The Strange Death of Liberal England – all over again!

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Nick Clegg made a speech on 19th December 2013 to a conference organised by the Open Society Institute and Demos which spelled out what Liberalism is about. It was poorly reported by the media which focused on criticisms of the Conservative policies on tax benefits for married people. But, it was an important speech in that Liberalism – the real third way of British politics – was, for the first time in many years, made the key topic.

In “the Strange Death of Liberal England” written by George Dangerfield in 1935, the twin political opponents of workers and capital were seen to squeeze out the rights of the individual as two opposing armies took over. This death was correctly seen as liberalism and the niceties of that philosophy were sacrificed to economic imperatives. Economic supremacy and economic growth (as measured by wages and GDP) became the real determinant in our politics and economics – a natural result of the economics of the 19th Century.

Now, western economies are relatively wealthy in pure economic terms despite the travails of the last eight years. It is the squeezed middle classes that have faced economic peril – with real antipathy to the financial “class” that seem to have acquired all the economic power. However, “austerity” economics has imperilled the lower paid and the poor on the altar of “balancing the books”.

In 2013, and in his recent resignation speech after an election that punished the Liberal Democrats for much more than cosying up to the Conservatives, Nick Clegg made the case so well. Liberalism stresses the balancing of the needs of individuals against power blocks – against totalitarianism of all kinds. “The values of the open society – social mobility; political pluralism; civil liberties; democracy; internationalism – are the source of my liberalism. And reflecting on the events of the last year, it is clear to me that they have rarely been more important than they are today.” Clegg said in 2013.

In his more recent speech made yesterday, Clegg stated that the loss of liberal values from recent politics spoke of a real risk to freedoms and the pursuit of life over entrenched interest groups. Unfortunately, this message had not been made by Liberals for 5 years (except in the odd speech like in 2013) and the mistrust held by the electorate over the decisions to become part of a Tory-led coalition along with the about-turn on University fees caused enough of the electorate to dismiss the Liberal Democrats. This party became “Tory-light” in the eyes of the young who had voted for them in 2010.

As economies struggle around the world, modern politics should be looking beyond the cul-de-sac of entrenched self-interest and power blocks to the values of the open society called up in Clegg’s 2013 speech. We should measure our rights to exist in ways that are more suitable than GDP or income measured in such straightjacket terms as numbers of £’s or $’s or Euros. Open society should be the way we measure our lives – this requires satisfactory income levels but there is more to what humans need than income to buy things that have diminishing returns to our well-being. Clegg’s speech should have been a useful starting point for what politics should be about beyond the next tax break. I hoped at the time that many would read it, that the press would begin to re-establish itself and begin to help lead the way to a new politics and economics for the 21st Century.

My hopes were dashed by a Liberal Democrat party that forgot its true centre (probably lost anyway when it joined with the Social Democrats thirty years ago) and only remembered it when it had lost.

Where does liberalism go now in the UK?

Perhaps the election throws up another route. The Labour Party’s dismay at it abject failure to ignite interest in the whole of the UK may be seen as an early stage in a change there, too. Born on the back of the struggle of the working class to assert itself in 1900, Dangerfield in his 1935 book showed clearly how that movement of labour was bound to kill off the party that had tried to represent labour up to then (the Whigs and then the Liberals) but from a middle class perspective.

Now, working people have succeeded in asserting their rights and many now aspire to middle income status. The struggle is now for all employed people to struggle in a world where the top 1% seem to be capturing the economies. They also have a mission to improve the lot of those outside of work.

For the Labour Party, this means that their traditional block of supporters seeks different outlets – Scottish Nationalist or UKIP, Green or even Conservative – where aspirations stretch from pure economic to the type of society for our children. Labour has to change to reflect aspiration – not just Tory-light (which Blairism was too close to) but something motivational. Ed Miliband talked about One Nation (a Victorian memory) that David Cameron repeated in his victory speech. This needs to be taken forward to the 21st Century and maybe Labour needs to reach out not go back into itself.

In the past, this was spoken of as a “realignment of left wing politics” but it needs a new 21st Century definition. Liberal thought as Clegg made so clear in 2013 and briefly referred to on 8th May, 2105, could be what drags the Labour Party kicking and screaming into a new mission for this century.

“The values of the open society – social mobility; political pluralism; civil liberties; democracy; internationalism” allied to safeguarding the poor and those who find it difficult to gain traction in that society, providing opportunity for all, motivating all to achieve both economic benefits and quality of life – these could be the new liberal values of Labour – and Liberals. Maybe the realignment is overdue – but, not just with left-ish ideals from the 1930’s, but liberal ideals for the 2020’s.

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Trickle-down Economics – Cameron’s legacy?

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This was originally posted in 2013 just after the death of Margaret Thatcher. Now that the Conservatives have amassed a majority at the General Election, I am re-publishing as the message holds even firmer today.

“In our system, everything is done according to a pyramid approach: the order is given from the top and carried out at the base.”

No, this was not Margaret Thatcher but Jiangwen Qu – professor at Kumming’s Centre for Asian Studies, talking about China. (Taken from China’s Silent Army, Juan Pablo Cardenal and Heriberto Araujo).

He went on to say: “We believe that other countries should follow this model, because if you let everybody give their opinion it is difficult to make decisions.”

Yet, it demonstrates how in our so-called democracy, the top-down theory of decision-making was so faulty. Margaret Thatcher won three general elections because the Labour Party was split between the left-wing (originally led by Michael Foot) and the right, which broke away to form the Social Democrats. In the UK’s ridiculous “first-past-the-post” election system, a party needs only 35-40% of the vote for a substantial majority – that was Margaret Thatcher’s luck. This luck had already been seen in her victory over Edward Heath in the leadership contest in 1975 – although it has to be said that she took full advantage of that luck.

Margaret Thatcher always said that she believed in democracy but made great fortune from its deficiencies. Apart from a rigged election system that gives minor parties full majorities, she did not practice democracy in terms of decision-making. Her cabinet (where the Prime Minister is supposed to be prima inter pares – first amongst peers) was where “the order is given from the top and carried out at the base”. This was her style from the time she became Prime Minister to the time she was thrown out by those who had the substance to rebel after 13 years of her idiosyncratic style of democratic rule.

Leadership and Democracy

Within a system such as ours, Margaret Thatcher did not split the country – her support was far less than half the country (usually than 40% of the voting population) and even those that voted for were split between various streams of the Tory party. She fragmented it. Her supporters in 2013 would mainly be found in UKIP today although she would have still used the Tory Party as it is the only vehicle for power. The split was far worse as it demonstrated that rule of a democratic party would be by just the largest minority and with extreme policies.

