Antigonistically Speaking – the Permeability of Governance

In a world too confused by the economic rise of China to question whether democracy will ultimately produce the best results for humankind; in a world where fighting between Sunni and Shia, between secular and religious, between Dinga and Machar dominates the news as much as Catholic and Protestant did in the UK not that long ago; in a world where the after-effects of the Arab Spring result in a literal chaos; in a world where street demonstrations in Turkey, Brazil, Thailand and elsewhere have threatened the rule of “law” – we need to question how our political institutions work and whether they are robust and durable enough to withstand the constant pressure that we put them under. In a “global” environment, in the so-called “west”, we should also question what political systems we are operating under – as we fit perilously into local, national, regional and global systems.

Around 441BC, Sophocles wrote Antigone http://en.wikipedia.org/wiki/Antigone -a Greek tragedy that, as a school kid, I could immediately appreciate – not through the tragic figure of Creon but through Antigone herself. She dared to push against the tyrannical rule of a king at a time when no-one else, let alone a woman, would dare to do so and lost her life as a result. Opposing the law that Creon laid down was, in her view, proper if that law was wrong – if it was tyrannical. I liked that as a pupil in a school where teachers could appear to be on the wrong side of tyranny.

In nearly 2,500 years since Sophocles wrote Antigone, humans have learned and unlearned the story many times. Because we focus on economics so much (i.e. how we generate wealth) we seem no longer sure whether there are other questions that we should be asking. As 2014 gets under way, maybe we should be questioning what the world needs in order to be Antigonistic – being able to prod the rule of law when that law or the implementation of that law is wrong and to understand where it is impossible to do so.

This is not just an argument for democracy but for a system of government and implementation that is permeable – allowing for change. We also should be asking how we fit into the various levels of government – local, national, regional and global.

It is also worth looking at how we understand where the permeability does not exist at all and where gentle prodding is not likely to succeed – for it is there that fractures happen.

Permeability

It is the ability of our human systems to be permeable (in normal times) that enables them to evolve as our needs change. It means that old-fashioned notions can be changed and that structures which are worn-out can be thrown away. When permeability does not exist, then tyranny wins out.

The permeability of authority is applicable to any organization or structure: from corporate to national government and beyond. In the 21st Century, as communication systems and capabilities continue to rise, how such structures take in information and change is a critical factor for our social existence.

The change in governmental structures from strong individuals (appointed by the gods) through the tyrannies of dictators and various forms of democracy can be seen in their permeability to new thoughts and to absorb the thoughts of others.

God-given rights to rule (whether Charles I of England or Louis XIV of France) were thought of as indisputable in the same way that the earth was thought of as flat. Such rights were disposed of in the 20th Century by political “truths” such as communism or fascism. These “truths” swapped god-appointed rulers for political dictators. Elsewhere, the “big man” tradition as shown by Idi Amin in Uganda or dos Santos in Angola is similarly impermeable to change or outside thought.

In China, the story of impermeability is writ large. The civilization state (Martin Jacques) has evolved at the top from god-appointed rule to political dictat but the impermeability remains. Whether the excuse is heavenly authority or communist or legalism, the ability of that nation’s leadership to restrict change through the impermeability of its structures remains.

The Permeability Grid

Any organization can be assessed as somewhere on the grid of permeability. At its worst extreme today, North Korea stands out – completely impermeable to any thought of change or even discussion, it embodies the lunacy of not just tyranny but of the inability to listen to any reason. This is not just about governing but also about the basic rights of its people. North Korea would get 0 on the scale of impermeability.

Of course, moving too far towards complete permeability is towards chaos. The other extreme (100 on the scale) would be where every thought is taken on board and acted on. This represents an organization that has no control – which some would find enjoyable even if chaotic – but often leads to mayhem. An example of this may be Waterworld  or some other dystopian view of the future, but the tendency here is that it leads towards strong group asserting themselves and veering back towards 0.

The balance between tyranny and chaos is commonly held to be democracy and open societies where the key parameters of society allow and enable freedom of thought and opinion with individual and group rights yet within structures that avoid chaos. This is not at the centre politically but may well be at the centre in terms of permeability.

