All 24 entries tagged Politics

Why Do Ordinary People Make Political Donations?

The other night I dined with a colleague who is doing research on what makes people give money to good causes. The good cause in his research was cultural -- a European city opera house. It reminded me of a time when I had to ask the same question, but the good cause was a political one (so, a good cause only because it was one that I happened to believe in). The following story illustrates how different people gave money to the same cause for varying reasons. These differences were exposed when a technological innovation lowered the cost of giving money.

The year was 1977, as near as I can fix it looking back. I was treasurer for the city organization of a revolutionary left wing party. Then as now, communism and revolution were pretty unpopular, so there were few members and little cash. Still, we were not an absolutely negligible force, with a dozen branches across the city and a total membership in the low hundreds. Among those members were a number of esteemed and influential figures in the city's trade unions and other organizations, widely respected for their experience and dedication to the community.

Financially, we operated on a knife edge. The class struggle was expensive. It cost money that went on printing, postage, phone calls, train and bus fares, and the petty cash of meetings and demonstrations. The party itself required upkeep: more mailshots and meetings, the maintenance of a city centre building that was a legacy of more prosperous past times, and a substantial contribution to the party's headquarters in London.

We scraped the money together from various sources. There were membership dues, but these were only weakly enforced since we were always desperate to retain members whatever their circumstances. A considerable proportion of the members were low in income and advanced in years. Among them was vast shared experience, however, of raising money in labour intensive but convivial ways: social events, bring and buy sales, and selling newspapers and raffle tickets. There were others that we visited at home, spending hours chatting and chewing politics over a pot of tea, coming away with small donations and dues. 

Change was forced on us by new demands and new possibilities. The dream of our city party secretary was to be a professional revolutionary. Together we made his dream happen. But there was a price to be paid, and often enough he and his family were the ones that paid it. He spent much of his time raising his own wages. The wage rate was low, and not infrequently it was not paid in full. Meanwhile, the revolution was on hold.

A solution appeared in the form of the standing order. I don't recall whose idea it was; it wasn't mine. But it worked. It began when one or two of the wealthier comrades pledged money on a monthly basis. But they didn't just promise it, and then wait for us to come round and collect it; they signed up for the bank to pay it automatically, every month, direct from their accounts to the party's.

If they could do it, so could others. The idea spread. Soon we had a sheaf of standing orders, all bringing the money in as regular as clockwork. At the top of the range, we still had the original clutch of orders that each brought in £15 or £20 a month, plus a few new ones. Many more that we won over were made out for just £1 or £2 a month -- but because they were many, they counted just as much, or more. I don't remember the total, but this was a lot of money in those days.

The local party's financial situation was transformed. The city secretary's wages were paid, if not in full, then at least in part with greater reliability. He had more time for the revolution. For a while, things hummed.

Politically, the outcome was far from simple. To me, as an economist, what I saw in the standing orders was a pure efficiency gain: a dramatic reduction in the party's internal transaction costs. To raise money, you now had to pay just the fixed cost of one-time persuasion to get that signature on the form. After that, the money flowed without resistance. There was no longer a need for time-consuming social rituals and renewal of vows with our comrades and friends. Under the old system, that had to be done time after time; now, it had to be done just once, and then the standing order did the rest.

What the economist in me saw as a pure gain was felt by others as a direct loss. Why did we not come visiting any more? To these comrades, often retired or unemployed and perhaps at risk of social isolation, the hours that we formerly spent chatting at home with them over a pot of tea were not a cost but a pleasure. In fact, that was the main reason they parted with their pounds. If we didn't visit, they didn't pay. Likewise, they paid up their 50 pences to come to our sales and socials because it was their pleasure to do so, to come together, fraternize, and complain about the buses and the balance of forces in the world.

Others felt a different loss: our new income stream from the standing orders made the time and effort they previously put into those sales and socials, and the skills and experience they brought to bear on these activities, worth less than before. The party's increased financial efficiency literally devalued their contributions. Their enthusiasm wilted. They gave less money and less effort. Somehow, for them, it was all less fun.

There was also a rebalancing of status among the city party's constituent organizations. The standing orders caught on quicker with the younger, more middle-class, single-no-kids, high-salary comrades at the university, where the branch was soon contributing far more than its share to party funds. The branches in the engineering factories and more traditionally working-class, family-minded neighbourhoods lagged behind, and still fell into arrears.

No doubt all this would have mattered less if the financial faultlines had not become entangled with social and political divisions. This is roughly what happened: with considerable variance, the keenest proponents of the financial revolution had a tendency to be more middle class and also more liberal, more attuned to new agendas of what today would be called "equality and diversity," less accepting of traditional, male-dominated, trade union militancy, and quite distinctly less sympathetic with the cause of the Soviet Union.

To the traditionalists, many (but not all) of whom were of the older generation, it must have seemed like we were buying up their party. We were liquidating their networks, their ways of doing things, and their values. And the bank was helping us to do it!

This is how I see it now. People that join political parties have mixed motivations. One motive is to achieve the party's political programme. Another is to mix with comrades who think the same and form solidaristic ties with them. No doubt the balance varies from one person to another, and perhaps also through each person's life course. 

It is easy to suppose, for example, that long term political goals might loom larger on average for younger people that are full of optimism and have many years in front of them, than for older people with less time and lower expectations. Of course, that's just a speculation. All the members were highly selected for being socially and politically deviant, so it must be a case of "Generalize with care!"

Think of party members as of two types. In one type, the political programme is the dominant motive. In the other type, it's the desire for comradeship. In my story, before standing orders came along, the two types of members coexisted in a mutual equilibrium. But standing orders, by dramatically lowering the cost of raising money, destroyed the equilibrium and put the two types of members at odds with each other.

The Type 1 party members saw the standing orders as a pure gain, making the party a more efficient instrument for achieving its programme. The Type 2 members were the party animals. They saw the standing orders as a detriment, because it made the party a less efficient provider of affective ties.

I like the way I've set out this story, but I'm not completely sure that I have it right. For one thing, I might have forgotten stuff. I have probably oversimplified. Specifically, I'm implying that I was one of the pure idealists -- someone who believed in a programme and wanted to work for it as effectively as possible. That might not be true. I also recall that I had a strong personal loyalty to our city secretary, so it might be that I too was motivated by comradeship, but towards a different set of comrades from the more traditionalist party members -- the ones I have called the party animals.

And, of course, I accept that the party animals did have political ideals -- often subtly different from mine, it has to be said. The memory that makes me think I'm onto something, though, is how clearly I recall the sense of loss that many of them expressed that we didn't have to give them hours and hours of time and conversation any more, just to get their 50 pences. If they wanted comradeship now, they had to get out and come looking for it, not have it brought to them on a plate of biscuits.

If I'd understood this then, would I have behaved differently? Maybe, but it would not have changed the outcome. The reason is that our cause was doomed, something I did not know at that time. Nothing was going to change that. But there's another story.

Mark Harrison : 28 Oct 2009 23:04 |  Tags: Altruism Politics |  Comments (0) |  Close comments |  Report a problem

The 2009 Economics Nobels versus Big Government

Writing about web page http://nobelprize.org/nobel_prizes/economics/laureates/2009/press.html

Elinor Ostrom and Oliver Williamson have just shared the 2009 Nobel prize for economics. Unsurprisingly, the first ever award to a woman is attracting much of the media interest. Many journalists are likely to find that an easier topic than the content of their contribution.

Anyway, we'll focus on what Paul Krugman would call the wonkish stuff. What do these two share? According to the prize committee, it is their contribution to "the economic organization of cooperation."

What does that mean? On the BBC news website BBC economics editor Stephanie Flanders is quoted as saying that the judges had rewarded work in areas of economics whose practitioners' "hands were clean" of involvement in the global financial crisis. This is true, sort of. As far as I can see, neither Ostrom nor Williamson have contributed anything to recent asset price bubbles, correlated risk taking by banks, or the psychology of "It's different this time."

But it's more interesting than this. In a year when big government is all the rage, the prize committee has chosen to honour two scholars whose work cautions against big government solutions to economic problems.

