25 October 2018

Say no more

Excerpts from two sources show just how wide the gaps between our political systems and citizens have become. First, from the UK:
I looked at the Bank of England data and it was 3.5% of business lending went to manufacturing, a century or so ago that number would have been more like 80% and that’s a trend that has been going on for a long time. And you compare this 3.5% going to manufacturing with 75% going to either finance or real estate and you can see that something’s wrong, finance has become kind of unmoored and disconnected from the real economy. How oversized finance sectors are making us poorer, Nicholas Shaxson, September
And from the US, Jane Mayer writes about the role of the Koch brothers in the presidential election of 2016:
In fact, amazingly, in 2016 the Kochs’ private network of political groups had a bigger payroll than the Republican National Committee. The Koch network had 1,600 paid staffers in thirty-five states and boasted that its operation covered 80 percent of the population. ...[T]he Koch network was sponsored by just four hundred or so of the richest people in the country. Election Night 2016, Jane Mayer, 2017
There's little more to be said, except that that within our current policymaking systems, there is no self-correcting mechanism. People become wealthy within the system, and use that wealth to manipulate the system to make themselves even more wealthy. Even if the gap between politicians and people were seen to be a problem, there's nothing within our current political systems to close it. It keeps growing wider. It's clear now that anything that, on the one side, billionaires big business and politicians can do to extract resources from ordinary people and small businesses, they will do. Our ruling caste gets away with it because policymaking, by accident and design, has become an arcane, protracted process, comprehensible only to those directly involved in it or paid to follow it.

That, and society's increasing complexity, is why I suggest politics be rejigged to focus on outcomes that are meaningful to ordinary people, and that market forces, currently subverted or gamed by the wealthy, be instead channelled into the public good. That's where Social Policy Bonds would enter the picture. It's true that, under a bond regime, many investors in the bonds would be rich and, if their bonds were redeemed early, they would become richer. But this would be a socially beneficial way of acquiring wealth. The value of their bonds would rise only if society's targeted outcome, as articulated by democratic governments, become more likely to be achieved quickly. The goals of investors in the bonds and society would be exactly congruent.

A less obvious benefit of a bond regime is that, being a socially beneficial way of acquiring wealth, it would divert human and other resources away from other less socially beneficial ways, like, for instance, much of banking or speculation in real estate.

14 October 2018

They got away with it in agriculture, so why not everywhere else?

George Monbiot writes about the European Union's corrupt, insane Common Agricultural Policy:
I’m a Remainer, but there’s one result of Brexit I can’t wait to see: leaving the EU’s Common Agricultural Policy. This is the farm subsidy system that spends €50 billion a year on achieving none of its objectives. Farmed Out, 12 October
(I would say "stated objectives".) I'm not a remainer, and the CAP is one reason why. There's little to add to Mr Monbiot and others' litany of the CAP's disastrous effects on the environment, small farmers, animal welfare, Africa and human health, but the persistence of the CAP is illustrative:

(1) It's been widely challenged for decades, yet its beneficiaries are wealthy and powerful enough to resist any meaningful reform.

(2) Agriculture in all the rich countries is a sector in which government involvement has been pervasive and long lasting.

The key question is: in whose interests are these agricultural policies? The answer is clear: agribusiness and landowners (especially the biggest). The losers? The rest of us: people who eat, taxpayers, plus the farmed animal population, plus the physical environment. Even would-be farmers don't benefit: they have to buy land at prices inflated by government subsidies.

It's not just agriculture. Increasingly, the complexity both of society and our policymaking process is being weaponised in favour of the people who own and run corporations, or the people they pay (in or out of government) to understand and influence policy. Government and their paymasters can get away with this because we accept a policymaking system that doesn't explicitly target outcomes that are meaningful to ordinary people. Currently policymakers can - indeed must - express their decisions as vague declarations of intent and changes in institutional funding and composition, or legislation. Their focus is on the supposed means of achieving vague outcomes, rather than on the outcomes themselves.
Issuers of Social Policy Bonds would in contrast have to be explicit about their objectives: transparency and accountability are built into a bond regime, as surely as they are excluded from the current policymaking apparatus. Insane, corrupt programmes, such as Europe's Common Agricultural Policy, have platitudinous, vague, mutually conflicting goals, which sound lofty and high-principled but actually end up shovelling vast sums of taxpayers' and consumers' money into the bank accounts of agribusiness corporates and their lobbyists. If outcomes were built into policymaking, as they would be under a Social Policy Bond regime, such policies would get nowhere. Instead they have lasted for decades, at great cost to everybody except a few millionaire businessmen and landowners, a burgeoning, parasitical bureaucracy and lobbyists . Oh, and fraudsters.

It's the persistence of such stupid policies as the CAP, which swallows up about the 40 percent of the EU budget, that makes imperative a systemic change in the way we formulate policy. Twenty-seven years ago, P J O'Rourke could write this, about the American political system in general, and that country's Farm Bill in particular:
I spent two and a half years examining the American political process. All that time I was looking for a straightforward issue. But everything I investigated - election campaigns, the budget, lawmaking, the court system, bureaucracy, social policy - turned out to be more complicated than I had thought. There were always angles I hadn't considered, aspects I hadn't weighed, complexities I'd never dreamed of. Until I got to agriculture. Here at last is a simple problem with a simple solution. Drag the omnibus farm bill behind the barn, and kill it with an ax. Parliament of Whores, P J O'Rourke, 1991
Since then, little has changed in agriculture, but the complexities in society and policymaking have proliferated and continue to perplex ordinary people. Consequentially, the gap between our corporate-political caste and the people they are supposed to represent has continued to widen. Clarity and transparency about policy objectives are essential if that gap is ever to close. Rewarding people who actually achieve these goals, rather than bodies who merely say they will, will also be necessary. Social Policy Bonds would fulfil both requirements.