 Slide1

This grid works in a similar way to complexity theory – the way that complex adaptive systems work. The tyrannies occupy the areas of stasis at the opposite end to chaos. In the middle, where real evolution happens, stands the “edge of chaos” – it is reasonable to assume that the best democratic, open societies or organisations exist here or should have ambition to do so. It is at the edge of chaos that real permeability exists – the ability of groups of people to listen, understand and adjust. This is where evolution happens without revolution.

The Common Threads blog has been all about how we are mired in rigid 19th Century establishments – even in democratic nations like the USA and the UK. There are a myriad of examples. Humans have evolved many ways to do itself down and ruling elites, wherever they are, enforce lack of permeability through many devices.  Even in supposedly open societies like the USA and UK, rigidity seems to be the natural default mechanism. This leads to poor voter turnout and reactions to Edward Snowden as we have recently seen.

Of course, these can be considered minor against other nations which vary from terror to corruption. South Africa, for example, has moved decidedly from one extreme – the tyranny of apartheid (terror) – but is in danger of side-stepping back into chaos.

Mandela shined a light into the darkness

The worldwide sadness that accompanies the death of a great man or woman shines some light into the cavernous darkness of those who do not live by the same high principles. This has been the case with the death of Madiba as was witnessed by the South Africa’s President Zuma when he rose to speak in front of his subjects in the memorial event in Johannesburg.

Jacob Zuma has been accused of corruption – millions of Rands of government money allegedly spent on his own property – an excess now termed Nkandlagate after the name of the region. The Guardian reported on this in November.

Yet, both fought the tyranny of apartheid – where a dictatorship of a minority (mainly of whites over blacks) could have been fractured by conflict but was changed by an eventual collapse of belief by the majority (under pressure from the rest of the world and its own black population) and nurtured to a peaceful outcome by Mandela.

Nelson Mandela was not one to overtly criticize those in the ANC that committed corruption. The ANC was his “home” but Mandela’s spirit of understanding and compassion must have been stretched to the limit when seeing his ANC brothers and sisters involved in enriching themselves at the expense of the mass of poor people in his country.

Andrew Feinstein, a former South African MP and ANC member, has written vividly on the post-Mandela corruption in South Africa in his book: “After the Party

Lighting up the shadows

Under Nelson Mandela’s giant shadow, there lies a worldwide web of corruption that is not just within the borders of his home country. As the boos rang out to embarrass Jacob Zuma, the question is whether they sounded loud enough to make a difference. Can the moments of reflection on Nelson Mandela’s life shine a light into the shadow so that those who see the problem act on it?

Throughout the world, corruption exists in many forms. The recent edition of Transparency International’s Corruption Perception Index showed that South Africa ranked 72nd (along with Brazil) out of 177 nations evaluated. Jacob Zuma and his compatriates may have corruption issues but there are (according to the Index) 105 countries in a worse state.

Nigeria – which is 144th on the 2013 list – has just recently seen a letter from the Governor of the Central Bank of Nigeria being sent to the President asserting that $50 billion of oil revenues has gone missing – representing 70% of the value of such revenues since 2012. Mr Sanusi’s letter calls for immediate audits of the oil accounts.

Whether or not the revenues have been misappropriated, the fact that the Governor of the Central Bank believes that they may have, this points to a society that is prone to corruption – and it is known to be on a grand scale.

Corruption can be seen as the brother of tyranny. Instead of terror, it provides a method of keeping the population quiet. Zimbabwe’s use of income from the Marange diamond fields ensures that the political leadership there is relatively secure and that real democracy / open society cannot permeate.

Angola is another example where Sonangol (the State Oil business) serves to ensure that oil revenues find their right place in the hands of the President and his family and retinues.

In both, terror accompanies the corruption of the resource curse and shows the methodology of keeping stasis – maximising the chances of ruling elites clinging to power and power over the resources of a nation.

How Do we Want to Live?

