Monday, 19 March 2007

The Trap: Whatever happened to our dreams of freedom? (part 2)

Last night BBC 2 showed the second episode of Adam Curtis’s new series, The Trap: Whatever happened to our dreams of freedom?

As I explained when I reviewed part 1, the general premise of the programmes is that over the past thirty years, trends in psychology and economics that viewed the people as a rational, selfish individuals interested only in personal gain have come to dominate public policy. Policy-makers have lost faith in the concept of public service and have instead applied market forces to public services in an attempt to give power to citizens (as consumers) and free them from the shackles of bureaucracy. However, Curtis argues that this has in fact backfired, leading to worsening inequality and a collapse in public services and political efficacy.

Part 2, subtitled The Lonely Robot, expanded on these themes with particular focus on the 1990s, and in so doing highlighted both the mistakes of what we call the Thatcherite Revolution and Mr. Curtis’s own erroneous analysis. I will explain these errors below, but first I will provide a synopsis of the programme. Those familiar with it may wish to skip the next six paragraphs and move on to my comments.

The programme began by returning to Buchanan’s Public Choice Theory, which argues that politicians and civil servants actually pursue their own rational interests rather than the public good. Curtis juxtaposed John Major’s efforts to create an internal market in public services that would use the rational interests of public servants to achieve public ends, with Bill Clinton’s interventionist presidential campaign, in which he publicly berated President Bush for his laissez faire approach, saying that if Bush would not use the powers of the presidency to improve America, he should stand aside for somebody who would. Clinton was elected, but before he took office was visited by Alan Greenspan and Gene Sperling, who explained to him that if he tried to intervene in the economy he would just worsen the economic crisis of the early 1990s. They convinced him that the power of governments to effect positive economic outcomes was a chimera; only the market could provide the prosperity America craved. Clinton accepted this advice and presided over one of the greatest economic booms in American history.

However, Curtis criticised the underlying basis of this belief. He argued that the consumer society did not in fact reflect the economics of Adam Smith. Rather, its assumption of the rational individual pursuing self-interest ignored the sympathy and moral sentiment which Smith argued were essential to man’s role in society. Instead, the selfishness of the species stemmed from scientific theory. Curtis dwelt upon and later critiqued anthropological studies of the Yanomamö people of Central Brazil, and also noted the view (promoted by Richard Dawkins, among others) that animals – including man – were merely vehicles and tools for the promotion of their selfish genes. Meanwhile, the revolution in psychological diagnosis described in last week’s programme had led to around half the population reporting themselves as suffering psychological disorder. New drugs such as Prozac appeared to offer a cure. The result was that millions of people took drugs to “normalise” their behaviour and emotions – a practice that some interviewees believed threatened to create a static, stagnant society.

Back in the world of public policy, 1997 saw New Labour elected to govern Britain. Labour took the distrust of policy-making to a new level, as demonstrated by the granting of independent powers to the Bank of England. Labour’s means of “incentivising” public servants was to set centralised targets and reward or penalise them accordingly. Curtis cited some of the more ridiculous examples of targets set by the Labour government, including:

  • A community vibrancy index
  • The quantification of bird-song in the countryside
  • A target to reduce world conflict by 6 per cent
  • A target to reduce malnutrition in Africa by 48 per cent

The result was not driven and measurable success, but what a member of The Audit Commission called a systemic “gaming of the system”. The NHS would employ people who’s job it was to greet people on admission so that they met their targets of seeing patients within a certain time, though no treatment was given; wheels were removed from trolleys and corridors were renamed wards so that patients could be counted as being in a bed in a ward; the police reclassified crimes as “incidents” so that crime fell; schools taught easy subjects and concentrated on mediocre children so as to raise the number of children gaining GCSE grades A-C. The result was a decline is social mobility to the point where a child born in Hackney was twice as likely to die in its first year than one born in Bexley.

Curtis also critiqued the supposed boom in the US. The apparent rise in the financial markets was based increasingly on dodgy accounting practices rather than reality. Meanwhile the economic progress was increasingly one-sided: one interviewer highlighted three interesting comparative statistics:

  • The real term after-tax income of a family in the lowest quintile fell between the 1970 and the 2000s
  • The real term after-tax income of a family in the middle quintile rose only slight between the 1970 and the 2000s
  • The real term after-tax income of a family in the top 1 per cent rose by an enormous amount between the 1970 and the 2000s

Thus Americans were not only becoming less equal; the poorest were getting poorer.

