Archive for the ‘Politics’ Category

The great tax debate

November 8, 2012

When I first saw the news yesterday that Barack Obama had been elected for a second term, I reflected somewhat sadly at how much less enthusiastic I am about him than I was four years ago. (Then, I stayed up all night to watch the results come in. This time, I had a good eight hours’ sleep.) My initial enthusiasm has been dented by the huge increase in drone-strikes, the failure to close Guantanamo Bay, the Dodd-Frank act, and Obama’s part in the failure to bring the deficit under control. But on balance, I think it is a good thing that Obama has another four years to try to implement his solutions to America’s problems. With all the deadlock of his first term, coming partly from the determination of many Republicans to deny him a second term by automatically opposing his every move, I feel as though he ought to be given a proper chance. It is to be hoped that the upcoming ‘fiscal cliff’ at the end of 2012 will force both sides to make the necessary compromises to narrow the gap between revenue and spending. (Perhaps this is too much to hope for; we’ll see!)

As with all election campaigns since the days of JFK, this one was marred by all kinds of personal attacks with no foundation (see and for two particularly blatant examples). But there was also a frank discussion of some fundamental differences. One was taxation. Both the US and the UK are sharply divided on the issue of tax, and both sides claim the moral high ground. In this article, I want to think about why.

‘We have made very clear that the wealthy must be made to pay their fair share’, wrote Simon Hughes in the Independent, earlier this year. The top rate of tax is certainly a bone of contention between Conservatives and Liberal Democrats in the Coalition government. At the Conservative Party Conference, George Osborne, who recently has become something of a hate figure for the Left, said the following in a speech.

‘Just as we should never balance the budget on the backs of the poor, so it’s an economic delusion to think that we can balance the budget on the wallets of the rich.’

In France, the debate is more extreme. President Hollande is ploughing on with his plan to introduce a 75% top rate of tax, in the teeth of some bitter opposition.

Let’s look at some figures. In the UK, a citizen with an annual salary of £500,000 per year pays about £240,000 in tax and national insurance, or about 48% of their income, whereas a citizen with an annual salary of £33,000 (about the national average) pays about £8,000 in tax and national insurance, or about 24% of their income. Progressive taxation, the system by which higher incomes are taxed at higher rates, is widely accepted throughout the western world. However, it is not universal. In 2001, Russia introduced a ‘flat rate’ of tax: everyone paid 13%, regardless of income. Other countries followed suit, including Serbia, Ukraine, Slovakia, Georgia, Romania, Latvia and Lithuania. Granted, in most cases this was to tackle the problem of tax avoidance, which is a lot harder when there is a flat rate of tax. But an article in the Economist (‘The case for flat taxes’, 14th April 2012) extolled the benefits of a flat tax rate for all countries, and conservatives in the United States looked on, enviously. For just as many on the Left regard progressive taxation as the only ‘fair’ system, many conservatives regard it as unfair, and even immoral. They say that people should be treated equally under the law; and what is more unequal than a tax rate which is twice as high for the rich, as it is for the average man?

To some extent, what we are seeing here is the clash of two rival philosophies of justice: utilitarianism, and classical liberalism.

Utilitarianism can be summed up by the words of its 18th century founder, Jeremy Bentham:

‘The greatest happiness of the greatest number is the foundation of morals and of legislation.’

Put differently, the right thing to do for a government (and a society) is to try to achieve the greatest possible amount of happiness, or well-being, in the society.

Classical liberalism, on the other hand, holds that all people have fundamental rights, which should not be violated, even in order to increase the total amount of happiness in a society. The most important rights include the right to life, the right to liberty, and the right to own property. Closely linked with the right to own property is the right ‘to enjoy the fruits of one’s labours’. Classical liberalism can be traced back to antiquity, but modern liberalism owes much to the 17th century thinker John Locke, who wrote in his ‘Second Treatise on Government’:

‘All mankind… being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions.’

In modern times, classical liberalism has been championed by the political philosopher Robert Nozick, among others. To avoid confusion with the American meaning of liberal (i.e. ‘big government’) and with the US Libertarian party (i.e. ‘small government’!), I will sometimes use the term ‘liberalist’ for an adherent of classical liberalism.