The rise of China and our continued reliance on economic growth / GDP as the only measure of our success as humans should give us pause – where “us” includes the Chinese as much as anyone else. If those of us in the democracies of the world believe that open societies are important, how important are they to us? How do they compare with a bit more GDP (knowing how unreliable GDP is anyway as a measure of wealth) and how unreliable is it to see economics as the foundation for the quality of our lives? How threatened are we by the non-democratic regimes elsewhere? Does China’s economic success of the past thirty years) threaten their internal structures or the rest of the world’s? Should we react to other nations’ lack of permeability – statis enforced by terror or corruption or legalism?

Common Threads has been about the impermeability of our legal, political, economic and social structures and changes needed in nations like the UK and USA. With the global economy upon us and with world-wide challenges such as climate change and resource scarcity; with G8 and G20 providing economic mechanisms for mutual dialogue; with Arab nations struggling to maintain the Arab Spring against the drive to stasis in places like Egypt and chaos as in Syria and Libya – how hard should we be pushing the “edge of chaos” – democracy – as the right answer throughout the world, knowing that this may cause us economic harm if the Chinese government, for example, don’t like what we say?

Is the alternative to motivating others to our ideals the fear that we could fall into the trap of impermeable extremism (as Golden Dawn in Greece would extol) or even the trap of Tea Party / Ayn Rand rigidity? China, Angola and many other states need an Antigone but it has to be more than brave students at Tiananmen Square. Antigonism will only work when our governments are brave enough to extol our open government world-wide.

Two-speed economics – Technology and Governance

The Price of Externalities: Georgescu Roegen Extravagance

Fast lane – Markets at the speed of technology

Tom Standage’s book “The Victorian Internet” describes how the mass of wired communications – the telegraph – changed the developing world – (http://www.amazon.co.uk/Victorian-Internet-Tom-Standage/dp/0753807033/ref=sr_1_1?s=books&ie=UTF8&qid=1347191394&sr=1-1).

As did Gutenberg’s printing press around 1450, the telegraph, the telephone, the fax, the mobile phone and now the internet and the world wide web continue to transform our ability to communicate and miscommunicate – instantaneously. There is no question that technological development races onwards. The human race has a special ability to make extraordinary progress in scientific research and understanding and in the application of that through engineering into products that transform the way we live.

The technological advance is propelled by the “marketplace” – where supply and demand perpetually force change.

Slow lane – Governance at the speed of bureaucracy

As we continue to make enormous gains in technology, our ability to keep up with the excesses of the market (market waste) is almost the opposite. It seems that we react late to technological advancement – delays that can cause inconvenience but also (at the extreme) loss of life.

Inconvenience: the UK awaits the Leveson Commission report into phone-hacking – the use of technology by certain newspapers to obtain salacious stories on (mainly) celebrities. Newspapers are closed, criminal prosecutions are under way and the possibility that press freedom will be curtailed.

Loss of life: the destruction of our environment through global warming (CO2 emissions and the potential for vast amounts of methane to be released by the rapidly melting glaciers) is a direct result of technology and manufacturing’s use of fossil fuels. It could prove just as damaging (or more) than the technology and development of weaponry that fuelled the two World Wars of the 20th Century.

The slow lane is inhabited by politicians and civil servants that exist in a variety of slow lane decision-making arenas. These could be democracies; they may be legalist governments such as China.

The slow lane is inhabited by the “mechanics of government” or “Market Governance Mechanisms” (MGM)– “governance”.

The tortoise and the hare

Since the development of governing institutions, those in government have continuously sought to control technology and its effects. From the control of counterfeiting (as in Newton’s day or now), developing health and safety standards, maintaining arms control, to reducing environmental degradation, people have put their faith in governments’ ability to manage the sweep of technology. Time after time, technology has been at the forefront and governance has been slow to catch up.

Aesop’s fable of the tortoise and the hare had the tortoise winning, but while the hare of technology can be tamed, it is continuously ahead of tortoise governance and, in the global economy we now inhabit, will extend that lead. It is only where governance is centralized and total (such as in Japan prior to the Treaty of Kanagawa in 1854 or where the government may be theistic such as with the Taliban) that the market is not allowed to exist at all and technology is starved.