Those policies did change the economic landscape that had been moving to rigid control by sclerotic centrist organisations such as Trades unions, Public Sector, old-style corporations and successive governments that had no vision for society.

Thatcher destroyed the comfiness of society in her own terms and put in its place more top-down doctrines around monetarism. Because liberalism had floundered after the first World War, centrist forms such as socialism and corporatism were, it seemed, all that there was left. Even the linking of Liberals and Social Democrats in he 1980’s was to prove a failure of liberalism as the Liberal Party moved towards a centrist European ideal and away from the localism and bias away from the centre that had characterized the party from its inception.

Strong leadership takes advantage of democracy in the UK (and still does) and the trade-off between the two is a constant battle. Where no leadership exists (and this is a story of today) then democracy does not replace it until some form of leadership appears. In the UK, we still have sclerotic centrist organisations that support the status quo and no vision or leadership for the 21st Century that would inspire the change that wealthier and better-educated citizens would aspire to.

The Centre going Forward

There is a massive danger that the completely centrist and statist system operating in China (as quoted in the first paragraph above) will, because of China’s growth and rapid ascendance, come to dominate political thinking the world over. Liberal Democracy is already wilting in western Europe as major decision-making is made by the unelected (in Brussels and for some time in Italy) with nations such as Portugal, Spain, Cyprus and Ireland ruled from the centre (read Germany). This is far away from localism and screams about the loss of Liberalism. The now-disgraced and jailed Chris Huhne remains a fan of the EU and the Euro – not a surprise that his background is social democracy not liberalism.

The 20th Century was a battleground between the forces of darkness epitomized by extreme Nationalism, Communism and Fascism on one hand and the forces of democracy on the other. Millions lost their lives and millions more suffered in gulags and concentration camps for democracy and the end of extremism.

The 21st Century battleground is more complex as the war between the different political forces of centrist and localism is splintered by the battles for resources and markets (and by the impending battle for climate and conservation) and between north and south and rich and poor and corruptors and corrupted.

Thatcherism knew only Hayek-style liberalism – an understandable reaction against socialism and the fear that fascism was created around that fear. In its place, The Road to Serfdom (Hayek’s best known work and Thatcher’s quasi-bible) postured a place for Government in monetarism and information provision – working to ensure that the market could work through transparent pricing. This was its limit and disregarded the essence of society (although Thatcher did not assert that society did not exist, she might as well) as did Hayek in his complete opposition to anything that wreaked of socialism – even social democracy was something that Hayek viewed as naturally leading to totalitarianism.

The problems that Hayek missed and that Thatcher and Reagan made possible (and that China is already risking) is that while socialism runs everything from the centre, the opposite camp of economic liberalism naturally tends towards a small minority at the top owning all the assets and all the decision-making apparatus. It is clear from the history of the last 30 years that the rich are getting richer while the poor get poorer (in terms of direct wealth and the supporting services offered to them) and that the dynamism needed in society from the other sectors is dying. Margaret Thatcher notoriously believed that there would be a trickle-down effect. That was nonsense and that is now proved.

Worse, a market-led economy which is based around numbers only (with GDP growth as the religion) leads to huge societal dislocations. The NHS is a valid case where management by statistics leads to deaths and the complete abandonment of human character – as evidenced by the maltreatment of the elderly. The opposite system (as in the USA) based on insurance only leads to only the wealthy having good medical services.

Worse, the motivation by quantity alone means that quality of life is abandoned in the drive for more goods. This is the market at work when left to its own devices. The market is driven by the simplest routes to success – numbers. We cannot be solely market-driven even if the market is the best form of driving entrepreneurialism.

People-centricity not Centrism or top-down

Society has experimented with many forms of government and economics. On the latter, we have a general agreement that market-led economics works best, but it is market-led not liberal or libertarian markets. Market-led means that other decision-making mechanisms are relevant wherever the market tends to extremism – such as domination of the market by monopolies or when the rich 1% control all the assets.

In the West, we believe that democracy works best because we all have a stake and are all equal under the law. Huge, developing countries like India and Brazil have similar philosophies but are riven by corruption. China is a centrist “civilization state” which directs from the core and will, at some stage, erupt into democracy. Russia is a centrist state by tradition and a mafia-dominated chaos.

Where we believe in equality under the law, we have to strike balances which Hayek / Thatcher / Reagan economics cannot achieve. This balance has to ensure that the drive is towards the individual but that society steps in to take out excesses. The balance is developed by society – with civil society and civil society organisations strengthened against the powers of the centre wherever they are.

This is far away from a socialist state where assets are owned and / or controlled from the centre and where equalization is the norm. Balance (whatever it is called) rewards entrepreneurship but would not award bankers or managers in the same way. It would not have made the reduction to 45% in the top income tax rate in the UK – whether or not this had been financially sensible in the short-term – as it shows a total disregard to society and the motivation of the great majority of its citizens that are struggling to prosper.

People-centricity and a focus on society using the best of the market and democracy but using brain power and ingenuity as well as technology represent the 21st Century as we struggle against top-down, centrism, climate change, resource degradation and inequality.

It is not what Margaret Thatcher intended as it requires not just the whip but also the driving force of human capability in all areas of society to see beyond the numbers or the desire to control from the top. It is leadership by motivation and inspiration.

With the death of Margaret Thatcher, let’s lay to rest trickle-down economics along with socialism and fascism.

When Bush Senior said “it’s the economy, stupid”, society was shelved.

Let’s talk society not just economics. Human brain power not numbers. Ingenuity not GDP. Well-being not hospital stats. Quality not quantity. Society not just economics. Real leadership, motivation and inspiration.

Trickle

“Farewell, fair cruelty” – The Age of anti-welfare

The “Safety Net”

Ian Duncan-Smith has introduced a new system of welfare payments in the UK that seeks to better link payments to the sick, disabled and those out of work to their ability to find work and get paid for work. His (and his government’s stance) is that since the introduction of welfare payments (brought in by the post-WWII Labour government following the Beveridge Report in 1942), the world has changed and welfare has become a “right”  that needs to be changed.

Churchill had previously voiced his view that a safety net be provided to all those in society who fell on hard times. In 2006, Greg Clark  (now Financial Secretary to the Treasury) urged the Tories not to be caught up in Churchillian rhetoric as: “The traditional Conservative vision of welfare as a safety net encompasses another outdated Tory nostrum – that poverty is absolute, not relative. Churchill’s safety net is at the bottom: holding people at subsistence level, just above the abyss of hunger and homelessness.”

Mr Duncan-Smith, according to Peter Oborn, writing in the Daily Telegraph “is animated by a profoundly Christian vision of free will, redemption, and what it means to be human in a fallen and imperfect world.” It is this vision that hearkens back to Churchill and pushes this coalition government in the direction of the 19th Century.