Utilitarianism and classical liberalism can differ sharply on what is the right thing to do in some situations. To see why, imagine that there is terrible disaster that leaves only fifty people alive in the world, one of them a doctor. The doctor and four of the other survivors are healthy, but 45 urgently need organ transplants, without which they will die. Between them, the four healthy survivors have enough organs to save the lives of the other 45, but any organ transplant would mean the death of the donor. None of the four healthy survivors are willing to sacrifice their lives.

The doctor is faced with a dilemma. Does he put the healthy survivors to sleep, and perform the transplants, saving the lives of the other 45, but sacrificing the four healthy survivors? A strict utilitarian would say yes: it is morally justified to kill 4 people in order to save 45. A strict ‘liberalist’ would say no: it should be up to the healthy survivors whether they want to sacrifice their lives to save the others; if they do not want to, they should not be made to.

This is obviously an unlikely situation. But now let’s imagine another situation. Suppose there is an isolated village of farmers. There are two major crops: potatoes and wheat. Potatoes can be sold to a another village at a higher price, but they are also more prone to disease. One year, two-thirds of the farmers decide to grow potatoes, and one third decide to grow wheat. The wheat crop does very well, but the potato crop is hit by a disease, and most of it is lost. The farmers who grew potatoes have just enough of their crop to live on, but none extra to sell. The farmers who grew wheat, on the other hand, have a big surplus, which they sell to a neighbouring village. There is a village meeting, and one of the farmers proposes a motion. He says that the wheat-growing farmers have lots of spare money, and should give some of it to the potato-growing farmers, so that the latter can afford just a few ‘luxuries’ such as decent clothes. The wheat-growing farmers argue that it is their choice whether or not they give their money away. But some think that the wheat-growing farmers should be made to give away some of their money. It comes to a vote. What should be done?

The strict utilitarian would probably argue that money should be taken from the wheat-growing farmers and given to the potato-growing farmers. He would say that the wheat-growing farmers have lots of spare money, and even if each of them loses 10%, their material well-being will not be affected much. On the other hand, if all this money were given to the potato-growing farmers, their material comfort would be greatly improved. In other words, the total amount of happiness would be increased by taking money from one group and giving it to the other. A ‘liberalist’, on the other hand, might well oppose this: the wheat-growing farmers have the right to choose what to do with the fruits of their labours, and no-one should force them to part with their money.

A similar debate is now being played out over tax. What are the common arguments in favour of progressive taxation, and how do they fit in with the utilitarian and liberalist standpoints?

In a modern society, the state provides certain goods and services to all its citizens, paying for them by taxation. Economists call these ‘public goods’. Examples are healthcare, in the UK, and toll-free roads. A supporter of progressive taxation might be tempted to argue that the rich use these public goods and services more than the poor do (they probably do drive more often), and so should pay more in tax. But a ‘rich’ UK citizen on a £500,000 salary currently pays about 30 times more tax than an ‘average’ citizen on a £33,000 salary, and there is no way that the rich citizen uses public goods 30 times more. Indeed, the rich citizen may well use them less: they are less likely to use the NHS (more likely to have private healthcare), and less likely to send their children to state schools. Certainly, progressive taxation cannot be justified on the grounds that the rich use up a greater share of public resources. If we just view taxation as a way of paying for the public services we use, we are likely to end up charging everyone the same amount of tax (e.g. £100 per month) – the very opposite of progressive taxation.

A more commonly used argument in favour of progressive taxation is that the rich owe their wealth partly to their use of public resources. If they have made their money in business, they relied upon roads and communications provided by the government, and funded by taxation; most of their employees were probably educated at state schools. This is certainly true. But everyone owes a certain amount of their income to their use of public resources: a self-employed shopkeeper could not work without literacy and numeracy, and there is a good chance that these were taught at a state school. It cannot be argued that 48% of a rich person’s success came from taxpayer-funded resources, whereas only 24% of an ‘average’ person’s success came from taxpayer-funded resources: while it is hard to calculate exactly, the numbers are probably similar. So if we view taxation as a way of ‘giving back’ the part of our earnings that we owe to society, we are more likely to end up charging everyone a flat rate of tax (e.g. 25%).

Progressive taxation is obviously a form of redistribution of wealth: the state is taking money from the salaries of its richer citizens, and giving it to its poorer citizens. A ‘liberalist’ sees this as violating the ‘right’ of the richer citizens to maintain possession of what they have earned, or to choose how to spend ‘their’ money, and so is likely to oppose progressive taxation.

