18 March 2017

Social Policy Bonds: the acceptable face of capitalism

Social Policy Bonds have many advantages over conventional policymaking. Mostly, they would be more efficient, as investors would have incentives to achieve society's social and environmental goals quickly and cost-effectively. Clarity and transparency of policy goals are further advantages, arising from the bonds' focus on, and explicit targeting of outcomes rather than the supposed means of achieving them. The question of which goals should be targeted is one that most governments evade or obscure, leaving a vague goal, most commonly 'economic growth', expressed as GDP per capita, to fill the vacuum. For much of history, that goal would have been strongly correlated with the improved well-being of a country's population. Nowadays, though, that correlation appears to be broken, with most of the gains in national wealth and income accruing to a minuscule number of people dubbed 'the elite'. In the US, for instance, the most recent data show that top 1% families captured 52% of total real income growth per family from 2009-2015 (source, pdf). 

Under a Social Policy Bond regime, we could ask whether society sees such inequality as a problem to be targeted directly or, rather, whether our main income goal is the alleviation of poverty. Even if inequality were seen as a problem in itself, it might not be necessary to target it for reduction. This is because Social Policy Bonds would be a means of acquiring wealth with which private gain is strongly correlated with public benefit. Many bondholders would be rich and, if their bonds were redeemed early, they would become richer. But this would be a socially acceptable way of acquiring wealth. Bondholders would become richer only by efficiently and quickly achieving society's targeted social goals. This means of accumulating wealth would allow other, less socially beneficial ways – inheritance, say - to be taxed more heavily. It might even transpire that investors would find achieving society's social goals will be easier than the sort of ethically questionable ways of acquiring wealth that constitute the ever more unacceptable face of capitalism. Social Policy Bonds: a new means of acquiring wealth that actually leads to a more cohesive society? Call them 'the acceptable face of capitalism'.

12 March 2017

Fossil fuel subsidies

Two brief excerpts from the International Energy Agency's publication, World Energy Outlook 2016, highlight what happens when there's no guiding strategic vision for our planet's future:
The value of fossil-fuel consumption subsidies dropped in 2015 to $325 billion, from almost $500 billion the previous year. ... Subsidies to renewables are around $150 billion today. World Energy Outlook 2016, Executive Summary; link to pdf here
The drop owes something to what the publication calls a 'subsidy reform process' but also to lower fossil-fuel prices. As well as these billions, there are, of course, subsidies for the exploration, development and production of fossil fuels. These are difficult to assess because of the “lack of transparency in government and company accounts, and limited information on off-budget subsidies to producers" source. It's easy to see how these subsidies arose, and why they persist. What is more difficult to discern is how our policymaking systems can do anything to address them. Large corporations have immense political power, partly funded by the very subsidies whose withdrawal they can effectively resist. The multitude of smaller interests, those of ordinary people and the environment, have little weight in our policymaking system.

There's nothing new in such an analysis, but what I can offer is a means by which we can aggregate and represent the interests of the vast majority of human beings - now and in the future - who don't benefit from energy subsidies and who suffer from the environmental depredations they cause. We could issue Social Policy Bonds that target for improvement the health of humans, plants and animals. Backed by national governments, the bonds would channel the market's incentives and efficiencies into improving the environmental well-being of the entire planet. Large corporations could still make money doing what they do now, but they'd find it less profitable. They might instead re-focus their resources into more environmentally beneficial areas. The way the bonds work means that bondholders would pick the lowest-hanging fruit first. In other words, they would maximise the environmental improvement per dollar spent.

But perhaps most important of all, Social Policy Bonds would clarify what we, as a species, wish to see. The current arrangement, the one that subordinates mankind and the planet to the narrow, short-term interests of large corporations, came about without consulting the rest of us. It thrives because the policymaking process is opaque to ordinary people, concentrating as it does on legalisms, institutional structures and, as we see with energy subsidies, obscure funding arrangements. A Social Policy Bond regime would change that. Because the bonds' starting point would be social and environmental outcomes, the public could participate in the policymaking process. So, if we wanted to donate billions of our taxes to large energy corporations we could still do so under a bond regime. I doubt that we'd choose to do that, but if we did we'd be doing so with our eyes open.

For more about environmental applications of the Social Policy Bond principle see here.

02 March 2017

How we decide

How we decide whom we shall vote for: Andrew Tyndall, a media analyst based in the US, monitors American broadcast news media at his website the Tyndall Report. He found that the overwhelming majority of the time spent by the US media in coverage of the run-up to last November's presidential election was spent on coverage of (1) the candidates and (2) polling.What about policy issues?
With just two weeks to go, issues coverage this year has been virtually non-existent. Of the 32 minutes total, terrorism (17 mins) and foreign policy (7 mins) towards the Middle East (Israel-ISIS-Syria-Iraq) have attracted some attention. Gay rights, immigration and policing have been mentioned in passing. No trade, no healthcare, no climate change, no drugs, no poverty, no guns, no infrastructure, no deficits. To the extent that these issues have been mentioned, it has been on the candidates' terms, not on the networks' initiative. Andrew Tyndall, 25 October 2016
From my viewpoint, it doesn't really matter whether we, the public, are more interested in personalities and opinion polls than issues, or whether the almost total absence of policy discussion reflects the preferences of the mainstream media. The important point is that we do not, as a society, debate the outcomes we want to see. Policymaking in all the democracies, not just the US, has become so obscurantist as to become inaccessible to all except those who are paid to follow it. All that's left for the rest of us is to discuss the personality flaws of the candidates, and how people react to them. It's not an edifying spectacle, nor is it one that makes for social cohesion. Powerful interests, with much at stake and resources to match, follow policymaking and influence it in their favour. We have, then, on the one hand government and big business (which these days includes much of academia) and on the other, ordinary people and small businesses. The gap between the two is already wide, and appears to be growing wider.

Social Policy Bonds could change that. They are focused entirely on the social and environmental outcomes we wish to see. 'We' meaning all society; not just policy wonks, ideologues and public- and private-sector interest groups. Social outcomes, under a bond regime, would be agreed and targeted for improvement. There's more consensus over such outcomes and the direction in which we want to move, than there is about the supposed ways of achieving them, or who we think will be better at achieving them - even when outcomes are actually under discussion which, as we see, is very seldom. And there's certainly more comprehension about what outcomes are than about the arcana that are such a feature of our current policymaking process. Of course, even under a bond regime, there would be disagreements about the priorities people would give to different goals but, importantly, even those whose strong opinions would be over-ridden, would have been consulted. More generally, with greater public participation in the policymaking process, there would be more buy-in - an essential feature that is largely absent from today's politics.

"How we decide" today is a risible process; one that is divisive and distracting. As a result "what we decide" is far removed from the concerns of ordinary people. Social Policy Bonds targeting broad, meaningful goals, would be a big improvement.