VII. Economic Recovery Suspensions Programmes and Lockouts
All countries have had to prepare separate exit strategies with different options or iterations, depending on how the local crisis enfolded. Some countries considered relaxing lock-in restrictions in stages beginning April 2020, although there appeared to be a lack of certainty and consistency, resulting in some exit strategies having to be reversed with new waves of infections. Almost all countries suffered because their initial lockup and lockdown strategies were inadequate. Some commentators warned that the economic disaster could transcend “the human one” if lockdown conditions were extended. The WHO introduced six criteria in April 2002 to be considered before any lockdowns were to be released and encouraged that measures be continued under a “new norm” until vaccines were available. The WHO later called for vaccine sharing between wealthier and poorer countries and the avoidance of export restrictions while the EU was strongly criticised for threatening to impose vaccine export restrictions. The UK was able to announce a four-condition formal lockout or release programme on February 22, 2021 following the success of its immunisation and vaccine programme, which would apply between March 8 and June 21, 2021.
Appropriate measures could be set out in new “Crisis Management” or “Post-Crisis Recovery” Protocols, which would develop a range of protective provisions for communities as well as corrective or stimulative measures for the economy. This would generally include a “Recovery Strategy and Timetable,” “Infection Management Strategy,” “Education and Community Strategy,” “Transport and Public Utilities Strategy,” “Business Sector Strategy” and “Government Services” strategy. All of these strategies would work together to allow people and businesses to have the confidence to return to work under controlled and progressive conditions. A series of programmes could be adopted under each of these strategies to allow for a staged or phased opening process addressing health, transport, workplaces, education, childcare and continuing welfare support. The specific purpose would be to provide clear guidance as to how lockdown conditions could be reduced or removed over time. All of these measures would be subject to continued monitoring to ensure that no new infectious clusters or third or fourth waves arose, particularly, by taking all necessary corrective action against new variant or mutation infections immediately and by tracking, tracing, and isolating new cases.
A continuing “Infection Management Strategy” would also have to be put in place to prevent viral recurrences or secondary spreading including through asymptomatic contact. This could, for example, be based on a six part programme of policy conditions consisting of care (monitoring), cause (origin research), containment (limiting spread), correction (treatment) control (prevention through immunisation and vaccination), and a community support (education initiative). This could be extended further as required. This would necessarily have to include ongoing vaccination development and distribution, community education and engagement strategies that attempt to identify possible viral strains and respond to new mutations. Conditional research and production strategies should also be in place to mitigate any new or unforeseen viral threats, especially where no immediate vaccine is available.
VIII. Market And Regulatory Model
In an extreme crisis, there are generally a number of different possible sources of exposure or points of failure within markets and economies. These may arise at the micro, macro, , or systemic levels. Difficulties may arise in terms of managing the relationship between markets, regulated institutions, and authorities, as well as between regulatory agencies and countries. It is also necessary to coordinate wider public policy responses to the threats created by larger cross-market impacts, like the emergence of new supercoins, such as Facebook’s Libra (later Diem) coin, or superapps, such as WeChat or AliPay. A number of new exposures may emerge that require a series of new regulatory approaches which may be summarised, for the purposes of this paper, in terms of co-financial or meso-financial (meso-prudential), para-financial (para-prudential), peri-financial (peri-prudential or techno-prudential), poly-financial (poly-prudential) and exogenous (exo-prudential) approaches. Each of these is considered further below.
Moreover, it is possible to design a new outline or proto-global regulatory control framework that would initially be directed at managing financial and then wider utility shocks as well as other areas of new technology applications. This could then be extended again to manage other forms of endogenous and exogenous threats and events to create a complete control programme. The following more specific comments may be made on financial and technological specific risks with wider exogenous exposures.
A. FinTech, RegTech, BigTech, DataTech and NewTech and FutureTech
Markets have undergone significant change in recent years, especially with the prevalence of technology across all financial sectors and in relation to all financial functions and activities. This change was accompanied by substantial growth in FinTech and RegTech, BigTech, DataTech, NewTech and FutureTech. FinTech uses technology to improve the structure and operation of financial markets and the delivery of financial products and services. RegTech uses technology for regulation and compliance purposes. BigTech involves the emergence of powerful and large technology companies that are increasingly moving into the financial and FinTech areas. DataTech involves the increased production, use, and distribution of personal data for business and regulatory purposes.
NewTech is concerned with current technology developments, and FutureTech with new evolving fields and applications of all kinds of technology. NewTech and FutureTech specifically deal with infrastructure or InfraTech, such as shared computing, super and quantum computing, telecommunications, blockchain and graph technology, and revision and reform of the Internet and World Wide Web, as well as applied technology or AppliedTech,, such as automation and small contracts, biotechnology and cryptography, nanotechnology, robotics and cyborgs (or cybernetics), machine reading and machine learning, and artificial intelligence (AI). All of these will have a major impact on the structure and operation of markets and their relevant risks. Technological advances can nevertheless also be used to manage any aggravated or new exposures and to assist in the balance between the relative advantages and disadvantages of such technology in markets and broader market function.
B. Micro, Meso, Para, Peri, Macro, Poly and Exo-prudential Regulation
Financial regulatory approaches have generally only considered markets in terms of specific sectors, on a micro-basis, or on a macro basis. This has resulted in the development of enhanced new micro and macro-prudential regulatory techniques, particularly, following the global financial crisis. A number of further gradations or extensions can be considered considering more recent changes. Meso-prudential, or co-regulation brings regulators, markets and regulated institutions closer together on a more integrated and embedded basis. Para-prudential regulation involves creating closer relationships between different sets of regulators among different countries. Peri-prudential, or techno-prudential, regulation is a part of RegTech and involves the increased use of technology for market operation, regulation, and compliance.
Poly-prudential, or polymodal, regulation involves considering exposures from across a wider range of public policy perspectives, including data protection, competition, and infrastructure, as well as monetary policy, financial integrity, capital and payments policy, and taxation policy. This has become of particular importance with the development of supercoins and superapps that could have a massive impact on global market scope, scale, and stability. Each of these must be re-considered again against the backdrop of possible exogenous or extra-systemic threats that may require a further level of exo-prudential regulation and ExoTech. This may again be reviewed as part of the establishment of a new global regulatory framework, which may be referred to as “proto-prudential regulation.”
C. Regulatory Policy and RegTech
The scope and content of financial regulation had to be reconsidered following the global financial crisis. This specifically led to a tightening of capital adequacy standards with the Basel Committee on Banking Supervision’s Basel II framework being reconstituted as a Basel III regime, and more recently, the Basel IV finalisation package. Base IV imposed stronger Tier 1 capital conditions with two new short and long term liquidity ratios and a non-risk adjusted leverage cap for the first time. Additional measures were adopted inter alia to strengthen governance, college supervision, cross-border resolution, and wider macro-prudential oversight. All of this has to be reconsidered again following the emergence of wider exogenous exposures. The immediate need was to conduct a perimeter review to ensure that all activities that could impact financial market stability were subject to proper authorisation and supervision.
Regulation can be assisted by technology through a new field of regulatory technology (RegTech) which uses technology for control or compliance purposes. This has been referred to as being the new FinTech. This can also be applied to official practice by authorities (or ControlTech) and firm compliance issues (CompTech). A number of benefits, disadvantages, and limitations of RegTech can be identified. This became of more importance as risk management and financial regulation became increasingly data driven and with technology being used to collect, process, assess, apply, and store data. RegTech became an increasingly important part of larger financial technology (FinTech) and attracted increasingly substantial annual investment The use of technology could bring substantial additional efficiencies to financial regulation as well. Regulation must become more morphic or ductile and embedded with a series of new regulatory principles to make RegTech more adaptive and reflexive, collaborative and coordinated, iterative and modular, resilient and self-sustainable, as well as emergent and inclusive.
D. Supervisory Policy and SuperTech
More complete supervisory arrangements can be established to cover all areas of policy within and between countries. Technology may already allow for substantially improved supervision to be conducted in practice. This could allow for more complete, detailed, and timely regulatory reporting to be carried out with firms increasingly moving towards real-time data, report tendering, and submission. Machine reading and machine compliance would allow firms to submit necessary returns on an automated basis and comply with any regulatory changes automatically. Authorities could separately develop new software to allow them to understand better the returns made which may include, for example, “anomaly software” that allows them to detect malware, viruses, and other variations or interference that require further attention. All of this may be referred to as creating a new form of supervisory technology (SupTech), including new forms of “machine supervision.”