I've never read anything by Ostrom; in fact, I'd never heard of her before yesterday. I feel bad about that, but I would feel worse if much more knowledgeable people like Paul Krugman (last year's Nobel laureate) and Steven Levitt (of Freakonomics fame) did not also admit to never having read her work. In order to say anything about it, I am relying partly on the Nobel citation, partly on a short interview she gave to BBC Radio 4 News last night.

Anyway, this is what I have picked up. Ostrom works on the management of common property such as land, water, and fish stocks. Economics 101 tells us that private exploitation will destroy the commons in the absence of government regulation. Ostrom's research is reported to show that there are alternatives in between private exploitation and government regulation. User communities often come up with cooperative management solutions that are less costly or more efficient than either, on their own initiative. It sounds like I should find out more.

In contrast to Ostrom's, I know of Williamson's work. I use it in my research papers, and also in my teaching. In fact, I'll be telling my final year undergraduate students about it next Monday in a lecture on the topic of "Government Failure." (The course is called The Making of Economic Policy, and I give two introductory lectures, one on how markets fail and one on how governments fail.) Williamson comes into the lecture because of his work on what he calls "the impossibility of selective intervention."

The starting point is to imagine the best of all possible worlds. We live in a market economy, and sometimes markets fail. Williamson's work shows, for example, that the very existence of firms is a response to markets not doing everything well. For some purposes it's cheaper to organize exchange within an integrated organization than through markets. Firms are these integrated organizations.

Can an integrated organization fix everything that markets can't fix? The key here is that government intervention is conceptually similar to just having bigger and bigger firms. In fact, twentieth century socialists often thought of the socialist economy as "one big firm." When markets fail, I suppose we'd all like to think the government could step in selectively, just when required and only then, and fix the failure. Then, we could always have the best of everything: market allocation, unless it fails; if the market fails, intervene to correct or replace it. That's selective intervention. Over the last century social democrats and democratic socialists have put forward many different ideas about what exactly needs fixing, but all would have agreed, I think, that selective intervention is the key. Williamson's work suggests, however, that this best of all worlds is out of reach.

Of course, Williamson is a scholar, not an ideologue, so he doesn't reach this conclusion directly. In The Economic Institutions of Capitalism (1985), for example, he asks a related question: what are the true limits on firm size? (Or, why don't we run the economy like one big firm?) He argues that replacing the market with an integrated organization always has unanticipated costs. The market, for example, provides high-powered rewards for success and penalties for failure. Intervention always impairs these incentives. We can define the benefits of intervention in advance, but not the costs. If politicians are allowed to intervention selectively, some interventions will inevitably make things worse.

Why? There are several reasons. One is the cost of good intentions: "Decision makers," Williamson writes, "project a capacity to manage complexity that is repeatedly refuted by events." Another reason is the propensity to micro-manage: Intervention always involves the exercise of power, including the power to divert resources to private goals. A third reason is the effect of "forgiveness" on effort: If a firm is losing out to market competition, there is no appeal against the verdict of customers. Managers and workers know this, so they make inordinate efforts to avoid losses. In a politicized environment, in contrast, sharing and horse-trading are much more important, so loss makers can buy political insurance against failure, or forgiveness. As a result, efforts to avoid failure are less. Finally, loss making activities are more likely to go on making losses. That's because politicization creates scope for lasting alliances based on reciprocity; loss making activities can win subsidies from profits made elsewhere and are not closed down. So, losses persist. 

In short, Ostrom and Williamson point in the same direction. Ostrom is saying that big government may be less necessary than we think. Williamson is saying that, even when necessary, the results of big government will always disappoint.

This is not the same as to say that politicians should never act. If there are always unanticipated costs, there may still be benefits, and the benefits may still outweigh the total costs -- both expected and unexpected. An example is the big-government bail-outs that saved the world economy over the past year. We will be paying the bill for a long time, and the bill will be bigger than anyone thought. The fact is, it had to be done and was worth doing.

The message of the 2009 economics Nobels is not to make a virtue out of what was done from necessity. The return of big government is not a cause for celebration.

Mark Harrison : 13 Oct 2009 09:55 |  Tags: Economics Nobel-Prize Politics |  Comments (1) |  Close comments |  Report a problem

Who are the Friends of the Poor? Or, With Friends Like These …

Writing about web page http://www.guardian.co.uk/commentisfree/2009/aug/24/revolution-1989-1979

Recently David Edgar (In the new revolution, progressives fight against, not with the poor, The Guardian, August 25) told a story in which one stage character, the “neoliberal urban middle class,” takes sides against another, “the economically egalitarian, socially traditionalist, rural poor.”

As his story unfolds, it turns out that a century ago the middle class was a friend of the rural poor, but became a victim of unintended consequences. The Russian revolution, Edgar writes,

grew out of an alliance between the progressive intelligentsia and the poor. That alliance was betrayed when Stalin turned on the intelligentsia in the Great Purge of the 1930s, as Mao did in the Cultural Revolution of the late 1960s.

In part because of this betrayal, Edgar narrates, the middle class then turned on its former friend the rural poor or became, at best, indifferent to its plight.

The latest chapter in Edgar's unfinished story continues this story in the world since the end of the Cold War. Progressive thinkers in many countries, we read, from the Middle East through the former Soviet bloc to the UK of "New Labour," have narrowed down their focus to rights and liberties that are real only for themselves -- property rights, freedom of expression and movement -- and have lost interest in affirmative action to raise up the victims of poverty and discrimination.

How will the story end? Time to turn the clock back, Edgar concludes:

Those of us who fervently believe in liberty, secularism, free speech, gay rights, civil liberties, enlightenment values and feminism, but also in social diversity, religious tolerance and economic equality, need to set about dismantling the barriers that people who believe in only some of those things want to erect.

At the heart of this story is a problem. My problem is not the ideals that Edgar promotes, which are laudable, but with what he thinks happened in history. What truly happened in the mid-twentieth century? What really broke the old, altruistic alliance of progressive thinkers with the poor? Where, in fact, do the poor stand today?

The unintended consequences of Edgar's story are right, but the history is “not even wrong.” The events that mattered most involved betrayal not of the middle class but of the poor. These events came years before Stalin's Great Terror or Mao's Cultural Revolution.

To achieve their goals, both Stalin and Mao imposed famine on the rural poor. Neither Stalin nor Mao particularly intended to do this; but it happened -- twice. In 1932 to 1934,  Stalin's policies of forced industrialization and food redistribution killed between five and eight million people -- in far larger numbers than he would ever kill the middle class. Mao repeated this achievement in the aftermath of the Great Leap Forward of 1956 to 1958 on a still larger scale: twenty million or more are thought to have died as a result. Both Stalin and Mao did this with the enthusiastic support of some (but not, of course, most) progressive thinkers, East and West.

For the progressively minded middle class, what happened in history should be far more disturbing than Edgar's fictional plot. The truth is that, in the peacetime years of the last century, educated intellectuals committed to the service of “pro-poor,” affirmative-action politicians helped to kill off as many of the rural poor as a global war.

With friends like these, who needs enemies? The rural poor might be forgiven for thinking twice before renewing such an alliance.

Mark Harrison : 17 Sep 2009 16:56 |  Tags: Economics Politics Stalin |  Comments (0) |  Close comments |  Report a problem

Government and the Fate of MG Rover

Writing about web page http://www.bis.gov.uk/mgrover-report

The demise of MG-Rover in 2005 has many lessons. Most of them, no doubt, are in the official report, just published. 

But the most important political lesson may well be this one.

In 2000, the government tried too hard to keep MG Rover in business. It did not try hard enough to do the right thing.

The right thing would have been to let MG Rover go to the wall.

If a business asset is good only for stripping, it is predictable that the best-looking promises to keep it in business will come from asset strippers.

If MG Rover had gone to the wall in 2000, nearly everyone would be better off today.

• The taxpayer would have saved the £16m cost of the Phoenix inquiry and report.
• BMW would have saved the "dowry" of loans and grants to the Phoenix Four totalling £475m.
• MG Rover's creditors would have saved nearly £1.3 billion of bad debts.
• The MG Rover workers and their community would have saved five years of false hopes and delayed recognition of their true situation.

