Thursday, 30 October 2014

I am standing for the Lib Dem policy committee. This is why.

Why would you, after all? Nights crawling home on the late train. Sitting in interminable debate about the intricacies of social care till way into the dark. Queuing up for half an hour in the rain to get through the equally interminable parliamentary X-ray machines. I’ve done it before and I want to do it again.

Let me explain by describing the email I received from the party a few days ago asking me to respond to a simple question with a one-word answer: what is the issue that will be most important to you at the next election?

Come on, answer – quick, quick? What is it: health? The environment? Immigration?

The odd thing about this survey, and so many other similar surveys where the results were solemnly studied around the committee table in the past, is that it begs so many questions that it isn’t really worth asking.

Is there really any difference between health and the environment, for example?  Does pretending there is misunderstand either issue in some people's minds?

If I say health, what would it mean? That I want the NHS to stay the same as it was in 1978? That I want it to undergo radical change to survive? That I want to privatise it? That I don’t want to privatise it? That I want more or fewer hospitals? That I believe resources should be shifted to prevention instead? That I believe air quality should be improved? That there should be more or fewer targets? Or not?

The answers to every one of these questions are somehow assumed? What does it mean that I think health is important – as I do? Has anybody wondered?

There is far better and more intricate polling being done by political parties these days, including in the Lib Dems. But this apparently simple, actually meaningless, survey betrays the old paint-by-numbers approach to policy – that all political platforms are kneejerk, that there is no new thinking, that it is all about positioning, and positioning from a point of view as free as possible from ideology or meaningful content.

I want to join the FPC (federal policy committee, for the uninitiated) because I don’t believe this. In fact, I don’t believe any political force which believes these boneheaded things can survive.

It is de rigueur to criticise party strategists when you are standing for an internal election, and I know this isn’t fair – they are actually increasingly sophisticated. But there is a fear, deep in the Lib Dems, of ideas. And I want to be at the table to put the opposite point of view as strongly as possible.

The world is about to change fundamentally, as I argued a few days ago. This is not the moment to assume that the existing systems, or the existing compromises, represent the only possible world.

It is particularly important when it comes to economics, the traditional blind spot among Liberals everywhere. The present dispensation is unravelling day by day. Everyone except mainstream economic policy makers understands that change is coming.

I am a Liberal. I believe in the potential of the party I joined in 1979 and the bundle of changing ideas they represent. If the party is going to survive as a potent force, it also has to represent an intellectual force, a force of coherent new ideas that allow us to navigate a safe way through the forces that threaten us.

That is especially so when it comes to inventing an economic dispensation that has some chance of spreading prosperity through the world, rather than hoovering up the available wealth like so many vampire squids.

If the Lib Dems become the cutting edge of policy thinking for the future, setting a bold course for change – and on people’s side, not compromising them for the sake of the survival of existing institutions and technocratic compromises – then the party will come back strongly in the years ahead, and just in time for the big shifts due around 2020.

That’s why I’m asking people to get me into a position where I have some chance of doing something about it. Fingers crossed...

Wednesday, 29 October 2014

The strange re-emergence of virtual currencies

I used to consider myself an expert on the future of money.  I realise I am not any more.  Experts on the future of money have to include more IT geek about them than I will ever have, and this realisation follows finding this: a table of some of the market capitalisations of the most valuable 'virtual currencies'.

The roller-coaster success of bitcoin has launched a flurry of activity, unfortunately somewhat similar activity - from darkcoin and feathercoin to litecoin and auroracoin.  Many of them - and there are anything up to 500 of them - are created by rather shadowy figures, often with codenames, using the bitcoin 'blockchain' technology that allows the currencies to bypass the control of banks.

The best introduction I've seen is by my colleague Leander Bindewald, who explains that we are seeing the beginning of a new kind of currency platform about as different from the conventional banking way as it is possible to be - using transparency where the banks use secrecy.

We will see, but this is certainly an awkward step towards the multi-currency world I've been predicting for some time.  But it isn't yet the diverse multi-currency world that I've been expecting.

But what I really find extraordinary about this is the way the financial world has been taken by surprise by it, because we have had parallel currencies of one kind of another since 1933.

I was staggered to see on Wikipedia that the term 'virtual currencies' "appears to have been coined in 2009".

