29 July 2009

Conflict Reduction Bonds

I've just begun reading Breaking down the wall of silence, by Alice Miller. From the preface:
What makes a person wish to destroy the world? ... [T]echnology alone is not sufficient to protect us from the consequences of denied, and thus uncontrolled, emotions. Without facing up to their origins - the production of hatred in childhood - we will be unable to resolve such hated and put an end to the work of devastation. It is in no way exaggerated to say that every tyrant, without exception, prefers to see thousands and even millions of people killed and tortured rather than undo the repression of his childhood mistreatment and humiliation, to feel his rage and helplessness in the face of his parents, to call them to account and condemn their actions.
This sounds plausible to me. The problem, from the point of view of policymakers, is that the evidence for or against it is too scanty right now to provide a firm basis for policy. Our national political systems are geared to deterring or fighting wars, rather than their looking for their psychological causes. Our global political systems are geared to intervening in existing conflicts or interposing themselves between likely antagonists. Investigating the psychological causes of war is too speculative and long term for government bodies. Government, including global bodies like the United Nations, are good at dealing with, say, disease outbreaks or natural disasters. There, the causes are by and large known, the actions to take are specific, monitoring of progress is easy. Indeed, only large organisations like government can effectively deal with such emergencies. Where such organisations fail, though, is when the relationship between cause and effect is not so simple to identify. The tendency then is to allocate resources according to factors other than long-term effectiveness and efficiency.

Prevention of violent political conflict may well require a mosaic of approaches, including those currently followed by the United Nations. But if Ms Miller is correct, then the huge disparity between the resources given to current prevention methods as against investigation of psychological causes would be especially grievous. When faced with something as apparently intractable as war, the right approach, I believe, is to specify a desirable outcome - some robust definition of 'peace' in this example - and reward people for achieving it, however they do so. We can't know in advance whether looking at children's treatment in the family will reduce the level of conflict, but we can take steps to encourage investigators inspired by Ms Miller to pursue their enquiry if it shows signs of promise. Conflict Reduction Bonds, issued with the goal of reducing violent political conflict to a very low level, would channel resources impartially into the most promising lines of enquiry, however obscure or unfashionable they might now appear.

26 July 2009

Give greed a chance

Climate change, the world's financial system, the risk of nuclear war or pandemics: the list of huge problems that our politicians are unable to comprehend, let alone deal with, is scary. We know little about the exact scale of the problems, still less about how costly will be their solutions. And even less about how most efficiently to go about finding such solutions. The consequences of getting any of these calculations wrong under the current command-and-control policy system is immense. And these consequences are borne entirely by people who cannot or do not want to bear them.

Social Policy Bonds can transfer the risks of getting it wrong to people who are prepared to take on that risk, in the hope of profiting from solving our social and environmental problems. The bonds channel the market's incentives into the achievement of universally desired goals rather than, as now, corrupting the global banking system or marketing dogfood. It is only 'greed' in the sense that going out to work, rather than staying at home while collecting a lesser sum on the dole is also 'greed'. That sort of greed can be helpful to us all if it's channelled correctly, and if the 'greedy' people's goals are exactly congruent with those of society. They would be so congruent under a Social Policy Bond regime. Read more by clicking on the links in the right-hand column.

22 July 2009

Preoccupied with trivia

In the midst of the most profound financial and economic crisis in living memory, what issues are the [British] political class arguing over? Not how our society should produce and distribute its wealth in the future, but how much a few bankers should get in bonuses and which bankers or bureaucrats should sit on financial regulation committees. Mick Hume, What good's an election without alternatives? 22 July

Public debate is always going to centre around issues that people understand. Our politicians and their corporate paymasters have successfully obscured most of the big issues in politics. Only specialists understand them, so matters of importance to ordinary people are resolved in favour of the existing vested interests. The media are filled with trivia, and urgent crises are ignored.

One of the big benefits of a Social Policy Bond regime is that it would start by clearly and transparently, deciding on society's targeted outcomes. These could include the absence of disasters, as well as more positive goals, such as reducing unemployment, or cleaner air and water. There would, in my view, be significant efficiency gains when a bond regime channelled market forces into achieving these goals. But perhaps of even greater benefit would be the accessibility of the public debate about which outcomes should be targeted, and their relative priority. People understand outcomes, so we could expect greater public participation in policymaking. We could also expect more attention to be paid to the big issues, rather than the trivia.

21 July 2009

Does government intervention lead to too much monoculture?

'Too much' in the sense that a properly functioning policy, with undistorted competition, would lead to more diversity and less vulnerability to drastic downturns. I suspect the answer is 'yes'. Take agriculture. Government has a long history of intervention in agriculture in the industrial countries. Perverse subsidies to the sector in the rich countries have contributed to the devastation of the physical environment, diverted wealth from the poor to the rich and accelerated the massive overcapitalization of farms and rural depopulation.