One of the important reforms adopted after the global financial crisis aimed to extend the use of “college supervision” and ensure that all large international banking and other financial groups had an appropriate supervisory committee made up of all of the relevant national component authorities involved. Supervisory colleges could be extended to ensure that they cover all areas of financial activity and operate as “conglomerate or complex group colleges.” A separate “Technology College,” or “sub-college” could also be established to deal with more technological and sensitive issues on a cross-sector and cross-border basis. A separate “Policy College” could also be created either on top of supervisory colleges or as distinct sittings of the same college with additional members representing wider policy interests. This could, for example, include information or data representatives, attendees from competition authorities or infrastructure departments within central banks, or supervisory authorities as part of new poly-prudential or poly-modal framework.
E. Data Policy and DataTech
As financial markets and society become increasingly digital and data-based, data regulation and data supervision could form an increasingly important part of any new, more complete, regulatory response. This is of particular relevance in relation to exogenous risk and the uncertainties created alongside it. New and extended forms of Big Data analysis could be developed to monitor economies and attempt to identify, track, or model potential exposures, although technology itself is not the solution.
Data protection would form an important part of any new co-regulation, co-supervision regime. A number of important obligations are imposed on EU firms and non-EU firms processing the personal data of EU citizens under the General Data Protection Regulation (GDPR) and specific national legislation like the UK Data Protection Act 2018. These include a general “compliance by design” principle and series of other more specific principles and rights and obligations imposed. Appropriate “data toolkits” could be created by authorities and firms working together to ensure compliance with all relevant requirements. It is essential that all necessary personal information and data interests are protected. Relevant representatives, for example, from the UK Information Commission, could be represented on the extended Policy Committee or College .
Other private market initiatives could also be considered and incorporated within these processes. These may include, Sir Tim Berners-Lee “SOLID” (Social Linked Data) and “PODS” (Personal Online Data Stores) proposals developed through the inrupt company. This followed a paper by Berners-Lee on “Socially Aware Cloud Storage” in 2009. The objective would be to hold personal data in PODS that could then be licensed to other parties for use, allowing maximum control, full realization, and participation commercial benefit. Other initiatives include, for example, Data Trusts proposed by Professor Dame Wendy Hall and Jérôme Pesenti in the UK.
F. Competition Policy and ComTech
An important new control element would be ensuring that all relevant financial markets operate effectively and are not damaged by anti-competitive, abusive monopolistic or oligopolistic, or other distortive behaviour. Competition considerations have generally been considered separately from financial market regulation, although elements of the considerations are increasingly being incorporated into financial laws. The principal issue with new supercoins or superapps is the possible abuse of a concentrated or dominant market position. Acquiring a monopoly, or operating within an oligopoly, is not illegal unless the position is separately abused. This may include preventing competition, acquiring competitors in the market to limit competition, imposing high prices, or potentially abusing data rights.
The behaviour of all relevant parties needs to be monitored to ensure there was no abuse of a dominant position or other illegal collusion under relevant national laws or EU law. Authorities may also consider whether specific definitions of relevant markets, power or dominant position, and abusive practices need revision to cover new global financial and commercial operations including BigTech and social media platforms. Discussions and decisions could also be coordinated under the proposed Policy Committee or College arrangements referred to. This is another area that would need careful monitoring because relative market positions may change over time.
G. Infrastructure
The impact of any new activities on domestic infrastructure systems needs monitoring so all necessary services and functions are carried out in an effective manner on a continuing basis. Infrastructure includes payment and settlement systems, securities and derivatives clearing, and settlement structures with any separate custodial or other functions. Infrastructure oversight may be managed by the central bank or possibly by a specific department in a separate supervisory authority. Infrastructure is generally not regulated as a separate activity, although specific functions may be like payment, securities exchanges, and clearing houses.
H. Resolution Policy and ResTech
A number of important initiatives were adopted following the global financial crisis to ensure that banks and other major financial institutions were subject to effective resolution and market restructuring or market exit procedures. Significant difficulties arose regarding a number of institutions being “too big to fail” (TBTF) and non-resolvable. The Financial Services Authority (FSA) in the UK adopted a number of early initiatives with a joint procedure later entered into between the FSA and US Federal Deposit Insurance Corporation (FDIC). The issue was considered by the Basel Committee and FSB, and a number of papers will be published on this. The EU adopted a separate Banking Recovery and Resolution Directive (BRRD) in 2014.
These measures generally provide for the establishment of Recovery and Resolution Programmes (RRPs) or pre-crisis “living wills”, or possibly “funeral plans”, allowing firms to restructure or prepare for resolution in the event of a crisis. This includes pre-crisis internal Recovery plans or programmes whereas firm would adopt a series of measures to restore its stability and prevent closure. A separate Resolution Plan or programme would come into effect when the firm could not be rescued, which would allow for external authorities to assume control, wind-up, and liquidate the firm including through official Special Resolution Regime (SRR) provisions.
One of the effects of the substantial growth in FinTech is that technological aspects of resolution must be taken into consideration. This is particularly import when operational risk, like technology, information, and data risk become more important as innovation, advancement, and construction of data based markets increase. Authorities could consider establishing separate “Technology Committees” or “Technology Colleges”, or sub-committees or sub-colleges, to manage such more specialized and dedicated matters. Parallel or integrated ”Technology Recovery Programmes” (TRPs),and RRPs could be developed to manage technological aspects of a rescue programme. Crisis Management Group (CMG) membership and function could also be extended to include technology and possibly other exogenous related exposures and risks.
I. Crisis Policy and CrisisTech
A further significant issue that aggravated the global financial crisis in 2008 and 2009, was the absence of effective extended market support arrangements. While traditional lender of last resort (LLR) facilities were available, they only applied to banks and on strict conditions. These required the institution be solvent, although illiquid, unless its closure created contagion and a systemic threat; in which case, support may be provided although only on penal terms to limit reliance and moral hazard. These have traditionally not been applied to securities or other non-bank financial institutions. A number of ad hoc facilities had to be developed in the post-global financial crisis period to provide support in specific sectors and, in particular, in the US. The global crisis was partly averted by the announcement of the UK three-point rescue plan on the morning of Wednesday, October 8, 2018, which was to provide around £35 billion of additional capital for the major UK banks with guarantees to allow them to roll over their wholesale lending and with additional market liquidity under the Bank of England’s Sterling Lending Scheme (SLS).
It is possible to re-state and synthesize these in terms of five possible general facilities that should be made available in the event of a possible future crisis. These consist of: (1) specific institutional Funding of Last Resort (FLR), (2) general Market Liquidity Lending of Last Resort (MLR), (3) Capital of Last Resort (CLR), (4) Guarantees of Last Resort (GLR), and (5) either Asset Purchase or Insurance of Last Resort (ALR or ILR). While the provision of market support is undesirable and should be restricted or conditioned to limit moral hazard, it must be accepted that all governments may need to respond to an extreme crisis event and provide necessary contingent support. A pre-set, organized, and publicly disclosed set of arrangements should be in place to provide necessary support within banks and to other non-bank systemically important financial institutions (SIFIs), global SIFIs (GSIFIs) other systemically important markets (SIMIs) as necessary.
J. Macro-Prudential and Poly-Prudential Policy
A number of new macro prudential initiatives were adopted following the global financial crisis. Difficulties arose as new products and services, like the structured finance market, developed in the gaps between existing financial market regulatory oversight regimes. Attention, accordingly, switched to attempting to identify wider risks across the financial system as a whole. A number of new agencies, with specific mandates, were set up for this purpose. These included the Financial Policy Committee (FPC) within the Bank of England in the UK, the European Systemic Risk Board (ESRB) in the EU, and Financial Stability Oversight Council (FSOC) in the United States. It may be argued that overall financial stability fell within the traditional mandate of a central bank although the reforms adopted clarified responsibility and provided a clear set of necessary statutory powers to contain such risks. Financial macro-prudential supervision should be further extended because a number of other significant policy areas may be impacted by new innovative products or wider risks. All of these issues could have to be considered within the combined new poly-prudential, para-prudential, or poly-modal procedure recommended.
K. Exo-Prudential Regulation and Protocol Policy
Existing micro- and macro-prudential data collection and oversight regimes can be extended to attempt to identify potentially wider exogenous shocks. This may, arguably, already fall within the existing mandates of many macro-prudential agents in the form of unspecified wider market threats. These terms could be further reviewed to consider any possible future exogenous threats. The overall objective would be to ensure that financial markets could withstand any form of major disruption and assist wider social containment and recovery efforts.
A new series of protocols could be adopted to clarify responses. Specific protocols can be adopted in the regulatory area to confirm the application of wider policies to new technological innovations like supercoins and superapps. This would include regulatory, supervisory, data protection, competition, infrastructure, resolution, market support, and macro-prudential initiatives. The protocols could then be extended to include wider policy areas such as monetary policy, monetary stability, and market integrity. Further, the protocols could be extended to include specific crisis protocols such as in relation to pandemics, natural disasters, climate impacts, terrorism and war, and other forms of social or systems collapse.
