‘Wrong’ said Fred
This morning on the Today Programme I heard Labour MP John Mann question whether the public humiliation of Fred Goodwin might detract from the need to engage in deeper questions. It put me in mind of a personal dilemma.
Preparing for conversation in which my starting point is contrition, I find myself rehearsing the words; ‘I am asking you to understand, not to excuse’. You may have said or heard something similar. Sadly, although this sounds like a thoughtful and humane distinction, it is probably fallacious; a consideration which may be relevant to the preponderance in recent times of mass outbursts of vilification (think celebrities, think MPs, think bankers).
The idea of pure personal blame involves putting a punctuation mark in the narrative of cause and effect. Something bad happened because someone who was free to make a good decision made a bad one. Attributing personal blame (rather than mere proximate cause) involves adhering to a robust sense of free will; a bad decision was the result not of what led up to it but of a freely made choice.
But when we ask for our actions to be understood we are suggesting they were, at least in part, the consequence of factors other than a free and bad decision. Explanation dilutes blame. Clarity isn’t helped by the different associations of the word understanding (the verb to comprehend ‘he is good at understanding maps’ and the adverb meaning sympathetic ‘he was very understanding’). While the conflation or overlaying of the positive meanings of understanding is common, it is logically necessary. It is perfectly possible to separate them entirely as in ‘I understand exactly why you did it and that’s why I want you to suffer’.
When it comes to individual blameworthiness, as in the case of Fred Goodwin, our options could be put in a two by two matrix using the different meanings of understanding as the x and y axis.
Square one: neither understand/explain nor understand/sympathise, is associated with total personal blame. Fred should be punished to the max.
Square two: don’t understand/explain but do understand/sympathise might be the space for the religiously humble (‘let he who is without sin…’). A person holding this view would probably not want to punish Fred gratuitously.
Square three: understand/explain but not understand/sympathise could be the position of the anti-capitalist. Such a person night argue that to single out Fred from all the other ‘evil bankers’ is to excuse ‘the system’.
Square four: understand/explain and understand/sympathise might be the square either of other bankers or soft hearted academics. Presumably they too would hesitate before taking Fred’s knighthood.
There may be utilitarian or symbolic reasons why Sir Fred should have been stripped of his title but of these four positions it seems to me only the first is commensurate with taking such a rare and exceptional action (there are after all plenty of rogues with honours). So, on balance, I think John Mann is right; there is at some level a trade-off between a desire to punish the man and a willingness to question the system. This approach also throws up an irony; advocates of lightly unregulated financial capitalism should presumably be relieved that the public seems more inclined to blame Fred than explore how he came to be so powerful and why his decisions caused such mayhem.
An end to the paradox?
Filed under: Credit crunch, Politics, Public policy, The RSA
Much to the relief of my PA Barbara (‘Matthew, I’m almost missing your jokes’), this is the final post in a series of seven exploring the paradox of entitlement. Along the way I have received many useful comments, some positive, other less so. A number of people have questioned the clarity and consistency of my use of the term entitlement. The criticisms are well founded. I am deliberately stretching the idea to try to develop a narrative which links all sections of society and offers a vision of solidarity and purpose instead of the prevailing atmosphere of pessimism and resentment. After reading today’s effort – come on folks just 750 words to go – you can tell me whether I have at all succeeded:
1. In the context of rising needs and limited resources (a squeeze which is highlighted by, but goes beyond, the current fiscal deficit) we face a social aspiration gap. The hopes and expectations we have for our collective future are not matched by the ways in aggregate we think and behave right now. There will be many forces which shape the future – some of them beyond our control – but the society we want is unlikely to emerge unless citizens as a whole are more engaged, more resourceful and more pro-social.
2. One aspect of the social aspiration gap is the paradox of entitlement. For reasons of equity, solidarity, well-being, freedom and efficiency we should aspire to an affluent country such as ours providing a range of entitlements to its citizens. However, unless they are matched with citizenship obligations and expectations these entitlements will fail to deliver the social outcomes we want and will increasingly prove to be financially unsustainable. (Beyond the deficit there is population ageing, the pressures of global completion and the constantly rising comparative costs of ‘high touch’ care based services. As Lawrence Summers wrote in yesterday’s FT, there has over the last generation been a fifty fold change in the relative price of a television and a day in hospital.)
