17 January 2016

Insiders, outsiders, and world peace

The Economist describes the French labour market as...:
 ...divided into “insiders”, those with permanent, protected, full-time jobs, and “outsiders”, whose work is insecure and temporary. .... And France’s biggest unions, for all their revolutionary rhetoric, have become talented and conservative defenders of insider privileges, at the price of shutting too many young people out of decent jobs altogether. Fighting French unemployment: mode d'emploi, 'The Economist', 16 January
It seems to be the way of all big organizations, be they trade unions, religious institutions, government bodies, large corporations or political parties. They start out well intentioned but at some point their interests diverge from those of the people they purport to represent, and their over-arching goal becomes self-perpetuation. Sometimes, especially during their early years, these bodies have interests that coincide with those of their members. Later, institutional growth or survival becomes an end in itself. Even when they do represent their members, large organizations do so only in their members' capacity as members - as distinct from human beings with interests that are longer term and broader than those encompassed by their membership. People outside these bodies suffer, either directly, because the organizations' rules benefit insiders at the expense of outsiders, or less directly, in that people expend a great deal of time and energy trying to become insiders because, largely thanks to big organizations' ways of working, that's the only way to improve one's quality of life. So, for instance, we see large corporations manipulating the regulatory environment to keep out smaller companies.

My own thinking is that of course there must be large organizations - including countries with borders - but they must be made to keep to their principles and so have broader goals than self-perpetuation. Many of our social and environmental goals are the responsibility of the large bureaucracies that, in common with other other large bodies, have self-perpetuation as their ultimate goal. That is why I think Social Policy Bonds could help. Under a bond regime the structure and composition of organizations responsible for achieving our social goals would be constantly changing. The market for the bonds would see to it that the people working for these organizations would be paid according to their efficiency in achieving our goals - which coincide exactly with society's goals. The market for would ensure that only the most efficient approaches to solving our social problems would flourish, and that unsuccessful approaches would be terminated. 

The organizations' structure, composition and all their activities, would be subordinated to the outcomes that we, as a society, want to see achieved. These new types of organization, because of the way the market for Social Policy Bonds work, would always have powerful incentives to achieve our social goals. For all these reasons, Social Policy Bonds mean that we could meaningfully target long-term, urgent, but  hitherto idealistic-sounding goals such as the achievement of world peace.

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