If the government had done the right thing in 2000, in fact, everyone would be better off today -- except the Phoenix Four.

Mark Harrison : 13 Sep 2009 19:48 |  Tags: Economics Politics |  Comments (0) |  Close comments |  Report a problem

Build Democracy — Very Slowly

Writing about web page http://unama.unmissions.org/LinkClick.aspx?link=Elections+2009%2FElectoral-law-eng.pdf

The people of Afghanistan have just voted in elections based on universal adult suffrage. All adults were entitled to vote, regardless of gender or property. So, that makes Afghanistan a democracy -- right?

By such standards, most democracies are less than a century old. Universal adult suffrage did not come to the U.K. until 1926 -- or to France until after World War II. Until then, they were less democratic than Afghanistan is today -- right?

Hmm.

Here's a problem. If you looked at Britain or France a hundred years ago, you would most likely conclude they were more stable, with more smoothly functioning political systems, and a wider selection of rights and better life chances for nearly everyone, including those not entitled to vote at the time, such as women, than Afghanistan today.

In fact, that could well have been true of England for much (not all) of the last 800 years. Why 800 years? Well, King John signed Magna Charta in 1215. Magna Charta limited the powers of the king over his subjects. It even enshrined their right to revolt against him, if he did not keep to the agreement he had signed. It also legislated discrimination against women and Jews. As soon as he could, John renounced it, plunging the country into civil war. Despite such imperfections, it is a convenient moment from which to date the beginning of England's long march to democracy. It is also a reminder that the full consequences of such events may not be obvious at the time, or for many years after.

To get from Magna Charta to today's parliamentary democracy took many steps. Civil wars curbed royal absolutism, so that the King stepped back from governing. As parliament became more important, the growing value of a seat in parliament led to increased corruption and cronyism. Popular pressure, including the threat of revolt, gradually extended the franchise, making the buying of votes more difficult. Politicians learned to play rules of democracy such as "Lose gracefully; hope to win again next time" and "Win, but don't crush the losers; next time, it could be you." The whole thing took centuries, and of course it is still going on. There were many steps back. So far, at least, we have avoided the trap of "One person, one vote, one time."

The single most important feature of the rise of democracy in the West is how late in the day we came to "free and fair" elections. But if elections came last, what came first? The answer seems to be that the process began with formal limitation of the powers of the government. The starting point, not of democracy itself, but of the process that led to democracy, was the principle that no one is above the law, even the King.

When this principle is not in force, then the government is above the law. In a state governed by laws, the law defines what is a crime, and the courts decide who is guilty on the evidence. Anyone can be tried, high or low, even the government. If the government is above the law, in contrast, the authorities can imprison people first, then decide what they are guilty of. Evidence is not necessary; if appearances matter, the police can always extract a confession. 

In a tidy world, democracies would be those countries that hold elections. Autocracies and dictatorships would be those countries where there are no elections and the government is above the law. But in our untidy world, you can have both at once -- the government above the law, and elections. This tends to happen in two kinds of country. Since they happen to be neighbours, we'll call one Pakistan and the other Afghanistan. The world has many more examples of both.

• In Pakistan there have been elections from time to time when the military is not in power, but the elections don't matter much. This is because the military is in power, even when it appears not be in power. In Pakistan the army controls nuclear weapons, military deployments, and intelligence activities independently of the government. It also has huge economic interests; according to Military Inc.: Inside Pakistan's Military Economy, by Ayesha Siddiqa (Pluto Press, 2007), the army disposes of one third of Pakistan's heavy industries and 6-7 per cent of private sector assets. These economic interests free the army from dependence on the civilian government's budgetary allocations. As a result, the elected government cannot tell the army what to do. In short, elections do not make Pakistan a proper democracy.
• Afghanistan has been a failing state since its monarchy was overthrown. (Pakistan may become one, but not yet.) In Afghanistan there are elections because of external pressure. Because of this pressure, the government depends on the outcome of the elections to continue in office. As a result, the elections really do decide who will govern Afghanistan -- at least this time round. In the short term, the prize of winning is great, because Afghanistan has only a weak constitution. Traditional restraints on central government have been eroded by decades of civil war. Being in power means you can do pretty much what you want, provided you control the territory. In the long term, however, the gain from winning is very uncertain. Maybe it just means being first in the firing line when the Americans withdraw.

What happens when you have elections and the government can do anything it wants, but only in the very short term? Several things: First, it is crucial to win the election. Second, it is crucial to win this time -- not next time, because there may never be another time. Don't settle for the chance to be the loyal opposition; bribe, threaten, do whatever you have to do to bring in the votes. Third, once you win, grab everything you can as quickly as you can. Forget about building the future. There isn't time. This argument is made by Paul Collier in Wars, Guns, and Votes: Democracy in Dangerous Places (The Bodley Head, 2009).

For such a country, elections are not the place where democracy begins. In fact, for any country, they seem to be the finishing touch on the democratic edifice. The foundations include a stable constitution (written or unwritten), and enough checks on the short-term freedom of action of politicians that they have no option but to play for the long term and cooperate in the games of politics and economics. Society benefits most when politicians see their greatest profit from promoting the steady, long-run growth of commerce and public goods such as roads and education. These things must be in place before democracy presents the electorate with real choices, choices that correspond to true social preferences.

Now that I've mentioned preferences, let's dwell on them for a moment. A virtue of democracy is supposed to be that democratic governments are constrained by the preferences of the median voter. It sets the game up in such a way that each party must compete for the middle ground. A government gets elected if it gets 50% of the vote plus 1. If you range the voters from left to right by their tax-and-spend preferences, for example, then the programme that captures the vote of the middle guy plus all the votes to the right (or left) will win. What the voters have to do is inspect their preferences and vote accordingly.

But when the government can do anything it likes, preferences have little traction. For one thing, parties are not bound by their promises. All parties may promise to be "clean" -- but everyone knows that as soon as they take office they will grab what they can, reward their supporters with part of the proceeds and pocket the rest. Instead, voters must set their preferences aside and make their choices strategically. For the most part this likely to mean ethnically or tribally: If the candidate gets in that is from the other group, what will happen to my group, and so to me? Better vote for my guy than their guy, however dirty. If I can, vote twice or three times, and stop the others from voting at all, unless I can trust them to vote my way. Once my guy is in, join the loot chain. Forget getting an education or doing business. And so on.

What really matters in a country like Afghanistan is not that elections have taken place. What matters is that its rulers, not just the government in Kabul but also the warlords and provincial rulers, need to start treating the country like a place with a future, and the citizens of Afghanistan as people who should not be killed, imprisoned, or plundered without legal process. That is what Magna Charta was all about. What Afganistan needs right now is not so much elections as a Magna Charta to which the government in Kabul and the warlords in the provinces all subscribe. This would be a bigger step forward than elections in which people vote on tribal lines, or are too scared to vote at all. The reason is that it would refocus the rulers away from what they can grab immediately from each other and from their citizens to the longer term benefits they can extract from investing in the economy and in simple things like roads and schools. 

I can see some important objections to this line of argument. In fact, I agree with most of them in advance. 

• Aren't you playing into the hands of oppressive dictators and exploitative elites?

Yes, it can do this. The problem in Afghanistan -- but not only there -- is that the alternative to oppressive dictators and exploitative elites right now is not democracy. It is, at best, a reasonably law-governed state in which traditional, unelected rulers see a common interest in promoting education, roads, trade, and tourism because they will get a bigger cut from the profits in the long run. They will protect the property rights of the poor as well as the rich, so that the poor will become less poor and will pay taxes and rents. This is why I wrote a while back that what Afghanistan needs is the right kind of feudalism.

It is a risk, however, that if we don't promote instant democracy ourselves, we may end up colluding with rulers who will never be ready for elections. They will oppose elections, not because society is unprepared, but because they are against elections on principle, because they prefer unaccountable power and wealth. In fact, it is not a risk -- it is a certainty.

• Aren't you undervaluing the thirst for democracy in the Middle East, from Iran to Afghanistan? Haven't these people got a right to decide their own future?