L. Proto-Global Prudential and Global Regulation
All of these initiatives may be drawn together to create a new form of outline global, proto-global, or proto-prudential control model. The residual challenge is to ensure all relevant regulations are applied on a consistent and effective basis nationally and internationally. Reference has already been made to the need to conduct relevant perimeter reviews establishing extended supervisory arrangements with pre-crisis Policy Committees or Colleges and post-crisis Policy Management Committees. Other wider areas of concern can be considered as part of the new poly-prudential, para-prudential, or poly-modal oversight mechanisms proposed. While these measures may be sufficient, consideration should be given to establishing clearer national or regional regulatory and policy zones that specify which regulatory provisions apply to new global products and that operators must comply with.
A number of countries established valuable technology support facilities including through the use of regulatory sandboxes on a UK Project Innovate Model. Originally, Project Innovate was created by the FCA in October 2014, to support technological innovation in the financial area and clarify and assist with the application of relevant regulatory standards for new platforms and operators. Project Innovate consists of a Regulatory Sandbox, Direct Support facility, Advice Unit, RegTech element, and engagement programme. The FCA recommended in February 2018 the creation of a global sandbox which led to the establishment of the Global Financial Innovation Network (GFIN). A number of benefits were identified with the GFiN and the work programme. The GFIN was set up with thirty-five, and now sixty, regulatory authorities and seven observers with three core work streams were pursued, with the GFiN acting as a collaborative group for authorities and providing a forum for joint work and regulatory trials and supporting firms through the provision of cross-border solutions. It was specifically agreed that the GFiN would focus on growth (G) be flexibility and adaptability (F), innovation andd inclusiveness, (I) and create a network (N) to support innovation in financial markets and inter-agency learning.
The GFiN is an important initiative primarily focused on collaboration, testing, and information exchange. With the emergence of significant new global financial products, like Libra (now Diem) coin, the GFiN regime could be strengthened to assume a more direct regulatory role. This might be referred to as creating a “Global Financial Regulatory Network” (GFrN) or “Global Regulatory and Enforcement Network” (GReN). These networks could include coordinating the design and application of national regulatory provisions with licensing, conditions, and enforcement either being managed on a cooperative basis, either through the GFrN or GReN, or extended supervisory or Policy Committees or Colleges referred to. Regulatory sandboxes could separately be converted into full “control boxes” in respect of specific products or platforms that raise regulatory concerns and ”policy boxes” to the wider public policy areas.
The effect of establishing a new global extended regulatory control network of authorities with clearly articulated regulatory and policy zones and regulatory and policy control boxes could form the basis of a new form of proto-global financial regulation. All of this work could be coordinated through the FSB, as the principal link financial agency at the international level, which specifically brings national central bank, treasury, and regulatory authorities together with all of the principal international standards-setting bodies and other important representative groups including the IMF and World Bank. The FSB already maintains a virtual global rulebook with its Compendium of Standards with around 300 standardsand 15 core standards. This work could be incorporated into that of the new Global Financial Regulatory Network, with the GFrN or GReN, and FSB also considering the possible creation of a separate set of key FinTech and RegTech standards or including this within the existing FSB standards. A specific product or institution set of standards could then be created for Libra (Diem), or other stablecoins, as part of a larger global “regulatory toolkit: to be administered by the GFrN.
The effect o would create a meaningful and relevant wider regulatory enforcement framework within which any new exposures could be managed and controlled. This could then be revised and extended to apply to other new global products, services, or institutions as they became relevant. All of this could be set up relatively easily and at low cost as it builds on existing international standards and processes. This would create a new form of proto-global financial control and regulation to manage financial and wider market crisis and shocks. This core framework could then be extended to create a supporting institutional structure for responding to more general exogenous shocks at the international level as well as other continuing global challenges.
XI. Global Market, Technology, and Residual Control Model
An appropriate total framework must be constructed to contain endogenous and exogenous threats to the financial systems, economies, and societies at the national and international levels. This is necessarily difficult because it is impossible to predict or foresee all possible sources of threat. Appropriate containment systems and arrangements must nevertheless be in place to prevent full existential or terminal collapse. The 2020 Coronavirus pandemic demonstrated the sensitive global condition and its vulnerability to unforeseen attack, at least in terms of the spread and impact, if not, specific source or cause. It must be accepted that similar threats may arise in the future with continuing challenges—particularly in relation to natural disasters, climatic and atmospheric impacts, cyber collapse, technology failure, or military destruction—all of which could result in social or systems collapse. It is also essential to consider and manage the impact of this on the most vulnerable people within each society and community and in the most impacted countries.
The opportunity can then be taken to extend the framework to incorporate and respond to other global challenges at this time. These challenges include protecting fundamental human rights, ensuring free trade between nations, climate protection, effective market regulation and global governance, technology ethics, and collective peace and security. A range of sustainable, manageable, adaptive, regulatory, and targeted (Smart) tools can be adopted for this purpose within a new composite “Social, Market, Atmospheric (Climatic), Regulatory, Technology, and Security” (SMARTS) framework. The SMARTS framework would operate with a parallel “Social, Trade, Atmospheric, Regulatory, Technology, and Safety” (STARTS) agenda. Security and safety can either be included in either agenda or dealt with separately. This would specifically include a technology-based new ‘Global SMART Market’ model operating on open but reciprocal market conditions. This could be set up under GIFT or a separate “Global Reciprocal Economic Area Treaty” (GREAT), which could form the basis of a new Global SMART Market system.
A further targeted support programme can be constructed based on “Finance, Investment, Regulation, Social, and Technology” (FIRST) principles. Emerging markets can be supported through a “Sustainable Assistance, Finance, and Engagement” (SAFE) initiative with climate support being managed through a parallel “Sustainable Assistance and Value Enterprise” (SAVE) framework. All of this is manageable through a ”Global Integrated Law and Technology” (GILT) programme or series of “Market, Economy, Technology, and Legal” (METAL) measures. These programmes or measures would be based on the “Rule of Law” (ROLE) or “Rule of Law and Ethics or enforcement” (ROLE) policy. Key measures would be established and implemented through a series of Protocols under a “Protocol Adaptive Safety and Security” (PASS) framework.
All of this would operate under a larger new Global Investment, Finance, and Trade (GIFT) treaty framework. This can be summarized in terms of creating a new Smart SMART STARTS GREAT FIRST SAFE and SAVE reform program with a supporting GILT, METAL, and ROLE agenda operating within a wider GIFT and PASS framework. This could be given effect by adopting a form of conditional or contingent “global neo-functionalism” or “market functionalism,” following the earlier neo-functional policy adopted within Europe as the basis for post-WWII integration. This would be conditional or contingent to the extent that countries wishing to trade with other countries would have to agree to adhere to the other core parts of the global SMARTS (and STARTS) agenda, with the implied sanction being loss of access and trading privileges if the condition is not met.
Existing international protections within the SMARTS and STARTS agenda would be restated and clarified with new measures added. None of the existing protections would be diluted or removed in any way, but rather collected together in a new consolidated restatement. The objective would be to draw together all of the key rights, protections, privileges, and objectives that exist to ensure consistency, coherence, and avoidance of conflict and overlap, and to make these available in an easy-to-access and understandable format. This would specifically rest on a series of core conditions, principles, and objectives common to all of these protections, with more specific entitlements being set out in individual protocols. This would create a larger, single SMARTS and STARTS agenda encompassing all necessary areas of protection. This larger agenda would include an open “Global SMART Market” mechanism, which would be constructed with the goal of having all countries agree to adhere to minimum common or collective global standards or conditions to maintain continuing access. All of this would be given effect within the larger GIFT Treaty and PASS Protocol framework supported by a series of more detailed policy and crisis management protocols.
The following specific comments and observations may be made to this proposal.
A. Threat and Social Impact
The personal and social damage created by exogenous threats cannot be quantified. Fatalistic causes and consequences can lead to the loss of life in societies and communities across the world. The scale of loss created through personal bereavement or suffering is limitless in terms of emotional and individual impact. People and communities must persevere, and societies must rebuild. Societies and social systems will always strive to survive, as one of the key responsibilities of government is to assist and promote these essential processes.
