other hand, we have unemployment very low at 3.7% and lots of job vacancies, which would suggest a tight labour market. What is the explanation of that puzzle? The truth, I think, is that headline unemployment figures no longer accurately measure the capacity utilisation of an economy; I think that that has been true for some time, but it has been brought to the forefront recently. A shortage of supply in some areas is combined with a general deficiency of demand in the economy. We would expect the latter to be the case, given that the economy has not grown for three years while the population has grown by 1 million and real wages have fallen substantially. Therefore, we would expect a deficiency of aggregate demand, even though there are pockets of shortage of supply. The Budget might have addressed its attention to that.

I wish that the Chancellor had argued in favour of job creation, rather than incentives to people to apply for jobs that do not exist. Gordon Brown and I, two years ago, argued for a public sector job guarantee scheme, which I still think would act as a kind of buffer stock of employment which would oscillate with the oscillations of the cycle. I am sorry that it was not adopted; it would have been—and still would be—a good method of job creation today that would also tie in with the devolution strategy.

My last point is about securing the long-term growth of the economy. Of course, I welcome the incentives that the Chancellor has provided for investment—the creation of 12 new investment zones modelled on becoming potential Canary Wharfs—but I wish he had given a bit more attention to two British institutions for investment, which I do not think that he mentioned: the UK Infrastructure Bank and the British Business Bank, both of which could be developed. As the noble Lord, Lord Eatwell, said, we know that investment has been a problem in the British economy for a long time. We also know that the share of public investment in total investment has dropped dramatically, and it has not been compensated by any increase in private investment. Here is a good opportunity to insert the state into the long-term recovery of the economy and to provide for the energy and security autonomy, which is the aim of the Government and us all.

In short, there are quite a few interesting initiatives, but I do not think that they have been properly joined-up, and we still await a commanding framework for action in a world that is spinning out of control.

Letter: The economic conditions that make wars more likely

FEBRUARY 17 2023

One year has passed since the start of Russia’s invasion of Ukraine, and nothing seems to indicate that the flames of war are dying. Why does the war still continue? Why are military tensions rising in the world?

We reject the thesis of a “clash of civilisations”. Rather, we need to recognise that the contradictions in the deregulated global economic system have made geopolitical tensions more acute (Opinion, February 14).

One of the worst faults of the present system is the imbalance in economic relations inherited from the era of free-market globalisation. We refer to international net positions, where the US, the UK and various other western countries have large external debts, while China, other eastern countries, and to some extent Russia are in an external credit position.

A consequence of this imbalance is a tendency to export eastern capital to the west, no longer only in the form of loans but also of acquisitions leading to a centralisation of capital in eastern hands.

To counter this trend, the US and its major allies have for several years abandoned their previous enthusiasm for deregulated globalism and have adopted a policy of “friend shoring”: an increasingly pronounced protectionist closure against goods and capital from China, Russia and much of the non-aligned east. The EU too has been joining this American-led protectionist turn.

If history is any guide, these uncoordinated forms of protectionism exacerbate international tensions and create favourable conditions for new military clashes. The conflict in Ukraine and rising tensions in the Far and Middle East can be fully understood only in the light of these major economic contradictions.

A new international economic policy initiative is therefore required to head off the threat of further wars.

A plan is needed to regulate current account imbalances, which draws on John Maynard Keynes’s project for an international clearing union.

A development of this mechanism today should start from a double renunciation: the US and its allies should abandon the unilateral protectionism of “friend shoring,” while China and other creditors should abandon their espousal of unfettered free trade.

The task of our time is urgent: we need to assess whether it is possible to create the economic conditions for world pacification before military tensions reach a point of no return.

Globalization’s Latest Last Stand

With the world increasingly turning away from economic integration and cooperation, the second wave of globalization is threatening to give way to fragmentation and conflict, as the first wave did in 1914. Averting catastrophe requires developing strong political foundations capable of sustaining a stable international order.

LONDON – Is the world economy globalizing or deglobalizing? The answer would have seemed obvious in 1990. Communism had just collapsed in Central and Eastern Europe. In China, Deng Xiaoping was unleashing capitalist enterprise. And political scientist Francis Fukuyama famously proclaimed the “end of history,” by which he meant the triumph of liberal democracy and free markets.

Years earlier, the British economist Lionel Robbins, a firm believer in free markets, warned that the shaky political foundations of the postwar international order could not support a globalized economy. But in the euphoria and triumphalism of the early 1990s, such warnings fell on deaf ears. This was, after all, a “unipolar moment,” and American hegemony was the closest thing to a world government. With the Soviet Union vanquished, the thinking went, the last political barrier to international economic integration had been removed. 