As soon as market forces allow, the pace quickens. China is a recent example of a centralized, legalist state that remains in control but has opened up the marketplace – totalitarianism plus capitalism. Of course, the rise of technology is a serious threat to governance stability in China. This is exacerbated by world-wide communications technology that provides comparisons with the rest of the world to every region. This comparative data spreads the world on what is available and draws everyone to want the same – more products and the latest technology. The hare merely passes on the baton to the next hare.

In the same race?

The question of how Governance reacts to the market is being played out constantly. Whether it is the forlorn approach of international Governance to environmental issues or national Governance reaction to the internet or any number of other interactions, Governance and the governing seeks to manage technology and the effects of technology.

The rationale for Governance (and control) over technology is based on a mandate from the public (whether by vote via manifestos or on a perceived basis – as in China or a theistic basis or historic basis as in most of the Middle East). This mandate often runs against the market – and many, for example, Tea Party libertarians in the USA, believe that Government should play no part whatsoever in managing the market. They do not believe that Government has a role to play at all. This Ayn Rand view of the world, the most extreme market view of governance, believes that the “invisible hand” will provide the right result.

So, should technology be subject to control? Is this two-speed race real?

The answer has to be “yes” – but an acknowledgement that it is a race would be a start. Then, we may be able to establish some of the rules: rules which enable the development of products and technology while ensuring that the trade-offs that we have to endure are sufficient to allow us (and other life forms) to continue to survive.

Race to what?

The marketplace works best when there is an identifiable demand and an ability to supply. This is the basis upon which economics exists. The market, however, is but one aspect of our lives and the market cannot dictate whether a particular form of animal life is allowed to survive or whether desertification is made worse in Sudan, for example.

These are typical market externalities and the market appears to have no answer to such difficult outcomes. These are outside the market and the invisible hand assumes that they can be dealt with as externalities – and forgotten.

These externalities, or market anomalies, are where non-market forces reside. Much of this is the responsibility of market governance; some of it is charitable work or non-market, voluntary activities. However, technology is primarily (at least in the 21st Century) market driven (as opposed to driven by government spending on defence, which brought into play technological advances in the 19th and 20th Centuries).

The race that technology exists to fight is one of material “progress” (advances in health care, biotechnology and the like are within this area) where there is a defined demand.

Governance is then required to sweep up behind in ensuring that the advances or changes in technology are suitable or genuinely advantageous.

Of course, as Georgescu Roegen (a leading economist) stated in 1975: “Perhaps the destiny of man is to have a short but fiery, exciting, and extravagant life rather than a long, uneventful, and vegetative existence.”

Intersection: market and governance

At present, the governance of technological externalities problem is two-fold:

(1) Each nation works out its own response to changes – often many years behind the change itself

(2) There are serious world-wide technological implications – changes that impact regions and the world – not just nations.

The problems get bigger as the intersection of the marketplace and governance is mainly concerned with economics, not externalities. Yet, this may be the biggest problem concerning mankind. Working out how to properly manage the interaction between the marketplace and governance in terms of market externalities while allowing for competition (the essence of the market and the progenitor of technological change) may well be the biggest challenge we have. If capitalism is the norm – and through this the market economy – what role has governance of the market – nationally and internationally?

Can institutions that are already in place (such as the WTO or UN Conferences on the Environment or IAEA or any number of international institutions that operate today (see: http://www.genevainternational.org/pages/en/55;International_Organisations) keep up with the market whilst enabling or at least allowing the best of what the market does to flourish?

Is it even possible for the market – now on a global scale – to be centrally managed to the extent that externalities that we all pay for in terms of health and safety and maybe inter-generational catastrophes of the future can be in any meaningful way properly be taken into account?

Or, are there self-organizing principles that guide human evolution and probably guide our economic and technological progress which work and negate the need for any central institutions?

An Olympian Challenge

 

To repeat: the governance of market externalities may well be the major challenge that mankind has to bear.

Already, we may be dangerously close to bequeathing future generations with a challenge that may be unwinnable.