Individual vs. State

The balance in any modern, developed State is to balance the interests of individuals and State (and also at least think through the requirements and abilities of the third sector / civil society). While, as Oborn writes, Margaret Thatcher ignored the welfare system and the NHS by refusing to substantively alter them, and while Blair and most obviously Brown made them more a political football, Duncan-Smith has taken a view that individuals must be given the incentive to work and stand on their feet.

This fits well in a society still in a state of shock following the banking crisis of 2007/8 and where our sovereign debt position is a massive risk for our future.

It fits with Tory doctrine of the 19th Century (although not with the post-WWII consensus that MacMillan and succeeding Tories espoused).

It fits partially with the Liberals (although not necessarily the Social Democrat wing in the Liberal Democrats) in that the balance between individuals and the State should always veer toward the former – although Liberals will usually point to freedoms and open society issues rather than the “incentives” that Duncan-Smith talks about.

Welfare Stands Alone

The problem is that while it is possible that Duncan-Smith has a mission and feels genuinely that welfare needs to be changed, the world is not just about welfare. It is also about economics and opportunity. Attempting to change welfare benefits (which will naturally come down hardest on the weakest sections of society) without successfully managing up the fortunes of the wider economy and critical areas such as education (a crucial force for change and a massive “enabler” in ensuring people have the skills and capabilities that allow them to stand on their feet) cannot work.

Even Samuel Smiles (the 19th Century author of Self-Help) said: “I would not have any one here think that, because I have mentioned individuals who have raised themselves by self-education from poverty to social eminence, and even wealth, these are the chief marks to be aimed at. That would be a great fallacy. Knowledge is of itself one of the highest enjoyments. The ignorant man passes through the world dead to all pleasures, save those of the senses… Every human being has a great mission to perform, noble faculties to cultivate, a vast destiny to accomplish. He should have the means of education, and of exerting freely all the powers of his godlike nature.” (my underlining).

Government is split into different areas of control and it is a real dilemma. If David Cameron really wishes to go back to the 19th Century and bring in welfare reforms that attempt to force people to work or lose benefits, then the same Government has, at least, to generate the capabilities that will allow them to do so.

This means that George Osborne and his Ministers have to attack our substantial problems of growth (or the lack of it) while we seem to be entering a Japanese-style lost decade.

This means that Michael Gove (himself on a mission) has to ensure that those areas of greatest need in education (which are the areas most adversely impacted by Duncan-Smith’s welfare reforms) receive the resources (investment and brainpower) that they need. This could, for example, mean forcing top quality schools (from private and public sectors) to link up with worst performing schools in the country much as Lord Adonis tried to do voluntarily as he describes in his recent book “Education, Education, Education: Reforming England’s Schools”.

Of course, this means jointly pursuing policies as a Government rather than addressing individual issues one at a time because individual Ministers want to make a name for themselves.

Of course, this is the job of a Prime Minister (and in a Coalition, the Deputy Prime Minister) to see that the key decisions of each Ministry complement each other. They have failed to see how disjointed it all is and failed to understand the changes that have been put in place since the 19th Century that repels the drive to go back in time.

Back to the Poor Laws

There is a real danger that the failure to articulate a vision by our politicians, allied to an economic position that is perilous is leading the UK (or at least England) back to the Poor laws as articulated in 1834. This was the age of the workhouse as described so well by Charles Dickens. The 19th Century zeal, which Duncan-Smith is bringing to bear, is allied to monetarism and austerity together with an education philosophy which focuses on individual schools (Academies) without much understanding of how to best ensure the worst ones thrive.

This means that a “perfect storm” is likely to erupt: an economy of austerity, a goodbye to welfare and a lack of educational opportunity where it is needed. This may be seen in the future as a Government that forgot the riots of 2011 much like the riots against the Poor Laws in the 1830’s.

Modern times deserve modern remedies and better leadership

The challenge for any Government in a post-2007 world is to sufficiently understand the role it places in providing the underpinning for a thriving society. This is not the old Tory rule from the top – where the top 3% get the resources and everyone hopes for a trickle down effect. The class system in the UK – no longer just three – may have been dispersed but the political class may not have yet picked up on their duties.

Whether or not many welfare recipients have pro-actively taken themselves out of the work markets and work ethics, Government’s job is to enable them to come back into the market. This means motivating and educating at the same time as gradually changing the rewards structure.

Tell a workforce that they are pathetic and they will become so. Tell people that they are work-shy scroungers and they will not co-operate. Cameron and Osborne (and Gove) understand little about leadership. They want to show leadership by forcing issues not by motivation (or nudging – I understand they read that book – shame they never read any on good leadership) in the same way that the Upper Classes ruled in the 19th Century.

Modern times need a government that motivates and has a vision that is constant throughout – not a bunch of managers with no sense of leadership.

This should mean that rhetoric changes to encouragement not estrangement in a way that Miliband’s desire for “One Nation” (Disraeli) is meant to work. Within that rhetoric (maybe the start of some vision), the economic policies of sustainable growth have to be applied not just hope that austerity will somehow work and shift us to private economy growth; within that rhetoric, an education system that drives the worst schools to function along with the connectivity with local people (including parents); within that rhetoric, a welfare system that rewards such involvement in the community – not just salaried work.

The latter means that people should be able in a modern society to be able to work in a variety of areas – within civil society – rather than for a pittance in a salaried job. This also means spending time with kids where the worst performing schools are victims of poverty and estrangement of parents and local leadership.

This is joined up Government where each part of government takes fully into account what is happening in other sectors of society. It is not what we have now.

Farewell, fair cruelty was said by Viola in Twelfth Night – Viola was trying it on – a woman pretending to be a man.

Duncan-Smith is worried about welfare beneficiaries who shouldn’t be getting welfare – people who are not what they say they are.

This government is pretending to be showing leadership – it isn’t. It is merely repeating the mistakes of their forebears from 200 years ago.

Farewell welfare, indeed. We run the risk of becoming an anti-welfare society that alienates huge sections of it while the rest of government stands aside. Time for some vision and leadership and for this government to understand the impact one part has on another – Duncan-Smith needs Osborne and Gove to help him succeed.  Malvolio’s experiences in Twelfth Night may also be educational for Ian Duncan-Smith – he was also a man more sinned against than sinning.

Easter and Eostre, Germanic goddess

In the Christian tradition, it is Easter – named after Eostre, the Germanic Goddess of Fertility and Spring. It is that time of year, when we look for growth all around us. Yet, more prosaically, mention growth to most and we talk about recession and how ironically the current German goddess (Chancellor Merkel) is not so keen on helping those in need around the periphery of Europe.  She wants them to help themselves.

