Sunday, 27 October 2013

Privatising Royal Mail: An Objection to Sub-Contracting a Commitment

Much has been written against the privatisation of Royal Mail. Often objections focus on one of two issues. First, majorities of both workers of Royal Mail and the British public were against it. Second, there are worries it will undermine the service it provides, with increased prices and decreased access in remote areas only two of the problems already cited. I sympathise with both worries, but my sense is that there is also a further difficulty, something that bothers me beyond concerns for popular sanction and proper provision.

There is clearly something problematic about sub-contracting certain actions. I should not, I think, appoint someone else, even someone who might do a better job, to write the message in my partner’s anniversary card. Such qualms can also arise in group actions. For example, if I am a member of a neighbourhood watch group, it does not seem appropriate for me to have a third party fulfil my duties. Some worry here regards proper provision; perhaps a third party would not have the same interests in doing the job aptly. But even aside from this worry, even if the third party was more reliable and more vigilant, I think the group could object to me outsourcing the task. “We did not agree merely that the job is done”, they might say, “we agreed that you would do it”. Unless I had good reasons for delegating the duty – that I was incapacitated by illness, for example – I think I owe them an apology. I seem to have violated some constraint assumed in our commitment.

Similar cases can arise in the citizen-government relation. It can be thought that government is justified, in part, by its contribution to realising collective goods. There are goals individuals cannot achieve alone, so they collectively empower an agent to coordinate these activities. Obvious examples include national defence and law and order. When a government assumes these roles, it provides a commitment to undertake these tasks on behalf of a population, and, again, there seem cases where sub-contracting this commitment is inappropriate. I suspect that it is something like this concern which explains the high numbers uncomfortable with privatising prisons. This function seems like a collective end handed to a collective agent that, through privatisation, it is not performing. Even if it is done effectively by the sub-contracted, I think we can say: “but we asked you to do it”.

Does this argument apply to the postal service? I guess it is most plausible to suggest that the relevant collective good asked of the government here would be ‘to provide a coordinated means of communication between dispersed individuals’. Mediums other than postage could meet this requirement. However, my sense is that when the government does not provide an alternative medium – whilst it does not, itself, provide, say, phone or internet connection to all – a case can be made that it should provide one means of communication for its population, a default option of sorts. We collectively empowered an agent to facilitate nationwide contact and when they sub-contract or privatise that role completely, I think we can say: “but you committed to providing at least some form of communications network for us”.

There are cases where a government would be excused this responsibility: 1) if the population agreed to sub-contracting; 2) if the government were unable or found it too costly to provide the service. 1 does not apply here since the population did not have a say, and, as noted above, were against privatisation. 2 does not apply to a business making profit. In the case at hand, I contend that privatising Royal Mail involves objectionably sub-contracting a commitment, and that there is some (additional) reason for the government to reverse that decision or provide an alternative default option for societal communication.