Dazzled by abstractions, economists and political scientists should have paid more attention to history. Globalization, they would have learned, tends to come in waves, which then recede. The first wave of globalization, which took place between 1880 and 1914, was enabled by a huge reduction in transport and communication costs. By 1913, commodity markets were more integrated than ever, the gold standard maintained fixed exchange rates, and capital – protected by empires – flowed freely and with little risk. 

Alas, this golden age of liberalism and economic integration gave way to two world wars, separated by the Great Depression. Trade shrank to 1800 levels, capital flows dried up, governments imposed tariffs and capital controls to protect industry and employment, and the largest economies separated into regional blocs. Germany, Japan, and Italy went to war to establish blocs of their own. 

The second wave of globalization, which began in the 1980s and accelerated following the end of the Cold War and the rise of digital communications, is now rapidly retreating. The global trade-to-GDP ratio fell from a peak of 61% just before the 2008 financial crisis to 52% in 2020, and capital movements have been increasingly restricted in recent years. As the United States and China lead the formation of separate geopolitical blocs, and the world economy gradually shifts from interconnectedness to fragmentation, deglobalization seems well underway. 

To understand why globalization has broken down for a second time, it is worth revisiting John Maynard Keynes’s memorable description of London on the eve of World War I. “The projects and politics of militarism and imperialism, of racial and cultural rivalries, of monopolies, restrictions, and exclusion, which were to play the serpent to this paradise,” he wrote in 1919, “were little more than the amusements of [the investor’s and consumer’s] daily newspaper, and appeared to exercise almost no influence at all on the ordinary course of social and economic life, the internationalization of which was nearly complete in practice.”

In our own time, geopolitics is once again threatening to break the international order. Commerce, as Montesquieu observed, has a pacifying effect. But free trade requires strong political foundations capable of soothing geopolitical tensions; otherwise, as Robbins warned, globalization becomes a zero-sum game. In retrospect, the failure to make the United Nations Security Council truly representative of the world’s population might have been the original sin that led to the current backlash against economic openness. 

But geopolitics is not the only reason for the breakdown of globalization’s second wave. Neoliberal economics, which came to dominate policymaking in the 1980s, has fueled global instability in three major ways. 

First, neoliberals fail to account for uncertainty. The efficient-market hypothesis – the belief that financial markets price risks correctly on average – provided an intellectual basis for deregulation and blinded policymakers to the dangers of setting finance free. In the run-up to the 2008 crisis, experts and multilateral institutions, including the International Monetary Fund, were still claiming that the banking system was safe and that markets were self-regulating. While that sounds ridiculous in retrospect, similar views still lead banks to underprice economic risks today. 

Second, neoliberal economists have been oblivious to global imbalances. The pursuit of market-led economic integration accelerated the transfer of manufacturing production from developed economies to developing economies. Counterintuitively, though, it also led to a flow of capital from poor to rich countries. Simply put, Chinese workers supported the West’s living standards while Chinese production decimated Western manufacturing jobs. This imbalance has fueled protectionism, as governments respond to public pressure by restricting trade with low-cost producers, and contributed to the splintering of the world economy into rival economic blocs. 

Lastly, neoliberal economics is indifferent to rising inequality. Following four decades of hyper-globalization, tax cuts, and fiscal tightening, the richest 10% of the world’s population own 76% of the total wealth, while the poorest half own barely 2%. And as more and more wealth ends up in the hands of tech speculators and fraudsters, the so-called “effective altruism” movement has invoked Laffer curve-style logic to argue that allowing the rich to become even richer would encourage them to donate to charity. 

Will globalization’s second wave collapse into a world war, as the first one did? It is certainly possible, especially given the lack of intellectual heft among the current crop of world leaders. To prevent another descent into global chaos, we need bold ideas that build on the economic and political legacies of Bretton Woods and the 1945 UN Charter. The alternative could be a more or less direct path to Armageddon.

The Return of Thoughtcrime

The UK’s draconian Public Order Bill, which seeks to restrict certain forms of protest used by climate activists, will expand the state’s ability to detain people deemed disruptive and limit the courts’ ability to restrain it. This will align the British legal system with those of authoritarian countries like Russia.

LONDON – In December 1939, police raided the home of George Orwell, seizing his copy of D.H. Lawrence’s Lady Chatterley’s Lover. In a letter to his publisher after the raid, Orwell wondered whether “ordinary people in countries like England grasp the difference between democracy and despotism well enough to want to defend their liberties.”