This makes me feel more ancient than really I deserve.  In 1999, a good ten years before that, I was commissioned by Financial Times Business Reports to write an expert study called Virtual Currencies.

I wrote it and it retailed at the shocking price of £495.  It didn't sell terribly well, but then - as the boom collapsed around then - many of the virtual currencies I was talking about, flooz or beenz for example, were no more.

I put the concluding chapter online here not long ago, since it is now interesting primarily as a museum piece.  It is pretty clear that I didn't envisage the explosion of bitcoin-style lookalikes - perhaps because of the demise of digicash not long before - and it included this paragraph:

"Do financial service companies have a unique role in the development of virtual currencies? Probably not, but they are in a good position to capitalise on them, because of the inherent trust which the industry can provide to new kinds of money..."

I'm not proud of this.  I was right but for completely the wrong reason.  In fact, the idea that financial service companies might lend trust to currencies is now completely laughable.  Bitcoin and the other coins are testament to the opposite trend.

In fact, the financial services are so untrustworthy that people have been flocking to invest in a money system so anonymous that its creators are still unknown.

And if you read it, cut me a bit of slack.  I wrote it 15 years ago.

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Tuesday, 28 October 2014

The world will change around 2020

Something is happening out there.  A fascinating article in Der Spiegel (thanks, Joe) puts the issue pretty succinctly: the global economy is no longer working as it should - the banks are not lending, and the huge sums to be distributed by them simply shore up their balance sheets, the middle classes struggle increasingly to make ends meet - and the poor just struggle.  While the handful of those at the top - less than one per cent actually - extract more and more.

It is the Piketty thesis and it is accepted increasingly in every area of modern life, except among national policy-makers.  The idea that the institutions of modern capitalism have become extractive - as institutions have done occasionally in history, with disastrous results - is becoming increasingly accepted.  The problem is that there are few agreed solutions, even tentative ones.  Certainly not from Piketty.

This is how Michael Sauga puts it in the article, describing the economist Daron Acemoglu:

He became famous two years ago when he and colleague James Robinson published a deeply researched study on the rise of Western industrial societies. Their central thesis was that the key to their success was not climate or religion, but the development of social institutions that included as many citizens as possible: a market economy that encourages progress and entrepreneurship, and a parliamentary democracy that serves to balance interests....

Extremely well read, Acemoglu can cite dozens of such cases. One is 14th century Venice, where a small patrician caste monopolized maritime trade. Another is Egypt under former President Hosni Mubarak, whose officer friends divided up key economic posts among themselves but were complete failures as businessmen. These are what Acemoglu calls 'extractive processes', which lead to economic and social decline.  The question today is: Are Western industrial societies currently undergoing a similar process of extraction?

The parallel I draw in my book Broke: How to Survive the Middle Class Crisis is with Spain at the height of its imperial power, where the gold poured in, the ability to manufacture withered away and inflation finally overtook the empire.

It may be that deflation is the demon that will do for us.  It does look increasingly as though the struggling big banks will go through another period of instability, as the big economies begin to struggle again  A new settlement is required - and one that can include people again - and, history has a habit of providing these things once the situation is really desperate.

What is more, those moments of reboot seem to happen pretty regularly every 40 years or so.  The last one was in 1979/80.  The one before was the rapid political and economic shift in the UK and USA in 1940/41.  Before that, it was the new settlement ushered in by the People's Budget of 1909 and Teddy Roosevelt's busting of Standard Oil, which ended finally in 1911.  The big political shift before that came in the mid-1860s.

We are not quite overdue for a major reboot, but it is coming and - by my 40-year pattern - it should emerge around 2020.  We don't know how it will happen, or what constipated failure to tackle the underlying forces at work will provoke it, but we can be pretty clear already the kind of shape it will be.

And here the Der Spiegel article reaches a parallel conclusion, quoting Acemoglu again:

What is needed, he argues, is a new political alliance that takes a stand against the power of the financial industry and its lobby. He sees the anti-trust movement from the beginning of the last century in the United States as a model. It was a broad coalition from the center of society and finally achieved its great victory after decades of struggle: the breakup of major corporations like Standard Oil.

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Monday, 27 October 2014

Lidl, Tesco and the need to control us all

I've never felt much kinship with Lidl.  The bare, rather unfriendly aisles, the functional and inadequate space  for paying, never gives me much comfort to be there.  It feels somewhat alien, even now.  But I warmed to them when I saw their advert giving Morrisons a good kicking.

