...Diana Stone notes that ‘Zimbabwe’s fiscal deficit is around 12 per cent of GDP’ and that a country ‘can’t run a deficit that size without stealing from the future’ ... Deficits cannot be assessed in isolation. We need to examine the whole economy, especially productivity, whose prime indicator is the level of employment. And we need to focus on the real aspects of the economy rather than worrying about economic conventions. The whole concept of ‘sound finance’, with its corollaries of ‘fiscal discipline’ and ‘prudent finance,’ all code words for austerity, must be discarded and replaced with functional finance. Japan is the outstanding example of a state that has done this, albeit inconsistently. It has continuously low interest rates, low unemployment, low yet steady growth, and most important, an unmatched standard of living. All this despite the fact that every year the budget hits deficits in excess of 15 per cent of GDP, while Japan’s Treasury has amassed a debt of some 230 per cent. Yet if, geography aside, Japan were to apply for Eurozone membership its application would be rejected outright because the country is in violation of the Eurozone’s deficit and debt limits. This is evidence enough of the folly behind the Eurozone set-up.... Vassilis Serafimakis, Letters, 'London Review of Books', 4 JulyThere's a large and, I think, growing gap, between such measures as fiscal deficits, debt levels, GDP; and social well-being. An increasingly out-of-touch political caste has little knowledge or experience of the world in which live the people they are supposed to represent. So they rely on these economic aggregates for information about how society is doing. Along with many others I've inveighed against GDP or GDP per capita and its de facto targeting by politicians. As well as their inherent deficiencies, such measures as GDP and the fiscal deficit are subjects to Campbell's Law, which tells us that:
The more any quantitative social indicator is used for social decision-making, the more subject it will be to corruption pressures and the more apt it will be to distort and corrupt the social processes it is intended to monitor.Which is why I believe we should target outcomes that are meaningful to ordinary people: goals that are inextricably bound up with social and environmental well-being. Goals such as better health, universal literacy or, at the global level, regional or world peace. We should be targeting and rewarding the achievement of such goals, rather than abstract entities like deficit reduction or GDP growth. Economic variables are, at best, means to ends. They are increasingly inadequate as such but worse is that they enable politicians to distract us by deflecting our attention to those measures that have improved under their governance, or deteriorated under the governance of the other side.
Social Policy Bonds are a way of channelling the market's incentives and efficiencies into the achievement of our social and environmental goals. That's one of their big advantages. But the other is more fundamental: the bonds require us, as a society, to clarify what are our goals and to come up with some sense of their priority. You would think this would be an essential feature of any democratic political system but no: what we experience today are sound bites, character assassination, personality cults or, as a very poor best: the targeting and manipulation of economic variables that don't really matter and about which none of us really care.