A utilitarian, on the other hand, may well approve of a certain amount of progressive taxation, as transferring money from rich to poor increases the well-being of the poor far more than it reduces the well-being of the rich. In the language of economics, the ‘marginal utility’ (or benefit) of £50 per month is much greater, if you are on a low income, than if you are on a high income. Even most rich people agree that a certain amount of progressive taxation is necessary for a good society – to ensure that the government has enough revenue to provide a high standard of shared goods and services, to ensure that there is some kind of social safety-net for the poor, and to ensure that there is a high degree of social mobility.

Some advance a further argument for progressive taxation, which does not fall within either the utilitarian or the liberalist ideology. A rich citizen may be able to earn more money than a poor citizen, though both work equally hard, partly due to circumstances beyond their control. For example, the rich citizen may have a greater natural talent in mathematics, music or sport, perhaps due to genetics or due to their early upbringing or education. For some, this would justify taking money from the salary of the rich citizen, and giving it to the poor citizen: it is correcting the ‘unfairness’ of genetics or of early upbringing. A liberalist, however, might well respond that it is no business of the state to try to correct inequalities of genetics or upbringing by redistributing people’s earnings. He might say, ‘My genetic characteristics are inherently ‘mine’; so are the characteristics my upbringing has given to me, and so is the money I am able to earn using these characteristics.’ Most utilitarians would also oppose this idea of ‘correcting inequalities’, on the basis that it prevents everyone, even the most talented, from becoming truly successful and enjoying the fruits of their success; and the hope of this success is an important ingredient in the happiness of a great many people. Also, when a state tries to do this, it leads to huge amount of interference and intrusion in people’s lives, and a great deal of unhappiness. (The Soviet Union is a case in point.)

In the UK, very few people (and no politicians) argue for a flat rate of tax. The debate usually hinges not on ‘whether’, but on ‘how much’ progressive taxation is justified. As well as the liberal argument, there are also utilitarian arguments against very high taxes on the rich. Too much redistribution may trap poorer people into what conservatives call ‘a culture of dependence’, by reducing their incentive to work hard to improve their situation. More importantly, the prospect of higher earnings is a powerful incentive for people to achieve greater success in business, creating more jobs for others: when this incentive is removed by too much redistribution, the economy does not grow, and everyone suffers.

Since freedom is an important ingredient in happiness and well-being, utilitarians must also consider the negative effects of high taxation on the well-being of the rich, which comes from removing much of their financial freedom. More pragmatically, very high tax rates may actually reduce the government’s tax revenue, as it may drive the rich to move abroad, taking jobs (and tax revenue) with them.

Another objection, both utilitarian and liberal: very high tax rates reduce charitable giving, for the simple reason that the rich have less money left over which they can give freely. Many private charities that work with the poor (and also some individuals such as Bill Gates) spend their money in a way which benefits the world a great deal more than most governments. Also, voluntary giving is a good thing in itself: it strengthens bonds between rich and poor, and is more likely to motivate the recipients to improve their situation, than state welfare. (There is often a feeling that voluntary help should be repaid in some way, by making good use of it, and this may not exist with welfare payments, which are somewhat more impersonal.)

My own outlook is, in a sense, utilitarian, but with such a strong emphasis on freedom as an ingredient of well-being, that I agree with the ‘liberalists’ on many issues. Most people’s idea of justice is based on some sort of combination of liberal and utilitarian ideas. I find myself asking: can President Hollande’s proposed 75% top tax rate be justified, by any combination of these ideas? And I find myself answering, ‘no’: it is too great an attack on freedom, on economic incentives, and charitable giving, and risks driving the rich abroad. In my opinion, a 50% top rate of tax is quite enough; if President Hollande and his ministers feel that the rich should pay more, there is nothing to stop them introducing a ‘voluntary component’ of tax, much like charitable giving, except that the money is spent by the government. Doubtless, very few would pay the top ‘voluntary’ rate, but a significant few would (both Bill Gates and Warren Buffett have expressed their willingness to pay more in tax than they currently do), and some would follow their example.

