31 January 2010

Corporations versus humans

We constantly confuse means with ends. For most of recent history a society's corporate health was a fairly reliable indicator of economic health which, in turn, was reasonably well correlated with the wellbeing of an entire population. But there's nothing inevitable about such strong correlations. Corporate objectives differ from those of ordinary individuals, and often conflict with them. But large corporations and government are now so big that they can manipulate the legislative environment to make sure they grow even bigger and more influential. Any link between the success of big organizations and the wellbeing of ordinary people is nowadays almost coincidental.

Social Policy Bonds could restore that link. They would subordinate the interests and activities of corporations and government agencies to outcomes that society itself chooses. Ones that would be inextricably linked the wellbeing of ordinary people. They would eliminate the confusion between ends and means that bedevils current policymaking at any but the most local level.

Meantime, the role of the corporate actor continues to expand. David Bollier reports that, on 21 January:
[T]he U.S. Supreme Court gave the go-ahead for corporations to enclose our democracy. The Court ruled that corporations must legally be considered “persons” who are thereby entitled to First Amendment rights. By this tortured logic, long-standing limits on corporate contributions to political campaigns constitute an unconstitutional infringement of free speech. [N]ow paid speech (on behalf of market interests) is privileged over people’s speech in electing our political leaders. “We the Corporations….” Corporations may now drown out the speech of real, live human beings for whom the First Amendment was designed. The Corporate Enclosure of Democracy, David Bollier, 21 January

26 January 2010

Deployment of Social Policy Bond principle!

"Today I am launching a new fund – www.arrestblair.org – to reward people who attempt to arrest the former prime minister." A Bounty for Blair’s Arrest, George Monbiot

23 January 2010

When intentions and self-interest conflict

Frederick Barthelme describes a genial shift manager at the Paradise Casino, in his novel Bob the Gambler:
Phil Post was always pleasant, always commiserating, urging us to leave when we were ahead or when we got even after a bad run of cards. He seemed genuinely friendly, but he worked for the Paradise, so who knew. He was paid to grease the skids, to shill, so it didn't matter whether he was friendly or not, because even if he was, even if everything he said to us and everybody else he dealt with was as genuine as the day was long, it still amounted to coaxing more money out of our pockets. (page 123)
It's unfortunate that, as with the well-intentioned but necessarily compromised casino employee, policymakers have no real interest in downsizing or efficiency. From the current Economist:
Periodic attempts to build “bonfires of regulations” have got nowhere. Under [George W] Bush the number of pages of federal regulations increased by 7,000, and eight of Britain’s ten biggest regulatory bodies were set up under the current government. The power of these regulators is growing all the time. Policymakers are drawing up new rules on everything from the amount of capital that banks have to set aside to what to do about them when they fail. Britain is imposing additional taxes on bankers’ bonuses, America is imposing extra taxes on banks’ liabilities, and central bankers are pondering ingenious ways to intervene in overheated markets. Worries about climate change have already led to a swathe of new regulations, for example on carbon emissions from factories and power plants and on the energy efficiency of cars and light-bulbs. But, since emissions are continuing to grow, such regulations are likely to proliferate and, at the same time, get tighter. The Kerry-Boxer bill on carbon emissions, which is now in the Senate, runs to 821 pages.

Fear of terrorism and worries about rising crime have also inflated the state. Governments have expanded their ability to police and supervise their populations. Britain has more than 4m CCTV cameras, one for every 14 people. In Liverpool the police have taken to using unmanned aerial drones, similar to those used in Afghanistan, to supervise the population. The Bush administration engaged in a massive programme of telephone tapping before the Supreme Court slapped it down. Leviathan stirs again, 'The Economist' (subscription), 23 January
I don't see big government as necessarily a problem, but I do see remote, inefficient government as a problem, and one that's getting worse. Government is now so big it alone determines its size and rate of growth. In my view, the size of government should be a by-product of the social and environmental outcomes we want to achieve. There are some things that only government can do, two of which are articulating society's goals and raising the revenue for their achievement. Where government tends to be inefficient is in actually achieving these goals. Contracting out such achievement, as would be done under a Social Policy Bond regime, would bring competition to many services that are currently delivered by government agencies. Competition is not an end in itself, of course; it is a means to the end of greater efficiency. Unfortunately, our current system is not efficient. Some of its achievements have been impressive, but much of their cost has been deferred as far as politically possible. That's the financial cost. There have been other costs, as the Economist points out, including ever-growing state intrusion into our lives. Social Policy Bonds, or something like them, could be the answer.