Nearly a century later, the United Kingdom’s draconian Public Order Bill, passed by the UK House of Commons last year and now being considered in the House of Lords, vindicates Orwell’s doubt. The bill seeks to restrict the right to protest by extending the scope of criminality, reversing the presumption of innocence in criminal trials, and weakening the “reasonableness” test for coercive action. In other words, it widens the government’s scope for discretionary action while limiting the courts’ ability to restrain it.

When the police seized Orwell’s copy of Lady Chatterley’s Lover, the novel was banned under the Obscene Publications Act of 1857, which prohibited the publication of any material that might “deprave and corrupt” readers. In 1959, the nineteenth-century law was replaced by a more liberal measure that enabled publishers to defend against obscenity charges by showing that the material had artistic merit and that publishing it was in the public interest. Penguin Books succeeded with this defense when it was prosecuted for publishing Lady Chatterley’s Lover in 1960; by the 1980s, the book was taught in public schools.

But while Western democracies have stopped trying to protect adults from “depravity,” they are constantly creating new crimes to protect their “security.” The Public Order Bill creates three new criminal offenses: attaching oneself to objects or buildings (“locking on” or “going equipped to lock on”), obstructing major transport works, and interfering with critical national infrastructure projects. All three provisions target forms of peaceful protest, such as climate activists blocking roads or gluing themselves to famous works of art, that the government considers disruptive. Disrupting critical infrastructure could certainly be construed as a genuine threat to national security. But this bill, which follows a raft of other recently enacted or proposed laws intended to deal with “the full range of modern-day state threats,” should be seen as part of a broader government crackdown on peaceful protest.

By transferring the burden of proof from the police to alleged offenders, the Public Order Bill effectively gives police officers the authority to arrest a person for, say, “attaching themselves to another person.” Rather than requiring the police to show reasonable cause for the arrest, the person charged must “prove that they had a reasonable excuse” for locking arms with a friend.

The presumption of innocence is not just a legal principle; it is a key political principle of democracy. All law-enforcement agencies consider citizens potential lawbreakers, which is why placing the burden of proof on the police is an essential safeguard for civil liberties. The Public Order Bill’s presumption of guilt would reduce the extent to which the police are answerable to the courts, aligning the UK legal system with those of authoritarian countries like Russia and China, where acquittals are rare.

The bill also weakens the “reasonableness” requirement for detention and banning orders, allowing officers to stop and search any person or vehicle without any grounds for suspicion if they “reasonably believe” that a protest-related crime may be committed. Resistance to any such search or seizure would be a criminal offense. And magistrates could ban a person or organization from participating in a protest in a specified area for up to five years if their presence was deemed likely to cause “serious disruption.” And since being “present” at the crime scene includes electronic communications, the ban could involve digital monitoring.

The question of what should be considered reasonable grounds for coercive action was raised in the landmark 1942 case of Liversidge v. Anderson. Robert Liversidge claimed that he had been unlawfully detained on the order of then-Home Secretary John Anderson, who refused to disclose the grounds for the arrest. Anderson argued that he had “reasonable cause to believe” that Liversidge was a national-security threat, and that he had acted in accordance with wartime defense regulations that suspended habeas corpus. The House of Lords ultimately deferred to Anderson’s view, with the exception of Lord Atkin, who in his dissent accused his peers of being “more executive-minded than the executive.”

Even in wartime, Atkin claimed, individuals should not be arbitrarily detained or deprived of their property. If the state is not required to provide reasons that could stand up in court, the courts cannot restrain the government. The UK’s current wave of national security and counter-terrorism bills directly challenges this view, making Atkin’s dissent even more pertinent today than it was during the war.

Law enforcement’s growing use of big data and artificial intelligence makes the UK government’s efforts to curtail the right to protest even more worrisome. While preventive policing is not new, the appearance of scientific impartiality could give it unlimited scope. Instead of relying on informers, police departments can now use predictive analytics to determine the likelihood of future crimes. To be sure, some might argue that, because authorities have so much more data at their disposal, predictive policing is more feasible today than it was in the 1980s, when the British sociologist Jean Floud advocated “protective sentences” for offenders deemed a grave threat to public safety. American University law professor Andrew Guthrie Ferguson, for example, has argued that “big data will illuminate the darkness of suspicion.”