The result of the revolution of the last thirty years, concluded Curtis, was that politicians were weakened by a mistaken belief that they could not affect change or improve welfare. Politicians were emasculated and corrupted and felt powerless. Meanwhile, the masses were not fulfilled by either consumerism or politics, but were instead doping themselves up on psychiatric medicines. At the same time, scientific evidence was emerging that undermined the selfish-gene and anthropological evidence of the 1970s, John Nash – the father of game theory – had begun to repudiate much of his work, and the free market was under attack by economists who argued for greater intervention and critiqued the rational individual thesis.

So ended the second episode. The third promises to discuss the War on Terror and – I suspect – “spin”.

Sadly, the second programme lived up to all my expectations. Curtis is an excellent documentary maker, but while he highlights genuine and important crises within society and provides a plausible historic context, he tends to misinterpret the causes and thus advocate policies that would exacerbate rather than alleviate those problems.

For a start, Curtis is prone to simple mistakes. For example, his critique of the American economic experience in the 1990s made a schoolboy error, confusing the state of the financial markets with that of the economy. In fact, the eventual collapse in share prices as the Dot Com and dodgy-accounting bubbles both burst had almost no effect on the US economy – the 2001 recession was the shortest and least painful in American history. Similarly, the statistics about relative welfare did not explain how far this was a result of taxes undermining the incomes of the poor (the statistics being post-tax incomes which suffer from heavy taxation), or of the effects of immigrant labourers who generally take low-paid work at the bottom of the economic pile, thus lowering averages without adversely affecting anybody, while they are happy to make a new life for themselves and their families. Similarly, in comparing infant morality rates in two London boroughs, Curtis failed to clarify whether the widening gap was due to a decline in Hackney or an improvement in Bexley.

Other errors, however, are more substantial, and demonstrate that he has fundamentally misunderstood both the classical liberal case and the causes of Thatcherism’s failures. The fundamental example in The Trap is Curtis’s belief that market mechanisms have been injected into public services and have as a result created perverse incentives for deliverers to “game the system” by aiming at achieving targets rather than positive outcomes for citizens; that governments have acted upon the belief that bureaucracies serve their own interests first. This is a profound error. In fact, the supposedly-liberalising agenda of the three (soon to be four) Thatcherite Prime Ministers has been completely undermined by the distrust that both the Conservatives and Labour have for freedom and the market.

Instead of creating a true market, with individuals holding the power as consumers and using their power over the money to reward success and punish failure, the past thirty years has seen the greatest centralisation of power in Britain since the Stewarts attempted to introduce an absolute monarchy. Distrustful of what a true market might produce, successive governments have endeavoured to micromanage the public services from Whitehall. Thus, instead of eliminating the power of self-interested bureaucrats, they have made local authorities and public services answerable to central government, made delivery departments answerable to the Treasury, and made the Treasury answerable to a small coterie around the Prime Minister and the Chancellor. This has led not to liberty and a genuine market, but to an over-regulated, over-centralised, overly-bureaucratic system. This is not what either classical- or neo-liberal economists would have suggested.

A real market that genuinely empowered people and lifted the dead hand of bureaucracy from our shoulders would put citizens in control. Rather than being answerable to civil servants in Whitehall, deliverers would be answerable to citizens through the latter’s ability to allocate funding. As Friedman demonstrated in theory and Sweden demonstrated in practice, voucher schemes not only drive up standards but they are particularly beneficial to the poorest in society. Sweden – that paragon on Social Democracy – has similarly had a very positive experience with creating a healthcare market.

Sadly, this kind of freedom is not to Curtis’s taste. For him the volatility and unpredictability of the market is disturbing, and the freedom of the individual is a myth. He prefers the certainties of Statism and the comfort of the community. But with the lack of hindsight that only a shift of generation can provide, he ignores the bleakness of the last period of interventionist government and the abject failure of Statist solutions. One need not look to pre-1990 Eastern Europe for evidence of the failure of state planning; dirigiste France’s youth unemployment of 25 per cent and Germany’s stagnant economy are lessons enough for us. Governments are incapable of managing so complex and delicate a system as the economy, which rely on incalculable pieces of information. Economies are, in essence, merely a mirror of society as a whole, and efforts to manage economies are therefore efforts to manage society. Whether it is through dictating how many hours an employee may work or through confiscating a portion of their earnings for central distribution, such efforts are inherently illiberal and should be kept to a bare minimum.