Whether it is genetic engineering, or nuclear warheads, or CO2 emissions or whatever, the global challenge is to admit that the challenge is a real one and that the market, left to its own devices, is unlikely to deliver the desired results in a timeframe that will allow life to continue to prosper – the Georgescu Roegen extravagance

Libertarians argue that we will ensure that technology and the market will find the solutions – a hope for the best approach that they believe will get us out of the Georgescu Roegen extravagance.

However, the danger that the challenge will be beyond the capability of the marketplace is large enough for us to consider the consequences of failure. The fact that we can obtain information quickly and internationally does not help unless we can use the information and make decisions quickly. Governance mechanisms are the opposite. It now looks increasingly like 19th Century institutions are incapable of addressing the negatives that the marketplace throws up – unpriced externalities Maybe the only way to solve the problems of the marketplace is through using technology and self-organization on a local basis so that externalities are assessed and redressed as appropriate.

This means that the role of international organizations would be to assist the process. Instead of not-for-profits like Witness (http://www.witness.org/) acting on their own to provide assistance to local groups (“See it, film it, change it”) it would be the role of large national and international institutions to enable local groups through technology. Markets are self-organizing but have created a degree of externality that is seriously and adversely impacting societies throughout the world. International governmental organizations are failing to come to terms with this. So, the role of national and international institutions has to be to equip and enable local groups – through finance and law changes but on a vast international scale.

Just like companies and government work together to develop the markets, so governments and NGO’s /local groups should be working to develop externality solutions (with the companies wherever possible) but on an international basis.

Research is ongoing such as at http://shapingsustainablemarkets.iied.org/ and sustainability in business is now a constant theme in best in class organizations. Those such a CIMA (Chartered Institute of Management Accountants – www.cimaglobal.com) have adopted sustainability and the role of senior management in delivering this for some time. Sustainability is the central mantra of organizations like Tomorrow’s Company (http://www.tomorrowscompany.com/) and the whole CSR movement.

But, just like microeconomics and macroeconomics never come together, so the business by business approach and the international institutional approaches never seem to gel.

Witness provides a great example of the ability of self-organization – governments, local, regional, national and international should now be harnessing the technologies to equip civil society to the same on a scale never before seen. Every national government should have an Externalities Minister – where such market problems are evaluated in total, practical help is provided to civil society to address the problems and genuine dialogue established with business. Governance and the markets would then be in the same race.

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.

Politics and polar bears – the race for extinction

Polar bears evolved into a niche that for thousands of years gave them a status at the top of their local food chain. Global warming is putting paid to that and, swimming from one ice-island to another they give the appearance of a doomed species. It may take some time, but the human race is ensuring that they are no longer suited to the new environment in which they have survived for so long.

Changing Environments

It’s probably less important, but the world is changing for politicians, too. They are suffering from their own form of global warming that shows that they have not sufficiently evolved to meet the demands of the new environment that they face. It is an environment in which the political systems of the 19th century don’t work and the where the fixed mental states of those in politics and who have grown up in politics and nurtured by 19th and 20th Century models no longer have the validity or purpose that they once did. Populations see them incapable of creating the conditions for us to live well and are giving up on them.

Voting is down to 50% in many democracies; in Western Europe, corruption and greed has isolated the political factions from their people. When Mario Monti said in an article in Spiegel recently, “If governments allow themselves to be entirely bound to the decisions of their parliament, without protecting their own freedom to act, a break up of Europe would be a more probable outcome than deeper integration”, then you know the game is up. Politicians and the people are separated and democracy itself us in danger.

When you have evolved into something of no use, then it is time to give way or you erode (or, worse, implode) with time.

Fukuyama believed that politics had evolved successfully and that liberal democracy had won. The problem with that analysis (apart from being plainly wrong, as he now agrees) is that he was providing an answer to the wrong question. The question was not which political system out of communism, fascism or democracy would win. Nor, was it a question about whether capitalism in one form or other would win – we know the market has its place on the winner’s podium already.

No, the question to be asked is more fundamental – what is the role of government in a modern society? Monti would argue that democracy might well not be part of it. There are other, better positions.

