The perigrination in the catacombs

John Maynard Keynes talked about life without the means of exchange as "a perigrination in the catacombs with a guttering candle".  Now that the European banks are stuffing their money into their reserves and governments are committed to spending as little as possible, that perigrination seems worryingly closer.

This is what we can do:

http://neweconomics.org/blog/2011/12/21/how-to-avoid-the-peregrination-in-the-catacombs

The extra costs of the big IT systems

My book The Human Element came out last month and it has been fascinating how people have responded – I got a Facebook message last week from a doctor in New Hampshire explaining how the fake efficiency being peddled by managers at her local hospital was adding to costs.

Then sometimes I run slap bang against new evidence myself. Because I hadn’t until last week used the new NHS Choose and Book appointment system.

The first I knew that I was using it was a letter asking me why I hadn’t called them up to book my appointment with a consultant. I hadn’t in fact received the original letter from my doctors, but didn’t know that at the time.

I called their appointments line. They couldn’t talk to me because I didn’t have a password.

Now I’ve recently been refusing to accept passwords. I have vast numbers of them already for every public and private agency I deal with. It means I have to keep them in a notebook.

Far from making my identity more secure, it is actually making it less so – like the phenomenon of people putting their daily password on a post-it note on their office computers.

So I said I wasn’t accepting any more passwords. Long conversation with the manager who eventually put the phone down on me. Stand off. They said I had to get back to my GP. My GP’s receptionist said I had to go back to the appointments line.
I felt excitingly embattled, but my resolve crumbled when I got my GP on the phone. I don’t want to make her life any more difficult, after all, so I meekly accepted my password.

It is (surely you’re not going to publish your password? I am, really, it’s no use to me) ‘estate tomato’.

The magic words finally got me through the appointment system phone line. They gave me another number to call, which got me through to King’s College Hospital. There a very nice lady said they would send me an appointment date in the old way.

I asked why that required a password like estate tomato and four phone calls. She said that, in practice, the new Choose and Book appointment system – imposed at vast expense by one of the ubiquitous IT consultancies – was so useless that they had opted out.

Why was it so useless? Because as students of the systems thinker John Seddon will know, these centralised IT solutions can’t deal with diversity. They are inflexible and therefore lock in costs.

Was there really a problem of people not being able to prove their identity under the old system? People stealing each other’s hospital appointments? I don’t believe so, yet the IT consultants have clearly made out that there was.

Maybe you need extra safeguards if you have a huge national system. It is another way that big scale solutions lock in costs.
So here we are, another way in which the legacy of New Labour still infects Whitehall. A more expensive system which works less well than it did before because it rules out informal solutions – very urgent appointments, anything which requires face to face judgement.
Inflexible solutions means higher costs. No wonder the deficit is rising.

What can we do? Well, we can refuse to accept any more passwords, but – I have to admit – I failed on this score at the first hurdle. I’ll do better next time.

The perils of payment by results

Payment by results, much beloved of the coalition - good idea in principle.  The trouble is that Whitehall has not really grasped what went wrong with their targets regime and therefore don't understand the perils of their new payment by results regime, as I discovered during a seminar in a Whitehall department last year.

The real problem is that payment by results will inevitably end up with targets again, as I explained in the new edition of Local Economy journal:

http://lec.sagepub.com/content/26/8/627.full.pdf+html

Why Clegg was right to choose Popper

Imagine yourself in the coffee houses of 18th century Edinburgh, in the elegance of the New Town when it really was new, the civilization of those paved streets, and the intellectual excitement of the Scottish Enlightenment.

It was there that the philosopher David Hume first cast doubt on scientific method, peering at ideas about what causes what and finding there was nothing there. All you can do, he said, is say that events tend to happen together.

Yet, if we can see nothing causing things under the philosophical microscope, that hands the scientists a big logical problem. It doesn’t matter how many times they do an experiment, or watch the sun rising bang on time, it doesn’t mean these events are any more likely to happen tomorrow.


Two centuries after Hume was writing in Edinburgh, the Viennese philosopher Karl Popper, a refugee from the Nazis, came up with an interim answer. But, more importantly, he also applied it to politics and organizations. You may not be able to prove what you believe about the world, no matter how often an observation or experiment takes place, but you can disprove it.

Popper used the example of swans. It doesn’t matter how many white swans you see, it still doesn’t prove that all swans are white. But if you see a black swan, then you know they are not.

Popper was writing during the Second World War, his home city was in the hands of totalitarians, and he quickly found himself applying this insight to politics too. In doing so, he produced one of the classic 20th century statements of philosophical liberalism, The Open Society and its Enemies (published in 1945).

