When a group becomes too rich and powerful, it can wield influence over politics and over commercial activities in which its members are not directly involved. The effect is to enhance that wealth and power. This process is likely to end in political and economic crisis. That was the history of royal courts across Europe, from Versailles to St Petersburg. More recently, it has been the experience of many developing countries and transitional economies. In the three decades since Margaret Thatcher and Ronald Reagan inaugurated the market revolution, it appears that Britain and the US have joined their ranks. Beware bail-out kings and backbench barons, John KayBig business and government have had an easy time of it over the past few decades. Our societies have all become richer on the back of cheap energy and globalisation. So it's been easy to be tolerant of distorted, corrupted markets and financial shenanigans in high places. It's been easy, too, for governments to spend huge proportions of national income inefficiently if not corruptly.
Those days are over. The transition will prove painful and where will it lead? I'd like to suggest that we'd do well to re-orientate policy so that it is focused entirely on outcomes that are meaningful to ordinary people. Its success or failure would be measured by how close it comes to achieving those outcomes. That sounds an obvious thing to do, but it would represent a stark change from the current regime where government (when it is well intentioned) rewards the ways it thinks will best achieve social goals. These alleged ways have led to bloated government agencies, a profound and tragic reluctance to terminate failed experiments, and resistance by public sector unions to any meaningful reform. They have also helped create the conditions by which big business has captured and corrupted government. Although Social Policy Bonds have been in the public arena for something like 20 years without any signs of take up (that I'm aware of), I am confident that something like them or, even more likely, outcome-oriented policy, will play a bigger role in the future. The question is: how far away is that future? John Kay continues:
But, as Louis XVI learnt as the guillotine fell, the longer reform is delayed, the bloodier the revolution. And the more unsettled and chaotic would be the eventual outcome for us all.