“The Gardens of Democracy” by Eric Liu and Nick Hanauer (http://www.amazon.co.uk/The-Gardens-Democracy-Citizenship-ebook/dp/B0061S3UMA/ref=sr_1_1?ie=UTF8&qid=1344783105&sr=8-1) describes, from an American vantage point, the type of new politics (combined with new economics and new citizenships) that could dominate in the future. More a long pamphlet (but no less important for its Tom Paine comparisons) than a major book, it describes the “big what and the small how” of politics in the 21st Century. But, it will require a sea change in politics and in politicians and take us well away from the technocratic (mechanical) notions of 19th Century thinking.

What is different now?

Liu and Hanauer’s work is based on discoveries made in the late 20th Century in places like the Santa Fe Institute (they base much of their work on the Eric Beinhocker’s great book “The Origin of Wealth”) into complexity and the new rules that completely shake the 19th Century idealism of economics doctrine that still rules (mainly through econometrics – the 20th Century form of alchemy) the policies of the 21st Century.

They bind together the new guidelines into citizenship and politics and, probably for the first time, attempt to develop a society-wide thesis based on the new rules. It is a bold attempt and no different to the aims of Common Threads (this blog) – to rid ourselves of 19th Century prescriptions based on Newtonian (they call it “mechanical”) rules and forward to what they call “gardening” – the desire for politics to shape and cajole (and, as necessary, fund and intervene) but not to control or to allow the unfettered invisible hand of the markets to run riot.

While their focus is on the USA (developing a point of attack against both free marketeers such as the Republicans – or, worse, the Tea Party – and the pro-government-does-all wing of the Democrats), this is a model for all nations.

What is different now is that in many countries people are tired of the old left against right philosophies and are reaching (or have already reached) a level of economic “wealth” (at least measured by numbers) that should allow us to turn our minds to what actually matters – Maslow’s self-actualization but on a global scale. More than this, education is sufficient for people no longer to want to be ruled by governments in every sphere of life but educated enough to know that massive income variations should not be the norm and that society is important – it is our position in society that matters more than the material wealth on its own.

As a Brit, nothing is clearer than the genuine pride shown during the 2012 Olympics – a pride of a nation that (despite may problems) has provided a high value games with genuine affection for all nations as well as pride in itself. The pride of the many volunteers that contributed will resound as long as the concerns over the amount it cost. This was a society working together – a form of national self-actualization.

This self-actualization has to take us away from the mechanical drudge of being a cog in a wheel – focused only on what monetary wealth provides – to a society that encourages growth of all its citizens. That growth is whatever we believe to be important and government’s role is to help us understand what that is (not “tell” – this is not a totalitarian regime proposal) and assist in attainment. It means  (according to Liu and Hanauer) the “big what” – i.e. what we aim for – and the “small how” (i.e. not controlling how we get there but aiding the process).

Politicians as leaders not controllers

Society in the developed world is driven (in the main) by money. We count our wealth in dollars or euros or pounds or yen or yuan. But, we all know that there is more to life than that. Our memories of our lives are far more than how much money we make – they are of family, education, learning, books we have read or films we have seen or football matches played in or viewed, pride in our kids, helping loved ones over illnesses or a myriad of other prized mental possessions.

Yet, modern society always seems hell-bent on just monetary gain – “it’s the economy, stupid”. This is a 19th Century concept given heart by 20th Century victories of democracies run on market economics against totalitarianism, communism and fascism. The result was a victory that was far, far better than the alternatives. We now have a chance to modify that victory and show that the 21st Century offers more than the Chinese alternative of a market economy driven by a legalist clique that fears for its life. Competing on those terms is not what we should consider.

The market economy is the best worst option but not as a free (unfettered) one. Government has to play a role and Liu and Hanauer point us towards that role.

The role of government changes in this worldview and the role of politicians, too. Instead of CEO’s in charge of a business, Liu and Hanauer propose that they become gardeners – working out the general landscape and then tilling the soil, weeding and watering the plants, as it needs it. This is a worldview that is consistent with the way the world works – not the way that 19th Century politicians and economists have developed the simulation.

What’s the next step?