Growing Pains

Michael Heseltine, Cabinet Minister under Margaret Thatcher, who recently provided a report to the UK Government on the regeneration of English cities that David Cameron and George Osborne have welcomed , told The Independent newspaper on Saturday, March 30, 2013 that: “the richer you get the less imperative there is” for people “to drive themselves”.”

BBC Radio 4 followed this up with a debate on Saturday’s Today programme between Mariana Mazzucato (an economist) and Terry Greenham (from New Economics Forum – NEF). Terry ended by calling for more quality rather than quantity in how we measure “growth” – that GDP as a measure was flawed.

Our Affluent Society

Back in May, 2012, I posted “The Affluent Society and Social Balance” which looked back at the writings of John Kenneth Galbraith (author of The Affluent Society) and wrote about how mindsets had not changed since he wrote the first edition in 1958. Quantity was still valued over quality – economics was still all about more things, not more quality of life despite our (developed world) ability to acquire so much stuff.

I spelt out four areas for concern as developed nations seek to address further “growth” requirements. They were characterized as follows:

Forty years ago, five, major elements were missing from or only sidelines in Galbraith’s analysis – issues which have become more central over time and which complicate the prescription that Galbraith proposed: They are repeated below:

1. Globalisation

2. The errors in GDP accounting – quantity vs quality

3. The Environment – valuing quality

4. Civil Society – ending the private vs public sector spat

5. Social Balance

1. Global Trading

The world is a different one from 1958 or even 1973. We trade globally and the developed nations increasingly use labour from the undeveloped nations to do low-cost, manual work (often in conditions we would not tolerate in our own countries). It is a 19th Century state of work but internationalised– where now, international companies tend to operate as the mill owners of old.

From a micro-economic sense that is understandable – each company is different and many act responsibly. However, from a macro-economic viewpoint and from an international political viewpoint, there are limited mechanics for equalizing health and safety laws let alone education and pay scales.

Galbraith’s concern was that we produced too much and that we should be able to make less in a country like the USA. When the work goes international, the responses to the problem have to as well.

2. Production by numbers: quantity versus quality

In an affluent society, production is made the cornerstone of all we do (the economy is central to all our decisions) because work is needed to secure income. Even in an affluent society, income at a certain level is deemed to be critical. Products of progressively less use (or utility) are sold (often solely on the back of advertising) and we buy them and this is meant to keep us in work and more buying goes on.

Of course, in an international labour market, that won’t always work (as Gandhi found out in the early 20th Century when England produced most of the cotton garments sold in India) and it has become harder to focus just on one country.

However, the global economy does not mean that products become more useful – much of what we make is simply wasting energy and resources. However, it is keeping people in work in many developing nations.

But, growth is measured by GDP and GDP is a poor measure of quality of life or even production. Quality of education, for example, is measured in GDP by its cost (an input) not an output. A £500 handbag is deemed worth the same as £500 worth of essential foods – no difference in utility is assessed.

The felling of a rare tree is “valued” at the cost of felling or its price in the market as a table. The value of a river is missed completely – unless over-polluted when its clear-up costs may enter as a cost in a nation’s GDP.

It is production by numbers, quantity versus quality.

3. Environmental Balance

While mentioning the issue of environment, the main topic of “The Affluent Society” is the social balance between public goods and market production. All these are made by people – so, the environment in which we live is ignored. The trade-off is not, of course, that simple (even though the Galbraith trade-off has never been seen to function). The environmental trade-off (our need to maintain our natural capital) is now being understood but remains relatively hidden in economic debates. Natural capital needs to be brought into any debate on affluence in society – our quality of life as opposed to the quantity of life.

4. Civil Society

To Galbraith, the game is between the market and the public sector and to most, this battle still exists as the only one. There was not much mention of civil society – where most of us spend most of our time – except through discussion of leisure time. Here, the trade-off was between productive working and spare time. I expect that this assumes that all non-productive time is spent on hobbies or watching TV.

The creativity and value of civil society – a huge array of organisations from sports to international development, from charities to women’s institutes – is normally missed completely by economists and thinkers on society. The problem is that it does not fit easily into econometricians’ computer simulations: more of the “if you can’t count it, it doesn’t exist” syndrome.

Of course, for centuries, people have been undertaking “good deeds” – the history of the 19th Century is full of examples of charitable activities. However, society is changing fast and as politics loses its appeal for so many (with parties genuinely fearing for their future), the role of civil society is growing and, in affluent societies, taking back more from the state that it lost to the state in the 20th Century.

This escape from the centre is to be applauded, but needs to be better understood.

5. Social Balance

Complete reliance on the market or on the centre (libertarianism or communism) may still appeal to some. The reality is that complexity is the norm. Society is a mixture of competing ideas and competing structures – out of which we muddle through and where individuals take centre stage and form organisations to make their voice louder.

Nevertheless, we should learn from history and our mistakes. Centrism is a doctrine of the defeated; totalitarianism a doctrine of the damned. There is no one answer but a constant mix of opportunities that society provides and where changes are constant in the way we answer our problems.

The mix of competing answers does no longer rest between public and private sector in an affluent society – that is a 20th Century doctrine or response. The response now has to take into account the social balance we want from our lives between products, social value, natural capital and civil society relationships in a global context not a rigidly national one.

This means being adult about the causes of change and grown-up about the challenges – it means being international in approach and understanding the complexity of the problem – not something that can be understood wholly by quantities or computer simulations.

As we grow materially (i.e. through the quantity of products we are able to manufacture) and bump up against the troubles of environmental degradation and massive disparities of wealth and conditions (on a global scale), the question to be addressed is how does a complex society best form itself to take the decisions it needs to maximize the value we all give and receive from this “affluent society”.

So, should we Give up on Growth?

Terry Greenham of NEF would propose (as does NEF) that this is what we have to do. As the developing world strives towards economic well-being as described by growth of GDP (gross domestic product), the developed world should (in NEF terms) re-balance the lives of their people so that quality is maximized and quantity is stabilized.

Of course, all our measures and motivation focus on quantity. Homo sapiens have developed over 100,000 years to seek food and shelter and the more the better. However, following Maslow (Hierarchy of Need), humans aspire to more than just “stuff” and as we gain wealth, the majority want more that is not measured.

A salutary valediction from The Independent’s Michael McCarthy (Environment Editor) today after 15 years with the newspaper, showed a pessimism that the human race could wake up to the qualitative disaster that it was causing in its rush to quantitative growth. Governments have responded with nothing in this debate – transfixed as they are by the glamour of GDP statistics. Heseltine is the first senior Conservative in the UK to state the obvious – that being the fastest growing economy is not necessarily what we all want. GDP is, in reality, meaningless as it fails to measure value as outlined above. A tree is not worth the amount it costs to fell and transport; a river is not worth just the cost of keeping clean – they have value beyond this that is not within the bounds of GDP.