Former Governor of the Bank of England Mark Carney has warned that transferring the market economy into the market society could be reversed by the coronavirus crisis, with values having to be placed before valuations. While more government intervention and further public control (BigGovernment) was necessary to combat the crisis, care has to be taken to ensure that more draconian controls that may have been introduced are later removed so that balance may be restored. A specific concern, for example, arises over the increase in surveillance to manage crisis in conjunction with the corresponding need to protect private data interests long-term. Governments may resist withdrawing from market intervention and direct social control, at least in the short-term. Governments were compelled to inject massive amounts of funds into private markets to support economies as part of a new form of “Crisisomics” or “Coronaomics.” Governments have to avoid austerity and depression conditions, with a new era of constructive and balanced sovereign debt management being created as part of responsible Coronaomics. Protectionism and “Isolationomics” may assist some countries in the short-term, although this may lead to increased social as well as economic challenges and dislocation longer-term.
Others have noted that liberal democracies may have to decide between “authoritarian nationalism” and an open global order based on state cooperation following the pandemic. While the crisis was not created by globalization or capitalism, it confirmed limitations within unrestricted private markets. Other “orthodoxies” have also had to be rejected, including strict-balanced budgets, public deficits, and debt GDP ratios, with sustainable spending and borrowing limits being reset in place of an earlier hands off approach. Open liberal markets will only survive based on political consent, with any new populism being resisted. The need for states to cooperate may re-create the conditions for a new, open progressive global order.
Technology has allowed countries to withstand and manage the pandemic and other biological threats more effectively than at any previous time in history. As data collection and analysis has increased, proper and responsible data control and management must still follow. Social suffering and impact have also still been unfairly distributed, with societies continuing to be heavily dependent on lower-paid services such as nursing and health care, teaching, delivery drivers, and transport, as well as electricity, water, and other utility provisions. The coronavirus confirmed that mankind can withstand natural onslaught if proper, informed, and balanced political leadership coordinates resource management and to take the difficult and necessary policy decisions where this cannot responsibly be left to machines.
Crisis can necessarily lead to the adoption of government intervention to manage demands, at least in the early stages. The key for all countries long-term is to reconcile or balance an active market economy with larger state involvement, particularly where there have been demonstrable elements of market inefficiency or market failure. Some commentators have noted that the balance between an active market economy and larger state involvement may represent the demise of traditional capitalism because states will have to support economies in extreme crisis events. Many politicians appointed following the global financial crisis have been forced to support more populist causes that reject globalisation and favour scientific or expert direction—although this may only be temporary. These conflicting positions must be reconciled by adopting appropriate and responsible policy balance.
B. Containment and Continuity
Governments and regulatory authorities must be aware of all possible endogenous and exogenous threats. Any one of these threats can have significant systemic, existential, or terminal consequences. New regulatory controls must manage endogenous risk as well as operate within larger safety parameters to protect markets and systems from wider, extra-systemic threats and exposures. The focus must be on loss absorption and resilience to ensure continuity and preservation of function rather than outright threat prevention which may be impossible. This focus on loss absorption and resilience can be dealt with through a combination of new para-prudential, meso-prudential, para-prudential, poly-prudential, and exo-prudential or ultra-prudential responses.
Crises can be explained in terms of causes and consequences. After any initial period of market restoration and consolation, systems must focus on containment and continuity. Specific responses depend on the nature of the particular endogenous or exogenous threat. In 2020, various steps were taken to test and identify the source of coronavirus to limit its spread within and across countries. Increasingly severe social distancing, remote working, quarantining, shielding, and lockdown measures were imposed in different countries, including transport restrictions between countries. These measures occurred while continuing efforts produced and tested viable vaccines. Several increasingly substantial measures were adopted on a staged basis to protect the stability of financial markets to ensure that markets and economies could continue to operate and to support wider social recovery. The scale of the threat inevitably meant that these measures were substantially more significant than those taken following the global financial crisis beginning in 2007-2008.
Specific markets, individual financial institutions, and companies were forced to trigger ad hoc preservation plans to allow themselves to keep operating while on a remote or core-staff-only basis. A specific challenge created by coronavirus was enforcing social separation requirements which compelled systems and societies to operate at a distance. While this challenge would have been one of the factors considered in designing continuity operations, the severe biological and physical nature of the pandemic’s threat stretched across many employment and medical systems. This will have to be reconsidered in terms of any post-coronavirus crisis reviews.
The scope and scale of the crisis also meant that many areas of policy response were triggered. The triggered areas included regulatory, monetary, economic, industrial and manufacturing, healthcare, educational, transport, police and public order policies. The scale of social impact and damage meant that all of these policies had to be considered and managed together, often using military-based procedures, military practices, and military personnel. These policies will have to be reviewed again subsequently to ensure that adequate containment, coordination, and control arrangements are always in place to allow these policies to combat future challenges or threats. A series of new common crisis management protocols must be developed in the ruins of the coronavirus crisis to allow appropriate contingent solutions to be available in the event of future shocks or disruptions.
C. New SMARTS and STARTS Global Control Model
Rather than simply respond to the immediate crisis, an opportunity can also be taken to construct a larger correction framework and agenda to attempt to resolve other continuing global challenges and threats. The new measures would be incorporated into a Smart framework. Smart is a complex, combination, or contestable concept, as noted. Smart can be understood in management terms. Other possible meanings of Smart include connectivity, automation, pre-programming, decision taking, and policy or purpose. The term can be re-used for this paper either to refer more generally to sustainable, managed, adaptive, responsive, and targeted (smart) measures, or possibly using Socially Managed, Adaptive, Regulatory, and Targeted (Smart) tools. It may also be used to construct a larger, more inclusive minimum protection and continuing reform agenda based on SMART or SMARTS agenda or parallel START or STARTS framework. The objective would be to identify a set of core standards relating to social, market, trade, climate, regulatory, technology, and security issues in each case. These core standards would include a Global SMART Market (GSM), as noted, based on a ‘single market agreed reciprocal, tied or targeted treatment’ model (Smart) and an ‘Open Trade and Tariff Elimination Regime’ (OTTER). This market would be operated under the GIFT or separate GREAT, as noted. This treaty would, in turn, promote open free trade and reflect a ‘Free International Tariff, Trade and Equivalents Regime’ (FITTER) .
Other papers have been issued in each of these areas at the international and domestic levels and by various government, public, regulatory, inter-governmental organisations (IGOs), non-governmental organisations (NGOs), and private bodies. Yet these papers create a complex and confusing mix of specialist standards rarely understood by anyone other than the dedicated practitioners in each field, and then usually only in isolation. It is consequently difficult to form any overview of each of these sets of measures or to understand how they might be considered to fit together and operate within an overall package. It is correspondingly difficult to ensure that they can all be implemented effectively in practice. A new smart, SMARTS, and STARTS agenda can thus be constructed for this purpose which restates or summarises the key rights, protections, and objectives involved.
This agenda would include several new response measures and CRISIS or CRISES agenda. These response measures would rest on a six-part programme of policy Care (Monitoring), Cause (Identification or Research), Containment (Exclusion and Spread limitation), Correction (Treatment), Control (Prevention through Immunisation and Vaccination), and Community (Education). This programme could include a more specific CHEST protocol. A separate FIRST system could be designed to target attention and funding with a separate SAFE programme for emerging and developing economies. There could also be a SAVE agenda to support climate care. These systems would specifically protect CLIMATE considerations and avoid WILD concerns. This protection could follow CLEAN systems and apply BUILD techniques to secure a DREAM system..
As it would be difficult to agree on all the detailed measures in a formal treaty adopted under Public International Law, the system would adopt a PROTOCOL model. This model would effectively operate on a ‘Protocol Adaptive Safety and Security’ (PASS) basis. This PASS basis could depend on a STOP (‘Standards Tailored Oversight and observance Protocol or Protection’) and DIGITAL (‘Design In Global Integrated Technology And Law’) response strategy. All of these systems would fit within a larger ‘Global Investment, Finance, and Trade’ (GIFT) treaty system within which the specific Protocols would be managed and administered. This treaty system would use the latest technology for measurement, monitoring, and management purposes. This technology could be implemented under a GILT or METAL operational framework. This implementation would reflect the rule of law with a set of core principles possibly set out within a supporting ROLE agenda based on underlying RULES.
The overall objective of the system would be to promote ETHICS or FIRE. This system would include SOCIALS and MORALS. This system could involve the use of the ‘Controlled Application of National Conduct and Ethical Laws’ (CANCEL). Protections would be expressed in the forms of GRIPs. Consideration could be given to preparing another ‘Fundamental Integrated Global Human rights Treaty’ (FIGHT) with a supporting ‘Fund for Investment in Global Human, Technology, and Economic Rights’ (FIGHTER).
There would be identified FORGE with FORCE. There could also be more specific controls on ‘Weapons Arrested (or assisted) Response or Responses’ (WAR or WARs) and controls on ‘Lethal Autonomous Weapons’ (LAWs). Separate protocols could be designed to ensure ‘Safe Equipment Conduct Under a Regulated Environment’ (SECURE).