I have been interested in complexity and the new findings of this deeper, richer analysis of how the world works since the 1980’s when I attended a lecture in London on complexity in business – with Michael McMasters, then a guru of the subject. Murray Gell-Mann (who found the quark) and Stuart Kauffman were presenters amongst a stellar mix of experts in science and economics. Work done at places like the Santa Fe Institute and elsewhere have pushed the boundaries of thinking in this area and there are now areas where this new (er) thinking is taking hold. Eric Beinhocker’s recent article in the Independent  (http://blogs.independent.co.uk/2012/08/08/new-economic-thinking-and-the-potential-to-transform-politics/) which highlights the Liu and Hanauer book also provides an example of how computing technology is assisting the process – how the difficult arguments of complexity can be made real.

However, in the last thirty years (since I attended that conference), it has been hard to see the visible signs on a macro-scale that complexity has made to make a difference in a society that is driven by simplicity – the drive to count based on GDP and earnings.

Liu and Hanauer have in a large pamphlet done something important in working to make a tough subject easier to understand. Now, we should be shouting like Tom Paine and working to establish such thinking in schools and universities and to challenge our leaders to address the world’s problems through the dose of reality that complexity provides. This is a major challenge of explanation no less important than any other doctrinal assertion over the years but without (yet) the simplistic notions that the Tea Party or labour rights or communism or centralized government (or left vs. right) have.

The Moral Tax Maze – What Does Society Want ……

…..and General Anti-Avoidance Rules (GAAR)

Following on from the Aaronson report in November, 2011, George Osborne stated in his budget speech to Parliament this week that he has decided (no doubt after Liberal Democrat pressure) to adopt General Anti-Avoidance Tax Rules (GAAR) after due consultation. This is a major departure for the UK and has potentially huge benefits on a world-wide scale.

 

Osborne stated his abhorrence to excessive tax avoidance and this repeated, in effect, the Aaronson dictum that only excessive tax avoidance should be the subject of any GAAR. Any law should focus, it said, on excesses – where schemes were devised that provided for a “moderate rule” that does not penalize proper tax planning. This would, Aaronson said in November, 2011, not need elaborate clearance systems because it would be clear that centre ground tax avoidance was not likely to be the subject of HMRC wrath. Guidance (rather like that provided with the 2010 Bribery Act, no doubt) could be provided.

 

Tax and avoiding commitment

 

Taxation is not an exact science. In the rush to comment on George Osborne’s 2012 budget, the focus has been on how the proceeds of taxation are used by the State. The Moral Maze on Radio 4 this week highlighted this issue. The discussion was not that illuminating but revealed the continuing problem that society has in determining the mix between public and private sector, taxation and philanthropy in a democratic state.  The extremes were in good evidence – at least in the ‘conversation” between Richard Murphy (of Tax Research UK) and Melanie Phillips (Daily Mail).

 

In the US, the Tea Party and similar Republican and libertarian factions have called for minimum state intrusion in the private affairs of individuals and corporations: to allow them to make their profits and earn their income and spend it however they wish.  Reagan’s opinion that the State was “the problem” is reflected in rightist policy in the US. Here, entrepreneurial spirit takes precedence over the “so-called” needs of those who can’t make it economically or fail through ill-health (or, it is assumed, lack of opportunity – opportunity is what you make yourself). State spending should be for defence (and maybe policing) and little else. The private sector should be responsible for everything and pricing through demand and supply should be responsible for sharing out the needs of the population.

 

Opposite to this are state run economies – the failed economies of the Soviet Union, for example – which proved that state monopoly failed. The attempt to centralize pricing when the number of SKU’s (stock keeping units) may run into billions was seen to be a huge error. China has awoken to that reality and the market economy is now much more the norm.

 

So, market economics rules and pricing is, wherever possible, market driven by supply and demand.

 

The problem is that the “market” (Adam Smith’s “invisible hand”) is not always right and the drive of many individuals and other organisations (the market) coming together is often imperfect on timing, often leading to monopolies of supply and often the result of market imperfections. Of course, there are also wider social issues on which government develops obligations to intervene. Global Warming may be one; re-armament in the UK in 1939 is another – no market would supply the needed response (at least in the latter).