Businesses, operating in the micro-economy cannot be expected to make the change – they are set up to benefit their shareholders and adjust to cultural and legal pressures (usually with some degree of resistance).

It ends up with Government having to lead. In very few nations is there an understanding of the problems that faces us – the race to grow GDP. Most completely misunderstand what GDP measures (and that includes most economists – centred as they are on econometrics the simulation of economies that reflect the 19th Century reality not the 21st Century’s).

We need to establish measurement (if that is how we work best) of the Gross Domestic Value  –  GDV  –  where Value takes over from product (things).

In this way, CO2 in the atmosphere can be valued; that tree being felled can be valued; humans can better value their time given back to society.

We should not give up on growth, but growth of value not product or income (based on the wrongful simulation of salaries, costs and sale prices).

National Value or Gross Domestic Value should become the target – not how many products we have. The question is whether there is a drive and energy to establish an understanding of what really is important or whether (as economist Georgescu-Roegen said in the 1970’s)

“Perhaps the destiny of man is to have a short but fiery, exciting, and extravagant life rather than a long, uneventful, and vegetative existence. Let other species — the amoebas, for example — which have no spiritual ambitions inherit an earth still bathed in plenty of sunshine.”

Michael Heseltine is only partially right. There is a limit to the drive and push people have to continuously get more stuff – but, there is probably no limit to our drive for more value. Michael McCarthy is, maybe, too pessimistic – we can drive human growth through value not products – GDV not GDP.

 

Leveson – 2000 pages for the 19th Century

A couple of weeks ago, I posted:  Selling Off the Fourth Estate – which attempted to outline the momentous problems impacting the print media. These problems centre around the rapid growth of online media, blogs, Twitter and the rest which make for competition in our snap-shot age.

Along comes Leveson and ignores it all! Not just my blog – which as part of the online circus will never get his attention but the whole of the internet. As James Ball writes in the Guardian: quoting Leveson first,

“[T]he internet does not claim to operate by any particular ethical standards, still less high ones. Some have called it a ‘wild west’ but I would prefer to use the term ‘ethical vacuum’,” it reads. “[T]he internet does not claim to operate by express ethical standards, so that bloggers and others may, if they choose, act with impunity.”

The report then suggests there is a “qualitative difference” between seeing, for example, pictures posted online versus on the front page of a national newspaper, noting “people will not assume that what they read on the internet is trustworthy or that it carries any particular assurance or accuracy”.

So, Leveson seeks to wrap up the online media in statutory rope with Ofcom as the judge and jury while ignoring the fact that the print media is dying an agonising death already at the hands of the internet as he reacts (maybe over-reacts) to the public call for action.

Public reaction in the UK is understandably violent against the phone hacking and over-intrusiveness of the press in key cases such as the McCanns and Christopher Jefferies. The desire to tame the press is not new – it has been the case for centuries. But, the real harm has been done recently by the internet and the freedom to publish on it which has taken much of the business of publishing away from the printed media.

There are many articles written about the likely death of print media and anyone who talks to journalists will know that they now operate in a silo that is getting smaller and smaller. Leveson has missed the opportunity and the UK has missed the argument. Appointing a judge to rule on the press was undoubtedly going to lead to a legal framework rather than any new understanding of what investigative journalism is all about. Leveson is a lawyer and the legal profession (which also makes up so much of our leadership in the UK) does not have the ability to “judge” society’s ills. They make law and judge on whether the law has been broken – lawyers are real dangers when they try to set the standards or try to understand what ails society.

So, the mistake in appointing a lawyer / judge is now apparent. The print media’s death will merely be hastened if a statutory rope is tied around it. The Fourth Estate – the crucial monitor of our executive, legislature and legal processes (as well as of society) – will be hastened towards the unregulated and “wild west” of the internet. This is happening anyway as more of us publish on it and more decide to give up regular reading of newspapers and weeklies. Analysis is being eroded and headline journalism (just one click away) is gaining momentum.

Leveson is completely out of date on this and ignorance is not a virtue. While TV and radio have managed to compete (so far), it has also suffered. Many online visual and audio news facilities exist and the number of options grow daily. But, TV and radio are not highly analytical. Even in a one-hour documentary, they scratch the surface. The cost of TV remains high and the options to this are considerable.

This means that printed media and its funding remain important and its ability to compete with the internet is so important. Leveson (and the government that appointed them) have missed a key point.

What next? This Government has already stated (through Cameron and Hague) that they are less keen to enact the key Leveson requirements (a legally enforceable press act) than others. This is good even if it infuriates public feeling on this, while gaining support from  Liberty, PEN and many other press freedom groups. What remains a problem is the notion of “press barons” and the difficulty of too much power in the Fourth Estate being held by too few people or organisations.

This and an understanding of the way that the internet is re-shaping the press and how both influence decision-making (at all levels) are the key questions that the “press” has to face. The law as it stands in this country and our desire for the freedom of the press so that it can rail against hypocrisy and totalitarian doctrines of the centre are at the core of our society. The printed press should work to get its act together – the market it attempts to steal by printing lies and which has resulted in the demise of the News of the World and potential court cases against senior management in the industry is already turning against it and to the internet. Government should focus on the twin issues of print press centralism (too few owners) and funding of the printed press and the rise of onilne media.

The UK deserved better than a blinkered 2,000 page report by Leveson that, despite its huge page count, was prepared to spend one page on the internet – the main reason for the drive for circulation that has driven papers like NotW to scandal and illegality.

Left-right, left-right: Parties and cliff edges

In the UK, Members of Parliament go back to work after the summer recess. All the talk is about Cameron’s reshuffle and leadership issues: Cameron is accused of acting like a “mouse”; Clegg’s leadership is under threat from his own party; the two Ed’s of Labour (Miliband and Balls) are said to be continuously arguing and that the phrase “two Eds are better than one” may not be true in this case.

More seriously, as the post-summer issues are traditionally short-term nonsense, last week’s Prospect Magazine has Peter Kellner (President of the pollsters, youGuv) writing an intriguing article on how the Liberal Democrats’ support has collapsed since the last General Election  http://www.prospectmagazine.co.uk/magazine/death-by-coalition/. As a result of entering into coalition with the Conservatives, their support has gone from 24% to 10% – which would result in a fall from 57 to around 10-12 seats if an election were to be held today.

While much of Kellner’s response to the polling made good sense, one aspect of the questions his pollsters asked concerns me greatly. This aspect focuses on how much to the left or right the party is.