Time alone will tell the effect of the 75% rate upon France, but if it is introduced in the teeth of opposition (and there already is a great deal of opposition: France is not Sweden!), I would predict lower levels of happiness and well-being, as well as lower levels of freedom.

I was saddened when some in the UK, including some close friends and colleagues, expressed support for a 75% top tax rate in the UK, for in my opinion, all the same arguments apply in the UK, as in France. My ultimate hope would be that both the UK and France will eventually turn into societies like Sweden, where the rich are (on the whole) willing to give more than 50% of their earnings (either in tax or as charitable donations), and where there is a strong, well-funded social safety-net, and a strong sense of social responsibility at all levels of society. Then, of course, many of the negative effects of redistribution would disappear. But this society won’t be achieved by introducing a 75% top rate of tax. In my opinion, it can only be achieved by people acting voluntarily, in accordance with their beliefs. A good dose of ‘love your neighbour as yourself’ wouldn’t be amiss!

In defence of philanthropy

February 15, 2012

Three weeks ago, an article by Robert Newman appeared on the Guardian website, entitled ‘Philanthropy is the enemy of justice’. In this post, I want to explain what I think is wrong with his view. As the article is short-ish, I take the liberty of reproducing most of it below.

‘It’s strange that at this week’s World Economic Forum, the designated voice of the world’s poor has been Bill Gates, who has pledged £478m to the Global Fund to fight aids, tuberculosis and malaria, telling Davos that the world economic crisis was no excuse for cutting aid.

Gates does not speak with the voice of the world’s poor, of course, but with the voice of its rich. It’s a loud voice, but the model of development it proclaims is the wrong one because philanthropy is the enemy of justice.

Am I saying that philanthropy has never done good? No, it has achieved many wonderful things. Would I rather people didn’t have polio vaccines than get them from a plutocrat? No, give them the vaccines. But beware the havoc that power without oversight and democratic control can wreak.

[The] Bill and Melinda Gates Foundation [is] keen to get deeper into agriculture, especially in Africa. But top-down nostrums for the rural poor don’t end well. The list of autocratic hubris in pseudo-scientific farming is long and spectacularly calamitous. It runs from Tsar Alexander I’s model village colonies in 1820s Novgorod to 1920s Hollywood film producer Hickman Price, who, as Simon Schama brilliantly describes in The American Future, “bought 54 square miles of land to show the little people how it was really done, [and] used 25 combines all painted glittery silver”. His fleet of tractors were kept working day and night, and the upshot of such sod-busting was the Great Plains dustbowl. But there’s no stopping a plutocratic philanthropist in a hurry.

And then there is the vexed question of whether these billions are really the billionaires’ to give away in the first place. When Microsoft was on its board, the American Electronics Association, the AeA, challenged European Union proposals for a ban on toxic components and for the use of a minimum 5% recycled plastic in the manufacture of electronic goods.

AeA took the EU to the World Trade Organisation on a charge of erecting artificial trade barriers. (And according to the American NGO Public Citizen, “made the astounding claim that there is no evidence that heavy metals, like lead, pose a threat to human health or the environment”.)

Now, the EU is big enough and ugly enough to have fought and won the case. But many an African country lacks the war chest for such a fight, and so will end up paying for the healthcare of those exposed to leaky old PCs’ cadmium, chromium or mercury, instead of embarking on, let’s say, a nationwide anti-malaria strategy. Bill Gates himself may not indeed have known about what the AeA was doing on Microsoft’s behalf, but the fact remains that if a philanthropist’s money comes from externalising corporate costs to taxpayers, and that if Microsoft is listed for its own tax purposes as a partly Puerto Rican and Singaporean company, then the real philanthropists behind these glittering foundations might be a sight more ragged-trousered than Bill and Melinda.

Free marketeers will spring to the defence of billionaire philanthropists with a remark like: “Oh, so you’d rather they spent all their money selfishly on golf courses and mansions, would you?” To which I reply: “Oh, you mean that trickle-down doesn’t work, after all?” But the point is that the poor are not begging us for charity, they are demanding justice. And when, on the occasion of his birthday, a sultan or emperor reprieved one thousand prisoners sentenced to death, no one ever called those pardons justice. Nor is it justice when a plutocrat decides to reprieve untold thousands from malaria. Human beings should not have to depend upon a rich man’s whim for the right to life.’