You can read it here.  It explains the palaver of getting a Morrisons loyalty card, fiddling around with passwords, remembering what food items qualify for the system of loyalty points.  As they say at the end: 'Or you could just go to Lidl'.

It must have enraged Morrisons, and so it should do.

The advert makes things horribly clear to me, especially since Tesco now seems to be on a terminal slide to takeover.

The first was that, if we had the sense to realise it, a 2005 survey by The Grocer - which I now can't find a copy of - should have given us a clue about what was about to happen.  It found that, of all the major retailers, Tesco was the bottom of the list for enjoying shopping there.

Waitrose came top.  I remember thinking at the time that the survey had identified something important.  It was simply unpleasant shopping in Tesco, from the badly designed aisles to the security guard peering at you.  What I didn't realise at the time was that there would come a time when this would be count.  When people understood that, actually, Tesco wasn't really cheap after all - even the street markets in London were cheaper at the time - then the fact that it was no fun to shop there would suddenly matter very much.

There was a kind of sneering atmosphere about the place - a bit like Ryanair - a smug, knowing attitude that people simply had to shop there because it was so cheap.  There was a whiff of contemptuous monopoly about it.  And the result now is all too obvious.

But Lidl's advert makes me realise how far that contempt has spread through the biggest organisations we deal with, public and private.  You read through the list of Morrison's instructions, padded out somewhat by the copywriters, and realise that the most important aspect of the way we are treated these days, by those who rule us, sell to us, supply us with energy or anything else, is control.

Tesco thought they controlled us.  The other utlities, banks, public services and superstores, have designed customer service systems primarily with control in mind.  They are designed to make us easier to process.

And then we wonder why people seem so angry that they are apparently prepared to vote for a party led by a man who used to sing Hitler Youth songs at school (sorry, the story was 'exaggerated', I gather).

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Friday, 24 October 2014

Is the NHS pulling in opposite directions?

Years ago, I remember sitting in the Lib Dem policy committee talking about I meant to call 'preventative health', but which I accidentally kept on referring to as 'health prevention'.

Half-way through, Conrad Russell - the much-missed Earl Russell - tapped me on the shoulder, indicated his packet of cigarettes, and said: "I'm just popping outside for a bit of health prevention".

All of which is a way to say that prevention as the key to the future of the NHS is hardly new.

Even so could you imagine anyone coming out with a report on the future of the NHS which is clear about the problems, honest about the solutions, minces no words and gets the overwhelming endorsement of absolutely everyone?  Because that is what Simon Stevens has managed in his Five Year Forward View, published yesterday.

That is a huge achievement in itself.  It is a bold approach to prevention and local control that everyone appears to be embracing.  It only has a paragraph on what I would call co-production, but Stevens evidently gets it.

Three things occur to me.

The first is kind of partisan: the combination of prevention, flexibility and integration is precisely what the Lib Dems set out - though in slightly different terms - in their new public services programme debated in Glasgow.

I'm not sure what it means when the NHS chief executive comes up with the same themes a few weeks later.  It may mean the Lib Dems were right; it may also mean that they didn't go far enough.

The second is that prevention requires a little more thought.  The New Labour approach to prevention patently didn't work - advertising and professional exhortation to us to drink and eat a little better.  Part of the problem is that effective prevention policies can't be pursued by the NHS alone - because they involve food policy, employment policy and much else besides.  Stevens hints at this but it requires very high level backing indeed.  As he says, it needs to be a national 'movement'.

It also implies a serious shift in funding away from hospitals. Which is when the trouble starts.

The third is that this report seems to me to mark the end of conventional competition in the NHS.  There will still be a market, and a commissioner-provider split.  There will still be choice - but there is no way that Monitor, for example, can preside over the kind of integrated care that is set out here and regulate it as a market in the way that Andrew Lansley originally intended.

In fact, I find what passes for a debate about the NHS at the moment really rather peculiar.  Partly because the left seems to forget that the original turbo-competitive version of the Health and Social Care Act wasn't actually passed.  Partly because the Department of Health seems to be going in two directions at once - on the one hand towards more formal competition, on the other hand towards more integration.