Yes, this is also a risk. Millions of people in countries that don't have democracy want to have a say in their own future. However, it is worth bearing in mind that wanting a say in your own future is not always the same as wanting democracy. Democracy creates losers as well as winners. It's easy to be a democrat when you win.

To have a true thirst for democracy, you have to prefer democracy, even when you lose. In some countries, many people are in favour of democracy only when they win. This is not a reason to be against elections, and generally it should not be up to us to decide whether other countries have elections. Where possible we should leave it to the citizens of those countries to work their processes out, just as the English worked theirs out.

• So where is our ethical foreign policy?

The first ethic of foreign policy should be not to do harm. Often the best way of avoiding harm is to leave a country alone. We couldn't leave Afghanistan alone because people in that country attacked our ally, the United States, on 9/11. Taking that starting point as given, however, we have probably done Afghanistan -- and ourselves -- a lot of harm by having the wrong objectives.

In each country there is a limited number of ways of doing good, and an infinite number of ways of doing harm. There is going to be a different recipe for doing good in every country, and we can't decide what that is on general principles. However, I think we should generally support the rule of law in other countries, provided the government is subject to the law like the citizens, and we should support the people that struggle to see the law observed and make the government accountable to the courts. This is where all rights spring from, including eventually the right to vote.

• You can't mean that every law deserves to be upheld? Some laws are disgusting or oppressive.

I agree. The laws in apartheid South Africa, for example, were obviously unjust and did not place the white government under the same restraints as the black population. The laws deserves our support where it creates checks and balances, limits the powers of the government, and gives the citizens redress against oppressive government behaviour in the courts.

At the same time, even in a law-governed country, the law will not always prescribe all the rights we think should be available in our country. In England, Magna Charta did not treat men and women the same, or Christians and Jews. Despite this, it was an improvement on what existed before, because it put the King under legal restraint, and authorized the use of force against him if he violated that restraint.

• According to you the Afghans will have to wait 800 years before they can have democracy -- that's ridiculous!

I agree. But I am not saying the Afghans must wait 800 years. Some of the reasons why it took such a long time to establish democracy in western Europe do not have to be repeated. One is that the Europeans did not know where they were going. If you know where you are going, that must save a few hundred years. Another is that there was a lot of resistance and backtracking. If you are strong enough to go in a straight line to democracy and quickly overcome resistance, that ought to save a lot of time too. At the same time a straight line is not a short cut. There are still important reasons why democracy cannot be established overnight from a standing start.

Why can't we build democracy overnight? Democracy rests on the idea of moral equality. This means that you are entitled to the same consideration as me, even if I disagree with you, and even if I do not know you. It is the idea associated with Voltaire, who is supposed to have said "I disapprove of what you say, but I will defend to the death your right to say it." Not all regions of this world have this idea in their culture. Without it, checks and balances are always at risk of being overturned, and minorities are at risk of suppression.

Put another way, democracy rests on expectations. The winners have a right to expect the losers to go into loyal opposition. The losers have a right to expect to be allowed to live and fight again another day. In many countries the history of power is a story of all-or-nothing, victory-or-death. This history determines the expectations of the contenders for power. Democracy requires them to unlearn this history and learn to expect restraint and trust instead. This takes time -- possibly, more than one generation.

Building commitment to democracy also takes time because democracy can be a disappointing experience. One person's vote is rarely, if ever decisive. Elections rarely, if ever, produce fundamental change in either governance or the conditions of life. Even in stable, long-lived democracies, most elected representatives turn out to be disappointingly human. The main benefits of democracy arrive over decades and centuries, because the requirement of periodic re-election enforces checks and balances; whoever is in power, they are restrained from acting in oppressive or confiscatory ways by knowing that eventually they must face the electorate. This is another reason why building support for a working democracy takes time.

Historical short cuts to democracy are few and far between. The only ones I can think of arise from merging sovereignties, when a society that lacks democratic institutions and traditions borrows them from a democratic neighbour. Something like this seems to have happened in Bulgaria and Romania as they joined the European Union, but it is still a puzzle -- according to "Explaining Democratic Success as an Analytical Challege: Why are Romania and Bulgaria in the EU?" by Venelin Ganev, in NewsNet (News of the American Association for the Advancement of Slavic Studies) 48:4 (2008). Moreover, this cannot help those emerging democracies that have seceded from or are in conflict with their neighbours.

It takes a long time to build a democracy. There are risks in being guided too closely by this; the risk is that we end up doing too little to encourage it. But there are also risks in the short cuts. In Afghanistan, we face huge moral hazards as a country, and our troops are facing deadly physical ones. I fear these are greater than the dangers that would have arisen if we had adopted a more cautious approach, better tailored to the realities of that country.

Mark Harrison : 30 Aug 2009 17:51 |  Tags: Afghanistan Politics |  Comments (0) |  Close comments |  Report a problem

Capitalism and Communism: A Few Things I Changed My Mind About

I sat over lunch under an apple tree with some old comrades. We reminisced about the U.K. referendum on EEC membership back in 1975. At the time, we all campaigned against. I mentioned that since then I had changed my mind. Why? Because, I offered, the EU had done more to spread and consolidate democracy in central and eastern Europe than any other factor or force. I'm not sure, but I think someone close to my right ear muttered "Shame!" That, and a few other remarks, made me realize that some of those I was sitting with might not have changed their minds about much, despite the passage of a third of a century.

Some things I have kept. I was brought up in a high-minded atmosphere of nineteenth-century rationalism. Now, I would not recommend this for everyone. It was not a lot of fun. I did not really learn how to party, for example. However, I did absorb a lot about the sanctity of truth and the beauty of logic. As for politics my mother, a lifelong Liberal, imbued me with the notion that:

Whoever could make two ears of corn or two blades of grass to grow upon a spot of ground where one grew before would deserve better of mankind and do more essential service to his country than the whole race of politicians put together (from Gulliver's Travels by Jonathan Swift).

That was the "rationalism" side of my upbringing. The "nineteenth century" bit was the optimism that came with it. I had instilled in me a belief in the possibility of progress -- that we, the human race, could learn from experience and reasoning to make things better for everyone.

These things I still believe.

But some I don't. One thing I used to believe was that the government could always fix things -- at least, if not the government, then some other government.

I lost faith in this idea gradually, a bit at a time. To begin with, I believed it wholeheartedly -- as did we all (this was those of us that were studying economics in Cambridge, England, in the late 1960s). The only problem would be if the government was mistaken in fact or logic. If so, it was our job to put it right! We all saw government service as the highest calling of a professional economist. I nearly went that way, but I got bitten by the economic history bug.

A little later, my view of politics had darkened. I no longer trusted the government -- our government, the capitalist government, that was. I became a revolutionary socialist, and then a communist. (By this point I had forgotten about the two blades of grass.) It was still the government's job to fix things, but it had to be a government of the people, by the people, for the people. This outlook wasn't anarchistic, but it was libertarian. I wanted a world, foreshadowed by Marx in the Communist Manifesto of 1848, where,

In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all.

What kind of government would that be? Well, although a communist, I did know it wasn't the Soviet government of the day. I had lived and studied in Moscow; I knew it was a police state and didn't much like it, although there were other things I was ready to admire. But the voices from the Soviet bloc that I listened to were the Czechoslovak and Polish reformers (some of them now exiled to Britain) and, in the Soviet Union, democratic Marxist dissenters like Roy Medvedev. This was the now forgotten era of Eurocommunism which, germinated by the 1960s, blossomed briefly during the 1970s. Italian and Spanish communists put forward the daring view that Soviet socialism had something missing from its makeup. The Russian Revolution of 1917, although not a mistake, had driven a wedge between democracy and socialism. In Britain some communists, but by no means all, took this up. It was our job to put democracy and socialism back together. (We failed.)

We debated the mistakes and crimes of Stalinism. This debate turned out to have some unexpected twists. In the Great Terror of 1937, Stalin had murdered a million people. No one really wanted to defend this. Those who wanted to support the Soviet Union on principle generally divided into two. One lot went into denial: some real enemies had been justly executed, and the rest was a fabrication. Others accepted the truth, but stuck to the line of Khrushchev in 1956: it was the fault of Stalin and a few leaders, who had died or been got rid of, and everything else was basically healthy, so that made it okay.