The concern is this: surely, this form of questioning is out of date in the realpolitik of 21st Century thinking and 21st Century politics. Surely, in an age of individualism and the lobbying by NGO’s and many one-issue organisations of one issue arguments, the left / right analogy is no longer relevant?

Is politics really about left vs right anymore?

The left and right of politics were named after where the French parties sat in the National Assembly in 1789 at the time of the revolution. In 1791, the Legislative Assembly had the “innovators” on the left, moderates in the middle and the defenders of the Constitution on the right. This became the dominant march of politics in the 20th Century. Different and violently opposed political doctrines literally fought it out on the battlefield throughout the 20th Century. Fascism and Nazi-ism on the right, Communism on the left were the extremes in the battlefields of China, Spain, Cambodia, Europe (in WWII) or wherever the post-feudal wars (those that we fought up to the end of the first world war) were fought. Innovation became muddled with socialism and communism; defenders of the constitution became muddled with economic rigour and libertarianism capitalism (never the manner of the “ancient regime”).

Right and left became doctrinal and, with the fight for the rights of labour against the owner class, the 20th Century adopted the political norm.

Is economics an argument of right and left?

Now that the 21st Century is into its twelfth year, the left / right argument appears completely out of date. Sure, there are arguments about economics that will be with us forever: from libertarian, tea party protagonists all the way to Keynesian interventionists. But, because capitalism is now the standard economic and accepted model, the battle is not right vs left in economics but which form of economic model around the capitalist norm. Arguments are much less severe in developed nations and turn on moderate changes in taxation.

Much bigger issues, such as ending tax havens, transfer pricing, corporate power, corporate governance, the role of banks, corruption and many other crucial issues are stymied as politicians argue over the short-term vote catching issues – 1p or 1c on income tax, for instance.

Is the way we are governed right vs left?

Communism or socialism now only survives on the periphery. China is not a communist state – its economics are capitalist within a statist structure and the party ensures a legalist control (it is above the law). This is not communism. Russia is now a centrally controlled capitalist enterprise (run as a large corporate machine). The rest of the world operates in a democratic to quasi-democratic state. Hereditary monarchy is now mainly for the tourists and the press (celebrities within a celebrity culture).

There is little traditional right vs left in government.

Is the environment a subject for right vs left?

Here, confusion reigns. Traditional right-wingers in the UK (from a Tory mould) can be classed as conservative when it comes to the environment. They often oppose untrammelled modernity and defend the right to conserve (as “Conservatives”). Yet, they oppose green movements because they associate them with restrictions on economic growth. Roger Scruton in “how to Think Seriously About the Planet – the case for an environmental conservativism” http://www.amazon.co.uk/Think-Seriously-About-Planet-ebook/dp/B00829L62C/ref=sr_1_1?ie=UTF8&qid=1346585639&sr=8-1 puts the case for the right to take back control of the agenda.

The affects of CO2 are now disputed only at the periphery but the case for changing our ways is not agreed. This is now much more about individual nations wanting their own freedom and more about the problem of worldwide agreements – not a right vs left issue at all.

Does politics need right vs left?

Less and less people vote in general elections. Maybe the reason is that the left vs right arguments that drew people’s interest and motivation are no longer prevalent. The motivation to vote for broad platforms which mainly focus on short-term issues designed to entrap voters based on their short-term economic concerns is weak. Tradition still subjects most voters to choose their party and most political parties focus on swing votes – the 2% that Romney and Obama will work to win over in the USA, for example. The 2% that means that 98% are virtually disenfranchised!

The traditional view of politics is one where political parties are formed to organize themselves so that they can attract votes from the individuals who are not organized. This is changing.

Individuals have always formed into non-political party groupings – from trades unions to employer associations, from charities to NGO’s. Many of these groups are single-issue campaigning groups or lobbyists that work hard to influence political opinion and political parties directly and via the media. These range from economic groups to environmental, from governance to charitable, health to education – the spectrum is vast.

This third sector (usually a reference to charities, but comprising all citizen action groups, from sports clubs onwards) is not primarily left of right, but single focus – taking up an issue or cause around some issues. Their influence on government is substantial. Most Government Bills are developed as a result of significant lobbying from single-issue groups. For example, the Bribery Act came into being as a direct result of such lobbying and formal meetings between Government and a diverse range of lobby groups from CBI to NGO’s.

This means that the ancient Greek form of democracy – where every individual is supposed to have an equal say in Government – which was never the norm in most democracies as political parties formed – is now fractured into more layers. Government now relies on the lobbyists and reacts more to them than the community or study groups assembled from the general populace prior to elections.

This means that the left and right of politics (already under strain anyway) are meaningless. Single-issue groups lobby on single issues and political parties, no longer fighting on the issues of left vs right, sway as they are buffeted by those who are able to articulate the issues and now the means to communicate effectively. This means that the individual voter is now even more disenfranchised as it is only a small fraction of the population that is engaged in this process – and that, even at elections, the driving force behind vote-catching is bound to short-term or lobby focused.

A new politics?

In an era of globalization and instant communications, individual nations are less able to maintain an individualist position. Nevertheless, as the Olympics and Paralympics have shown in the UK, national pride remains important and is a reason why the Eurozone crisis will endure much longer than hoped.

However, within this national pride, it is likely to be an era when individualism is also crucial. The mass movements of left vs right are no longer relevant and single issues are much stronger in motivating and exciting.

If there is any truth in this then it is interesting to note the preamble to the Liberal Democrats Federal Constitution:

“The Liberal Democrats exist to build and safeguard a fair, free and open society, in which we seek to balance the fundamental values of liberty, equality and community, and in which no-one shall be enslaved by poverty, ignorance or conformity. We champion the freedom, dignity and well-being of individuals, we acknowledge and respect their right to freedom of conscience and their right to develop their talents to the full. We aim to disperse power, to foster diversity and to nurture creativity. We believe that the role of the state is to enable all citizens to attain these ideals, to contribute fully to their communities and to take part in the decisions which affect their lives.”

In the nonsense over cabinet reshuffles and personalities, it is probably the case that very few even know where to look for the above statement http://www.libdems.org.uk/who_we_are.aspx  – (which is found on the Liberal Democrat website after its coalition agreement – which is all short-term).

Yet, it could be the clarion call for our age – a liberal theme that is far more “of our age” than the 20th Century arguments of right or left.

If right vs left is truly out of date, then open society, balancing liberty, equality and community, individualism cherished, developing talents, creativity and the rest within a coherent community is a proper and enticing call that should be further developed. Apart from a better focus on the environment (our natural capital) which demands more from us, the preamble is not right or left – it is also not middle ground but moves the argument away from traditional left vs right.