These initiatives could be given effect to through a series of technical protocols in each area. A core set of regulatory, policy, crisis management, SMARTS, and institutional protocols could be developed. These protocols would then be drawn together into a new global framework system under the GIFT Treaty model proposed. The protocols may either consist of standards or separate technical processes and procedural protocols. Standards protocols would set out core protections with technical protocols establishing relevant implementing standards including computer coding and automated operations, if possible. These core protections can be applied on a sustainable, managed, adaptive, responsive, and targeted (smart) basis. The overall objective would be to promote HOPE and a more HUMAN system.
D. Social Control
Minimum social standards can either be considered in terms of individual human rights, or more collectively, having regard to the United Nations Sustainable Development Goals (SDGs), or other social, political, and economic rights. A core set of minimum human rights was set out in the Universal Declaration of Human Rights (UDHR) adopted by the United Nations General Assembly on December 10, 1948. The objective was to recognise “the inherent dignity and equal and inalienable rights of all members of the human family as the foundation for freedom, justice and peace in the world.” The articles prescribe thirty core rights and protections. The European Convention on Human Rights (ECHR), which contained sixteen core entitlements, was adopted by the Council of Europe on a proposal by Winston Churchill in 1950 and came into effect in 1953. The ECHR was implemented in the U.K. under the Human Rights Act of 1998.
The UDHR is said to create an International Bill of Human Rights with the International Covenant on Civil and Political Rights (ICCPR), with two optional protocols, and the International Covenant on Economic, Social and Cultural Rights (ICESCR) both adopted in 1966. The ICCPR consists of fifty-three articles and came into effect on March 23, 1976, with the ICESCR comprising thirty-one articles and coming into effect on January 3, 1976. The General Assembly originally intended to produce the UDHR with one convention and implementation measures. The decision was taken to propose the UDHR for adoption during the third session of the Commission on Human Rights and with the convention being divided into two covenants in 1952 for separate finalization and approval which became the ICCPR and ICESCR.
A number of these core values were separately incorporated into the 2030 Agenda for Sustainable Development and United Nations SDGs. The objective was to set out an action plan for people, the planet, prosperity, and to strengthen universal peace. This agenda followed a number of other important initiatives including the establishment of the Millennium Development Goals (MDGs) agreed at the Millennium Summit in September 2000 and Monterrey Consensus on Financing for Development agreed in March 2002, along with other important developments. The SDGs can be considered to consist of eight principles relating to the individual and eight measures applying to society, with the addition of a seventeenth implementation objective.
Other attempts have been made to establish new development laws or models. The UN General Assembly adopted two important resolutions on May 1, 1974: the Declaration on the Establishment of a New International Economic Order (NIEO Declaration) and the Programme of Action on the Establishment of a New International Economic Order. These resolutions were later restated and developed in a further resolution on December 12, 1974, in a Chapter of Economic Rights and Duties of States (CERDS). Despite strong support for these measures by developing countries, a core group of leading developed states resisted their formal recognition and implementation.
While more strict measures are often required during a crisis, authorities must also ensure that essential and fundamental rights of citizens are not unnecessarily or disproportionately removed or undermined. Ultimately, this is a question of balance. Powers must be exercised for legitimate purposes although not in a manner that unnecessarily curtails other rights and privileges. Authorities must also take proportionate action in relation to crises more generally. The 2020–2021 coronavirus was particularly infectious and spread rapidly especially in urban populations of poorer regions and countries. Many people were either asymptomatic or only displayed mild symptoms, with the most vulnerable being the elderly or people suffering from pre-existing medical conditions. Governments must consider the short-term damage to legitimate businesses, and the long-term, inter-generational cost transferred to future taxpayers.
A condensed version of twelve core individual and twelve social principles could be incorporated into a new consolidated set of SMARTS standards. The individual core standards would consist of rights to (1) life, (2) liberty, (3) legal identity and protection, (4) privacy, (5) avoid physical and economic slavery, (6) non-discrimination, (7) freedom of thought, conscience and religion, (8) freedom of expression, (9) marry and have a family life, (10) peaceful assembly, (11) vote and participate in democratic inclusion, and (12) nationality and passport. The parallel or supporting social rights would consist of (1) protection from hunger and proper provision of food and water, (2) shelter clothing, (3) heat and energy, (4) prevention poverty and provision of minimum standard of living, (5) medicines and health provision, (6) equality, (7) education, (8) employment and training, (9) hold private property, (10) freedom of movement, (11) welfare and care provision, and (12) guaranteed legal rights and protection. All private and public organizations would be expected to adhere to these standards, particularly with respect to working conditions, infrastructure, sustainable communities, and effective, accountable, and inclusive institutions.
E. Market and Trade Control
The SMARTS agenda can be considered to include a core market regime and the STARTS agenda can be considered to incorporate a supporting trade regime. These can either be used separately or as part of a single set of core values and objectives. The market regime would reflect more general social or economic entitlements, associated best market principles, and standards relating to the sale of goods and supply of services. The trade regime would incorporate core principles and policies recognized under International Trade Law.
Market or trade standards are intended to promote cross-border exchange in accordance with an agreed set of objectives. This creates a minimum safeguards framework while simultaneously promoting trade liberalization through the removal of monetary tariffs, quantitative quotas, and other measures of an equivalent effect (MEEs). Free trade was promoted by the Spanish theologian, Francisco de Vitoria (1483-1546) on the basis of the international law of nations (ius gentium) as well as Scottish economist Adam Smith (1723-1790) and English economist David Ricardo (1772-1823). The establishment of an International Trade Organization (ITO) was proposed at the Bretton Woods Summit in New Hampshire in July 1944; less than four years later, the Havana Charter was produced in March 1948 after it was proposed by the British Economist, John Maynard Keynes. Following the failure by the United States to ratify the Havana Charter, countries entered into the General Agreement on Tariffs and Trade (GATT) with eight rounds being agreed upon between 1947 and 1994. The World Trade Organization (WTO) was eventually established on January 1, 1995, resulting in “the biggest reform of international trade since the end of the Second World War.”
In April 1994, the Final Act concluded the GATT Uruguay Round and the Ministerial Marrakesh Agreement, thereby establishing the WTO. The GATT has since been utilized to govern goods, with a number of other agreements, annexes, decisions, and undertakings being entered into and provide for trade, services, and intellectual property rights. The Doha Development Round (DDR) was commenced in Doha, Qatar, in November 2001—with meetings being held between 2001 and 2015 and concluding in Nairobi, Kenya in December 2015—and covered twenty areas of trade. Specific points of negotiation included agriculture, export subsidies, export credits, special and differential treatment of emerging economies, and international food aid. Further progress has been limited.
The purpose of the WTO system is to provide for the negotiation and progressive liberalization of trade barriers over time. Consideration could then be given to the establishment of a revised form of open international trade regime based on a Global SMART Market (GSM) system which would be based on a single market trade model. This system would operate like the GIFT or a separate GREAT and promote open, free trade based on a Free International Tariff, Trade and Equivalents Regime (FITTER) or a Free Advanced Structured Trade Efficiency Regime (FASTER). Such a regime would adopt an aggressive liberalization policy with a target of no or minimum tariffs, quotas, or MEEs imposed on the exportation and importation of goods and services and with maximum use of technology to dematerialize customs documentation and limit filings, burdens, and delays. In this system, countries would be expected to reduce standard conditions to a minimum common set of agreed protections with maximum convergence and commonality. While market access could be managed on as much of a reciprocal basis as possible, an absolute minimum compliance condition would nevertheless be imposed with countries agreeing to comply with the wider SMARTS agenda set. Market access and participation would be conditional on such continuing adherence and compliance. The effect of this would be to build on the existing WTO regime while incorporating core elements of the European internal Single Market model including, in particular, the underlying principles of Mutual Recognition (MR), Minimum Harmonization (MH) and Home Country Control (HCC). This system would supplement existing regimes and attempt to ensure that they work more effectively in practice and in accordance with their original purpose, principles, and objectives.
Two core sets of market and trade principles could be extracted from the GATT and WTO systems and combined with the EU Single Market model to form the basis for the new Global SMART Market. Again, such principles could be considered separately or together. The market principles could, for example, consist of (a) open and inclusive trade, (b) open market access, (c) free and fair markets, (d) open pricing, (e) open competition, (f) prohibition on cross-border dumping, (g) state aid balance, (h) state control balance, (i); trade cooperation, (j) development support, (k) development sequencing, and (l) international monetary and financial stability. A further series of trade principles could consist of (a) OpenOpenconditional access (on adherence to the SMART framework), (b) non-discrimination and Most Favoured Nation (MFN) status, (c) non-discrimination and national treatment, (d) zero tariff, quota, and MME targeting, (e) progressive liberalization, (f) minimum harmonization of standards (MHS), (g) home country control (HCC) or country of origin (COO) control, (h) restricted general good on national interest derogation, (i) special and differential (S&D) treatment for developing and emerging economies, (j) controlled contingency measures, (k) enhanced surveillance and conditional access enforcement mechanism, and (l) structured dispute settlement within the WTO framework and continuing revision and review.