More disturbing, if anything, was the problem of the far more numerous victims that Stalin didn't intend, but killed anyway: for example, the five to eight million deaths resulting from the famine of the early 1930s. There was no plan to kill them, but they died because Stalin's drive to industrialize the country took too much food from the villages, leaving not enough to keep the rural population alive. Their bones were buried in the foundations of socialist construction. This was harder for some to face up to than premeditated mass murder. If a death was a crime you could convict the murderer, but killing by mistake placed the whole Soviet system on trial.

We wanted to heal the rift between socialism and democracy. We were failing, but we didn't know it yet. For the mid-1980s saw the coming to power in the Soviet Union of a leader who walked and talked like us: Mikhail Gorbachev. Like us, Gorbachev wanted to put socialism back together with democracy. The Soviet Union could become a free, democratic society! We were re-inspired, briefly.

It wasn't all philosophy and infighting. While disagreeing on history and the Bolshevik Revolution, we lived in our own country in the present. Putting differences aside, we engaged in many campaigns. We fought for jobs and full employment, opposed racism, supported strikers, marched for peace, campaigned for votes, and worked to enliven and empower our local communities.

Some other beliefs that I still held at that time mirrored my faith in political action to put things right. One was that fairness matters more than efficiency. In the late 1980s, shortly before his final illness, I became friends with Peter Wiles. We soon understood each other pretty well. Given our different starting points -- in many ways he was a classic liberal -- he was exceptionally kind to me. But even when he was no longer quite sure who I was or why I was there, he would turn to me suddenly and say: Efficiency! You've never paid enough attention to efficiency! Efficiency is very important!" And he was right. Because, the more efficiency you have, the more blades of grass and ears of corn you have, and the easier it is to be fair. At the time, this was something that I was still thinking about.

Then the Soviet experiment came to an abrupt end, a complete and total failure. Sometime early in 1991, I decided that the era ushered in by the Bolshevik Revolution was over. It was time to move on. I didn't know where, but I knew I couldn't stay where I was. I turned in my party card, and that was it.

A few years later, I was still stuck with nineteenth century rationalism, but I had changed allegiance from Marx and Engels to Smith, Ricardo, and Mill. In economics and politics I had become a liberal. I was happy -- as most liberal economists are -- with progressive redistribution through taxes and benefits, and tax-financed health and education services. I still had an optimistic belief in progress. But I no longer thought the government could drive progress, or fix everything, and I didn't even want it to do these things any more.

Political economy and the study of bureaucracy helped me to this view. Politicians and government officials, I realized, are not to be judged by their high-mindedness. Whether capitalist or socialist, under democracy or a dictator, political leaders and civil servants are self-interested. If the incentives align their private interests with those of society as a whole, well and good. Mostly, however, this is not the case. I ceased to believe that good government needed only correct facts and correct logic. I began to grasp the possibility that governments could fail systematically, perhaps more often than markets could fail.

From there it was a short step to the idea that a good way to organize society is to place the government under strict constitutional constraints, and let the citizens govern themselves as much as possible.

There were plenty of things I struggled with then, and still do today.

One is climate change. When climate change is (in the words of the Stern report) "the greatest market failure the world has ever seen," it is clear that without some kind of political action there is no solution. (You can actually read me struggling with this in my first and only article about climate change, written way back in 1991. I had figured out the political action problem, although in a crude and overdramatic way, but not yet the coordination problem that goes with it.)

Another is military intervention. I still thought military force had a purpose in the modern world and, to be perfectly honest, I still do. That doesn't mean I know exactly what that purpose is. Here's an example. I was in favour of the U.S. led invasion of Afghanistan in 2001, and less surely in favour of the invasion of Iraq two years later. What do I think now? There is a lot of evidence now to suggest I was wrong. I still think Saddam Hussain brought defeat on himself by pretending to have weapons that he wanted to have, and had tried to develop, but did not in fact possess. Also, I think the full consequences will not be known for many years, and could well differ greatly from what seems obvious now. Still, that is to anticipate hindsight that we don't yet have.

More to the point is this. I never forgot a conversation about Iraq with an American friend and fellow economic historian. I visited his university in November 2004 when Bush had just won his second term. Depressed and angry, Tim exploded at me: "You ex-coms are all the same!" (I wondered how many he knew.) "When it comes to military intervention you still think the state can fix everything." I think he had me just right. I was skewered.

A third thing I struggle with is who gets my vote. I favour policies that are economically conservative, socially liberal, tolerant and generous in international affairs, interventionist when forced but always reluctant and mindful of the perils of selective intervention. The only party that would be all these things is a party that is not interested in power. No party is all of these things in any country that I can think of. But if we don't vote, I believe, they will take our liberties anyway.

The last thing I want to mention is what it has meant to me to have spent the last eighteen years working in and with the Soviet state and party archives. First, a wonderful privilege: what luck, that I was granted such an opportunity. I have used it to work on a wide range of topics -- statistics, economic planning, growth and development, wartime mobilization, defence planning and procurement, decision making, information, secrecy, lying, cheating, whistleblowing, and repression. There is so much to study! This was a state of 200 million people and one sixth of the world's land surface that recorded everything of note in millions upon millions of documents over 70 years.

And second, a strange voyage of discovery, hard to define in a few words -- but I'll try. In general, no great surprises. The documents show a vast, centralized dictatorship with a mailed fist and a decaying metabolism. But we knew that, already. The fact is that academics and writers older and better than me, the dissidents and scholars of Peter Wiles's generation, had already worked out the main dimensions and characteristics of the Soviet system, its politics and economics. This was a state that just had too much power. 

In specifics, though, my sense of shock, accompanied by a full span of emotions from grief to laughter, is continually renewed by the opening of each new file. Two examples: First, how did I get interested in secrecy? I was working on Soviet military procurement. Every year the government gave the Red Army a cash budget to buy new equipment. Soldiers toured the factories to work out what weapons were available and at what price. Industry was supposed to sell weapons to the military at cost price. So, the officers' first question tended to be: "How much does that cost?" And the standard answer? "We can't tell you. It's a military secret." It sounds ridiculous! But it worked! Year after year and decade after decade, it worked. That told me there was something interesting and remarkable in the operation of Soviet secrecy that needed to be understood.

Second example: Earlier in the summer I took a first look at the files of the Lithuania KGB, newly acquired from Vilnius by the Hoover Institution archive. Every year the KGB second administration, responsible for counter-intelligence, made a plan of work and a report of work. They enumerated the thousands of "objects" that, in the course of the year, they would aim to monitor, intercept, warn off, compromise, recruit, blackmail, or arrest, and the hundreds of informers they would deploy to achieve the plan. This is what the KGB did in Lithuania year after year, right up to the end of the 1980s. The term "object" is no mistake; they coldly manipulated "the lives of others" with casually understated brutality. Suddenly at the end of the 1980s the endgame arrived, and a hundred thousand people were on the streets, demonstrating for independence -- half of them, party members! They were taken completely by surprise! They'd been watching the wrong people! (Or had they? Again, there's a story in this.)

And finally, an inner struggle between the calls of science and morality. As a social scientist, my first duty must be to understanding. Understanding comes from new knowledge, and there is so much new knowledge in those dusty files and blurred microfilms! Judgement should come later. But there is also a feeling that spreads involuntarily from my gut, a voice that I can't shut out: Reagan was right. This was an evil empire.

Do I regret my past associations or activities? No. I believed or did many things that seem silly or misguided with hindsight, but I did not betray anyone or do anything really wrong. Many good people belonged to the communist party who inspired me both as idealists and as activitists. From them I learned about how to translate ideals into action, and how to work with people of differing views, build cooperation, and get things done in the face of criticism and opposition; it is hard to imagine that I could have learned these things in any other way. One thing I learned was always to start from the world as it is, not as you would like it to be. This was one reason I did not write off the Soviet Union at the time. Which bring us to mistakes. Well, they are supposed to help you learn. I made many, many mistakes and this just gave me plenty of scope to learn from them. Of course, I probably did not learn all that I should and I probably made many more mistakes than I ever recognized.