The two can live alongside each other up to a point, but only just.  One of them must be compromised, and the idea that the NHS is being 'sold off' in some way - which we hear constantly from commentators - is not quite accurate.  Something else is going on as well.

Yes, there is a great deal of private investment and private sector provision, though far too few social enterprises and mutuals being commissioned.  The narrowing of contract culture is having a serious effect - the real problem here, it seems to me.  Yet at the same time, this report is evidence that there is another direction entirely being planned - integrated primary care, integration between the NHS and social care.

How does this live with more competition?  I don't know but I think we should be told.

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Thursday, 23 October 2014

Plunging ourselves into delusory data

The principle that numerical measurements will always be inaccurate if they are used to control is now known as Goodhart's Law.

The law was formulated by Charles Goodhart to shed light on macro-economic policy, but it mainly now informs - or, more accurately, fails to inform public services.

The point is that, however incompetent staff may be, they will always be skilful enough to make targets work for them rather than against them. Take for example, the rule that patients shouldn’t be kept on hospital trolleys for more than four hours.  It was early in the targets story that hospitals got round this by putting them in chairs. Others bought more expensive kinds of trolleys and re-designated them as ‘mobile beds’. 

In similar ways, we transformed services into a huge industry dedicated primarily to making the output numbers seem as if they are rising. This is achieved sometimes despite the job they are supposed to do, and often instead of it.  See more in my book The Human Element.

But it is the inaccurate measurements that concern me here.  And this is where the staggering naivety of management consultants seems to cause so much trouble - and I've been thinking about this in relation to the idea that GPs should be paid £50 for diagnosing dementia.

There are no effective treatments for dementia now, so the only possible justification for this idea is that it will provide more accurate data about how many people have this problem.  That is pretty much the conclusion of Ann Robinson's article in the Guardian.  But by creating a situation where doctors are tempted to fall over themselves to diagnose dementia, as a way of plugging the growing hole in their cashflow, the last thing we will have is accurate data.

Data is the new icon.  We worship it.  The prime minister sits demanding graphs, imagining they can make visible the tiny changes around the nation.  We assume that, once we have the data, no further action is necessary.

But what the new utilitarians forget is just how inaccurate this data is - and especially when we give such an incentive to game it.

The same is increasingly true of financial data, gamed from inside the banks or the dark pool traders.  We are awash in a sea of inaccurate data - no problem there except that we appear at the same time to be losing our scepticism about it and loading it into the machines which manage the nation.

Wednesday, 22 October 2014

Supporting business by breaking up the big banks

A fascinating conversation the night before last has made me realise that, although I don’t think I’ve got it wrong on the banks, I only had half the picture.

I was aware that, compared with other businesses – and certainly compared to the salaries and bonuses they pay – the big banks are no longer profitable enough to carry out the basic jobs of providing banking services that they were originally designed to do.

Love them or hate them, everyone seems to agree that banks need to end the pretence of free banking. It isn’t real and it leads to the kind of swinging charges on the people who can least afford them.

But no bank can realistically go it alone on this, and if they try to agree between them they will go to prison. So what can they do?

The answer seems to me that the government needs to facilitate some kind of legal discussion on the future of public service banking, involving all their stakeholders, so that these issues can be resolved in public.

And also, some kind of agreement whereby the banks pay for and mentor the local lending infrastructure that can lend in the places and sectors where they quite patently can’t.

But there is another element to this, which is finally now being spoken by regulators in the USA. The big banks over there have paid out more than $100 billion in fines over the past six years for their behaviour, but still seem unable to reform.

New York Federal Reserve chief William Dudley said, quite rightly, that it they were too big and complex or their systems were irredeemably unfixable, then they would have to be broken up. This is what he said:

"If that were to occur, the inevitable conclusion will be reached that your firms are too big and complex to manage effectively. In that case, financial stability concerns would dictate that your firms need to be dramatically downsized and simplified so they can be managed effectively.”
That moment is now arriving and not before time. But there is a big difference now.

Six years ago, at the height of the crisis, frontline politicians were nervous about taking the big banks apart because it looked vindictive. It looked anti-business.

Now it seems to me to be the other way around. Enterprise is crying out for effective, trustworthy banks, that are no dedicated to short-termism and are not dedicated either to sucking up all the available talent and capital from the productive economy,

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