18 October 2010


[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.

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