Insanity

Even little New Zealand feels it has to subsidise the rich:

The extra [NZ]$20 million subsidy for The Hobbit will be paid as a tax break on a pool of profits to be shared by actors and other workers on the films, including director Sir Peter Jackson, it is understood. The Government has kept under wraps details of the extra cash incentive to Warner Bros, which comes on top of the 15 per cent subsidy worth about $65m on the budget for the two movies of about $670m. Prime Minister John Key said yesterday that commercial confidentiality meant he could not say what the money would go on. Source

This is rancid politics. It's government pandering to the rich and glamorous with taxes paid by ordinary people. It's quite outrageous.

The problems are systemic

Johann Hari sums it all up in an article about US politics, but which could apply to all the democratic countries:

If you want to run for national office in the US, you have to raise huge sums of money from corporations and very rich people to pay for the adverts and the mailings that get you on the ballot and into office. These corporations will only give you money if you persuade them that you will serve their interests once you are in power. If you say instead that you want to prevent anything destructive they are doing to ordinary people, or tax and regulate them, you will get no money, and can't run. As the Wisconsin politician Ed Garvey puts it: "Even candidates who get into politics with the best of intentions start thinking they can't get re-elected without money. Senators get so reliant on the money that they reflect it; they stop thinking for themselves, stop thinking like the people who elected them. They just worry about getting the money." ...[W]e have to be honest: the continuities with [President George W] Bush are far more pronounced than the differences. The real reason Obama has let us down - and endangered us, 25 October

Against this systemic flaw, what can Social Policy Bonds offer? The clue is in my tag line: Policy as if Outcomes Mattered. The current system is too indirect. Apart from representing our views and raising revenue, government and officials are employed by organisations that are supposed to achieve these goals: government agencies, or contractors working for them. This obscures the relationship between intention and achievement. It's particularly corrosive when there's no correlation between social outcomes and the rewards to the people who are supposed to be achieving them. The system is inherently cynical: if a government agency, at any level, is too successful in, say, reducing crime, or raising literacy, it's likely to shrink in size, with its funding reduced accordingly.

It's no surprise then that, with such a loose connection between government and outcomes, ordinary people are turned off by the whole exercise. Those who do take an interest are those who are paid to: lobbyists, usually employed by large organisations: corporations, trade unions, religious bodies, or government agencies themselves. These organisations have as their overarching goal, not the interests of society, but their own self-perpetuation. Who loses? Ordinary people. Who wins? The wealthy organisations, as Mr Hari elouqently points out.

Social Policy Bonds could help. Under a bond regime, society's goals would have to be declared at the outset. We'd focus on outcomes. Not the structures or funding of government agencies; not the personalities, peccadilloes or ideology of prominent politicians; and not the high-sounding, emotional, appeals to patriotism or other sound-bites, crafted solely to garner votes under an inherently corrupt system. Government's role would be to articulate our goals, and to raise the revenue required to achieve them. But, because our politics would be expressed in terms of outcomes and their costs, ordinary human beings could participate in the policymaking process. And end in itself, but also a way of engendering buy-in - something that we need if we are, as a society, to meet our urgent social and environmental challenges.

Outrageous

[President Obama's] political difficulties began with the revelation that AIG, which had received $170 billion from the government, had paid out $165 billion in bonuses to the division that had brought the company down. [Treasury secretary Timothy] Geithner had known about the bonuses but insisted there were no legal grounds to block them. (It then came out that Geithner had pressured Senate Banking Committee Chairman Chris Dodd to insert a provision into the stimulus bill that protected the bonuses.) The Unnecessary Fall, John B Judis, The New Republic, 2 September

This is what happens when politics becomes a specialised craft; something so arcane that outsiders take no interest, out of apathy or cynicism. But it's the outsiders - that is, ordinary people - who suffer as a result.

One answer to the alienation caused by this extreme specialisation is perhaps more specialisation in the form of Social Policy Bonds. Under a bond regime, politicians would be limited to what they do best: articulating society's wishes and raising the revenue for their achievement. But the actual choice of objectives and their relative priority, would be in the hands of the public. And the public would be far more likely to take an interest: we'd be choosing outcomes. Outcomes that are meaningful to ordinary people. Targets like lower crime rates, more employment, a cleaner environment. Expressing politics in terms of outcomes is far more likely to engage the public than the (deliberately, one might think) opaque discussions about process, institutional structures and legalisms that feature most prominently in current politics. Once targets have been set, a bond regime would contract out their achievement to investors, whether they be public or private sector. They would have incentives to be efficient: the bonds would always be in the hands of those who believe they can achieve society's targeted goals most cost-effectively. A stark contrast with the current system, where most of the people working for organisations charged with achieving social goals are paid simply to turn up at the office. I refer, of course, to government agencies.

