02 February 2010

Galbraith and government

While [J K Galbraith] is perfectly able to see the defects of businessmen — their inclination to megalomania, greed, hypocrisy, and special pleading — he is quite unable to see the same traits in government bureaucrats.... A man who has devoted his life to the study of economics — and occupies one of the most prestigious chairs in the subject in the world — does not appear to understand that the existence of thousands of corporations, as well as the possibility of starting new ones, introduces a significant difference from a situation in which there is a single employer under very tight political control. The Galbraith Revival, Theodore Dalrymple, 'City Journal', Winter 2010
It's a common mistake, and an easy one to make for those of us lucky enough to live in societies with a history of benign and not-too-disastrous public policy. But the limitations of the single-employer approach are increasingly apparent. Dr Dalrymple mentions "the fact that Britain spends nearly $100,000 per child on public education, and yet a fifth of the population is unable to read with facility or do simple arithmetic...". I would point also to the persistence of poverty and disease in the poorer countries, the failure to eradicate war, and the increasing risk of catastrophic environmental or nculear disaster. We do, I think, need an explicit focus on such problems, and government is big and (generally) sufficiently well intentioned to provide it. But we also need a large array of diverse approaches and problem-solving bodies that can adapt their approach quickly to changing circumstances. We need in particular, a means by which inefficient solutions to social problems are terminated quickly. And government, however big and well intentioned, cannot effectively manage diverse, adaptive approaches. No single organization can.

Social Policy Bonds could square that circle. Under a bond regime, government, whether national or supra-national, is big enough to target global social problems and to raise the revenue for their achievement. It could stimulate diverse, adaptive solutions by issuing the bonds, which would be redeemed only when targeted outcomes - world peace, for example, or climate stability - had been achieved. Government can perform these tasks without getting involved in actually achieving these goals: such achievement would, under a bond regime, be contracted out to agencies (mainly private sector) who would be highly motivated to explore and implement only the most efficient solutions to our problems. Government would then function not as the monopolistic 'single employer', but more as the articulator of society's goals and the agency that transfers our scarce resources to the people who help achieve them.

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