3. There are many types of social entitlement but they could be divided into three: the entitlement to decent subsistence provided to those who are unable to meet their own needs, the entitlement to public services and protections made available to all citizens, and the entitlement afforded to the well off in society to use their privileges to the future advantage of themselves and their children. Whilst the third of these entitlements is of a different nature to the others it can nevertheless be seen as such in that the capacity of the well off to exact future advantage from today’s success offends meritocratic principles to which a majority of people strongly subscribe.
4. There are principled and pragmatic arguments for each type of entitlement. For example, a failure to meet basic subsistence needs could be seen not only as inhumane but also to be likely to lead to widespread social disorder; the withdrawal of public services could be seen to undermine social solidarity but also to lead to a chaotic and inefficient patchwork of rules and provision; seeking to ban the well-off from using their privileges to seek future advantages would be seen not only as an intrusion into basic liberty but administratively impossible and economically counter-productive.
5. But each entitlement also brings with it moral hazard. The guarantee of subsistence could lead people to accept dependency instead of seeking independence; the provision of public services and protections could lead to people maximising their own gains from the system at the expense of the community as a whole; and the freedom to use economic advantage could lead not only to unjust outcomes but also inefficiency as the most talented lose out to the most privileged.
6. We need a new approach to politics and policy which has these characteristics: tough minded and honest in explaining that citizens have to step up to the plate; optimistic in arguing that we can raise our game and, if we do, we can improve quality of life despite rising needs and limited resources; even handed in raising expectations of responsibility across society.
7. From this starting point we can explore a range of strategies for balancing entitlement with obligations and expectations. As I have described in earlier posts, this could include a tough but supportive regime of conditionality; the development of the principles and practice of a new contributory principle; reconceptualising and re-organising public services as collaborative relationships between service providers, service recipients and the wider community; and building a social consensus about the need for action to ensure that inequality of outcome does not inherently lead to systematic inequality of opportunity.
8. The story told by this series of posts is partial, incomplete and probably inconsistent (not to mention pompous and pious). But however much it can be improved, the core point remains: we urgently need our political leaders to articulate a powerful, and inclusive narrative that assigns us all a role in finding purpose, solidarity and hope for difficult times ahead.
The more you put in, the more you get out?
Welfare reform exhibits a well-known ‘trilemma’: out of the three main goals of policy – helping the poorest, incentivising work and saving, and containing expenditure – it is possible to choose any two but never all three. This, in essence, is why the contributory principle, which was only ever partially embedded in the welfare state, has been consistently eroded by governments of all parties. As John Hills, perhaps the UK’s leading welfare expert, argued in a paper back in 2003:
‘ under governments of the Left, arguments in favour of inclusion have been predominant, non-contributory benefits expanded and contribution conditions softened; under those of the Right, the emphasis has been on focussing limited resources on the poorest through means-testing’
Those on the political right are particularly prone to criticise what they allege to be a ‘something for nothing’ welfare culture. The celebration of Margaret Thatcher’s reign occasioned by the release of a biopic may therefore be somewhat tempered by the recognition that reforms to pensions and benefits during her time in office were a major assault on the contributory principle. The current Government is making further inroads into what is left. The Employment and Support Allowance is in part a form of insurance against losing employment through ill health. Those who have paid into National Insurance were implicitly buying this protection, but now it is being cut back.
The idea that what you get out of the welfare state might in some way reflect what you put in is not, however, something which should be consigned to history. Reviving this idea might be part of addressing ‘the paradox of entitlement’, the subject of several of my recent posts.
Yesterday saw an alliance of organisations (including the RSA) representing a wide array of interests and views calling on the Government and opposition to work swiftly towards a new funding regime for social care. The Coalition appeared to knock the recommendations of the Dilnot Commission on Social Care funding into the long grass when they were published last July, but talks are forthcoming to try to develop a new cross party consensus on reform.