No doubt there is some degree of self-serving fiction in my story. The way I tell it, I remained true to the values I got from my mother: truth and reason before everything else. The facts changed, so I changed my reasoning. The world changed, and I moved on. But there could be other versions.

My children might say: In his youth, Dad was a free thinker. He got older and more established, put on weight, and settled for a comfortable life in an armchair.

The old comrades I lunched with might not go along with that. After all, they got older too, but they did not settle for comfort or accommodate to new times. They remained true to the cause. Among them, some might tell a story of treachery and betrayal, in which I began with my heart in the right place, but eventually sold out the cause in return for academic status and reputation. Others might wonder if I wasn't always a middle-class revisionist, just playing with politics, an enemy within from the start, never a true comrade. Somewhere in this tangled tale lies the golden thread of truth -- but where? You choose.

Mark Harrison : 19 Aug 2009 08:23 |  Tags: History Politics |  Comments (8) |  Close comments |  Report a problem

Prince Charles: A Time to be Silent?

Writing about web page http://www.guardian.co.uk/uk/2009/aug/17/prince-charles-national-trust-patronage

Recently I thought: I long for Prince Charles to be king. Then, he will have to be silent.

This scientifically uneducated, culturally backward-looking, self-indulgent, self-pitying moral coward believes that he has a mission to educate the nation and control its thinking about the environment, health, aesthetics, and family values.

Have I overstated things? Perhaps Prince Charles is no worse than anyone else. He has made mistakes, as we all have done. But he is no better than the rest of us, for sure. Nothing in his life qualifies him to tutor us, other than the accident of his birth.

Prince Charles surrounds himself with advisers, none of whom has the courage to tell him that there is a time to be silent.

My hope was that, when he becomes king, Charles will have to step back from controversial posturing, so we shall hear from him less.

But then I realized that, as king, he will have even more opportunity than now to meddle in secret, behind the scenes.

I have always been a republican, but not a passionate one since I came more to appreciate the value of long established institutions.

Prince Charles's behaviour may increase my enthusiasm for constitutional change.

Mark Harrison : 18 Aug 2009 11:58 |  Tags: Monarchy Politics |  Comments (1) |  Close comments |  Report a problem

Health Care: A Letter to Americans

Writing about web page http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/6001372/Sarah-Palin-calls-Barack-Obamas-health-reform-plans-evil.html

Working on both sides of the mid-Atlantic discipline of economics, I find I spend a certain amount of time trying to interpret America to my British friends and colleagues. Less often, I have to do it the other way round. Now seems to be one of those times. Britain needs to explain itself to America.

It seems Britain has become an issue in America: specifically, our national health service. Recently Chuck Grassley, a Republican on the Senate finance committee, was quoted as saying:

I don't know for sure. But I've heard several senators say that Ted Kennedy with a brain tumour, being 77 years old as opposed to being 37 years old, if he were in England, would not be treated for his disease, because end of life – when you get to be 77, your life is considered less valuable under those systems.

Now, I have only limited claims to offer any insight worthy of note. Specifically, I'm not a health professional (or a health economist). But I am a person, so from time to time I get sick. As a parent I had to see my children, now grown up, from birth traumas through the usual illnesses and accidents of childhood and adolescence. Recently I turned 60, so I have started to encounter conditions that go with aging. Within the last 20 years I experienced the deaths of both parents, both of advanced age, one after a long illness and the other after a short one. Along with all that, I sometimes worry about nothing. For all these reasons, I have had plenty of personal experience of health care in the U.K. and consider myself qualified to talk about that. So:

Dear Americans, here are some personal answers to some of the questions that seem to be on your minds.

• Has the British national health service ever been a bad experience for you?

No. It has looked after me and those I love with unstinting professionalism.

• Has the British national health service ever denied you or your family treatment on grounds of cost?

No. We have occasionally been faced with delays for testing or treatment that were a little longer than was comfortable. It was more urgent in our eyes than in the eyes of the medics and managers.

• Do you worry about whether the state will pull the plug on you when you get older?

Absolutely not. I do worry that I will be kept alive beyond the point where I would prefer to slip away. That's another story, not for now.

• Is that just because you're a national treasure? Do the national health service bureaucrats just give out privileges to famous people?

Hmm, let's think about that. It sounds like the Stephen Hawking argument -- that Hawking survived our health service only because he was famous. I'm fairly sure my NHS doctor doesn't know I'm famous. That's suggested by the fact that last time I saw him he asked me what I did -- and then wrote it down. My wife and children like to think I might be famous but for some reason I'm keeping it from them. In fact, I'm keeping it under wraps so effectively that even I don't know I'm famous. Nope, I think I'll be treated exactly the same way as everyone else. Just like Stephen Hawking, in fact.

• Doesn't the NHS ration health care?

Sure. The truth is that health care is rationed everywhere. In a society without public provision, it tends to be rationed by price, or by the insurance premium. Those that can't afford it, don't get it. In the national health service, affordability is reckoned at various levels, national and local, but not in terms of the depth of my personal pocket.

• Is the NHS perfect, then?

No. It has many of the imperfections of government provision. For one thing, it can be squeezed by budgetary limits. As a result, bringing in expensive new hi-tech treatments can be at the cost of basic procedures or attributes such as cleanliness and diet in hospitals. Results are uneven: Britain is not very good at diagnosing and treating some cancers, for example. I could go on. The main thing is that, despite many imperfections, it basically sort of works. Specifically, it has been working for half a century without leading Britain to Nazi eugenics or a communist dictatorship.

You have to notice that David Cameron, who leads the most free-market mainstream political party that we have, is vociferous in defense of the national health service. Why? Because he knows it is very, very popular. It's popular because, despite the imperfections, it works.

• If you have to be in hospital, wouldn't you rather be in hospital in the United States?

Yes. It's a no-brainer -- American hospitals are the best in the world. At least, that would be my preference, conditional on having full insurance cover. But if you changed the question slightly, my answer would change. If the question was: "Unconditionally, which system would you prefer to live under?" then my answer would be the British one, because then I would not worry about needing treatment for conditions that were not covered by my insurer, or about exhausting the limits of my cover, or about possibly losing my job and my cover with it -- not only mine, but my family's cover too. Here, I am not afraid to be ill or injured. Of course, that's my personal choice; others might choose differently. But it is not an irrational choice.

• How do you square acceptance of tax-financed health care with free market economics?

The market economy can solve most problems, but not this one. There are three reasons. First, according to market principles, the consumer is sovereign. In the market for medical services, most of us face a huge difficulty in trying to enforce this idea: the doctor knows best! We are too ignorant, and too emotionally involved, to be the best experts in our own care. That's why it makes sense for a powerful intermediary to buy medical services for us. That intermediary can be either the government or a private insurer. This leads to the second reason: private insurers like to cherry-pick their risks. Poor people have consistently worse health outcomes, and so make poor risks. When the only intermediary is private insurers, they will inevitably tend to price poor people out of the market. Only a government scheme can make sure that poor people are included. The third reason is that poor people should be included. This is on several grounds, starting with social justice, including justice for their children, who are not to blame for their parents' life choices, and because otherwise poverty will spread untreated diseases through the community.

Within our national health service I am in favour of the unevennesses that give us individual choices. It's a good thing if all doctors, hospitals, therapies, and procedures are not exactly the same. This lets us compare results and make choices among them. I'm also in favour of the internal markets that let doctors choose between consultants and facilities from which to purchase care for their patients.

In short, the NHS does violate free market principles, but with health care these principles are going to be violated anyway -- even in a free market. Health care raises issues of market power, information, and health spillovers that do not arise in most markets. It is an exception.

• Doesn't government health care create huge bureaucratic overheads?

Well, yes. Interestingly, however, the overheads of government-financed medicine may not be as large as the overheads of insurance-based health care. As far as I understand it, my country commits a much smaller proportion of its GNP to health outlays -- and gets considerable better average outcomes than the United States, measured by life expectancy and many kinds of morbidity. Of course, there are confounding factors that complicate our understanding of the causes. Government purchasers are not necessarily any better than private insurers at holding down underlying costs. But it is not hard to see that taking ability to pay (or insurance status) out of the equation cuts out a lot of bureaucracy.