Monday, 21 October 2013

Rewards and Responsibility in the Banking Sector

The source of a particularly spirited 4-hour debate in a bar in Istanbul with Will Abel (we know how to have fun) – I thought I would bring this debate to a broader discussion in, dare I say it, a more intellectually rigorous environment.
In the lead-up to the financial crisis of 2007-8, senior executives at investment banks oversaw a system in which their firms reaped substantial rewards for selling products which they knew would ultimately lead to substantial losses for whichever firm was left ‘holding the buck’. The result of these actions we know all too well: an international financial crisis which has negatively impacted the livelihoods of billions of people worldwide.
The low number of criminal prosecutions for these actions appears to be due to a combination of the complexity of the financial products involved, the widespread and interconnected nature of the transactions and the fact that it is notoriously difficult to prove harmful intent. Thus, while their actions were dishonest, immoral and reckless, they were not technically illegal.
If a doctor were to knowingly take risks when treating a patient and that patient were to be adversely affected as a result, the doctor would be criminally liable for their actions. Likewise, if an individual takes the risk of driving when overtired or intoxicated and injures another person as a result, the driver would be criminally liable. Yet, in the case of banking, we require an additional proof of intentional malfeasance in order to prosecute.
At the current time, senior banking executives are entitled to large scale benefits while passing on the risk to their shareholders, the taxpayers who are (effectively) forced to bail them out, and a global community which relies on a banking sector in order to function. Sanctions, meanwhile, have focused on fining the offending institutions – punishing shareholders and reducing banks’ ability to lend to individuals and small businesses – rather than the individuals who ultimately made these decisions. 
I move that, given the banking industry’s importance to society and the large benefits bestowed upon its senior custodians, they have a responsibility to avert such systemic levels of risk and should be legally liable for creating such levels of risk, regardless of intentional malfeasance. Not only is this a more just alignment of power and responsibility, it is a more effective way to deter reckless behavior in the future, thereby benefiting society more broadly in the long term.
Admittedly, there are difficulties in defining exactly what level of risk is palatable for society, assigning responsibility to specific individuals (since in this case the practice was so widespread) and how to deal with rogue traders such as JP Morgan Chase’s Bruno Iksil. To an extent, however, I think that these issues can be resolved on a case-by-case basis – in a sector which perennially finds new and innovative ways to make money this may even be preferable. But by establishing a precedent that not just intentional malfeasance but a negligent attitude to risk is an illegal act, we can develop a more just reward-responsibility balance and protect the interests of society from the excesses of the few.
Finally, as much as I still hope to see prosecutions brought against individuals whose actions led to the 2007-8 crisis, I do not advocate for retrospective punishment and would intend for the standards outlined above to implemented only moving forward. As frustrated as I have been by the lack of widespread prosecutions, I take solace in the fact that the rule of law has been upheld in the face of strong public pressure. Conducting prosecutions based on retrospective law changes could ultimately create a broader ‘chilling effect’ on society which would be contrary to my intentions.

Sunday, 13 October 2013

The Moral Limits of Markets

In August 2012 five people went on trial in China for facilitating illegal organ trading after a student was found to have sold his kidney in order to buy an iPad. In the subsequent reporting of the incident, the case was held up as an example of the foibles of a world obsessed with consumption; a world in which everything has a price. Even though I agree that such transactions should be prohibited, the focus on whether or not people are materialistic somewhat misses the point. The salient question is not to do with the morality or immorality of consumerism, but rather a question about the boundaries of legitimate state intervention in the affairs of private individuals.

I’m going to outline a couple of reasons there may be for wanting the state to stop these sorts of transactions. One reason is that if a market in a particular good or service corrupts the social meaning of a good, then it is legitimate to restrict the sale of that good.  The main problem with this argument is that it is quite illiberal. It can permit the restriction of the rights of citizens on the basis of reasons with which they may radically disagree, even if those rights have no harmful implications for anyone else. So, for example, the argument could be deployed in a country where a majority of Christian citizens object to the sale of kidneys on religious grounds. The Christian citizens may attempt to restrict the commodification of kidneys because they believe that human organs are a sacred gift from God which should not be ‘corrupted’ by monetary valuation. Now consider if there was a minority of atheists in this country. The atheist minority can reasonably disagree with the religious justification for the laws restricting their choice to sell their kidney. The atheist minority could protest that they are not being treated as equals; a comprehensive doctrine that they do not accept is being used to restrict their liberty. They are not being permitted to act as they choose, despite these actions having no harmful implications for any other members of society. 