Social Policy Bonds, in short, would see politicians and the market each do what they are best at. Respectively: expressing our wishes as realizable, costed goals and raising revenue; and allocating resources to achieve these goals most effectively.

The caste of politicians

Brendan O'Neill articulates our disenchantment with today's politics, commenting on the recent leadership contest for the UK opposition Labour Party:

[T]his was a decadent, neo-aristocratic affair, with various party grouplets shifting their allegiances around for no clear or rational reason, while media insiders sought to provide a political personality and narrative for Ed [Miliband, the eventual winner]. Spiked, 27 September

More than ever, politics resembles a caste system. Any causal relationship between the public's goals and actual outcomes seems more and more to be coincidental: a random occurrence, independent of the wishes or actions of the politicians.

Social Policy Bonds offer a way to reconnect the public with policymaking. Under a bond regime, instead of choosing professional politicians, people would choose the social and environmental outcomes they wish to see. Instead of government-funded ministries and departments choosing how to bring about undeclared, vague, or mutually conflicting objectives, as under the current system, a bond regime would see the spontaneous creation of a new type of organisation, whose structure and activities were entirely subordinated to society's goals.

Of course, any adjustment to such a rational system of policymaking would take time. In my book I describe a migration pathway; essentially entailing the gradual reduction in funds allocated to traditional organisations along with a corresponding expansion of funds allocated to redeeming Social Policy Bonds. It would mean a radical re-thinking of the way in which society is organised. But the alternative - the entrenchment of a political caste almost totally removed from ordinary people, and consequent alienation of even more of us from politics - would be far less edifying.

Means and ends

Michael Mascarenhas asks "how do we actually measure this complex activity known as water access in subsistence communities?" and, as his article shows, it is a genuine problem. In rural Africa it's difficult to imagine any centralised system of programme funding allocation and assessment working well. The well-being of an individual or community, while it is likely to be accurately perceived by insiders, would be difficult to quantify in a way that's useful to national or NGO decision makers.

But the Social Policy Bond approach could help. Rather than try to measure such abstract concepts as 'availability', it would instead focus on, and target, the benefits that such availability will have on verifiable outcomes: infant mortality, morbidity, longevity, birth weights, to give a few possibilities. It would be a shame, I think, if the failed paradigms of the west - the implicit or explicit targeting of such close-to-meaningless accountancy-type abstractions as 'the economy', GDP etc - were to be adopted by the developing countries. They have led us astray, quite dramatically; with the full ramifications yet to be felt.

Numbers have limits

The dietary guidelines for Americans should focus on whole foods and eating patterns rather than individual nutrients, argue Dr Dariush Mozaffarian and Dr David Ludwig in the Journal of the American Medical Association pointing out that this is not a radical approach at all, but a return to more traditional, time-tested ways of eating. ‘The greater the focus on nutrients, the less healthful foods have become,’ they write. Quoted in GI News

As society grows more complex and centralised, we see metrics taking over from intuition, instinct and insight. Much as we might try to define well-being in terms of numerical indicators, they are always going to be imperfect at best and in conflict at worst. We might, for instance, target an indicator like literacy for instance but, in doing so, transfer resources away from infant mortality, say, in such a way as to reduce overall social well-being. It's a difficulty for the Social Policy Bond approach, but it's also a difficulty with the current approach to policymaking.

The bonds do have the merit of forcing a focus on what policy is out to achieve, and to express these goals in terms of objectively verifiable numbers. That, in turn, would focus attention on those metrics that are inextricably linked to well-being. Lofty sounding goals ('punching above our weight', 'making us more secure', 'safeguarding the auto industry', 'saving the family farm') would be seen right from the beginning for what they are: distractions - and often very expensive distractions. A bond regime would probably then see more emphasis on safety-net measures: it is for the most disadvantaged that numerical indicators (of income, nutrition, literacy, for instance) most closely correlate with well-being. It would also show a sharper focus on reducing the probability of catastrophe (via Disaster Prevention Bonds, for instance) because, unlike under the current system, the precise nature of the catastrophe need not be specified in advance for funds to be devoted to its mitigation.

The limitations of metrics could function as a useful discipline. They would tend to concentrate government interventions on those policy areas where they can do most good: helping the disadvantaged and insuring against catastrophe. Government could limit itself to those areas without issuing Social Policy Bonds, of course. But they don't.