19 September 2008

Thinking aloud

This week's financial turmoil speaks to me of a confusion in high places between policy ends and means, but I confess I have no easy answers. It shouldn't have got to this point, of course, where taxpayers prop up the financial system, rather than the other way round. Under a Social Policy Bond regime the health or otherwise of any single industry - financial, agricultural, manufacturing or whatever - would be subordinated to goals that are meaningful to ordinary people. In other words, instead of targeting the health of particular sectors ('means') we'd target objectives like literacy, physical and mental health, environmental well-being and the eradication of poverty. Government objectives are currently too obscure or too mutually conflicting, so that it's not in any people's interests to prevent this sort of catastrophe. Or rather, the oversight is done by government agencies, which, as in any other policy area, is not rewarded in line with its achievement. This is the same sort of oversight that has led to nuclear proliferation, for instance, with all its attendant, catastrophic, dangers.

A Social Policy Bond regime would reward the successful, sustained, avoidance of catastrophe, however caused. And it would inject market incentives into the maintenance and improvement of the standard of living of natural persons, rather than abstractions such as 'the financial sector'.

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