*       *       *

First of all, the ‘facts’ quoted in the article are hugely misleading. It is ludicrous to suggest that most, or even much, of Bill Gates’ fortune came from ‘externalizing costs to taxpayers’. At most 5% of Microsoft’s profits ever came from hardware sales; the rest is software, which carries no such pollution risk as Newman refers to. Does he think that Microsoft manufactured the ‘leaky old PCs’? In the words of another blogger, ‘Microsoft didn’t run over your dog!’

Of course, claims that other companies and individuals made their money by ‘externalizing costs to taxpayers’ have to be assessed on a case-by-case basis, but many of America’s richest made most of their money entirely legitimately. Warren Buffett of Berkshire Hathaway and Larry Ellison of Oracle (the second and third richest Americans in 2011) are two good examples; likewise the founders of Google and Facebook. The nature of their businesses must mean that only a small proportion of their fortunes could come from ‘unethical’ business practices. Some ideas just inevitably generate a lot of money!

Should they pay more tax? Perhaps – and Bill Gates admitted as much, in a TV interview with the BBC:

“And I certainly agree that [taxes] should go up more on the rich than everyone else. That’s just justice.”

But the rich should certainly not be taxed so heavily as to discourage philanthropy. Voluntary giving is a great thing: within a country, it produces a social cohesion which is hard to achieve through state welfare. The recipient has more of a sense of obligation to make good use of their opportunity than they would have after receiving, say, a state benefit, because someone has chosen freely to help them. The giver in turn sees the positive impact of their philanthropy, and is inspired to give more. It is much better that the rich give voluntarily, than that they be forced to surrender a large part of their income by others. Compulsory income redistribution via taxation should be viewed as necessary, only because voluntary giving on its own is not sufficient to alleviate poverty. But it is an unfortunate necessity. (Indeed, one could argue that in an ideal world, taxation would not be necessary, because there would be enough voluntary giving.)

What about the ‘havoc that power without oversight and democratic control can wreak?’ Newman seems to be claiming that governments know better how to spend money abroad than the ‘billionaire philanthropists’. There is certainly a risk that a philanthropist will spend their money unwisely, but there is also a risk that governments will spend their tax revenue unwisely – giving billions of dollars of military aid to countries guilty of war crimes, and waging wars which the voter may not support. The latter is, in a sense, forcing a citizen to fund positively unethical action.

At the moment, I trust the Bill and Melinda Gates foundation much more than either the US or the UK governments, to spend money abroad in the most effective possible way. A philanthropist such as Bill Gates, nearing the end of their career, and deciding how best to spend money on philanthropy, has generally only one objective: to do the maximum amount of good. (A cynic might raise the Kantian possibility that they are really doing it to gain accolades, but this is irrelevant to the actual impact of their giving.) A politician, on the other hand, may wish to achieve other things: to bolster or curry favour with a foreign ruler, to win support from a (partly selfish) electorate, or to advance their political career. Even if they have good intentions, these might be frustrated by an act of Congress. The Bill and Melinda Gates Foundation has access to the foremost health experts in the world, and can make a decision based on the best available evidence. The UK government, on the other hand, repeatedly ignores the advice of its own experts (for example, those who resigned from the Advisory Council on the Misuse of Drugs) out of fear of a populist backlash. It is a running joke in the Department for Education that Michael Gove and his team want ‘policy-based evidence’, rather than evidence-based-policy, to justify their rash decisions retrospectively and save face. Of course, in an ideal world, governments would not have such problems, but we have to be realistic. Who is more likely at the moment to make a good decision on how to spend money abroad: a billionaire philanthropist or the US Congress? At the moment, my money is on the philanthropist.

(Of course, we should still try to make government aid more effective, and Gates himself is calling for that very thing!)

When it comes to domestic spending, the government may be in a better position: it has a clear incentive to spend money well, or it will not be re-elected, and the electorate, while sometimes prone to supporting an unethical foreign policy, often know what will make them happy in terms of domestic policy. But voluntary giving is still to be valued, because of its additional positive impact on both the receiver and the giver, and the consequent strengthening of social cohesion. (An aside: perhaps people could be encouraged to pay voluntarily into a national ‘Poverty Alleviation Fund’, which would then be spent with ‘oversight and democratic control’?) And there is no substitute for personal acts of charity: as a member of a community, a philanthropist will often know far better than a bureaucrat, who needs help most, and who will make best use of it.