The desire of recent governments to end the old bureaucratic tyranny is laudable, but their efforts have been risible and their methods misguided and ultimately counter-productive. Only by genuinely empowering citizens through giving them the power to allocate their resources – be they those they earn or those transferred to them by a welfare state – and allowing the consequences of those decisions to have their effect, will we improve the quality of public services and benefit society more generally. Into the bargain we will re-invigorate the population who, being now in control of their own destiny and no longer supplicants at the mercy of the state, will rediscover the moral sentiments that Smith and Mill thought vital elements of a fully rounded person.

I have separately reviewed part1 and part 3. Curtis's conclusion and my analysis of it are discussed in a final post.

12 comments:

James said...

Mirroring your own position, I know less about the economic theory and more about the biological stuff, but I share at least some of your concerns.

Thus far, Curtis has portrayed game theory as concluding that only ruthless, brutal selfishness is the way to behave. In fact, game theory repeatedly suggests that co-operation and even some forms of altruism are inherently 'rational'.

Dawkins' Selfish Gene, for example, is all about co-operation at every level, from the gene up to the species as a whole - it's conclusion is that we can't survive without co-operation.

What appears to be problematic is not the theory, which is continually evolving, but reductionist and selective applications of it.

With that said, I'd like to be convinced of the 'it works in Sweden so why not here' argument, but I'm not. Sweden spends a lot more of its GDP on education than the UK, does it not? A voucher system may well be the answer to our educational system, but it can't be done on the cheap. It may well be a price worth paying, but unless you have the politicians willing to make the spending commitment, marketising the education system would just lead to even greater inequalities.

AxeTheTax./ WatchKeeper said...

I have read your review all but the last two paragraphs and the last two lines.

Mr. Papworth, I have a couple of Blogspots on Google and Google has been kind enough to list my "Action Network" Website top of the shop on their Search Engine. That is for "Sovereignty Democracy Taxation".

It is my contention that it would be a much better thing if the Taxpayer was in control of Direct Taxation. It is a simple matter to remove the power of Westminster and Whitehall from this job, this function of allotting Taxpayers money to the seperate regions or areas of the Country, according to their voting record. Buying off the population as they go.

To cut a long story short, it is no trouble to change the way an Employee agrees to work for an Employer. The method of Payment can be Legally arranged so that the Company or Business, becomes a holding company and employs an Agent registered in some Off-Shore Tax Haven, the Agent does the Hiring and Firing and looks after the Payment of wages and Remunerations. From an Off-Shore locatiion.

The Employee then has a duty to notify the HMRC, Inspector at the HMRC Office located at the district nearest the Employees residence. That is the basic outline. I forgot, there is a concession, allowing you to claim 100% Taxation relief on all money Not remitted to this Country.

More detail can be found at-:
http://www.bbc.co.uk/dna/actionnetwork/G2287 And Links to other sites

Time I moved on. Once again, thank you for a very interesting article.
Regards, ATFlynn.

Anonymous said...

first two episodes are here:
[url]http://blogomnibus.blogspot.com/[/url]

Anonymous said...

Dear Mr Papworth,
Thanks for your summary of The Trap as we managed to miss some of it and are not political analysts. I wasn't sure from the programme if Berlin got it wrong as from what I saw there was no negative freedom, but vested interest -(would that be positive freedom?). I'm not sure the experiment has really been done and the theory dis/proved.

It strikes me that there is often a misappropriation of ideas from one field or discipline to another, especially from science to society. The selfish gene, for example, does not mean the selfish human. The survival of the fittest phenotype in one particular environment does not mean the fittest business model. Molecular science is not economics .

Your explanations and links are a real help and joy to one like me so again, many, many thanks-SHC

Tom Papworth said...

SHC,

It is a pleasure to be of help.

I am planning to post a summary of the final programme later today, where I plan to explain that Berlin was right but that Curtis misunderstood both what Berlin was proposing and what we have seen in the last thirty years - lip service to negative liberty used to mask a positivist agenda that has reduced freedom.

I hope you will continue to enjoy my site.

Tom.

K-Pax said...

A school voucher system is nothing more than a redistribution - upwards that is - via a money off coupon for the wealthy paid for by the taxes/charges of the middle and lower income groups.

> From the frontlines of the war against social mobility, the investigative journalist Greg Palast.

Scroll down to - The Great School Voucher Hoax...

http://www.gregpalast.com/no-childs-behind-left
....OK, class: What is wrong here? Umm, well, it's not so easy to find a good school that will teach your kid for $3,500 a year, and there are exactly none for $1,000. In other words, your school voucher doesn't get you into school. You can give a poor kid a $3,500 voucher, but it won't get him into Phillips Academy. Little Antonio can use his voucher for about four weeks of Phillips ($33,000 per school year), at which point he'll have to go back to picking broccoli outside Phoenix. In other words, the Arizona "voucher" program, like every other school voucher program proposed in the USA, is not a voucher at all.