12 October 2018

The finance curse

Nicholas Shaxson writes about the UK's 'finance curse':
A growing body of economic research confirms that once a financial sector grows above an optimal size and beyond its useful roles, it begins to harm the country that hosts it. The most obvious source of damage comes in the form of financial crises – including the one we are still recovering from a decade after the fact. But the problem is in fact older, and bigger. Long ago, our oversized financial sector began turning away from supporting the creation of wealth, and towards extracting it from other parts of the economy. To achieve this, it shapes laws, rules, think tanks and even our culture so that they support it. The outcomes include lower economic growth, steeper inequality, distorted markets, spreading crime, deeper corruption, the hollowing-out of alternative economic sectors and more. The finance curse: how the outsized power of the City of London makes Britain poorer, Nicholas Shaxson, ''The Guardian',5 October
It's not just the finance sector that works to influence policy in ways that drain resources away from ordinary people and small businesses: governments the world over are in thrall to big business. They act as though the interests of big corporations coincide with those of the citizens they are paid to represent. Our economies and societies are so complex that they can believe this, or act as though they believe it, with impunity. The Social Policy Bond idea is an attempt to re-orientate policymakers so that they again think in terms of the well-being of citizens, rather than the financial health of private- or public-sector bodies whose operations might, or might not, generate net welfare gains.

Almost all of us want to see a healthy business sector and an effective welfare system for the most disadvantaged. Government, and often, only government, can and should do the basics: infrastructure, education, health up to certain levels. But when things become complicated we should be targetting ends, rather than the supposed means of achieving them. The finance sector, which should be the financial services sector, has become grotesquely enlarged because of this confusion. So:

Lending to businesses outside the financial world – which many people might think the principal activity of a bank – represents about 3pc of the activity of British banks. The City services only itself, John Kay, 'The Telegraph' (London), 9 September 2015
Fine if the bankers want to do other things, but they shouldn't siphon funds from the rest of the economy, nor manipulate the regulatory environment, to do them. A Social Policy Bond regime wouldn't confuse ends with means, and wouldn't subsidise big business at the expense of ordinary citizens and small businesses. As Mr Kay puts it: 'We do not need an army of the overpaid and overbonused buying and selling from each other.' We don't need it and we certainly shouldn't tax people to pay for it.

06 October 2018

Human nature is peaceful

People (like me) who believe world peace is possible are often put in a box labelled 'Idealists.' So weapons continue to pile up and when we see the horrors of war on our tv screens, we sigh as though violent human conflict were inevitable. The wealthiest amongst us plan escape routes or prepare for war's aftermath. The rest of us dutifully contribute to peacekeeping efforts by such bodies as the United Nations, though with no expectation that they will actually achieve very much.

In War, Peace and Human Nature, Douglas Fry et al argue that (1) the belief that war is part of human nature is itself destructive and (2) war is not part of human nature.

A view, erroneous though it may be that war is ancient and presumably thus reflects some natural feature of humankind or human social life, feeds a suspicious and hostile view toward other peoples and countries, making the preparation for war and the practice of war that much easier. The reasoning, or in many cases “gut reaction,” seems to be: if war is in human nature, then we’d better be prepared to fight and perhaps strike first. This implicit assumption, in great part simultaneously stemming from and reinforcing of the violent view of human nature, can be seen as contributing to arms races, preemptive strikes, excessive spending on weapons, hostility toward others, and inordinate fear of other nations or groups, who are by this thinking, naturally inclined to attack. I am suggesting, in other words, that in widespread assertions that war is ancient, we are seeing a cultural belief with very important real world ramifications. Such a view may be in the short-term self-interests of a minority (e.g., arms dealers), but it is not in the long-term interests of humanity overall.
It's an important point. And much of the rest of the book backs up the assertion, that over the whole period of human existence, war is not an intractable feature of humanity, Mr Fry has this to say, summing up the evidence gathered and written up by other contributors to the book:

[Steven] Pinker's thesis that chronic war stretches back over the far-reaching millennia before the agricultural revolution is not substantiated by the actual data. ... The worldwide archaeological evidence shows that war was simply absent over the vast majority of human existence .... —the time period beginning far to the left side of [an n-shaped] curve. But with a gradual worldwide population increase ..., the shift from universal nomadic foraging to settled communities, the development of agriculture, a transition from egalitarianism to hierarchical societies—and, very significantly, the rise of state-level civilization five thousand to six thousand years ago—the archaeological record is clear and unambiguous: war developed, despots arose, violence proliferated, slavery flourished, and the social position of women deteriorated. This comparatively recent explosion in pre-state and then state-based violence is represented on the rising left side of the letter n in the curve, but taking place within the last 10,000 years. (My emphasis.)
Conclusions? People who believe world peace is possible are not being irrational or going against human nature. Violent political conflict is not inevitable.

Where does the Social Policy Bond idea fit in? Simply: knowing that world peace is possible, we can issue World Peace Bonds as a way of rewarding the people who help achieve it. There are reasons why such bonds have not been issued (they're untried, they threaten existing institutions ...etc) but a big one is that people think that world peace is some Edenic, idealistic vision, not for this world. What Mr Fry and the other contributors to his book show is that world peace is not only possible, but it was, for the greater part of man's existence, a reality.