Friday, 6 January 2012

The new Economy: autonomy, fairness, accountability

In the last few years the world seems to have shifted, it is now a very interconnected place. Nationalism now seems at odds with the way the economy now works, surely in a world where everyone relies on everyone else to get things done letting your suppliers or customers fail is a bad idea?

The spectre of communism seems to still scare people, and the left and right fight increasingly meaningless battles over who can impose an irrelevant categorisation system to policies. The arguments about capitalism, socialism and, communism seem to never be about the philosophical arguments for more or less even distribution of resources and more about what level of central control an economy should have. The prior discussion I believe is far more easily answered: at the moment resources are too uneven, the existence of the hedgefund 2:20 payment system I believe is argument enough of this at the moment. But I will not argue this anymore here. The real discussion should be about how much central control economic systems should have imposed on them.

I feel I should clarify what I mean by central control, this does not just include governmental policies that can incentives or disincentives various things, but also what companies do. Are bankers bonuses really any different from governmental incentives? Sure the money comes from the a different place but the effect of applying rigid rules to very dynamic and complex systems. Bonuses however are a more insidious kind of control however as unlike governmental control there is very little accountability, which can only lead to ossification. But more than that, it decouples what should be the purpose of an industry from personal gain. Does the banking sector really only exist in order to give a good return to investors? Or should it exist to help people who need investment while giving the investors a reason to invest. The difference in those two statements is subtle but I believe hugely important.

I do not mean to focus on the banking sector, it just has the most well publicised and easily demonstrated examples. I would say that all the large ossified industries have a problem with self-imposed central control that prevents dynamic changes to the complex nature of a globalised economy. The issue is how to deal with it. It will be no easy task and one that better minds than mine would struggle with but I feel the rewards could be huge. My suggestion would be a focus on accountability rather than incentivisation. This might naturally move the economy in a more meritocratic direction, and harnessing the intrinsic motivation of the population.