A voucher is a coupon that lets you get something for no cost. An airline screws up your ticket, you get a hotel voucher, you don't pay for your room. However, the Arizona "voucher" is nothing but a discount coupon, the kind you get in the mail every day and toss in the recycle bin. So who benefits from this "free" private school program?

According to No Child Left expert Scott Young, 76% of the money handed out for Arizona's voucher program has gone to children already in private schools. In other words, the $1,000 check from the state turned into a $1,000 subsidy for wealthy parents, a $1,000 discount on private schools for the privileged.
How astonishing: A program touted as a benefit for working-class kids that turns into a subsidy for rich ones. You're shocked. What about little Antonio? He returns with his unused voucher to his wretched under-financed local school in Apache County, Arizona....

K-Pax said...

As regards your over-regulated point. This is quite ridiculous, the Thatcherite system of deregulation/liberalisation is not called that as spin. That is the system! That's why whenever the experiment in deregulation and lower prices, say in electricity, in every state in the US has been tried it has failed. Before this is was called regulated for a reason i.e. the market did not control it the community did. The same higher prices can be seen in every other nation, from Nordic nations to New Zealand to the UK. Your harping about the failure as a sign of a need for more market reforms sounds like more "useful idiot" nonsense which would get you straight into some government employed think tank persuading developing nations to take up anti-developmental polices, such as in Tanzania with biwater

.... a right little Lord Lytton

Tom Papworth said...

K-Pax, I'll take a Nobel Laureate over a gutter journalist any day!

But as we’re citing sources (http://www.friedmanfoundation.org/friedman/downloadFile.do?id=102)

Does school choice help students do better in school?

Seven studies using random assignment, the gold standard for social science, have found statistically significant gains in academic achievement from vouchers, and no such study has ever found negative effects. Random-assignment methods allow researchers to isolate the effects of vouchers from other student characteristics. Students who applied for vouchers were entered into random lotteries to determine who would receive the voucher and who would remain in public schools; this allowed researchers to track very similar “treatment” and “control” groups, just like in medical trials. Other research establishes positive academic effects from vouchers as well.

Does school choice make public schools better?

A large body of evidence says yes. If all schools compete for students, public schools will not be able to take students for granted, as they do now; they will have to improve to prevent students from walking out the door. In practice, it is becoming clear that this is exactly what is happening. Not one empirical study has ever found that outcomes at U.S. public schools got worse when exposed to school choice, and numerous studies have found that they improve.

Doesn’t school choice drain resources from public schools?

No [US] state or city with school choice has seen its public school budgets go down. When Milwaukee’s school choice program was founded in 1990-91, its public schools spent $6,316 per student; by 2003-04 that had risen to $10,375. Cleveland’s public school spending rose from $6,616 in 1996-97, when its choice program began, to $10,420 in 2003-04. And these figures include only the portion of school budgets known as “current expenditures”; figures for total education spending would be even higher.


And from the older version…

Does school choice SERVE the students who need it most?

Research shows that prior to receiving a voucher, the majority of participating students score well below the national average on standardized tests. In Milwaukee, for example, children scored in the 31st percentile. In New York, children scored in the 27th percentile. In addition, a recent study showed that the majority of charter schools in America serve academically under-served children. Basically, prior to receiving a voucher, students perform in the bottom third academically.


Regarding your nonsense about de-regulation leading to price rises, that is simply not borne out by the facts. Water and electricity prices in the UK have plummeted through competition, and the effect on telecommunications has been revolutionary.

The last couple of lines of your comments are very revealing of yoiur mind-set, however.

Anonymous said...

Dear Tom Papworth

with regard to your article and in particular to your replies to K-Pax

Re: K-Pax
I would note you did not answer the direct example instead you quoted other sources and studies of other systems and implementations.

I smell a Rat and it is not K-Pax but you and it smells of Spin.

The point was made that the voucher system in Arizona did not allow a poor person to enter private education. What it did do, quite nicely however, was subsidise those already in private education. K-Pax quoted fees and voucher values and the percentage of the fund used by those currently in private education in the state.

You instead did not answer him on the specific example and instead quoted research into other systems in other places.

Classic "Politician Speak" I am afraid and you stand accused of what I call the most heinous crime in Politics: smoke and mirrors!