16 January 2010

Economic growth = hungry children?

From the current Economist':
According to the Food Bank for New York City, an estimated 1.3m New Yorkers now rely on soup kitchens (which provide hot meals) and food pantries (which give away food). The number of people having trouble paying for food has increased 60%, to 3.3m, since 2003. ... Almost half of all New York City households with children have difficulty affording enough food. A staggering one in five of the city’s children, 397,000 small people, rely on soup kitchens — up 48% since 2004. The Big Apple is hungry (subscription), 'Economist', 14 January
This must be the 'Bush Boom', that Jerry Bowyer writes about. As the blurb for his book, The Bush Boom: How a Misunderestimated President Fixed a Broken Economy has it:
[George W Bush] resolved to pursue an economic policy that included unprecedented tax cuts. What’s the result of Bush’s low-tax economic program? Jerry Bowyer confronts the critics and offers clear and convincing evidence that the Bush Administration fixed a broken economy, boosting the fastest economic turnaround since President Ronald Reagan. Source

15 January 2010

Taking refuge in equations

Not only was [David Bohm] not given full credit for his plasma work, but most physicists appeared uninterested in the deeper philosophical questions of their subject. To make matters worse, they even ignored the underlying physics they were studying, preferring the surface brilliance of mathematical techniques. Infinite potential: the life and times of David Bohm, F David Peat
Sadly economists and, increasingly, policymakers have exactly the same tendency. You might think or hope that their cynosure would be the wellbeing of ordinary people. But no. Like the foremost physicists of their generation, their focus is on intellectual elegance, symbol manipulation and mathematical consistency. And, in truth, it is easy to be distracted or hypnotised by the numbers and to work on the assumption that relationships that held in the past hold true today. So we have the lazy, implicit, targeting of Gross Domestic Product per capita, which takes no account of, amongst other determinants of wellbeing as the state of the environment or leisure time. Or, when the maths manifestly fails, the substitution of ideology for pragmatism, when pragmatism would do the job.

But the pragmatic approach, in policy, means some humility on the part of our politicians and bureaucrats. Social Policy Bonds, about which I have been talking for 20 years now, have gone nowhere, partly I suspect because governments would have to relinquish some of their assumptions about how policy goals are to be achieved. The bonds would encourage diverse, adaptive approaches to solving our social and environmental problems. Nobody - least of all governments - would know in advance which approaches would work and which would not. Much easier to preserve the illusion of emotional security by adopting an ideological position or taking refuge in the internal consistency of elegant equations.

13 January 2010

What is government for?

In contrast with the past, what is good for America's global corporations is no longer necessarily good for the American people. The disposable worker, 'Business Week', 7 January
Exactly. Big corporations are like big government: concerned almost solely with self-perpetuation. It's unreasonable to expect them to be altruistic, under the current legislative arrangements, but it is reasonable to expect governments to change those arrangements so as to favour ordinary people. Instead, most governments and political parties, most of the time, still believe that corporate goals are identical with those of wider society. Or, if they don't believe it, they behave as if they do. Often, their funding depends on maintaining that fiction.

At best, government has confused ends and means. It should concentrate not on bailing out failed businesses, or supporting inefficient sectors, but on the wellbeing of its citizens. What do we see instead? Massive transfers not only to bankers, but to large industrial and agribusiness corporations that would otherwise go under. Government instead of facilitating the creative destruction of failed business models, is resisting it. Big corporations are the winners (in the short run). So is government, which enlarges its role in the economy. But ordinary people are losing out.

We need, urgently, to realign government with the interests of natural persons, as against corporations. Social Policy Bonds could refocus government on ordinary people's wellbeing, not on the presumed ways of reaching them. If that means that certain businesses or sectors go to the wall, then so be it. Government should be about protecting disadvantaged people, not subsidising inefficient corporations.