Social care is in crisis and – as I have suggested in past posts – it may now represent the first major area of welfare provision since the creation of the modern welfare state demonstrably to deteriorate. Many in the sector argue that a new funding regime is the essential prerequisite for creating a more stable system capable of providing decency to all in frail old age.
In a sense the Dilnot package includes a modern form of the contributory principle. The Commission proposed a state guarantee to pick up all social care costs above a fixed limit (£35,000 was suggested by the Commission). As well as addressing the perceived unfairness of older people giving up lifetime’s assets to pay for care, through capping the total an individual can be asked to pay this proposal seeks to create the basis for a market in social care insurance. Dilnot also proposed that the means test limit below which people are not required to pay for any care should be significantly increased.
Some on the left criticised Dilnot on the grounds that his package was more geared to helping the middle class than the poor. But any attempt to create a financially sustainable system in which all have a stake involves combining a universal safety net with a partnership between the state and those who can afford to meet some of their care costs.
Another response to an ageing society is the auto-enrolment pensions system designed by Labour but from later this year being gradually rolled out by the Coalition. Indeed in combining individual contributions, employer contributions and a Government contribution (through a tax break) the new system echoes one of the first manifestations of the modern welfare state: Lloyd George’s famous ‘Ninepence for Fourpence’ health insurance scheme unveiled in 1911.
The student loan system too is a form of contributory welfare. Students’ courses are funded by a combination of direct funding and underwriting of loans by the state and income contingent student contributions.
It is well understood that the classic Beveridge model contributory system has largely withered away. It is less often noted that new models and proposals for state-individual contributory partnerships are emerging. Squeezed budgets and rising costs mean that new contributory arrangements are necessary – indeed inevitable - if universal entitlements (including core public services) are to be protected.
An important task for politicians and thought leaders is to explore the rationale, values and expectations necessary to underpin a new contributory principle.
Defending rights from the right
Since first writing about it a few weeks ago I have found myself thinking more and more about what I called ‘the paradox of entitlement’. I have even allowed for the possibility this could be a strong enough topic for a book. But as anyone knows who reads this blog at all regularly, when is comes to sustained intellectual projects my reach far exceeds my grasp. As under-promising and over-delivering is as sound a strategy for life as it is for politics, I will for the time being restrict my ambition to a few more posts examining various facets of the paradox.
To recap, the paradox of entitlement states that social rights are a good thing but their social benefits are much reduced, and their economic viability increasingly questionable, if people treat them as mere entitlements. This post and my next will argue that this contention has the virtue of challenging orthodoxies of both the left and right.
Forgive the generalisation but the right is uncomfortable with the idea of entitlement. The most obvious concern, especially in times like this, is financial viability. But while this makes a pragmatic argument for the limits to what can be guaranteed by the state (one which thoughtful people on the left would accept but to a different extent) there are deeper more doctrinal concerns.
Through the generation of moral hazard, entitlements – especially in the domain of welfare benefits – are seen as socially corrosive. To use a phrase favoured by columnists in the Daily Mail and Spectator (but also by Labour centrists) welfare rights create a ‘something for nothing society’ and trap the poor in ‘a culture of dependency’.
It is obviously more palatable to attack social rights on the grounds that they are bad for the poor but the right also believes they are bad for everyone else. On the one hand, financing social rights (whether protections, services or welfare payments) through taxation requires restricting the freedom of those who have become wealthy through their own choices and efforts; thus the rights of the unsuccessful and feckless are put above those of the successful and industrious. On the other hand, the provision of expanding universal social rights provides a pretext for the growth of the state and the wider imposition of a bureaucratic conformity; to use Hayek’s mordant phrase it sets society on ‘the road to serfdom’.
Many of these concerns are reasonable and can be seen to reflect genuine problems for policy makers. But the idea of social rights can nevertheless be defended. For a start, I want to argue that many of the problems the right links to social entitlements are contingent rather than inherent. The degree of moral hazard and the extent of central state interference can be altered by the design of benefits and social programmes and by the normative context of expectations and obligations in which those rights are exercised.
