27 February 2016

Overcoming institutional sclerosis

The disenchantment we see with western governments, the European Union, and some United Nations bodies is almost inevitable. But it's not particular to government bodies; it is a feature of almost any large institution, be it a trade union, church, university, or political party. It's also a feature of the largest private-sector corporations: those whose survival doesn't depend on customers buying the products in something more competitive than a monopolistic or oligopolistic market. These are the large corporations that can manipulate or subvert the policy environment to their ends at the expense of consumers. Institutional sclerosis can also afflict the military, where it remains untested. So I'd expand a bit on this quote from Thomas Sowell;
The most fundamental fact about the ideas of the political left is that they do not work. Therefore we should not be surprised to find the left concentrated in institutions where ideas do not have to work in order to survive. Thomas Sowell, 'The Survival of the Left', in The Thomas Sowell Reader, 2011
Big businesses that are close to government, lobbyists for farmers (for example), right-wing political parties, and other bodies not linked to the political left are subject to exactly the same sclerosis that Mr Sowell describes. It's not about 'left' or 'right'; it's about being responsive to changing circumstances. Many big organizations, not just those on the left, are institutions 'where ideas do not have to work to survive'. The long-term result of this is alienation from ordinary people and a culture of insiders against outsiders. And the result of that is something we are seeing now: a disenchantment with conventional politics and a willingness to embrace anything that promises radical change. This could turn out to be positive; it could also be calamitous.

Which is why I have suggested we think about policy not in terms of institutions, with their limited capacity to think in the very long term or to prioritize, when it comes to the crunch, anything other than their own survival. I suggest that we encourage instead the creation of new types of organization whose funding, composition, structure and activities are entirely a function of how well they achieve society's goals. This would happen under a Social Policy Bonds. As well as channelling society's scarce resources with optimal efficiency, a bond regime would, by rewarding people for achieving society's goals, close the gap between policymakers and the people they are supposed to represent.

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