Finally, a word about justice. I could scarcely believe the article’s closing paragraph. Aside from the fact that condemning someone to death and then reprieving them is clearly different to organizing a global effort to save people from malaria, the statement ‘human beings should not have to depend upon a rich man’s whim for the right to life’, is particularly insidious. In reality, the proper working of international aid is just philanthropy on a more spread-out scale. If the UK government decides to spend some of its revenue on eradicating malaria, it does so with at least some support from the electorate, and hopefully after some public discussion on why it’s a good thing to do.  Effectively, millions of taxpayers are giving about £10 each, as opposed to a few people, each giving millions each. Why is the first one ‘justice’, and the second ‘a rich man’s whim?’ The first can be viewed as lots of moderately rich people’s ‘whims’ – or ‘decisions’, as they are more usually called. There is only a real difference between the two when many of the taxpayers are unwilling to help, but are forced to do so against their will. Effectively, this is one group of people being ‘philanthropic’ with the money of another group! It is actually a less sustainable and less desirable state of affairs than genuine philanthropy: it will create resentment, and the resentful rich will move elsewhere, to a country where they have more say in how their money is spent.

How can anyone in their right mind prefer enforced ‘giving’ to voluntary giving? For as long as there is inequality in health and wealth, there will be a need for those with more to help those with less. How much better that this help be largely voluntary, rather than forced?

Philanthropy literally means ‘love of humanity’; love means nothing unless it is translated into voluntary action. Philanthropy is the enemy of justice? One might as well say that love is the enemy of justice.

In praise of U-turns

December 26, 2010

There are some rather odd news headlines today… ‘Government accused of free book funding partial U-turn’… Surely the U-turn shows UK democracy working as it should?

Last week: the Department for Education sends a letter to the charity Booktrust, informing it peremptorily that all its public funding (£13 million per year) is to be cut. There is an outcry from authors such as Phillip Pulman (‘unforgivable disgrace’) , ex poet laureate Andrew Motion (‘act of gross cultural vandalism’), and children’s laureate Michael Rosen (‘absolutely appalled and utterly enraged’). And it wasn’t just authors: teachers, health visitors and librarians also expressed their dismay. The opposition, rightly, switches into attack mode: Ed Milliband states: 

‘This Conservative-led government knows the price of everything and the value of nothing. The abolition of Bookstart will deprive children of an early opportunity to discover the joy of reading. It is one of the programmes introduced by Labour of which I am most proud.

It was a gift from the government to the next generation. This week we learnt that many of the Lib Dem ministers privately admit what they are doing is wrong and unfair. They may have convictions but they do not have the courage of them.’

And now, the DfE has put out a joint statement with Booktrust, stating that public funding will continue, although the level has yet to be determined. We should applaud the DfE for being willing to make a (partial) U-turn in the light of input from people who best know the impact the cuts would make. Hopefully, the final decision will be a wise one.

Booktrust says that, through support by publishing companies, it has been able to generate another £4 for every £1 of government money. The DfE seems to have taken this to mean that it does not need government funding. But the important thing about government funding is that (ideally) it provides a basic level of security for a certain number of staff, whereas private sources can be more subject to short-term economic conditions. If there is a short space of time when private sources dry up, the government funding is there to tide things over. £13 million per year is not a great saving in the grand scheme of things, and judging from those ‘on the ground’, it sounds like it’s in the public interest to maintain the funding.

In general, I think it would be a good thing if politicians were more willing to make U-turns if new evidence changes the picture against their original decision. If a policy isn’t working, or new evidence comes to light showing that a planned policy is a bad idea, the worst possible thing to do is to continue it in order to save face. The public (and the media) should respect the politician who, in response to criticism by those who know the situation, changes their policy. Open debate and willingness to change policy for the public good are great assets for a democracy.

In my opinion, the electorate (and the media) shouldn’t be too hard on the U-turn itself. The original mistake can be criticized, if it betrays poor judgement, but sometimes it can be due to a lack of information and a breakdown in communications which isn’t wholly the fault of the government. The practitioners and the experts also have a responsibility to bring important information to the attention of the government. And no actual harm is done if the government realise their mistake and act to correct it. No government can always get everything right with the first policy draft. The question we, as the electorate, should ask is: are the eventual actions of the government conducive to the public good?