By portraying contingent problems of welfare regimes as inherent the right avoids confronting the core question; is it a good thing that as wealth, freedom and opportunity expand we should seek to increases the entitlement of all citizens to those basic aspects of life that research consistently shows to be the most important to people’s well-being, resilience and life chances? Or to put it another way, how defensible is the idea that in a rich society many citizens might through misfortune, mistake or even eccentricity be denied the basic building blocks of a decent life over which they can exercise some control? As John Rawls famously argued, if we were designing a society knowing we had to live in it but not knowing whether we would be privileged or talented, we would surely be inclined to design one which protected the interests of its less fortunate citizens.
A concern for the opportunities of everyone not just the successful also provides a defence of social rights from the argument that their financing through taxation infringes freedom. For if freedom is considered aggregately across society, then the freedoms at the margin lost to the well off by paying taxes are likely to be more than offset by the freedoms gained by the poor as a consequence of having various social entitlements and therefore being more able to exercise autonomy in their lives.
Interestingly, an emphasis on freedom also poses problems for the right’s general support for greater conditionality in welfare provision (a support shared strongly by the general public). It may be an unfashionable idea, but for a society to agree that all reasonably law abiding, reasonably sane, citizens should receive social entitlements is an important statement about the freedom of citizens to choose lives they consider valuable even if most of us don’t agree with their choices. The wider conditionality extends the less such freedom exists.
These are the bare bones of the first half of the case for the entitlement paradox; social rights are a good thing. I would, of course, be pleased to hear from my friends on the right why I’ve got this wrong, but bear in mind that my next post will focus on the second half; that for people to treat entitlements as entitlements may be both socially corrosive and financially unviable.
Up the workers
As RSA Chairman Luke Johnson announced in his FT column yesterday, the Society is to hold a Jobs Summit in January at which a range of experts will offer ideas to get today’s labour market moving and to prepare the way for the jobs of tomorrow.
Some new data from the United States offers interesting food for thought ahead of the summit. As Robin Harding explains in the FT, the key figure is 58%…
‘That figure is the share of US national income that goes to workers as wages rather than to investors as profits and interest. It has fallen to its lowest level since records began after the Second World War and is part of the reason why incomes at the top – which tend to be earned from capital – have risen so much. If wages were at their post war average share of 63%, workers would earn an extra $740bn this year, about $5000 per worker.’
This is not only an issue of fairness, it also impinges directly on the economic crisis. For while many corporates are sitting on cash mountains (which they are not investing because of low demand and uncertainty about the future), were that money in the hands of workers they would presumably be out spending it.
The causes of this trend are complex but it seems reasonable to conclude that a combination of globalisation, technological change, and neo-liberal policy has led to a fundamental shift of power from workers and their agents on the one hand to owners, investors and their agents on the other.
The factors which govern the balance of power and wealth between owners and workers are all pointing to a further shift away from the latter. Tight labour markets favour workers but apart from some pockets of the economy high unemployment means the power lies with buyers – not sellers – of labour. Outside the public sector trade unions are now very weak. The Coalition is committed to less not more labour market regulation. Rising wage levels in developing countries will eventually lessen the impact of globalisation on developed world employment and wages, but only in the long run.
Perhaps one answer– and here I am well outside my comfort zone – is to provide carrot and stick incentives for companies and investors to put their money to work, especially in ways that boost wages or create jobs. One way is the idea floated in the Autumn Statement of investing pension funds in infrastructure projects, but the problem here is that this is a slow solution to an immediate crisis. Another – which could work much more quickly – would be some kind of deferred ‘use it or lose’ tax on company liquid assets.
As always, I am hoping for some enlightening comments on this post but I will also be nervously scanning my inbox. The last time I ventured into economic policy I got a polite but firm late night email from Jonathan Portes, Director of the National Institute of Economic and Social Research. I can’t recall the precise words he used but it was something like; ‘Hi Matthew, I really enjoyed your recent post about a bond to create jobs. Sadly, it was economically illiterate’.
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