 

This leads to the need for some societal intervention beyond the market. However, as soon as one section is taken outside the market economy, then the economy is further driven in directions that are imperfect. The requirement for a nation (or city-state or whatever) to defend itself from potential invasion has, throughout civilization, meant that central government has needed to collect tithes or taxes from the population it is defending. Of course, ancient monarchies were defending the monarch rather than the people, but newer, democracies have a similar aspect. Until we reach the perfect state where no-one needs to defend themselves, defence spending will be “allowed” through taxation. This is a basic need and taxation results. Governments (that take on the responsibilities that society gives them through the democratic process) then extend that remit to tax and supply “needs” such as policing, a legal system, health, social security and market intervention. It also has the power to alter the direction that markets take through taxation or incentivisation – e.g. 100% capital allowances or allowances for R&D and geographical location.

 

The question is no longer whether market economies should exist but the degree of state (on behalf of society) intervention through taxation and the ability of society to accept that taxation and / or devise ways to minimize individual and corporate tax burdens (in the same way that computer hackers attempt to break down IT security defences).

 

The Moral Taxation Maze

 

If we believe that democratically elected governments have the right to raise finance through taxation based on the mandate they have been given by society, then it cannot be too far a push to agree that the collection of tax receipts should not be stymied. Tax evasion is a criminal activity; tax avoidance has long been seen as the right of the clever (and the wealthy) to find ways to minimize the tax they (individuals and companies) pay.

 

This “right” has pitched the seemingly able and spirited against  government bureaucrats and tax inspectors in a battle that the public seemed to want the former to win. After the banking and credit-induced damage inflicted in 2007/8, the “spin” has changed direction. It is no longer just bankers that have questionable business ethics. We are now engaged (world-wide) on a deleveraging project of austerity and public sector cut-backs. This is made much more difficult by those individuals / organisations who are engaged in tax avoidance and try to minimize the tax-take made by government. This impacts directly on the need to save even more public sector spending – impacting directly on those sectors of society that can least afford it.

 

The fact that tax avoiders inhabit the same off-shore jurisdictions as drug dealers, kleptocrats sending oil and energy wealth into their own accounts and organized crime is maybe a clue  that tax avoidance is not a wholly respectable activity – whether done by individuals or corporations. The debate seems to be changing and the world is now waking up to the debilitating impact of the “legal” flouting of tax laws through manipulative mechanisms and offshore tax havens. Ethical considerations are now allied to the deleveraging process.

 

Tax: Society’s writ, Government implementation

 

The moral tax maze may becoming a lot simpler to navigate. Taxation in each country should now be  based on a wide-ranging general anti-avoidance law, which should go further than the Aaronson proposals. While tax will continue to be a competitive issue between nations (within broad guidelines set by trading agreements), tax havens located where value does not arise should be outlawed and value-adding nations (where goods and services are produced, designed and /or sold) should have the sole rights to levy taxes and, through a broad-based anti-avoidance rule, collect those taxes from those operating there (with double taxation only operating between those signing up to the general provisions in operation).

 

George Osborne’s discomfort with the worst excesses of tax avoidance (based on Aaronson’s GAAR proposals) is a start. But, in a world, which will take a decade or more to rid itself of the excesses that began to unravel in 2007/8 and where economic strength will continue to be more broadly based internationally, governments (where properly representative of society and elected by that society) will need to ensure that society’s wishes are carried out. Taxation is a key to that (as it has always been).  As transparency grows and we know more about tax take and where it is spent (as Osborne is keen to provide information on – or so he stated in his budget speech), the ability of the wealthier and most powerful to manipulate their taxation burden must diminish or the outcry from society will become too loud. In the same budget that reduced the top income tax rate from 50% to 45% (because earners had been able to manipulate the tax take from an estimated £3bn to just £100m!), we are given some hope that the fight back is taking hold.

 

A few weeks ago, retrospective action was taken against Barclays Bank. Now the consultation is under way on general anti-avoidance rules on tax. Modern economies should not shy away from the essential need of society to see that the governments it elects carries out its wishes. Tax laws (and the ethics behind them) should be implemented and be seen to be implemented. This is an international requirement – the UK may be at the forefront of something transformational – if it does not get too scared by being out in front.