It is perhaps more important in ‘confidential’ decisions, such as in foreign policy or domestic security, that the government be right first time, most of the time. The safety-valves of public discussion and debate just aren’t there. U-turns in foreign policy are often more serious, but the unwillingness of US presidents such as George W. Bush to ever admit to them is worrying. U-turns, or ‘flip-flops’ as the Americans call them, are sometimes necessary for the national and international good. Suppose a US administration is 75% sure that making a U-turn on policy towards Iran will substantially improve the situation for both the US and Iran. They may doggedly continue with their policy, thinking that the damage to their reputation from making a U-turn justifies the smaller chance of success if it is not made. This is what a democracy should wish to avoid; such hypocrisy should be ruthlessly exposed and punished at the ballot box. Again, open, informed public discussion seems to be the way forward.

Of course, foreign policy opens up a whole new hornets’ nest, as the actions of one country may be in the national interest, but not in the ‘international interest’ – i.e. bad for the world as a whole. However, in today’s closely interconnected world, international goodwill, trust and co-operation are important assets which any country discards at its peril. More of this anon…

Free votes and referendums

May 31, 2010

This is inspired by Gowers’ blog entry ‘If politicians were mathematicians’, although it gets away from mathematics almost immediately!… Gowers raises the following problem in democratic politics. Say a party wins a general election, with 55% of the popular vote, and proposes a controversial policy, which only 70% of its MPs support. If party discipline is sufficiently strong, all the MP’s from that party may end up voting for the measure, and it may be passed, when in fact under 40% of MPs support it. Gowers puts forward the following idea, which might help overcome this problem; I take the liberty of quoting verbatim…

`Votes are made electronically and then counted. After they are counted, the way people voted is made public. However, before that happens, each vote is changed, independently, with a certain probability such as 10% (but the precise value could be argued about, and might even vary from vote to vote, being lower for especially important votes). If you feel strongly that your party is wrong on a certain issue, then you can vote against it, and if that annoys the party whips, you can tell them that you voted for it but your vote was flipped. However, you cannot play this game too much, or the number of times your vote appears to be against the party line will be so far above 10% that it will be clear that you are not a loyal party member.’

What I have been thinking is, maybe there are other solutions to this problem as well. First of all, a government will not want to propose too many policies which are unpopular with a majority of voters, if only because this would endanger its chances of re-election. (Naturally, one would hope that they also wish to represent the best interests of the voters!) Neither will it want to alienate a majority of MPs, as if it does this repeatedly it may even risk been brought down by a no-confidence vote. Governments will often allow MPs a free vote on contentious issues: in the UK, this tends to be popular with constituents, as it (hopefully) gives MPs more freedom to vote as a majority of their constituents would wish. But the problem is: what happens when an MP finds themselves at variance with their party in a whipped vote? Ideally they should be able to vote against the party line without severe consequences. One would hope that a party that issues a two or three line whip on every vote would alienate its MP’s and also become gradually less popular with the electorate due to perceived authoritarianism, but in reality this may not happen. Gowers’ solution does indeed provide a way of occasionally escaping the penalties for breaking party lines. But if an MP chooses this way of escape, they are unable to participate openly in the debate on this issue, which is a sad loss.

An alternative solution would be to lobby governments to relax party discipline in more instances. Before a general election, parties could be asked to publicize their policy on whipped votes. (Certain rules could even be enforced by an independent parliamentary commission.) For example, parties could promise (or be forced!) to allow a free vote if enough MPs signed a petition to allow one. This blog advocates a free vote on every single issue. This would not necessarily make government impossible – the government would just have to spend more time building consensus within its own party (and maybe even across parties).

All this begs a much larger question: what about direct democracy? Why should we delegate so much decision-making power to MPs? Wouldn’t it be possible to have a nationwide referendum instead of a parliamentary vote, on many issues? A friend of mine has proposed a system where everyone has the option to vote on every new measure, but can choose to delegate their vote to an elected representative if they wish (for example if they were apathetic, or felt they were uninformed about the issue).

I’m not sure that the majority of British voters would support a direct voting system. I’ll try to outline some (reasonably well-known) potential problems with it below.