Re: your article on The Trap.

I suggest less navel gazing and pontificating on statistics and some attention to the real world Mr Papworth. There is a war on out here and it is not just on Terrorism. It is fought by the Rich and Influential. It has one goal, remaining rich and in power whilst the rest of the world either drowns, starves or dies of disease.

Whatever your beliefs on Conspiracy or Game Theory it is a fact of real life that those in power seldom, if ever, vote against those with money unless they wish to lose their influence.

It is a fact of political life that campaigns cost money and you are forever beholden to your benefactor.

Those in power defer to those with money who will, out of self interest, make choices that tend to continue the status quo if they can not further tip the balance in their own favour.

It is attributed to Confucious (but then almost everything is!) that an official wanting a high post will do anything to obtain it and having obtained it, fearful of losing it, will do anything to keep it.

This is not game or conspiracy theory this is a simple observation of human behaviour when it attains selfishness as the building of personal wealth seems to cause. Whether you beleive or not the bible states it is not Money but "The love of Money" that is "the root of all evil"

The human race can and do cooperate and do display altruism. Our love of survival stories and heroic tales of self sacrifice show that in literature the world over. Not everyone is selfish but the expression of altruism is all to often stamped on by individuals of aggresive nature whom it would seem tend to end up as leaders.

Perhaps it is the cult of "leader" and the fact it usually results in Party Politics that always ursurp the democratic process to allow a "leader" to dominate that is the problem?

Anonymous said...

I quote from the Brunei Times (home of the not so poor Sultan) of 10/4/07 in an Article on one of Asia's supposedly politically cleanest and most prosperous nations. I think it proves my points about the cult of leader destroying democracy and the fact that the Rich and Influential seek only to maintain or improve the status quo in their favour.

SINGAPOREAN Prime Minister Lee Hsien Loong recently recommended an 83 per cent pay increase for all his cabinet ministers, a proposal that would up their current annual pay rate of S$1.2 million (US$784,300) to S$2.2 million.
...
High pay for Singaporean government officials has historically helped curb corruption, which compared with other Asian countries ranks favourably on international graft rankings kept by such organisations as Transparency International. But many here feel that the upward adjustment, which will indirectly benefit Lee's ruling People's Action Party (PAP), which currently dominates Parliament by controlling 82 of 84 seats, is in poor taste at a time that many middle- and lower-class Singaporeans face a declining standard of living.
...
Minister of State for Trade and Industry Lee Yi Shyan (no relation to the prime minister) said in Parliament on November 8: "At the household level, between 1990 and 2005, households in the top 20 per cent experienced the fastest per capita income growth of six per cent per annum. The lowest 20 per cent actually (saw) their household income decline between 2000 and 2005.

"We can see the effect of globalisation here," he noted. "It is pulling both ends further apart. The end result? The top is soaring ahead, the bottom is falling behind and the middle is feeling the pressure."

Prime Minister Lee's proposed pay increase is clearly aimed at keeping the ruling PAP class in Singapore's upper wage-earning tier. The question is whether the move is controversial enough to create substantial political turbulence.

Three weeks before Lee spoke about the need to raise his politicians' pay by 83 per cent, the government had defended as sufficient its recent decision to increase social welfare to the destitute by S$30 per month. Minister for Community Development, Youth and Sports Vivian Balakrishnan told Parliament during the budget debate: "An elderly recipient, living alone, currently receives about $260 (US$171) a month. We will increase that to $290 a month."

Even the ruling PAP's own backbenchers were underwhelmed by the marginal boost _ cognisant, perhaps, that growing wealth disparity was a hot-button issue taken up by opposition parties during last year's general elections. Member of Parliament (MP) Lily Neo, responding to Balakrishnan, told him: "My single constituents told me that they needed to skip one meal a day to live on the $260 per month. And now, (the ministry) is going to give them $1 more a day."

end quote

Nuff Said!

Tom Papworth said...

Anonymous defender of K-Pax,

I think you have missed the point. On the one hand, school choice benefits those in public schools as well as those in private schools, by driving up standards for all. Even if the money ONLY went to rich parents in Arizona, it would not matter if it resulted in improvements for all Arizona's children.

On the other hand, I fail to see why a system that taxes everybody - progressively, so that the rich pay a greater proportion of their incomes than the poor - and promises all children an education is worse than one where everybody is taxed but some children are excluded from benefiting because their parents exercise choice. That is not liberal.

But enough about school choice! It was just one line in a whole review, and deserves a separate posting.

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