Those in 1989 so illusioned with the fall of the Berlin wall, never saw the Basel Accord that had hit the West 1988

Sir, Edward Luce writes: “We returned to England in 1989, hungover, each carrying a small chunk of the Berlin wall…We were infected with optimism.” “When west isn’t the best” Life & Arts, May 6.

And now, soon thirty years later Luce is so disappointed with what has happened thereafter, that he even writes such nonsense as “Others… in Caracas… share Russia’s hostility to western notions of progress”. Mr. Luce, dare go to the street of Venezuela and see for yourself how more than 80 percent of that country is risking their lives on the streets, fighting to maintain liberal values you hold, all in order to demolish a Havana-Beijing-Moscow-Teheran wall built by thugs, and which has destroyed a beautiful nation.

Luce ends with: “The west’s crisis was not invented in 2016. Nor will it vanish in 2017. It is structural and likely to persist. Those who gloss over this are doing liberal democracy no favours”; and that’s having already stated: “The self-belief of western elites saps their ability to grasp the scale of the threat.”

Sir, let us put the house in order. Luce writes: “The year 1215, the year of the Magna Carta, is today seen as the “year zero” of liberal democracy… By limiting the power of the king, the Magna Carta set a precedent for what would later be known as “no taxation without representation.”

Limiting the power of the king? In 1988, one year before Luce chipped away at the Berlin wall, the Basel Committee for Banking Supervision managed to get the Basel Accord agreed… and that accord, for the purpose of the capital requirements for banks, risk weighted the king, the sovereign, with 0% and its subjects, the citizens with 100%. From that moment on the statists’ wet dreams were realized and, amazingly, the western elite said nothing about this rape of the Magna Carta.

But Basel’s bank regulations did not only favor the king, it also introduced a risk aversion that had nothing with that “God make us daring!” attitude that made the west great.

That also realized the wet dreams of bankers, namely that of leveraging the most with what was perceived as safe, so as to be able to earn the highest risk adjusted returns on equity on what was perceived as safe, so as not having to lend the credit umbrella to risky SMEs and entrepreneurs.

Of course the west, with banks no longer financing the riskier future but only refinancing the safer present and past, and the sovereign, could, after that, only go in one direction, namely down, down and down.

Add to that the complications created by robots and automation. Those, on top of having to create jobs, now also require us to create decent and worthy unemployments.

The challenges for the west loom immense. To face these requires a neo Magna Carta that probably has to include something about a universal basic income, and of course getting rid of that insane mindset that came up with current bank regulations. That because, as Einstein said: “No problem can be solved from the same level of consciousness that created it”.

@PerKurowski

Since development seems not really mean the same for UK than for China, why should UK join AIIB?

Sir, I am from Venezuela, and the United States has at least recently criticized what is happening in my country, while China in most non-transparent ways has mostly dedicated itself to finance and take advantage of what is happening in my country. And that I confess is one subjective reason for why I find it so hard to agree with Martin Wolf’s “It is folly to rebuff China’s bank”, March 24.

But that said I also feel that in order not to lose yourself in the new globalized world, you need to be able to reassert who you really are, now more than ever. And in that respect, few are so close as the US and Britain. In April 1999, feeling that the UK could become slightly uncomfortable with EU and with the Euro, and having heard about the ideas of Conrad Black and Paul Johnson, I even speculated in an Op-Ed about “A new English language empire”.

In essence I find no good reason why the UK should lend some credibility, against what is clearly no real influence, to an organization that does not really share its values. I am certain that, at least for the time being, when Wolf and I, UK and US, speak about development, we mean something quite different than what current China does… or at least so I hope.

PS. And, sincerely, I find Martin Wolf’s “As a former staff member of the World Bank” statement, indicating that as far as not living up to the “highest global standards”, AIIB and World Bank would stand on similar ground, to be clearly out of line.

PS. And by the way, to present oneself as a development buff, while at the same time not objecting to those credit-risk-weighted equity requirements for banks that clearly stand in the way of development, is sort of silly.

@PerKurowski

In these globalized times, would you not want your flag to be a flag of convenience, flagged by many?

Sir, what extraordinary interesting questions and suggestion of answers those of Janan Ganesh in “Fly the flag for the liberal values that define Britain” June 17.

I have often proposed that in these days of social media with circles of friends and known and unknown acquaintances, we should always be able have a fast reference to where on earth we all find ourselves, what flags we feel we live under, and perhaps what flags we would like to live under… because, just as ships can carry a convenience flag, why should not a Venezuelan-Polish citizen, in Sweden educated and in Washington living individual like me not be able to carry a British flag if that was the flag I best liked.

And in this respect I do not think that asking what is the flag Britain should flag to rouse the nationalistic sentiments of the locals, is half as good as asking what flag should Britain flag to rouse the globals to want to align behind “the liberal values that define Britain”. In these days we must never forget that you do not need an Armada to conquer, nor do others need an Armada to conquer you.

Or, as Violet Crawley might have admonished, “Do not be so parochial. It is so middle class”.

And with respect to flagging and signalization let us never forget that the order is vital. For instance if you flag the ex-ante maximization of opportunities flag long before the ex-post redistribution of wealth flag, I am certain you will get much better results than flagging in the order that Thomas Piketty sort of seems to imply.