For one thing, there are theoretical problems with allowing a referendum on everything separately. Suppose there are 3 people, A, B and C, voting on 3 economic decisions, decisions 1, 2 and 3. A ‘yes’ to decision 1 will cost A £1000 pounds, but it will earn B and C £100 each; a ‘no’ means that nobody loses or gains. Similarly, a ‘yes’ to decision 2 will cost B £1000 and earn the other two £100, and a ‘yes’ to decision 3 will cost C £1000 and earn the other two £100; a `no’ means that nobody loses or gains. If each person votes on each decision separately to maximize their earnings, two out of three of them will vote ‘yes’ on every decision, so each will end up making a net loss of £800. Presumably, if none of them communicate with the others before or after their vote, each will vote ‘yes’ to every decision, if they are guided only by self-interest. What happens if beforehand, there is a general election? There are two parties, one which promises to decide `no’ every time, and one which promises to hold a referendum on each decision separately. All three of A, B and C should be in favour of the first party, as it would reduce their losses to zero. So it looks like it could be in the best interests of everyone to appoint a ‘government’ which will carry through a unified policy.

The same kind of thing happens in the well-known ‘prisoner’s dilemma’. Here, the situation is even simpler. There are two prisoners locked in different cells, accused of being partners in crime. The police know that they can convict both on a minor crime, for which the maximum prison sentence is 2 years, but to get one of them on the big crime, they need the co-operation of the other. A policeman visits each of them separately and makes them an offer. ‘If you refuse to co-operate, we’ll give you 2 years for the minor crime. But if you implicate the other guy, we’ll just give you 1 year, and he’ll get 10 years.’ The prisoner, who isn’t a fool, asks the policeman what happens if they both implicate each other. ‘In that case’, the policeman replies, ‘you both get 5 years.’ Whatever his partner does, it’s better for each prisoner to rat: if his partner does too, his sentence has gone down from 10 years to 5; if his partner doesn’t, his sentence has gone down from 2 years to 1. Without the possibility of influencing the other prisoner’s decision, in the absence of the proverbial ‘honour among thieves’, both prisoners are likely to implicate each other and get 5 years, whereas if they both refused to co-operate, they would both get only 2 years. But what happens if the two prisoners had another option, to appoint a lawyer who would prevent the police from making either prisoner any kind of offer? They’d be better off going for the lawyer.

Even allowing each person a certain amount of ‘credit’ which they can use at each vote, as discussed in Gowers’ blog entry above, won’t prevent the above situation from happening, where a pre-agreed, fixed strategy is better for every single person involved than when everyone votes independently for selfish reasons. It is true that many people will not vote for a policy which they know will cause overall harm, even if it benefits them slightly, but there are probably enough people motivated mainly by self-interest to make it dangerous to rely on altruism.

What happens, though, if the ‘prisoner’s dilemma’ above is repeated again and again, this time with financial penalties rather than jail-time? This would be more similar to what happens when different measures are voted on. One would expect two prisoners to learn rather quickly that the best thing for them to do is to consistently refuse to co-operate, establishing trust and a stable pattern, and indeed, this tends to happen in sociological experiments.

One could argue that over time, people would learn that voting for the bests interests of the country as a whole will build trust and lead to reciprocal benefits, but again, there is a certain amount of risk in relying on this. Delegating some decision-making power to MPs, provided it is accompanied by genuine debate involving the whole cross-section of society, seems to be a way of getting around this risk.

But what if a majority of the electorate becomes convinced that a particular policy proposed by the government is detrimental to the country as a whole? A compromise solution might be to oblige a government to hold a referendum on an issue provided enough people signed a petition for it. The government would then have the opportunity to put its case to the electorate before the referendum. It’s interesting to speculate on what would have happened if there had been referendums on capital punishment in the UK. (Only in 2006 did popular support for capital punishment as a penalty for adult murder drop below 50%, for the first time.) Would the majority of those who backed capital punishment in opinion polls feel strongly enough about it, and be sufficiently convinced of their position, to press for a referendum on it? Maybe if there had been several referendums on this issue, there would have been a real chance for an informed debate, and opinion would have shifted much more quickly?…

Do we have the right balance between delegating authority (and consequently losing some influence over the decision-making process) and being able to intervene in the process? Maybe we’ve delegated too much… I’ll return to this at some point!