Citizens of the 21st Century world maybe deserve something more from our governing elites that have not moved from their 19th Century models.  How we balance our competing single issues and how citizens get to have their say in the crucial issues that determine how we spend our lives is what 21st Century politics should be about. Maybe parties like the Liberal Democrats should think of the themes that will dominate thinking in the 21st Century. Maybe that is a way to get some common ground with citizens – the voters.

Do we care? Ethics in the 21st Century.

To corrupt: cause to act dishonestly in return for money or personal gain

(Oxford Dictionary)

 

Dishonest: behaving or prone to behave in an untrustworthy, deceitful, or insincere way

(Oxford Dictionary)

It should not be too hard for the world of politics, economics and our society to focus at least occasionally on the ethical foundations on which we have to operate to survive. In order to live with each other and prosper together, there are written and unwritten laws which lead us to reduce dishonesty to a minimum and rid ourselves of corruption.

Society as a concept is one in which all participants should have respect for each other even if we disagree with each other’s beliefs.

The central core of society is that we should not be dishonest or act dishonestly.

Underlying the way society works is the split between the various sections of that society – and, in a well ordered state, the division and co-operation between legislature, executive and judiciary (as marked out in the USA, and less clearly in the UK). Making law, executing the law and ruling on the law are fundamental to any just society – but, the debate (that we hear and see through all the media) is about the mechanisms that rule society more than the ethical under-pinning.

In the UK and the USA (and many other nations), the law (its formation, its implementation and the rulings on it) seems to be the pervasive elements that dominate everything we do.

The debate is constant – no government feels it has done anything without changes in the law on a constant scale. The legal apparatus has overtaken so much of what we do and think. Even though the number of lawyers in parliaments may have diminished in many countries (viz statistics from Dawn Oliver and Gavin Drewry, The Law and Parliament, 1998) the debates in legislatures (which formulate laws, of course) are based on the premise that a range of laws exist and need to be tampered with regularly.

In the UK the situation is made worse by the fact that the Executive (those whose remit is to implement the laws) are also part of the legislature – where they are seen by the public most often.

Ethics in the Centre

Tinkering with laws – whether social issues or economic – represents the norm in many societies where the rule of law has been in place for some time and where the division between the three branches of the system operate. Of course, elsewhere, the attempt is made to copy the tenets of those countries’ already established procedures. This is basic and proper in many cases if it correctly enshrines the ethical basis of a society.

Recently, the new country of South Sudan was formed after many years of extreme strife (and continuing strife with Sudan). South Sudan has recently formulated laws that attempt to take into account the subtle (and sometimes not so subtle) divisions in society between regions, tribes and religions but the society is based on a legal system and laws. The ethical basis of that society in its various legal charters is subsumed within the economic struggle to survive – which is leading to grotesque corruption.

In the same way, many other nations are set up with detailed legal systems (as was the U.S.S.R. under Stalin – which did not stop millions being executed and many more sent to the gulags) but where the law is not enacted as the ethical underpinning does not exist.

It is not just a legal system, which has to underpin society – it is an ethical stance that is the grounding for that legal system and for society in general that has to be formed and around which society has to operate. People do not stop killing each other because of the law except where terror rules (although many in parliament believe that is the only thing that stops us) but because an ethical process and system exist within which cultural norms apply.

Ethics – the moral principles which guide our behaviour may well change over time and geographically. A continuing debate about our ethical grounding is key and often lost in the debate over which tax is being increased or reduced. Often laws overtake the ethical consideration; often economic decisions (many short-term) discard ethical consideration; often politicians have no ethical stance or forget it.

Forgetting ethics

Recently, many examples come to mind (some minor, some major), which highlight a forgotten set of ethics. Here are some but I bet we can all see many more every day:

Example 1: George Osborne slaps a limit on tax deductions by the wealthy when making charitable donations – a tax decision, an economic decision but completely bereft of any apparent ethical standards.

Example 2: the death of Neil Hayward in China highlights the completely different ethical basis on which Chinese politics rests. The hushing up of the death because Bo Xilai’s wife may have been involved is reminiscent of 18th Century ethics in the UK. How do we deal with this? One way is proposed by Martin Davidson, the CEO of the British Council – see: http://blog.britishcouncil.org/2012/04/we-must-engage-with-china-through-culture/

who proposes continuous normalization of relations.

Example 3: Transparency International produces its annual corruption perceptions index. Corruption (see above) is a key indicator of ethics (or lack of) in a society. The index is seen by many yet is not generally held to be a decisive indicator of action by those in power – to whom practical issues like exports are far more important.

Example 4: the death of Sergei Magnitsky in a Russian jail (as highlighted by Bill Browder – a hedge fund owner for whom Magnitsky worked) while investigations were under way over corruption making Browder appear to be guilty of fraud shows a manipulation of the legal system and power in Russia and an ethical framework, which is defunct.

Example 5: care homes in the UK are filmed by the BBC showing mistreatment of patients.

Example 6: reports show elderly patients in hospitals in the UK are malnourished and allowed to die as efficiency statistics become more important than patient care.

We can multiply these examples by millions…….

So What?

Society in the 21st Century moves on. Developed countries are saturated with products so that economic discussion is more about the next iPad or its equivalent. Elsewhere, the production processes are ramped up to meet the rising demands of increasingly developing nations such as China, Brazil, India and, maybe, Africa. Worldwide, short-term economic issues are central to all decision-making.

Other issues are sidelined in the pursuit of short-term economic growth. Externalities (like resource depletion) are sidelined and economic growth, the measure of success, is the politician’s mantra.

So, society becomes focused on a prospective nightmare. We may well now be at a critical point in the world’s history – a point where economics by numbers cannot be the central objective of mankind, where a resurrection of ethical considerations should begin – not just in universities but also throughout all we do. The basic tenet of how we live has to be that we weigh whatever we do against crucial ethical norms.

So what? Well, it becomes essential that our politics, our economics, our legal systems, our strategic decision-making and the way we operate in the world be ethically based. In the 19th Century and before, the ethical basis was religious and formed the backdrop to Empire-building; in the 20th Century, economics and totalitarianism were the backdrops to communism and fascism as human ethics disappeared down the throat of centrist power building.

Today, economic short-termism and a blindness and inability to act on what is right provides societies worldwide with real risks. It is not just climate change that can impact our society in the future (although it will in ways we don’t yet fully comprehend). Just as great is the risk that we have developed simply into short-term, economic robots, where real society-driven ethics are lost.

As John Kenneth Galbraith wrote in “The Affluent Society” in 1958:

“To furnish a barren room is one thing. To continue to crowd in furniture until the foundation buckles is quite another. To have failed to solve the problem of producing goods would have been to continue man in his oldest and most grievous misfortune. But to fail to see that we have solved it and to fail to proceed thence to the next task would be fully as tragic.”