• Still, wouldn't you prefer to pay a voluntary insurance premium over compulsory taxes?

I pay both. And I do so very willingly. My taxes go to the national health service, which ensures that I and my loved ones are fully covered both for emergency treatment, and for all other procedures that are available although not necessarily exactly when we want it. My insurance premium then lets me bypass many queues if I need to. Moreover, the two systems mesh smoothly, allowing me to switch back and forth between them -- as I did recently when my NHS doctor recommended some tests that could not be done instantly within the national health service. My insurer paid so that I could have them done privately, and I took the results back to my NHS doctor.

In other words, it's not a question of government versus private provision. You can have both working together -- and in fact, in the United States, you do have both. It's a question of the right balance. The balance we have in the U.K. right now may not be perfect, but it is not a bad balance.

• Don't you mind that your taxes also pay for the care of needy and feckless people that pay no taxes themselves?

No. In fact, I'm very happy that the lazy scumbags get health care too. This is partly on pragmatic grounds, so that they do not pass their diseases onto others, and so eventually to me. Another reason is moral: poor and needy people have children who themselves can be in need of medical care. And from the moral to the personal: the poor and needy of the future might turn out to be my grandchildren! Or even my children! (I didn't mean to say that, it just popped out.)

• Does the NHS explain your bad teeth?

No, I obtain my dental care privately under an insurance scheme. My bad teeth are connected not with socialized medicine, but with the fact that I spent my childhood in Britain in the 1950s.

In conclusion, dear Americans, you must make your own minds up. We Brits can understand perfectly well the importance of private versus public, free market versus government, and individual versus collective responsibility. These are big important things that all of us should and will debate freely.

What we don't get is the depth of anxiety with which some of you face the prospect of wider sharing of health care. British experience gives plenty of food for thought. We may not have got it exactly right. But the choices we have made are well within the parameters of a society that is free as well as modestly equitable.

Keep well, Mark

Mark Harrison : 14 Aug 2009 15:38 |  Tags: Economics Health Politics |  Comments (5) |  Close comments |  Report a problem

How Can We Get to See What's Coming Round the Corner?

Writing about web page http://www.wehc2009.org/programme.asp?find=world+in+2030

At a meeting I attended earlier this week, some of the world's best economic historians discussed how the world might look in 2030, based on their knowledge of the long-run trends at work over the last couple of centuries (or, in the case of China, the last couple of millennia). People talked about trends, models, and forecasts, using a lot of numbers and graphs. The picture was generally optimistic, in a moderate sort of way.

One speaker worried about the small number of big things that, although they happen only rarely, might completely derail our visions of the future: things like deadly pandemics, Great Depressions, and global wars. Anther speaker worried about the rise of nationalism, how far it might go, and whether it could then have unpredictable effects.

This made me think about people that haven't had the benefits of a training in economics -- most historians, for example, but of course not only them. It occurred to me that such people often think about the future in a completely diffferent way, a way that is much more intuitive than economists' trends and models. They think about the future by telling stories taken from the past. (This is not a completely original thought. I began to think about it after reading "The Political Economy of Hatred," by Ed Glaeser, in 2005 in The Quarterly Journal of Economics 120:1, and more recently Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, by George A. Akerlof and Robert J. Shiller, published by Princeton University Press in 2008).

How do people use stories from the past to think about the future? First, they think about the conditions obtaining in the world today. Then, they scan the past for stories that began with initial conditions somewhat like these. They ask: "What happened next?" Then, they let the story unfold. From the story, they work out what might be about to happen in our own future. In this way, they try to see what's coming round the corner but still hidden from direct view.

Here are two examples.

• Today, we are in the early stages of a Great Recession that was preceded by a financial crisis. That's somewhat like the world economy in around 1930 or 1931. What happened in the Great Depression was a global contraction followed by the breakup of world markets, the rise of nationalism, the attempt of Germany, Italy, and Japan to carve out new empires, and World War II. Is that what might come next?
• Russia today is a great power that began the transition from totalitarianism to democracy -- and got stuck half way. The Russian political elite feels encircled by an old enemy, NATO, in the West, and a new rival, China, rising rapidly in the East. With a shrinking population, Moscow may well feel that time is running out. That's somewhat like Germany in around 1912. Germany was stalled half way from Prussian absolutism to parliamentary democracy. Germany was a rising power, but with the sense of being encircled by old enemies, Britain and France, in the West, and new rivals, Russia and Japan, that were rising even faster in the East. What happened next in that case was that the German political elite took an immense gamble. They launched World War I, not because they were confident of winning, but because they feared that time was running out. They feared the consequences of doing nothing -- the certain continuation (as they saw it) of peaceful decline -- more than the combined risks of victory and defeat if they started a military adventure. Is that what might come next?

Story-telling like this has some remarkable features. First, it is indeed a way of thinking about the possibility of rare and unpredictable events. As such it is immensely powerful. Its intuitive appeal is much greater than models, charts, and numbers. It speaks the language of nations and politics: shared experiences, common destinies, collective rights and wrongs. It is easily voiced by leaders and heard by followers untrained in statistical thinking about trends and standard errors. As a result, while politicians may turn to economists for technical advice, they get historians to help write their speeches -- Arthur Schlesinger Jr (John F. Kennedy), Richard Pipes (Ronald Reagan), and Norman Stone (Margaret Thatcher).

Second, story-telling is deliberately selective. When we scan history for stories, we look by definition for sequences of events that have a beginning, a middle, and an end. In the middle, something happens that is out of the ordinary, dramatic, and unexpected. Invariably, we rule out all those past historical circumstances that also somewhat resembled the present day, but after which there were no surprises and nothing much happened.

Third, story-telling typically sounds an alarm. In history, dramatic events are rarely good news. The good news in history has generally been made up of the slow, steady progress of emancipation, literacy, and prosperity. Such good news is easily illustrated by statistics and trends, but does not make good stories. It is the bad news of crises and wars that makes good stories.

Fourth, exactly because story-telling is alarmist, an entirely legitimate purpose of stories may sometimes be to sound the alarm about the risks we face and so avert their realization. Putting it in its best light, we sound the alarm of another Great Depression so that governments will take the actions necessary to save us from having to relive the experience. We warn of the danger of a new war so that governments will change their policies to a peaceful track. One result is that it is generally very difficult if not impossible to test the efficacy of story tellng as a form of prediction.

Fifth, some stories can be self-fulfilling. There is a particular kind of collective story, for example, that communal identity politicians like to tell (Glaeser wrote about this in "The Political Economy of Hatred"). These are stories of past hate crimes allegedly committed by some other ethnic or religious group against their own group: Black against White, Germans against Jews, Jews against Palestinians, Protestants against Catholics, Sunni against Shia -- and, in all cases, vice versa. Such stories can be extrapolated into predictions of future hate crimes yet to be committed, and then into justifications for hateful and violent action to preempt the future crimes.

Related to all this is the problem that we control the initial conditions of the stories we select only very imperfectly. The world economy today is only somewhat like the world economy of 1930; in many ways it is quite different -- and the differences may well turn out to be crucial. In the same way, Russia today is only somewhat like Germany in 1912. And so on. Thus, the stories we tell have the capacity to be deeply misleading about the true underlying risks in the world today.

If the risk of war or depression illustrated in the story does not materialize, this could be because telling the story stimulated effective action to avert the risk, or because the risk, although real, happened not to materialize this time (i.e. we were lucky), or because the risk was nonexistent in the first place; we may have no idea which is the case. If the risk of community violence does materialize, we don't know whether the underlying story merely predicted it -- or actually precipitated it.

In summary, such stories are powerful. They have great potential to illuminate the risks we face, but this potential is also dangerous; it is a power to accentuate risks, as well as to illuminate them.

I draw two simple conclusions from this. One is that economists and economic historians interested in addressing the wider public should think carefully about the stories that can put our messages across. The other is that we should pay close attention to the stories that others narrate in public about what has happened in economic history: we should look out for these stories, identify them, test them carefully against the evidence that we have, and then report the results to the public ourselves.