The global trading system would suffer if trade between the major countries was damaged by nationalist retreat and diplomatic uncertainty as well as major market fragmentation. Countries should avoid isolationism, especially in relation to trade, capital flows, innovation, and global institutions. Countries should avoid adopting “techno-nationalist” policies, indigenization, and technological sequestration. The G20 could assume a leadership role in 2021–2022 and commit to the proposed market principles in order to build a sustainable economic future based on effective global rules governing trade, investment, intellectual property, and technology standards, as well as other systemic threats including terrorism, cyber warfare, climate change, and nuclear proliferation. International Financial Institutions (IFIs) and multilateral organizations must be strengthened rather than undermined to develop a sustainable, global, economic order.
The objective is to agree to a set of core minimum standards and principles that all countries could adhere to. An immediate attempt could be made to secure a substantial initial reduction in residual barriers, especially in medical equipment, supplies, vaccines, and other core foodstuffs to promote trade and economic growth and development in developed countries and emerging economies. This would again operate on the basis of a new form of neo-functionalism.
F. Atmospheric and Climatic Control
A parallel set of absolute, minimum standards could be agreed upon in the area of atmospheric and climate control. Such an idea has attracted significant attention with the continued substantial rises in global climate temperatures. This rise is principally driven by increasing anthropogenic greenhouse gas (GHG) levels from emissions such as carbon dioxide, methane, halogens, nitrous oxide, and other gaseous compounds. The Intergovernmental Panel on Climate Change (IPCC) in 2018, as well as other studies, have concluded that the dominant cause of observed global warming has been human influence on the climate. Anthropogenic factors are clearly either direct causal conditions or aggravating contributions. Any origin arguments are not relevant in any responsibility debate here. Greenhouse gases are generated by the burning of fossil fuels, including oil, gas, coal, and wood, as well as from agriculture and deforestation which limit the absorption of carbon dioxide (CO2). Global warming creates extreme weather conditions and disrupts natural water cycles, thereby producing more droughts and floods. Climate conditions must be managed to maintain the continued habitability of the earth and the operation of any minimum social and market systems. Again, this could be referred to as a form of minimum contingent or systemic market functionalism, which could, without minimum protections, underlying social, financial, and physical systems, collapse. It is possible to construct an effective new common global response in this area.
The United Nations Framework Convention on Climate Change (UNFCCC) was entered into in 1992 to limit human interference with the climate system. The Kyoto Protocol to the Framework Convention was finalized in 1997 and countries entered into emission commitments. A Copenhagen Accord was produced in 2009 to limit future temperature increases to below two degrees C. The Paris Climate Agreement was entered into on December 12, 2015 to establish a procedure for setting and assessing goals and assisting developing countries entrance into the framework. The 2020 United Nations Climate Change Conference (UNCCC) was to be held in the U.K. in November 2020, but was postponed until 2021.
A series of responses and solutions has been produced as part of these different measures in the climate area. Several minimum core principles and objectives could be extracted from these various responses. These minimum principles could include: (a) open and inclusive participation based on the principles of sovereign autonomy, sovereign territorial and resource exclusivity, and sovereign responsibility; (b) industrial, developmental, and energy resource assessment and fairness; (c) Nationally Determined Contribution (NDC) identification and progressive NDC reduction; (d) minimum two degree Celsius target and net zero emissions; (e) stocktake and ratcheting mechanisms; (f) mitigation and carbon markets to limit and manage carbon production; (g) development of consistent sustainable development and adaptation policies; (h) adoption of aggressive damage limitation polices; (i) provision of substantial financial assistance packages; (j) development of carbon conversion, carbon absorption, and safe storage technologies with increased technical cooperation; (k) promotion of education and public awareness with trust and confidence; (l) capacity building with the construction of appropriate institutional structure and proper and timely ratification and entry. This creates a twelve point core set of minimum climatic or atmospheric controls and standards which could be incorporated into a Climate Protocol supported by relevant guidance and bridge documentation. This core set of principles would connect the new Protocol with existing measures in place. Preparing a separate energy protocol could be considered, although all the key contents of this are essentially provided for in the measures proposed which could be supported by more specific supporting climate protection and energy guidance.
Development assistance may be closely connected with the issue of climate management. A further supporting development or emerging markets agenda could be constructed in parallel with the climate programme. The objective would be to confirm all relevant objectives, rights, entitlements, and interests and to set these in a dedicated “Sustainable Assistance, Finance and Engagement” (SAFE) programme and implement SAFE or SAVE Protocol. Such a programme could restate and consolidate the SDGs and other development objectives referred to above. While the SMARTS agenda could focus on climate impact, STARTS could incorporate a series of new development principles based on SAFE and SAVE.
G. Regulatory Control
It is essential to ensure that financial markets are subject to effective continuing oversight and control. The global financial crisis confirmed the difficulties that can arise when new uncontrolled activities arise between or outside traditional markets and the scope of the existing micro or legacy regulatory framework. A substantially strengthened and enhanced set of measures, in particular, in the banking, securities, and insurance areas had to be adopted following the crisis. Hard law and regulation must nevertheless include an appropriate set of high level standards and be supplemented through an effective official or market and self-regulatory ethical framework.
A consolidated set of financial or regulatory principles can accordingly be constructed to ensure that firms respond properly and behave effectively in new market areas. Many countries already require financial firms to comply with certain general principles. These are, for example, set out in the UK by the Financial Conduct Authority (FCA) in its Principles for Business (PRIN). These consist of eleven core principles that all firms are required to comply with. A parallel but simplified set of provisions apply to individuals under the earlier FCA Approved Persons code (APER), which has been replaced by COCON. A slightly revised version of PRIN was adopted by the Prudential Regulation Authority (PRA) to reflect its responsibility in respect of firm stability. These provisions were originally based on standards produced by the Securities and Investments Board (SIB) proposed in March 1990 and adopted in January 1991. These were partly reused by the International Organisation of Securities Commissions (IOSCO) in December 1990. Many of these were originally derived from underlying concepts of English Common Law and Equity.
Some issues remain with regard to PRIN in that these mix conduct and ethical with more prudential, protective, and prohibitive provisions. The major omission that arises is with regard to the absence of any complete guidelines on the meaning and application of these principles in practice. It is still possible to produce a consolidated set of core financial ethical principles that firms could be required to comply with at the international level. All financial firms would have to agree to operate in accordance with these standards.
A condensed or consolidated set of principles could consist of the following: (1) Integrity; (2) Skill, Care and Diligence; (3) Management, Control and Systems; (4) Financial Resources and Prudence;(5) Proper Market Conduct; (6) Respect Clients’ Interests; (7) Respect Client Communications; (8) Protect Client Assets; (9) Protect Client Trust; (10) Avoid Conflicts of Interest; (11) Continuity Planning and Resolution; and (12) Full Regulatory Compliance and Cooperation. This can be summarised in terms of the Commitment, Care, Control, Capital, Conduct, Consideration, Choice, Caution, Confidence, Consent, Coordination, and Cooperation.
Regulation can also be considered in terms of wider global governance reform. Specific concerns have, for example, arisen about the composition, mandates, roles, and activities of major international financial institutions (IFIs), such as the IMF, World Bank Group, and regional development banks (RDBs). The core IFI architecture was established under the Bretton Woods Treaty system agreed around seventy-five years ago in July 1944. A set of new guiding principles could be agreed concerning the composition and operation of IFIs and in respect of country relations in modern more integrated, interconnected, and interdependent technology driven markets. This could be set out in a further governance protocol within STARTS with financial ethics built into SMARTS. This would effectively create a standard of parallel ethical principles for country relations and country adoption.
H. Technological Control
It is possible to construct a parallel set of technology-directed principles. The philosophy of technology is generally concerned with examining the impact of technology on social values and structures. The technology of ethics has been referred to as “technoethics,” and has been used to identify rules to support science and technological progress. Ethics in technology examines technology related ethical concerns. The ethics of technology can, for example, be considered to include around twenty separate areas of concern. Technological determinism attributes changes in social value and structure to technology and explains social structure in terms of technology. Technology-related ethics can include the design and use of technology (“robot ethics”) or the conduct of the technology created (“machine ethics”) and the effect and impact of artificial moral agents (AMAs). Three laws of robotics were developed by the American writer Isaac Asimov in 1942 based on the concepts no injury, obedience, and no conflict.