And in much of the countryside in the west, the visual testament to a long history of government involvement is square kilometre after monotonous square kilometre of land devoid of trees, hedges and human beings, devoted to intensive production of crops or pasture. Subsidies have exaggerated this specialisation, partly because guaranteed prices have reduced the risks of on-farm specialisation and partly because capital assets receive favourable tax treatment. So one result of the combination of subsidies and centralised price-fixing and subsidies has been a greater degree of monoculture in agriculture than would otherwise prevail. As well, without the high levels of subsidy it’s unlikely that farms would be as land-intensive as they are today. Net production would be lower, but so too would use of fossil fuels, pesticides and prices to consumers.

Government involvement in infrastructure has similarly increased our dependence on fossil fuels. Government has implicitly guaranteed oil supplies. It's done it on our behalf and as a result the construction industry has, as in agriculture, entrenched and exaggerated our dependence on oil.

The construction industry: not necessarily a part of government but certainly remarkably close to it. Perhaps my header would read more accurately if I inserted the words "on behalf of its corporate friends" after "intervention". And rephrased it as a statement, rather than a question.

17 July 2009

Perils of the McNamara approach

One of the most intelligent men ever to hold public office, [Robert] McNamara mused in retirement on why a project that promised so much had gone so badly wrong. Decentralised markets had systematically outperformed central plans, planned development strategies had failed. Detroit’s obsession with numbers had fallen victim to the Japanese passion for quality, and the American military machine was defeated by the forces of North Vietnam. John Kay, 15 July

It's worth pondering what might have happened to the car industry if there'd been no Japan, no competition from decentralised markets. We'd have something like we have today in global affairs, where responsibility is largely handed over to huge organizations, devoid of any pressure to be competitive, efficient, or even effectual. The United Nations, for instance, or the World Bank/IMF. The decisions of any large monopolistic body are going to be determined entirely its culture and goals, and there's no inherent congruency between these goals and those of the people they are supposed to serve.

We're coming late to the idea that the evolutionary forces that have propelled most of us out of abject poverty - trial-and-error, experimentation, diverse approaches with termination of failures, adaptation - can actually be consciously deployed, as they would be under a Social Policy Bond regime. But it is heartening to read here that the idea is at last being discussed and tried in an area that desperately needs it: development.

15 July 2009

Kyoto will fail

What the G8 summit in Italy decided to do about climate change last week was much less than is necessary, but the very best that a realist could have hoped for. Some tens of millions of people will probably die as a result, or some hundreds of millions if we are really unlucky, but there is still time to avoid the worst. And anyway, it can’t be helped: this is the way we do business. Gwynne Dyer, 10 July
Talking with friends recently I'm more and more convinced that efforts to cut greenhouse gas emissions are going to have a minimal effect on the climate. As a species our chances of controlling the climate, looking at it from the process-engineering angle, appear to be minimal. That said, the Kyoto process might not be totally without benefit. It might encourage us to do the right things (like reduce our absolute dependence on fossil fuels, conserve energy etc) for the wrong reason. There's nothing wrong with that, except that the Kyoto's upfront costs could probably be better spent in reducing the impact of climate catastrophe; and the risks of failure to stabilise the climate are not only large, but will be borne by the wider population. If the real goal genuinely is to stabilise the climate then something like Climate Stability Bonds would be far more efficient than Kyoto. Incentives are important, and the over-arching incentive I see falling out of the Kyoto process is to game the system.

09 July 2009

Two degrees or 350ppm?

The G8 countries have approved a target of 2° C rise in global average temperature above the natural, preanthropogenic climate, that they resolve should be avoided. But would 350 parts per million of carbon dioxide equivalent in the atmosphere be a better target? Frankly, given that the agents ultimately charged with achieving the target are governments, I don't think it matters. There will be no accountability and no penalty if the target is not achieved. Instead - you can hear it now - there will be excuses. Administrations change, and politicians are expert at evading and deflecting blame. They will be able to blame vagaries in measurement, or in the scientific relationships; or previous administrations, other countries' administrations, 'unexpected' events, ...the list goes on.

Broad target setting is all very well. It does, indeed, underpin the entire Social Policy Bond concept. But there has to be motivation as well. Government and its agencies are paid to perform activities, to stop other people performing activities, to allocate funds, to ensure compliance with rules - and a whole host of other things, not all of them useless. But they are not paid to achieve outcomes. Climate change is a huge, urgent challenge. Well-meant targets must be backed up by powerful incentives so as to reward success and penalise failure. And that's where Climate Stability Bonds should enter the picture. The G8 (or the United Nations) could still set broad climate-related goals. They could still raise the funds to reward investors in the bonds. But, by issuing the bonds, they would be contracting out the achievement of climate stability to people who are motivated to succeed, rather than merely paid to turn up to work. A huge, and quite possibly a planet-saving - difference. Look under 'climate stability' here to find out more.