He said societies, governments, bureaucracies and companies work best when the beliefs and maxims of those at the top can be challenged and disproved by those below. This has huge implications, not just for effective societies, but for effective organizations too.

Popper was flying in the face of the accepted opinions of the chattering classes at the time. They may not have liked the totalitarian regimes of Hitler or Stalin, but people widely believed the rhetoric that they were somehow more efficient than the corrupt and timid democracies.

Popper explained why they were not and why Hitler would lose. Anybody who has read Antony Beevor’s classic account of the Battle of Stalingrad, and the hideous slaughter and inefficiencies brought about by two centralized dictators who had to take every decision personally, can see immediately that Popper was right. Real progress required ‘setting free the critical powers of man’, he said.

The possibility of this challenge – in what he called ‘open societies’ – is the one guarantee of good and effective government or management. Those human beings at the front line, those most affected by policy, will always know better about their own lives or their own work than those at the top.

Open societies can change and develop; closed societies can’t. Hierarchical, centralized systems, by their very nature, prevent that critical challenge from below.

Why this rant about Popper?  Because he is the critical Liberal philosopher of the twentieth century.  I kept saying so during the process that produced the Liberal Democrat philosophy document It's about freedom, but still failed even to get him a name check.

But also because he is the central figure of Nick Clegg's important speech today on the open society to Demos (though again Popper only gets one name check).  The speech is vague about Popper, vague about precisely why Popper said open societies work and closed ones grind to a halt, but it chooses exactly the correct philosopher - exactly the right underpinning to make Liberalism distinct now.

It is also, as it happens, the philosophical justification for Liberal-style localism - it is about "setting free the critical powers of man".

The critical importance of geographical place

It hardly matters what kind of policy meeting it is, it's always the same when you talk about community.  Someone will pipe up and talk about the shift to virtual communities, or communities of interest.

Which is true, of course - but only up to a point.  Localism is impossible without real geographical communities.  So are most solutions to social problems.  So are most public services.  But at last politicians are beginning to remember the importance of place, and among them is Nick Clegg:

http://www.neweconomics.org/blog/2011/12/15/the-vital-importance-of-place-for-re-growing-economies

Money: why the UK political classes are deaf to the problem

Why is Merkozy so jealous of the City of London? Isn’t it obvious? It’s because:

1. It is so focussed on short-term fluctuations that it corrodes the value of businesses that think ahead (a nasty continental habit).

2. It allows a handful of none-too-bright traders to spend £70,000 on an office Christmas lunch, using profits won from betting against their fellow countrymen (that’s competition, right?)

3. It completely ignores the financial needs of the businesses of the future (why should we want hundreds of tiny banks investing in every community like the French and Germans – that’s socialism, isn’t it).

4. It sucks talent and investment from the productive economy (that’s the modern way).

5. Every generation or so, it requires bailing out, using most of the tax revenues generated from their activities (that is the unfortunate consequence of buccaneering Anglo-Saxon risk taking).

Yes, it is dysfunctional. Yes, it is corrosive. Yes, it does immense harm to real, productive business all over the country – and pays £53 billion into the exchequer so that its leading members are allowed to carry on getting repulsively rich. But at least it’s British. It must therefore be the Envy of the World.

All of which explains a little about why Sarkozy and Merkel and their colleagues are jealous of Britain’s financial sector. The answer is: they’re not – but they would prefer not to let the City of London corrode their economies like it corrodes ours.

But (seriously now) there is a pattern here which needs articulating.

The criticism which the new economics levels at the City of London, and the rest of our supremely dysfunctional financial service sector, is not understood by the political classes – not even really heard.

We are not arguing that the City is privileged (though it is). Nor are we just arguing that it isn’t fit for purpose (though it clearly isn’t). We are saying that it is actively corroding the UK economy.

Why do the chattering classes not grasp this, and thereby see David Cameron’s ‘veto’ a little more clearly?

The answer, I think, is that they assume the arguments about the City are traditional UK political arguments – that they derive from class envy – and they therefore discount them.

It is precisely the same with two other crucial arguments about the economic future of the nation.

We are not complaining that the concentration of economic power in a handful of mega banks because of class envy – we are saying they are actively failing the UK economy.

We are not complaining that clone town mega-retailers dominate too many regional economies because of class envy – we are saying that they are actively dismantling local economies.

The mainstream media, including the BBC, are so stuck in the traditional UK political groove – the game the political classes play with each other – that they don’t hear the argument.

Nor do they hear the real debate about the City, because they assume it is a familiar move in a familiar game: Britain versus the continent, the UK versus Brussels, England versus Rome.