Mark Harrison : 06 Aug 2009 08:09 |  Tags: Economics History Politics |  Comments (0) |  Close comments |  Report a problem

The Social Work Taskforce: Why Not Just Pay Them More?

Writing about web page http://publications.dcsf.gov.uk/eOrderingDownload/DCSF-00752-2009.pdf

The British government's Social Work Task Force was set up to review "frontline" social work practice and to recommend improvements and reforms of the social work profession. Its interim report, out today, is entitled Facing Up to the Task.

Everyone can see that social work in our country is in a mess. If social workers fall down on the job they are treated like murderers; if they try to do it properly they get treated like the Gestapo. If they spend all their time on the "front line" they have no time left to talk to each other and to other agencies; if they talk to each other the way the government requires, they spend all their time doing paperwork and have no time for their clients. In the words of the report (page 12):

Widespread staffing shortages mean that social work is struggling to hold its own as a durable, attractive public sector profession, compromising its ability to deliver consistent quality on the frontline. There is no robust, standing system for collecting information on local and national levels of vacancies, turnover and sickness, and for forecasting future supply and demand. Local authorities are finding it hard to identify effective methods for managing the workloads of frontline staff. Staff shortages and financial pressures are making these challenges harder still.

In other words, a big problem facing social work managers today is that demand exceeds supply. That sounded to me like an economic problem. As an economist, without a background in social work, I thought about the Economics 101 solution: if demand exceeds supply the price should rise. Maybe social work would become more manageable if we paid our social workers more?

Sounds simple -- maybe too simple. How would it work? Well, in several mutually reinforcing ways:

• With higher salaries, more people with better qualifications would be attracted into training for the profession. (In today's Guardian, David Brindle quotes Sue Berelowitz, deputy children's commissioner for England, as saying some universities accept students on social work courses with E grades at A-level; some courses have pass rates for essays and exams of just 30%.)
• There would be fewer unfilled vacancies.
• A larger number of better qualified and more competent social workers would share out the work, so workloads would become more manageable.
• Properly managed, with higher salaries and lower workloads, even existing social workers ought to become more effective.

Given higher salaries, it is true, social service departments would probably have to reduce their social work staff complements. But this would be a price worth paying. With fewer posts unfilled, the number of social workers actually in post ought to increase. Departments would be spared the expense of frequent resort to expensive agency workers and consultants to make up for staffing shortfalls. And at least some social work catastrophes would be avoided, sparing everyone those other sorts of costs that then arise: deaths and injuries, investigations and trials, commissions of inquiry, imprisonments and sackings.

Given higher salaries, why would the existing social workers perform better? There are two reasons. First, the existing workers would have more, better people around them with whom to share the work. The other reason is that, the higher your salary, the greater is the cost of losing your job. Assume that bad social workers eventually lose their jobs. If so, then a higher salary would increase the cost of being a bad social worker, and so make existing social workers work harder to avoid being seen as bad. Of course, this depends on good performance management being in place so that bad social workers are actually let go.

All this is first-year economics. I wondered what the Social Work Task Force would make of the first-year answer. I note that the report emphasised the need to achieve "a much more sophisticated understanding of supply and demand." I looked for what this might involve. I found two things (both on page 18):

First, numbers of workers supplied and demanded:

A better future for social work depends on an appropriate supply of suitably qualified applicants into stable teams with the right mix of experience. The supply, recruitment and retention of social workers is therefore a central issue for reform. As a prerequisite for improvement, there need to be robust and durable arrangements for understanding and forecasting supply and demand across training and the job market.

I think what this means is that, in the view of the task force, one of the main instruments for bringing supply and demand into balance in the long term is forecasting demand and then increasing training places to match. The reference to retention, however, suggests an important role for pay, the factor that an economist would see as bringing supply and demand into balance. This brings us to the second thing I found (which actually came before the first one):

Social worker pay has also been raised in a number of different ways with the Task Force.

• Levels of pay are felt by some to be too low and not reflective of the importance of what social workers do and the pressures they currently work under. However, others have argued that levels of pay in themselves are not necessarily a decisive issue but assume importance because of wider problems with status, recognition and investment in training, support and the working environment.

• Pay differences within local authority teams between permanent staff and agency staff who may not be handling the same complexity of cases) are a source of some frustration and disillusionment.

• Shifts and variations in pay between local authorities are causing some dissatisfaction and may be contributing to movement and turnover in the workforce, with authorities competing to attract staff and address shortfalls through localised improvements in pay and conditions. This has led some to suggest that the profession needs a single national framework for pay and other conditions of employment in the statutory sector

Now, I understand very well that pay is not everything. If it were, I wouldn't be an academic. People come to many jobs, especially those involving education, health, and social care, because they are drawn to the work itself rather than the pay packet. In fact, people who care only about money would make bad academics and probably bad social workers too. Because of this, not offering very high pay can be a way of screening out people that care only about money (at this point we've moved from first-year economics to the second year).

However, it does not look to me as if the main problem in British social work today is that the profession is being invaded by money grubbers. On the contrary, there is an equal risk from offering relatively low pay: it can be felt as society's way of saying that the job is unimportant and a professional motivation is rubbish.

Because of this, for the sake of their motivation, it is important to pay people in proportion to their responsibilities -- and frontline social work is a very responsible job. If social workers are to match up to their responsibilities, commitment alone is not enough. The profession also needs to attract people that, in addition to being committed, are organized, fair-minded, team-oriented, competent, knowledgeable, and decisive, qualities that are valued highly -- and often highly rewarded -- in business. All this suggests that raising salaries could be part of the solution.

Raising salaries would seem to be a much more promising line of advance for the profession than the failed route of responding to crisis through frequent and costly reorganizations, reforms, and commissions of inquiry and task forces.

To give an example, every time there is a disaster, we are told that social workers failed to talk to each other and to other agencies. But competent, organized, knowledgeable, motivated social workers who are not crushed by overwork will talk to each other and to doctors and teachers without being told to do so. It is necessary to try to force social workers to do these things and to create artificial channels for them to do so, only because social workers are underpaid, underskilled, and overloaded.

To return to the report, if local authorities are being forced to raise salaries in order to compete for scarce social workers, isn't that a good thing? To judge from the tone of the task force report, "authorities competing to attract staff and address shortfalls through localised improvements" is being presented as a negative; "a single national framework for pay and other conditions" is put forward as the alternative to employer competition. When employer competition is pushing up pay, it looks like there are those that would prefer to hold it down.

A final thought on good and bad uses of money. One of the task force's headline recommendations is "The creation of a national college for social work" (page 40):

We are therefore exploring the case for a new organisation to support social work, which can play a role similar to that of the Royal Colleges that support the medical and allied professions. This might take the form of a national college for social work in England. ... In particular, the Task Force is interested in the potential for the national college to have a key role in driving learning and best practice in social work and provide a strong voice which speaks to the media about the profession. We are also considering the roles it might play bringing coherence to the professional and occupational standards which underpin different aspects of social work training and practice, and in relation to regulation of professional practice, training and education.

This Royal College of Social Work (say) would be in addition to the bodies that already exist: the General Social Care Council (GSCC), the relevant sector skills councils, the Social Care Institute for Excellence (SCIE), and the British Association of Social Workers (BASW).)

How much would this cost? In 2007/08 the Royal College of Nursing had 400,000 members and an annual budget of around £80 million, so around £200 per head of the profession it serves. In the same year the GSCC spent about £42m and the SCIE another £8m, so £50m for these two bodies to cover around 100,000 registered social workers and social work students. In other words, social workers were already paying around £500 per head for their own statutory regulation. (I'm not sure why it already costs so much more to regulate and support social workers than nurses.)

My question: wouldn't we all be better off if, instead of creating yet another expensive statutory professional body, we abolished them all and used the money saved to pay social workers more? Maybe there's a lesson in Economics 101 after all.

Mark Harrison : 29 Jul 2009 16:08 |  Tags: Economics Politics Social-Work |  Comments (3) |  Close comments |  Report a problem