10 January 2010


According to the New Scientist's review of Storms of my grandchildren, James Hansen believes that the threat posed by climate change:
...is far worse than [I] thought even a few years ago. The very survival of life on Earth is at stake.... "Your governments are lying through their teeth", he says. [T]he Kyoto protocol is a dismal failure, and its proposed successors, along with the cap-and-trade schemes favoured by [US] President Barack Obama, have no chance of achieving what is needed either. Earth on the brink, 'New Scientist', 12 December 2009
James Hansen and I agree that our political system is incapable of acting effectively because politicians serve the short-term interests of special interest groups with plenty of money to throw around, rather than the long-term welfare of citizens. It's madness.

08 January 2010

Systems or results?

Reading Infinite Potential, the biography of David Bohm by F David Peat, one is struck by the overwhelming wish of great physicists to unify and systematise; to generalise from past data or past experience; to abstract principles that can apply to new situations. We probably all have this tendency, which has served us very well, for the most part. But in great scientists it seems to be all consuming and, perhaps inevitably, to lead to grief. Reality is just too complicated.

Policymakers in our increasingly large and complex societies are ever more remote from ordinary people. So they rely more and more on the advice of experts, all of whom are trained to abstract general principles and relationships from history and datasets. It's a never-ending, never-complete task of course but it's an approach that yields useful insights and has led to the development of unambiguously good policies. Unfortunately, though, many of our most urgent policy goals are just not amenable any longer to that approach. We are increasingly interlinked; relationships between cause and effect are ever more tangled; and society is changing so fast that there is very little precedent for solving some of our most challenging social and environmental problems.

But our policymaking system doesn't recognise this. As a result, it's both too limited and, perversely, too ambitious. Too ambitious, as, for instance, when it tries to tackle climate change by identifying one variable that it can control (or say it's trying to control) - greenhouse gas emissions - and assuming that that will be enough. Too limited, in that it fails to deal with problems, such as war, that it recognises it has no hope of solving with the current array of policy instruments.

Our policymakers are perhaps more interested in control than in results. They want not so much to see problems solved, but rather to identify organising principles and approaches that they can use to solve our problems. Implementing Social Policy Bonds would mean that politicians would have to relinquish some of their power and to subordinate their wish to identify and control policy levers (even if there aren't any) to the achievement of results. It would mean a massive psychological shift. But the rewards are potentially huge.

03 January 2010

What would Ivan do?

Chase Madar writes:
Elite professional groups, wrote [Ivan] Illich, have come to exert a “radical monopoly” on such basic human activities as health, agriculture, home-building, and learning, leading to a “war on subsistence” that robs peasant societies of their vital skills and know-how. The result of much economic development is very often not human flourishing but “modernized poverty,” dependency, and an out-of-control system in which the humans become worn-down mechanical parts. The People's Priest, 'American Conservative', February 2010
Illich does seem to have anatomised a growing problem: our passivity in the face of the growing influence of corporations, and their crowding out of non-corporate - that is, human - ways of doing things. I would include government here one of the corporations. Criticism is all very well, but as Mr Madar says: 'A common, spluttering response to Illich’s polemics was “Just what does he propose we do instead?” Good question.....' Perhaps the answer is twofold: first, that economic development has gone hand in hand with population growth and life expectancy; it might not, in net terms, have raised the quality of life much, but it has certainly raised the quantity of life. We have collectively consented to that trade off, and presumably we could, if we wanted, reverse that decision.

A more proactive answer would be to subordinate economic growth or social change not to corporations (including government again) and their incentives (primarily self-perpetuation), but to the outcomes that ordinary people would wish for. A Social Policy Bond regime, for example, would allow our social and environmental outcomes to be achieved by means that are diverse, rather than dictated by government or corporations. Radical monopolies need not arise, because the most efficient way of achieving a specified outcome will most likely vary according to space and time. Investors in the bonds will be motivated to continuously reappraise their projects; they would have no built-in bureaucratic or ideological wish to convert the rest of us to their way of doing things.