Three Extraordinary Stories You’ve Barely Heard of

While our attention has been on Libya, the aftermath of bin Laden’s death and a hundred other news stories, there seem to me to have been three other stories playing out that are of considerable significance. They are not headline grabbing, but that does not diminish their importance.  They are long-term stories of gradual but dramatic change:

1. Banks resist capital controls.  This story has been going on since the credit crunch.  There is one simple measure to stop another such episode – requirements for banks to hold more high-quality “core” capital (ie capital that is highly secure – common stock and reserves, in banking jargon “Tier 1” capital).  The banks have been resisting such measures, because the more capital that they have to hold, the less lending they can undertake, and thus the lower their profits.  Despite endless discussion at the G20, the Basel Committee, and various national regulatory authorities, the banks have largely succeeded in preventing rules requiring them to hold a volume of capital that most experts would regard as sufficient to guard against another credit-induced collapse.  There was a further chapter of this story this week when the US decided to postpone higher capital requirements, under intense but barely-reported lobbying pressure from the banks, who usually make the claim that any economic recovery will be at risk if such controls are imposed.  The banks win again; the systemic risk to the world economy remains un-addressed.  I don’t see the banks losing this war. I will write more about this.

2. Europe re-erects its borders.  In response to an uptick in immigration from North Africa, triggered by the “Arab spring” unrest in Egypt, Tunisia and particularly Libya, several EU countries have resurrected national border controls.  This sounds innocuous but in fact it represents a major backwards step in the project of European integration – for people, rather than business.  Unimpeded and visa free travel across those countries that are members of the Schengen Treaty has been a major gain in the history of Europe, promoting travel, understanding, and changing our perception of borders themselves.  Edward Mortimer makes this case eloquently here in the FT.  Given the growing right-wing anti-immigrant sentiment evident across Europe – from Finland to Italy – I have a feeling that these border controls, once resurrected, will not come down for a very long time…

3. China cracks down.  Again, a slow burn story but of immense significance to the people of the largest country in the world.  In this extraordinary report in the FT, it is clear that the Chinese authorities have, for various reasons, significantly increased their surveillance of the population and repression of possible dissent, including disappearances of potential dissidents like artist Ai WeiWei.  The security apparatus in China is of vast scale, and has grown considerably in the last few years.

These are pretty dispiriting stories.  My next post will be about more encouraging trends.

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