Many different sets of ethical agendas have been adopted or are proposed in the technology area. A number of major BigTech companies established a non-profit, Partnership on Artificial Intelligence to Benefit People and Society, in 2016 to promote understanding of artificial intelligence (AI). The OECD has produced five values-based principles for responsible use of AI. An EU High-Level Expert Group on Artificial Intelligence (AI HLEG) produced a list of seven key requirements on AI systems and recommended that AI systems be lawful, ethical, and robust. The HLEG has also produced a set of thirty-three recommendations to promote sustainability, growth, competitiveness, and inclusion. The European Parliament adopted a resolution on Civil Law Rules on Robotics in February 2017. It included a recommendation to adopt an instrument governing establishing civil law rules on the liability of robots and AI. The resolution applies to cyber physical systems, autonomous systems, smart autonomous robots, and other subcategories. An EU agency for Robotics and Artificial Intelligence was to be created with a registration system, code of conduct for robotics engineers, research ethics committee (REC) code, and model designer licences. The European Parliament also considered confirming the legal status of electronic persons although this was rejected by other parties.
The Institute of Electrical and Electronics Engineers (IEEE) established a Global Initiative on Ethics of Autonomous and Intelligent Systems which produced eight general principles within the first edition of its Ethically Aligned Design principles. The US Computing Community Consortium (CCC) and the Association for the Advancement of Artificial Intelligence (AAAI) have produced a separate proposed 20 Year AI Roadmap. Research and collaborative work has also been taken forward by OpenAI which was originally set up by Elon Musk, Sam Altman, and others in December 2015.
From a legal perspective, a number of difficult issues arise regarding technology and specifically responsibility and liability in terms of the ethics of technology and AI ethics in particular. Clear sets of liability rules must be determined by legislatures, especially in potential areas of possible loss of human life and injury. A general rule of user liability should be considered in such cases to allocate responsibility effectively with supporting principles to avoid people denying liability in situations that their machine use created. Similar moral difficulties arise with regard to the use of “Lethal Autonomous Weapons” (LAWs) or “Weapons Assisted Responses” (WARs). Where all relevant options have not been properly programmed in accordance with agreed legal and regulatory standards and moral conflicts still arise, machine or autonomous functions should be capable of being cancelled with the human re-assuming control for the activity.
Difficulties also arise regarding Artificial Moral Agents (AMAs) and whether machines can assume or be programmed with a sense of moral responsibility or direction through coding. Moral agency refers to the ability to make decisions based on moral judgements. It is arguable that machines should never be required or able to make such discretionary moral judgements based with this remaining a human function outside pre-programmed code parameters where the applicable rules are clear. Liability for machine action and results should generally remain with the machine user except where separate fault may be attributed to a manufacturer or programmer. Difficult issues may still arise especially following the “singularity,” when machines are able to outperform humans in equivalent functions. A further underlying issue involved is whether machines can assume a self-preservation (and self-replication) function that may conflict with human direction, instruction, and control.
In response to all of these technology related issues and concerns, a number of core principles can be extracted to create a basic code of conduct for roboethics and machine ethics. A basic distinction can be drawn in this area between infrastructure, or access, rights and applied, or substantive, rights. Access rights can correspond with digital or network rights. These may be considered to include the following: (a) Network access; (b) Network equality; (c) Network neutrality; (d) Network Security; (e) Network data control; (f) Network freedom of expression; (g) Network respect; (h) Network compliance; (i) Network liability; (j) Network open regulation; (k) Network open governance; and (l) Network continuity. Other countries have been considering adopting further Internet use or digital platform laws. A separate set of provisions could be incorporated within the same Access protocol governing platforms, including specific new competition law protections as these evolve.
A parallel set of substantive rights and principles can be developed to govern the use and application of technology. This could consist of: (a) Human agency control and oversight, as well as direction and delivery; (b) Human purpose and values; (c) Design and technology security and safety; (d) Precautionary principle; (e) Controlled gene editing; (f) Controlled self-awareness and consciousness creation; (g) Controlled irreversibility; (h) Controlled self-correction; (i) Controlled self-replication; (j) Legal and regulatory compliance and accountability and liability; (k) Legal and regulatory responsibility and human liability; (l) Suspension or cancellation; and (m) Continuing review and reprogramming. All of these could be simplified and incorporated into the new framework within a Technology Protocol and supporting architecture documentation.
I. Security Control
It is further necessary to create an appropriate institutional structure and security framework. To date, this is formally based on the United Nations (UN) architecture with the UN Charter having been agreed at a San Francisco Conference on June 25, 1945. This confirmed the objectives of the Charter with six principal agencies or operations being established subsequently.
Several core standards can be extracted specifically from the purposes and principles of the UN as set out in Articles one and two of its Charter. These essentially consist of: Maintaining peace and security; Developing friendly relations; Promoting international cooperation; Harmonisation; Sovereign equality; Good faith adoption; International settlement of disputes; Non-aggression; Mutual assistance; Extended application; National subsidiarity; and continuing application.
These ideas are supplemented by other general principles of Public International Law. This would specifically include the Laws of War which apply both with regard to the right to enter into war (jus ad bellum) and conduct during war (jus in bello). These include international treaties and the laws of war, custom, and other general principles of Public International Law. A significant number of treaties, declarations, conventions, resolutions, and other documents apply. Two of the most important sets of these consist of the Hague Conventions of 1899 and 1907, which are concerned with the laws of war, disarmament, and war crimes as well as establishment of the Permanent Court of Arbitration (PCA), and the Geneva Conventions in 1949 covering the humanitarian treatment of prisoners and civilians. The use of chemical and biological weapons were banned under a Geneva Protocol in June 1925 following the use of mustard gas during World War I. The production, storage and transfer of biological and chemical weapons is dealt with under two subsequent treaties in 1972 and 1993. A general Treaty on the Prohibition of Nuclear Weapons (TPNW) was produced by the UN on July 7, 2017, although this has still not come into effect due to insufficient ratification.
Separate measures have been adopted on excessively injurious or indiscriminate effects weapons, landmines, cluster munitions and child protection. Attention has more recently focused on the use of remote-controlled weaponry and robotic weapons which use human guidance and non-human autonomous weaponry. These can be considered, for the purposes of this paper, to cover lethal autonomous weapons (‘LAWs’) including lethal autonomous robots (‘LARs’), bio-autonomous systems (‘BASs’), nano-autonomous systems (‘NASs’ or ‘nano-LAWs’), remote weapon systems (‘RWSs’) and fully autonomous and self-preservation weapon systems (‘AWSs’). A ban was proposed on the use of autonomous weapons at the 24th International Joint Conference on Artificial Intelligence (IJCAI-15) in Buenos Aires in July 2015.
A number of general principles can again be extracted from this to govern the use of war and warfare. These may, for example, include: (a) Proper justification or military necessity; (b) Legitimate military objective; (c) Proper distinction between combatants and civilians; (d) Proportionality; (e) Disclosure; (f) Surveillance; (g) Humanitarian assistance injured; (h) Nuclear non-proliferation; (i) Remote weaponry controls; (j) Lethal Autonomous Weaponry (LAW) bans; (k) War crime prosecution; and (l) Adherence and Review. The objective would be to create a clear and concise set of applicable minimum principles and standards for application in all cases. These could be set out in an appropriate protocol under the SMARTS framework with a parallel set of crisis management measures (or Safety) included within the STARTS agenda.
J. Emerging Economies and Development Finance (FIRST, SAFE and SAVE)
It is possible to create a supporting financial and technology-specific agenda for developed and emerging or developing economies to ensure proper and targeted investment, research, and delivery. This could be set out in a new ‘Financial, Investment, Regulatory, Social and Technology’ (FIRST) agenda. This could incorporate, or be cross-referred to, many of the earlier sets of core objectives referred to in each of these areas.
Emerging markets and economies also have specific special needs that have to be managed on a continuing basis. These could be supported under a dedicated ‘Sustainable Assistance Finance and Engagement’ (SAFE) programme with a further ‘Sustainable Assistance and Value Enterprise’ (SAVE) agenda for climate protection. A large number of initiatives have been adopted in this area on core human rights and development rights. The most significant of these are the extended Sustainable Development Goals (SDGs), which replaced the earlier Millennium Development Goals (MDGs). A large number of further international agreements have been agreed in this area. A number of important initiatives are continuing which consist of various core objectives and supporting policy areas.
The particular challenge that arises in the emerging market area is moving from the production of continuing reports and reviews, which often simply replicate and cross-refer to each other, to securing actual delivery and results which is dependent on underlying political will and necessary commitment, engagement, and funding programmes in practice.
