It hasn’t slipped my
notice, and it shouldn’t slip yours either, that by and large, the services in
this country that have been consistently performing the worst in recent times
have been the services politicians have been attempting to heavily manage.
Think about it; the most financially strained, under-performing, crisis-laden
services are the health services, social care, education, and the parts of the
economy that politicians attempt to govern. Don’t get me wrong, our health
workers, social workers, teachers, etc are doing an amazing job under hugely
challenging conditions – this is not their fault – but the industries in which
they serve, and in which they are understandably so unhappy, strained and
unsettled, are the ones that are most incompetently managed and poorly planned
by our political overseers.
Despite the clear warning
signs of more deeply rooted issues with this model, remarkably, the majority of
the population seem to think that these issues can only be resolved by having
even more government involvement in the matters, or more public money thrown at
the problems, or that things wouldn’t be quite so severe if only the other
party was in charge. This kind of wishful pleading and sub-standard party
political group-think has been going on for decades, and it is perpetuating a
narrative that has the dual effect of misleading the public further and
further, and increasing the damage to society as it does so. I will explain
both.
The first thing you should
always remember is that humans are primarily selfish – by which I mean that
they are primed to put their own interests first, and those of their family and
strong tie connections, and think and act in a relatively short-term manner.
There’s nothing outrageous or shocking about that – humans have limited
capacity (time, energy, resources), so it makes sense that they do this. Just
as when you’re on a flight that comes into difficulty, the wisdom of “putting
on your own oxygen mask first before helping others” is sensible advice (you
need oxygen yourself to enable you to help others, even your own children) –
similarly, if you are going to have a widely positive impact on others, you
need to get your own house in order first.
The kind of pattern of
behaviour I’m describing generally works well in the free market too, where
pursuing your own family interests first, also creates wealth and value for
others too, in a broad competitive and cooperative society. Jack the furniture
maker, Jill the florist, Susie the accountant and Dave the greengrocer all make
a living by selling their goods and services, but they are of benefit to their
consumers too (these are called consumer and producer surpluses). The key to
all the value being created here is that, in a world consisting of billions of
complex trade-offs, all the agents of participation know their own wants,
needs, skills and individual preferences better than anyone else, so are
(usually) optimally equipped to make those decisions.
The problem is, this kind
of model does not translate very well into the political sphere. Humans being
primed to put their own interests first works a lot better in a market where
the Smithian ‘invisible hand’ is at work, than in politics. It doesn’t work
brilliantly in the market every time, and it doesn’t work badly in politics
every time – but, by and large, human selfishness is a bigger problem in
politics than it is in the market. Here’s why. Even if you are selfish, greedy
and profit-seeking in the market, you can’t make a living unless you are
competent enough to provide goods or services that others want and are willing
to pay for. But selfish politicians don’t have the same incentives to be as
careful with their money, their actions or their policies as the everyday
individual, because politicians rarely feel the full effects of their actions,
and almost never pay the price of their bad policies. The only way they pay the
price is by being voted out at the next election, but that simply means that
those self-interests are most energised in favour of short-term decision-making
and narrow perspectives that usually benefit a small minority at the expense of
everyone else.
And it’s becoming
increasingly difficult for society to hold politicians accountable for acting
in such selfish narrow interests, not just because humans generally are
self-interested and lack the incentive to bring about changes, but because the
whole political charade has been partially created by the volitional
endorsement of its model by the electorate. In other words, there is a
co-dependency by the governors and the governed that acts as a tacit advocation
of the human selfishness problem on which the political sphere operates - and
this consists of numerous self-centred, short-termist decisions that range from
being annoying and marginally costly, to being absolutely dreadful for society.
For example, the main
reasons that the health services, social care and education are in such a mess
is because politicians aren’t able to make decisions that factor in the range
of complexities required for the services to be optimal. As a consequence, they
mismanage the finances, and they continually try to solve problems with short
term perspectives, meaning that they never keep up with the changing landscape.