07 July 2009

Nobody ever dies of divergent goals

My header is an inelegant echo of an old article by Garret Hardin: Nobody Ever Dies of Overpopulation. What I'm saying is that the current rioting in China is only the most visible sign of an economic and political system gone badly wrong. In brief, the goals of the government and its corporate allies are not only different from, but are in conflict with, the goals of the wider population. And not only different, but diverging. At the beginning of industrialisation it's largely true that what's good for the corporations is good for the people. And when things are improving it's easier to be optimistic that more of the same will bring about a better standard of living for everyone. But at some point, and this is by no means unique to China, government listens less and less to the people, and more and more to the big corporations. The interests of the corporations - essentially reducible to profits, revenue or market share - become identified in the politician's mind with those of the wider citizenry. Then, when even the corporations are ceasing to grow, and the economic figures no longer look promising, the degraded social (and physical) environment assumes a larger, baleful role. The things that cannot be captured by the statisticians and that are of little concern to corporations, begin to assert themselves. Riots, blamed on something else, are one manifestation. We shall see more of this, I'm sorry to say.

One way of realigning ordinary people's interests with those of government and the wider economy would be to introduce government-backed Social Policy Bonds. In a world that is now largely designed by governments and corporations, it's unfortunate that unless something is explicitly targeted, it's going to be neglected and probably suffer as a result. A bond regime could change that by having as its over-arching goals improved social and environmental wellbeing. We cannot know exactly which goals people will decide on, though I'd offer 'avoidance of catastrophe, man-made or natural' as a high priority: one of the larger benefits of a bond regime is that society's goals would be decided by ordinary people ourselves. That would be in stark contrast to the current system, whereby it's assumed they are congruent with those of politicians and corporations, until the inevitable collapse in social cohesion becomes impossible to ignore.

05 July 2009

Biologically programmed to crash and burn

As products of evolution probably the one thing that we are not designed for is to live sustainably. Evolution selects for reproductive fitness. Now that can be consistent with restraining our numbers in the short run or, less often, with restricting our consumption levels, but it is more generally in conflict with them. Our institutional apparatus - bodies like United Nations peacekeepers, atomic energy watchdogs, or the numerous non-governmental organizations working in the developing world - do heroic work in difficult circumstances. But their influence on the big picture seems peripheral. Are they merely pebbles on the road to ruin? Faced with overwhelming environmental or man-made catastrophe, we appear not to be very interested in looking after the long-term interests of human, animal or plant welfare. We all know that it's in nobody's interests to have, for instance, a rapidly changing climate, or the proliferation of nuclear weapons. But we seem unable to link that knowledge to effective action. Perhaps we are genetically incapable of defusing crises unless they are fast-moving and have readily identifiable causes.

Social Policy Bonds could help by targeting universally desired outcomes: perhaps above all the avoiding of catastrophe. They could blur the distinction between our narrow, short-term, individual goals, and the greater good of the planet. They could align our daily self- and family-sustaining activities with the achievement of our broad social goals. It's a big claim, but I do not see any alternative. The current political system is, frankly, not up to the job of managing our future. More and more it seems we are destined to crash and burn.

Emails gone astray

If you have recently tried to email me using the encrypted email address on the socialgoals.com site, and not received a reply, please try again, using the new link the right-hand column on this page. There was a technical problem which has now been solved.

01 July 2009

Flying blind

There is optimistic talk about emerging from the recession in the UK and Europe. I think we are confused on several fronts. First, the health of an economy, even if it were accurately measured, is not the health of a society. Second, because what passes for the health of an economy these days are, essentially, the profits and sales of large corporations, and the rate of growth of house prices. Far more important though, are what is left out: the numbers of unemployed, debt levels, crime rates and the huge negative non-market impacts that a growing fossil-fuel dependent economy has on the environment. All this is not to deny that there are positive non-market externalities when the economy, as simplistically measured, is doing well. There are, but the negative impacts: climate change, for instance, or the risks of other environmental catastrophe, or an alienating physical infrastructure; these are ever more serious on a shrinking planet.

And we're not addressing them. The politicians and their corporate paymasters are desperate to revive the old economy. At the global level there are no systems in place to deal with climate change, nor man-made disasters such as a nuclear exchange. There's very little explicit targeting of such desirable but elusive goals as 'avoiding catastrophe'. At the national level, governments fiddle with well-intentioned, but meaningless or even harmful Mickey Mouse targets. The problem is similar to that of the public sector: the interests of government agencies and public sector auditors are the interests of their organization, and when they conflict with the greater good - for which, admittedly, goals are difficult to define - it's the wellbing of the organizations that wins every time.

So we are flying blind. Our flightpath is determined by powerful corporate interests and their friends in government. On our aircraft there are many well-intentioned people doing the right thing. But the overall direction they are travelling in bears little relation to their efforts or intentions. It's not the wellbeing of ordinary people that will determine whether, or when, we fly into a mountain, or crash into the sea, but the short-term interests of large organizations, public and private sector, as measured - badly - by the accountants.