K. Market Technology and Protocol Framework (PASS, METAL and GILT)
The overall objective of the proposed protocol programme would be to codify all core objectives, principles, and standards in each of the key areas identified. Much of this involves separate and distinct complex areas of domestic and Public International Law, which has become increasingly specialist, opaque, and non-transparent. It is necessary to attempt to draw all of this together into a clearer, integrated, and accessible framework for action that would allow effective and targeted responses to be developed irrespective of the specific cause or threat concerned. The underlying objective in all cases would be to maintain certain core minimum standards and principles. Rather than attempt to set these out in any new treaty arrangements, substantive provisions could be included within the series of crisis management and other essential standards protocols adopted under a GIFT or FIRST Treaty and general Public International Law.
A number of different types of Protocols may be used with some of these being specified as being directly enforceable where appropriate agreement can be secured. While all Protocols may not be directly enforceable, these would still be subject to an implied obligation to adopt and adhere to them breaches would be sanctioned by losing market access and privileges. This would be given effect under the Protocol Adaptive Safety and Security (PASS) regime.
All of this may be considered to confirm the importance of such core doctrines as the ‘Rule of Law’ (summarised as ‘ROLE’ under this paper). Rule of law is concerned with the authority and influence of law in society, with everyone being subject equally to publicly disclosed legal codes and processes. The rule of law was recognised by Aristotle and Cicero. The Anglo-Saxon King, Alfred the Great (1847-1899) consolidated earlier codes of conduct in the Doom Book in 893AD. The Rule of Law was used by the Scottish theologian, Samuel Rutherford, to argue against the divine right of kings in Lex, Rex (Law is King). The English philosopher, John Locke, confirmed that freedom was defined in terms of the laws imposed by the legislature. The English constitutional theorist, Albert Venn Dicey (1835-1922), stressed the sovereignty of Parliament and the supremacy of the law. A separate summary of core legal directions and provisions could be set out in this protocol for the purposes of this paper. This would confirm all minimum rights and protections.
All of this could be drawn together to create a new Protocol standards architecture made up of a series of primary and secondary standards, technical protocols, schedules and annexes, definitions and guidance, bridges, and supplements. The core sets of rights, protections, and objectives would be set out in the protocol programme discussed above. This could consist of regulatory, policy, crisis management, SMARTS or STARTS, and institutional protocols. Bridge documents, or bridge sections within protocols, could be used to connect the summary core provisions with underlying original international treaty or domestic provisions. All of the underlying core international and domestic documents could be listed in an electronic or virtual Compendia of Standards on the model of the FSB provisions governing banking, securities, and insurance markets. An additional virtual Directory could also be created by implementing domestic provisions, which would be appropriate. Additional information and details can be set out in schedules, annexes, or other supplementary documentation. Countries could confirm implementation through the use of Adoption and Adherence Letters.
L. New Global Treaty Model (GIFT)
All of these separate measures can be drawn together into a single international treaty framework. This has been referred to as the Global Investment, Finance and Trade (GIFT) Treaty, with a possible supporting ‘Global Reciprocal Economic Area Treaty’ (GREAT), which could form the basis for the new Global SMART Market system. GIFT could be considered to create a form of Bretton Woods III Treaty system following the original Bretton Woods Treaty agreed in July 1944, which created a new international monetary order following World War II. This was followed by proposals to create a form of ‘Bretton Woods II’ after the global financial crisis, in particular, at the April 2009 London G7 Meetings, although this never formally materialised. This could also be referred to as creating a new form of “Fifth Industrial Revolution” (FIR) following the earlier First and Second Industrial Revolutions in the 1700s and 1800s, the post-World War II Information or Digital Revolution and proposals for a Fourth Industrial Revolution, in particular, to realise the potential benefits of new technology. The Fifth Industrial Revolution is used for the purposes of this text to refer to the creation of a new sustainable, managed, adaptive, responsible and technology driven (smart) global control framework based on carbon neutral production, replanting, regeneration, recycling and reuse rather than dilution, consumption, and exhaustion.
The GIFT framework would operate on a flexible and dynamic basis. International treaties can be difficult to agree to as countries are reluctant to surrender significant areas of control, especially where these are concerned with, or sensitive to, national sovereign identity issues. International treaties can take a considerable time to negotiate, with many countries insisting on derogations and exceptions that are then costly to amend with potentially only limited implementation, sanction, and enforcement mechanisms available. The inherent difficulties that arise with formal Public International Law treaty models have to be recognised and accepted.
The GIFT solution would create a core international framework within which a new protocol system referred to above would operate and, in particular, under the PASS framework proposed. As much detail as agreeable and acceptable would be included within the treaty terms directly, although a flexible approach would be adopted to avoid unnecessary delay or collapse in negotiations with further technical detail being set out in the protocols and supporting guidance. The core underlying need is to create a larger framework within which the new standards recommended can be understood and applied over time. The GIFT treaty, at minimum, only has to create core objectives, disclosures, and monitoring frameworks with a supporting institutional structure. Much of this can then be achieved through the re-use of existing IFIs, inter-governmental organisations (IGOs), and non-governmental organisations (NGOs). A significant part of the GIFT Treaty would operate by way of supplement and amendment to other existing international treaties and relationship systems. The underlying objective would be to create a core institutional structure within which the new framework could operate. The substantive content could be set out in the separate crisis management, and SMARTS protocols could be adopted and applied.
The principal sanction would be based on a combination of official implementation, monitoring, and reporting supported by social media and public approval or disapproval with the threat of denial or removal of market access. Countries and governments would be encouraged to adhere and implement the standards as quickly, rigorously, and consistently as possible. This would then be reported to monitoring bodies and reflected in the metrics disclosed. All of this would be subject to the glare of continuing press and media coverage and the power of social media comment and public opinion. A supporting dispute settlement mechanism could be set up to provide interpretative and advisory decisions or rulings. The underlying principle would nevertheless be for the system to operate based on mutual self-interest and self-regulation, with the threat of contingent withdrawal of participation and involvement.
X. Global Market and Regulatory Close
Crises can cause substantial market and social disruption. This may arise as a result of a wide series of internal or endogenous and external or exogenous threats beyond traditional examination and analysis. This creates massive levels of uncertainty and unpredictability that are inherently difficult to model and manage. Governments and regulators cannot prevent instability and crisis. Instability to a significant extent only reflects natural cyclic effects with crisis representing more substantial disruptions within this. Governments and authorities have to focus on absorption, resilience, and continuity where outright prohibition or prevention would not be possible to secure or achieve in practice.
The most significant disruptions can arise with regard to exogenous shocks that may be triggered by various human or anthropogenic, biological, or natural causes and conditions. These can be more devastating as these would impact a wider array of industries, markets, sectors, social and community functions, and activities. The occurrence of such incidents again cannot be prevented with a necessary response being based on absorption or containment, systems preservation, and resilience with managed continuity of function. The global financial crisis demonstrated the extent of the monetary loss and damage that can be inflicted on an economy. The 2020–2021 coronavirus crisis confirmed the wider social impact and damage that external or exogenous shocks can cause.
It is possible to create a sustainable, managed, adaptive, recurrent, and targeted (SMART) conditional or contingent framework based on a series of core underlying rights, protections, and objectives for the modern world. These would be set out in a series of dedicated technical regulatory, policy, crisis management, institutional, and SMARTS and STARTS protocols. A supporting extended documentation architecture could be constructed. All of this would be given effect through a strengthened international GIFT Treaty framework, which builds on existing agreements and relations but also allows this to work on a more integrated, effective, and progressive manner.
The new opportunity and new challenge that arises is to combine immediate crisis correction with further and future new agenda construction. It is possible to build a wider and more complete framework to incorporate all of the other essential continuing common causes of concern at the international level, and to construct a new more relevant, effective, complete, and comprehensive global reform programme.
This new framework would respect the fundamental rights of men and women. It would promote open free markets and unobstructed international trade. It would provide essential climatic protections and build sustainable green economies with zero carbon production and consumption systems. It would adhere to specified high level regulatory and ethical principles in finance and governance in both private and public markets. It would adopt a new technology related design and management control framework and supporting ethical agenda. It would maintain collective peace and security in accordance with agreed common minimum standards and humane and responsible conduct. All of this would operate within an appropriate extended treaty and institutional structure.
We have created a new world with new possibilities because of continuous, real-time contact, communication, and connection. This, in turn, creates essential inter-dependence and fundamental mutual reliance. Market-specific and wider social crises can have common causes that result in common loss or common damage based on common interest and common threats. This creates an underlying system of common identity and common commitment, which can only be managed or contained through common or collective responsibility, action and activity supported by the necessary political engagement, and full social and public involvement and participation. We can build a new direction and a new future.