It’s not entirely their fault; we’ve become a society that demands that
politicians solve problems they are ill-equipped and unmotivated to solve
properly, so everyone has to keep up the facade – which is why we get the
aforementioned futile cycle of the majority thinking that these issues can only
be resolved by having more government involved in the matters, or more public
money thrown at the problems, or that things wouldn’t be quite so severe if
only the other party was in charge. This has been failing for so long, it is mystifying
to me why so few people have got wise to this debacle.
To make matters even
worse, the selfish, short termism of politicians is even more damaging when it
comes to the influence they have on the economy. Again, many people are
struggling with the cost of living, yet they seem to be perpetually convinced
that if only the failing model grew even bigger, or another party took over to
govern it, things would be better. Let’s take the confusion about inflation,
prices and public spending as a good example of a long-standing and snowballing
catastrophe.
I have a couple of blogs
in the Economics sidebar that go into inflation more deeply, but let’s talk about
inflation in relation to price perspective. Consider tomatoes. The media has
reported this week that there is a shortage of tomatoes. Suppose for simplicity,
tomatoes generally cost £2 per kilo. When a supply shock occurs, with no change
in demand, supermarkets raise their price to £2.50 a kilo. This is generally a
good thing, because nothing has changed in the UK’s money supply, and with the
increased price, those who value tomatoes at less than their new retail price won’t
buy them. Unfortunately, most politicians and social media commentators have
joined the general public in confusing inflation with price increases. Higher
value tomatoes caused by a supply shock or a natural increase in demand is a
price increase, not inflation; inflation is largely connected to an increase in
the money supply. If there was no change in the supply of tomatoes, but the
government decided to increase the money supply to pay for a subsidy so that
every citizen in the UK could have a kilogram of tomatoes every week, then the
price of tomatoes would go up because people now have more money to buy
tomatoes. When the money supply is increased, each pound you own becomes less
valuable, because there are more of them in circulation.
Returning to self-serving
politicians, part of their short-termism is in vastly increasing the money
supply to pay for things that will help them stay in power. But when
politicians increase the money supply and the credit supply, purchasing power
goes all out of whack with the market’s supply and demand signals, hurting most
of the citizens in the country (this is also mostly why house prices have
continued to rise faster than real wages). In other words, the government and
the banks usually benefit from an inflated money and credit supply, but most
other people feel the costs – they just don’t often realise why they are
feeling the costs.
All this new money hasn’t
created significantly more value or any more material resources, which means
there is more of it competing for the same resources, which means that,
combined with higher taxes to pay for it, things like food, fuel, energy, etc
cost more for the consumer like you and me. It is literally the case that
short-termist governments are increasing the money supply to favour their own
self-interested priorities first, and in doing so, they are diminishing the
wealth and purchasing power of almost everyone else. It is also literally the
case that this has been going on for decades, and that the public blithely
encourages their own wealth diminution with consistent regularity by continuing
to vote for this kind of governance.
Furthermore, such a system
of governance has continually been manipulated by special interest lobbyist
groups, who bid for first dibs on the extra money or credit that has been
generated. The politicians are often happy to support these projects regardless
of whether they provide value, whether they allocate resources efficiently and
whether they make the nation poorer overall, because a) they know there will be
little resistance from a general public that doesn’t really notice how these
activities are harming them, and b) they know they can make the very same
public pay for it through increased taxation, and burden future generations
with much of the debt. At the time of writing, this official national debt
(what the state owes to private enterprise, including banks) is about
£2,800,459,700,000 (it’s even more than that, really, if you factor in other
unmentioned liabilities – but let’s keep it simple), and is growing at the rate
of about £5,170 per second.
The above is the kind of
consideration you should be having when being forced to confront the daily
realities of cost-of-living crises, rising prices, inflation, strained public
services and a devalued pound sterling. Covid has only exacerbated the
problems, of course – but this cycle of problematic and clumsy economic
mismanagement has going on for a long time – and that is largely because of the
way that the malaware of human self-interest and short-termism has become so
infectious in our politics, and because the anti-viral software of the general
public is so badly in need of an upgrade.