A second (and better) reason for restricting markets is that people may only sell particular types of goods or services when they were in situations of such dire economic necessity that it constitutes a kind of coercion. Michael Sandel sums up this position well, he writes ‘a peasant may agree to sell his kidney or cornea in order to feed his starving family, but his agreement is not truly voluntary. He is coerced, in effect, by the necessities of his situation.’ I suspect this is why most people, me included, may want the state to step and stop these kinds of transactions. But people who are sympathetic to this view might want to consider a couple of problems with the argument.  The first thing to note about this argument is that it is not an objection to markets per se, rather it is an objection to markets which operate under highly asymmetrical background conditions. Therefore, it could not provide a reason to prevent a wealthy person selling their kidney. Another potential problem is that the transaction is paternalistic – it says that people who are in poverty are incapable of making a choice which they perceive as increasing their well-being simply because they have few resources.

Sunday, 6 October 2013

An Age Old Old Age Question

It is a truth universally acknowledged that the UK population is ageing. To be precise, by 2050 there will be 19million people aged over 65. What is more rarely acknowledged is the scale of the problem this poses. Old age is the price any society pays for improved health care; the trouble is our society simply cannot afford to pay it. In an ideal world of unlimited resources the just solution may be for the state to cover the costs of everyone’s social care. Alas we do not live in such a world. A years stay in an older people’s residential home can cost upwards of £30000. Multiply that by 950 000 (around 5% of older people currently require care) and the bill is staggering.

I intend outline three practically feasible alternative payment mechanisms and consider some of the potential injustices these systems may pose. There will be no 500 word dash to the most plausible/least objectionable/insert-political theory-phraseology here solution. I simply wish to generate some debate around one of the least fashionable, but most pressing, policy issues of our generation. Additionally, I would like to implore political theorists to consider justice through the lens of a real world policy problem. We do not only ourselves but our society a disservice if we are unwilling to be stirred from our ivory towers to get down and dirty in the dilemmas of real world policy making. And in any case, in 50 years time we will all be reaping the life that we sow now.

So, possible solution one: make individuals pay, but provide a safety net for those who cannot. This is pretty much how the system operates in the UK at present. There are two main problems with this. First, the safety net care paid for by the state is inadequate. State funded care is poor in quality and choice and, with the pressure on it increasing, is only likely to get worse. The NHS is based around the intuition that people should not receive inferior care because they cannot afford to pay – why should this be any different in older people’s care? Second, it is highly debateable whether it is fair to ask people to pay for their own care. Not everyone who gets old will need social care. Is it fair to ask an old person who is unlucky enough to need care to pay, often exhausting all their assets in the process, when their neighbour of good health will not part with a penny?

Solution two: up taxes such that all care can be funded. Putting to one side the usual questions that surround high taxes (will it destroy the UK economy, will the super rich move abroad and so on) this seems to be unfair because it places the bulk of the burden on the younger generation. Those who are already retired will avoid having to pay for their care without ever paying any form of punishing tax for it. Given the youth of the UK are already facing greater economic hardships and fewer opportunities than their parent’s generation, is it fair to disadvantage them further by levying a new tax? Or is this one off disadvantage one society must accept for a better care system for future generations? Further, is such a tax sustainable? The latter is an empirical question which depends on economic recovery and projections. In any case, any tax that would be sufficient to cover the scale of the problem would need to be substantial.

Solution three: people are left to insure themselves against the risk of expensive social care. There are already companies that provide services akin to this, but premiums are so high that few people choose to opt for them. This may be more palatable than high taxes because people choose whether or not to insure themselves against the risk of high costs, meaning it is less financially punishing and less paternalistic. Unfortunately, the flip side of an absence of paternalism if that people may fail to insure themselves altogether, meaning people could be forced to pay high costs for their bad decisions in later life. It is my opinion that some form of compulsory insurance system may be the least unpalatable option, not least because old people insuring themselves now would pay significantly more than young people, and pay this equally, thus baring the cost of their generation’s care themselves. However, additional to the problem of paternalism this measure would also be highly inconsistent. There are many things it may be beneficial for people to insure themselves against that are not compulsory. How could this inconsistency be justified? Ultimately, my answer to that is that consistency should be an aid to justice, and not an end in itself. I for one would rather live in an inconsistent society with more just outcomes than one where consistency is pursued above all else.