Somehow we have to break through this political complacency. If we want a thriving economy, somebody is going to have to tackle the City so that it does what it says on the tin – providing finance to new business and innovation.

Someone is going to have to tackle the banking oligopoly so that we can have the benefits of an effective local banking infrastructure that they enjoy across most of the continent.

Someone is going to have to tackle the huge privileges given to supermarkets so that we can have thriving local economies.

The bottom line is this: why should Britain have a more dysfunctional economic infrastructure than those on the continent? Why do we allow it?

Cameron wields veto to defend Fred the Shred and a dysfunctional City

It is a depressing thought that David Cameron has ridden into battle in Brussels in defence – of all things – of the conglomeration of short-termism, bonuses and economic corrosion represented by the City of London.

One of the few benefits to the UK economy of the euro crisis might have been that the European Commission would have stirred themselves into some kind of financial reform.

We have lived too long with a dysfunctional City, sucking up capital and talent that might have been used productively.

Sadly, we are going to carry on doing so.

Cameron was stirred into sacrificing the euro rescue on the altar of the City by a brilliantly timed, but mistaken, report by the think-tank Open Europe.

Earlier this week, their report Repatriating EU Social Policy warned in mildly hysterical terms that the City of London was in danger from EU regulations in the pipeline.

It made a series of debatable assumptions and knitted them together into a nationalistic panic, which deserves more critical scrutiny than it is currently getting.

The report made front page news, especially in London, where – as usual – they wheeled out City of London MP Mark Field to harrumph like Colonel Blimp in a Turkish bath.

The trouble with its two major assumptions is that neither is correct:

Assumption #1: That the City of London, as presently constituted, plays a crucial and important role in the UK economy.

Assumption #2: That the current EU proposals on financial reform are designed to stifle Britain’s financial sector.

Yes, the City pays £53 billion in taxes, which is certainly important, and would be a sign of UK economic success if this came from the City playing a useful role nurturing and supporting the real economy – but, as it currently stands, it signally fails to do so.

The tragedy is that the City has become a huge engine designed for its own self-aggrandizement, vacuuming up the talent and resources out of the UK’s economy in order to make its key figures immensely rich.

It is allowed to continue this largely useless work of enriching itself purely by paying large sums to the exchequer. Any threat to its privileges, and everyone looks at their tax revenues and leaves them alone.

Or vetoes European treaties.

As a result, we are stuck in the UK with an ineffective engine of economic development, when other EU nations – the ones Open Europe believes are so jealous of us – have effective engines.

As a result, our enterprises and entrepreneurs are starved of the credit they need, our communities are abandoned when they most need financial infrastructure, and our best and brightest dedicate themselves to a life of corrosive speculation rather than long-term investment.

The rhetoric around the Open Europe report also implies that this is somehow based on pique and jealousy on the part of the nations of the eurozone.

In fact, France and Germany and many of the others, already have a thriving and stable local banking network that is able and prepared to invest in their entrepreneurs. We have a dysfunctional, highly centralised oligopoly which is neither.

So when the EU bring forward proposals to break up the cosy monopoly of big accounting firms, or to tax speculative financial transactions – both ideas that would enormously benefit the real economy, not just in the eurozone but here in the UK – we should support them vigorously.

Not to do so will tragically entrench a dysfunctional UK economy and a City dedicated to speculation rather than real investment.

History will look back at Cameron wielding his veto as a huge opportunity missed.  The bottom line is this: Britain's interests lie in financial reform.

Partnership banking: how to make our banks fit for purpose

It really is extraordinary how long this debate is becoming.  We have a highly centralised, dysfunctional banking system.  Most of our trading partners also have an effective decentralised local banking system as well, fuelling their economy.  We don't. 

It isn't really rocket science, yet there is David Cameron weighing into Europe to defend what our corrosive City institutions which - apart from paying a humungous amount of tax - don't do the job they are required to do.  Worse, they suck imagination, energy and investment away from productive local economies.

But maybe the answer lies in something a bit like the Bank of North Dakota:

http://www.neweconomics.org/blog/2011/12/08/making-banks-fit-for-purpose

The lamps are going out all over Europe - if we let them

Yes, a new European treaty that will enforce effective fiscal union may save the euro - and save our economies for a while.  Certainly the alternative is a frightening prospect.  But the consequences of tightening the euro screw in the euro zone may also be terrifying and far-reaching, because - although a common European currency is a civilised and importat idea - a single currency was always a flawed concept:

http://www.neweconomics.org/blog/2011/12/07/the-lamps-are-going-out-all-over-europe-if-we-let-them