The next task is the re-establishment after hundreds of years of conflict over land and resources of a global set of ethics which should form the bedrock of our societies: an ethics system that swings us away from the corruption-centred economic system so prevalent that we can think that reducing charity income is some sort of solution, that the elderly are a burden, that special needs are wasteful of resources, that we support unethical regimes in order for Formula One racing to continue.

We show every day that we have limited ethical bedrock and that decisions and actions are undertaken in its absence – not after real consideration. Listen to David Cameron on F1 in Bahrain?

“It’s important that peaceful protests are allowed to go ahead. Bahrain is not Syria, there is a process of reform under way and this government backs that reform and wants to help promote that reform,” Mr Cameron said.

We run the risk of self-corruption.

So what?

Under-valuing Civil Society – Wherever the Market and Government don’t work

What, in the 21st Century, is it the role of charity?  Where does civil society (the real society) fit in a world dominated by the market and the state?

Recently I became Chief Executive of Willow Foundation (www.willowfoundation.org.uk) – a Charity in the UK that works to help 16-40 year-olds who are suffering from life threatening illnesses. We do this by providing psychological and emotional benefits through the provision of “Special Days” – something exceptional that we organize and make work  for them and their close ones. Our research shows that this is important for all – whether in curative or palliative phases of their illness.

So, my question above is heartfelt as well as intellectual.

Well, the simple and well-known answer is that where the marketplace has no response to society’s need and today’s government (focused on financing an NHS as the biggest employer and where they are just getting round to looking after elderly patients with care) is not entrusted (or does not feel entrusted) with this task, then charities and civil society intervene. That response encompasses both interventions such as Willow employs all the way to campaigners for new rights (here and overseas).

Charities?

In 2010, Sir Stephen Bubb, CEO of ACEVO in his paper titled: “Rediscovering Charity: Defining our role within the State” focused on the role of charities from their origins to the present day through their varying links to Government.  Whether funded by government (the state) or philanthropists, the link with the state was crucial from early times when the state was there just to extract taxes and fight wars to now (when it seems to be much of the same!) where the state sets the minimum standards of involvement.

The state also sets the laws under which charities operate (partly to defend its citizens from rogue elements) and pays a considerable amount of its taxation to charities. My recent blog on this: Do we value the Charity Sector? (https://jeffkaye.wordpress.com/2012/04/01/do-we-value-the-charitable-sector/)

was a statement of concern that the state completely fails to lay out the economic benefits and costs of the sector.

But, it is not only in regard to the state (or government) that charities must be seen. Charities exist in the 21st Century in the USA, UK and other, wealthier countries because neither government nor the “market” meets all our needs – even if they are better met than five hundred years ago. The “Third Sector” exists where the main economic system actors fail and where the need is financeable and / or manageable by volunteers and / or better managed by this sector.

Charities (or civil society organisations) range very widely. With newer forms of company (like social enterprises, community interest companies), the blurring is intensified, but the relationship of many forms of non-government, non-traditional market organisations are continuously reforming and developing.

Also changing is the gap that is to be filled as a result of government and / or the marketplace “failure”.

Maslow described in 1934 our “hierarchy of needs” which changes as we become wealthier. From charities operating to provide food and shelter (critical in much of Africa now and the UK in the 19th Century and before), as economies grow, the gaps become different. As income grows, the market may wake up to provide the need; government raises taxation and develops new ways to disburse that income where voters shout for that need to be filled.

Charities and the economy

In 2010, Charities had an income of £36.7 billion – about the same size as Aviva’s revenue – the UK’s biggest insurance company. The UK economy’s GDP in 2011 was around £1.5 trillion – so, the Charity sector is about 2.5% of the UK’s GDP as measured in simple economic terms (comparing income to GDP).

Financially, the raw economic facts do not speak for themselves. Economic statistics are based on what is measured and it is assumed that £1 is £1 is £1. Measurement in our economy is flawed – real value is mistaken, of course, when our decisions are made almost entirely on the basis of cost data.

The impact of the charity sector, then, is much greater than the raw data. This is reflected in the media and elsewhere but because the third sector is not so easily measureable – charities don’t have financial bottom lines – it is too easy to ignore it or treat it like a small child to be patted on the head when it does well and scolded if it doesn’t.

How important is the Third sector / civil society?

If it is not practical to value civil society or that piece of society that is not government or the market (although it interfaces with both), then how can the real value of this sector be valued? If we are now working to value our natural resources, the value of the charity sector (or whatever we call it) has to be made so that decisions are not taken purely on the basis of costs.

The stupid action of the Treasury in proposing to set an upper limit of £50,000 or 25% of income for tax deductions on charitable donations is so crass as to be almost unbelievable! It is the sign (if we needed it) that valuation is not the issue. Apart from the fact that the Treasury cannot even provide decent examples of the complex schemes that they are trying to hit (sledge hammers cracking nuts), it completely under-values the Charity giving sector and the value that is created from these donations.

This is happening throughout our austerity-driven society. In the same way that pollution effects of manufacturing in the 19th and 20th Centuries (from pesticides to greenhouse gasses) were not properly valued (and are still not properly), so charity is completely undervalued by those responsible for taking decisions that have enormous and adverse impacts.

The value created by a volunteer does not show up in statistics. The value created by pro-bono help from companies and lawyers and school governors and countless others is not shown. The reduced cost of staff in the sector compared to other sectors (notwithstanding the argument about managerialism which is another important subject) is shown as much lower and demands far lower “income” to fund it. Discounts from companies, gifts in kind – all appear to reduce the economic benefit of the sector because they show up as lower costs. But, they provide huge value, which is seriously under-reported. The Big Society is much bigger than the raw data shows.

Yet, decisions are still made based on 19th Century statistics and 19th Century economics.

If we value society as a mix between the market, government and the third sector – with individuals as the customers of all three – then we have to be much smarter and less lazy in understanding what real value comes to mean and much less lazy in using out of date models to make decisions.

The Charity (or third) sector / civil society has a huge and under-estimated impact on society – far greater than the 2.5% of GDP or its equivalent to other sectors of society – which (apart from various externalities) are better approximated by GDP statistics. It is not just the market and the state which makes up society – although we are brainwashed to believe it it.

In the past, before we became beholden to numbers as the only arbiter in society, charity was understood for the huge part it played. As we have become wealthier, rightly government and the market have taken positions, which in the past were covered by charities. Charities and civil society in its widest sense have moved into new areas as the demand became clear. Now, we need to understand the impact of the sector in macroeconomic terms (across the huge range of “charitable activities”) – not just its GDP – in order to properly make decisions.

Osborne’s recent numbskullery with the £50,000 limit has not done much to Cameron’s happiness index nor his leader’s desire to establish the Big Society, has it?