But when considering such measures, we should keep in mind that the state can sometimes be far more dangerous than terrorists, and certainly more than glued-down protesters. We must be as vigilant against the lawmaker as we are against the lawbreaker. After all, we do not need an algorithm – or Orwell – to tell us that handing the government extraordinary powers could go horribly wrong.

Spying on Citizens

Sir, Your leading article (“Digital Danger”, Jan 2) warns of the use of Chinese-made surveillance systems to track people in the UK. But neither your editorial nor the surveillance watchdog, Fraser Sampson, seems to have any qualms about British-made equipment being used for the same purpose. In 1786 Jeremy Bentham designed the Panopticon, in which a central prison watchtower could shine a light on all the encircling prison cells without the inmates being able to tell that they were being watched. This, he thought, would motivate them to behave legally. Bentham thought his contrivance was equally applicable to hospitals, schools and factories. In Orwell’s dystopian novel Nineteen Eighty-Four, one-way TV systems are installed in every flat. Big Brother would always be watching you.

The danger of where a surveillance system is made seems of minor importance compared with our acceptance of the right of democratic governments to spy on their citizens whenever and wherever they please in the name of national security.

Speech on “Ukraine: Tactical Nuclear Weapons”

My Lords, I am grateful, as we all are, to the noble and right reverend Lord, Lord Harries, for initiating this debate and for drawing attention to the real danger of nuclear escalation.

I am in profound disagreement with the Government’s policy on Ukraine—I have said it before in this House and I shall say it again. This disagreement can be stated in one sentence: the Government’s policy is a war policy; I support a peace policy. I shall try to justify that.

The then Foreign Secretary, Liz Truss, stated on 27 April:

“We will keep going further and faster to push Russia out of the whole of Ukraine.”

This policy has been repeatedly restated by government spokesmen. It is supported by the Opposition and echoed by the media.

In calling for peace, I may be an isolated voice in Britain, but not in the world. Everyone outside the NATO world is calling for negotiations and some within it—I draw attention to President Macron in particular. Let me try to be logical. The Government’s policy makes sense on one assumption: that Ukraine, with NATO military support and economic sanctions on Russia, will soon complete the reconquest of Ukraine, including Crimea. In this case, there will be nothing to negotiate; the deed will have been done—it will have been accomplished.

I am not privy to secret military intelligence, but such evidence as I have, plus a dose of common sense, suggests that neither Russia nor Ukraine can achieve their war aims at the present level of hostilities, so the pursuit of victory is bound to bring escalation on both sides. Russia will intensify its air war, and NATO will provide Ukraine with more weapons to shoot down Russian aircraft. At what point such escalation leads to the accidental or deliberate deployment of tactical nuclear weapons is anyone’s guess, but the danger must be there, as the noble and right reverend Lord, Lord Harries, pointed out. That is why the war should be ended as soon as possible, and that can be done only by negotiations based on a ceasefire.

I utterly reject the premise underlying the Government’s policy that it is up to Ukraine to decide if and when it wants to end the war. President Zelensky’s policy is to get his “land back entirely”. Of course, it is up to Ukraine to decide what to do, but we cannot give Ukraine carte blanche to determine its war policy when we are in fact providing it with the weaponry to continue the war at considerable sacrifice to our own people. The decisions for peace and war, and on what terms to end the war, must be taken by Ukraine and NATO jointly.

I have reached one conclusion which is more compatible with government thinking: that no meaningful negotiations are possible as long as President Putin remains in office and, more importantly, in power. It is not only that his personal prestige is too heavily implicated in an impossible object but that his attempt to achieve it is leading his country to disaster. His invasion of Ukraine has galvanised Ukrainian nationalism, expanded NATO, shifted the balance of power in Europe to its most anti-Russian eastern states, exposed hitherto hidden Russian military and technical weaknesses, subjected Russia to the most sweeping economic sanctions ever imposed, and provoked the emigration of many of the most talented Russian scientists, technicians, thinkers and artists. In sum, he has erected a new monument to imperfect and incompetent statesmanship.

Any settlement of the war which can inspire confidence in the future will require Mr Putin’s departure from the scene. I do not know how this is to come about; it is beyond our control. However, we can offer an incentive: our Government can say that they would be willing to join our partners in serious negotiations to end the war with a new Russian Government. This negotiation would include the future status of Crimea and the dropping of sanctions. It would encourage forces within the Russian state to implement a change of government. This is a tough but constructive policy that I would understand and support; I do not understand the present policy in intellectual terms. It might not succeed, but it is infinitely better than the dangerous bellicosity we seem to be trapped in.