The bankers that run Britain’s financial services industry are roundly condemned as having been guilty of having caused the credit crunch by their sheer unadulterated greed. The chief executives of many British banks were indeed guilty of greed not to mention myopia, arrogance and recklessness. They are, believe it or not, human beings after all. All humans are guilty of committing what the bible terms as ‘sins’. We have all been guilty of greed, probably on many occasions; we have all also been guilty of lust, gluttony, sloth, wrath, envy and pride. It’s part of what makes us human. The bankers are responsible for their actions but we should not consider that greed, or other vices, are the preserve of one section of society. Our politicians, who are supposed to be selfless public servants, have exploited the largesse of the taxpayer to pay for items as petty as their bath plugs. Out Trade Union leaders insist on six-figure salaries and our GPs command similar rates but refuse to open on Saturdays or in the evenings. Communism, a system predicated on the idea that a selfless bureaucratic class would rule on behalf of the proletariat, collapsed because its leadership was as greedy and power hungry as those in the West who did not pretend to look out for anyone but themselves.
Free market economics is based on the idea that when all people are given the freedom to pursue their own interests and goals they actually benefit society as a whole. For example, in order to make money, a person will sell a product or service desired by his fellow citizens. When a transaction takes place it is a purely voluntary exchange, the buyer wants to use the product or service and the seller wants cash to buy another product or service. This is the ‘invisible hand’ espoused by Adam Smith, the idea that millions of individuals pursuing their own goals will produce an economic equilibrium far more efficiently than one remote bureaucratic attempting to make decisions on their behalf.
The ‘Invisible Hand’ theory was developed by behavioural economists to create Public Choice Theory which was applied to the running of political and public institutions in the 1980s. Public Choice Theory stated that those who on the surface appeared to have chosen selfless public service careers, such as politicians and civil servants, were in actual fact pursuing their own goals, often to the detriment of wider society.
Public Choice Theory was brought to a wider audience by the popular sitcom Yes Minister, which was inspired by tales of civil servants blocking public service reforms that threatened their personal bureaucratic empires.
The comedian Armando Ianucci has claimed that Yes Minister was as effective as Orwell’s 1984 in promoting public distrust of the state. The Thatcher years and Reagonomics went some way to limiting the power of monolithic bureaucracies and non-democratic organisations and allowed people more freedom to make their own economic decisions. This trend was continued with the public sector reforms implemented by New Labour. However while Public Choice Theory allowed private individuals greater freedom and choice, there are signs that it has been taken to its ideological extreme. To some extent public institutions have been saddled with a new tyranny, the tyranny of target driven incentives. Incentives are an important part of free market economics, and human behaviour in general, yet by applying targets and incentives to public institutions, Public Choice Theory supporters appear to believe that public servants have no altruistic motives whatsoever. For example the introduction of targeted waiting times for NHS hospitals seems to pre-suppose that doctors would have no interest in reducing waiting terms if they did not have an artificial incentive to do so. As a result NHS administrators complain of having to spend more time meeting Government imposed targets than they do running a good hospital. Surely it would be better to assume that the majority of NHS staff do have an altruistic interest in helping people and to allow each NHS Trust the freedom and the authority to make its own decisions on how best to provide that help.
I missed out on The Wire when it was shown on satellite TV but I have just finished watching the first series and I am looking forward to series two starting on BBC2 this Monday. I am not usually a fan of TV drama but the Wire combines gritty realism, with a compelling narrative, strong characterisation and rich colloquial dialogue set against the uncompromising backdrop of the hopeless, decaying city of Baltimore, Maryland. Apart from that The Wire also abounds with numerous economic themes. As seen in the youtube clip at the top of the page, the drug dealers run gangs which mirror America’s greatest blue chip companies in the way that they are organised and run, minus the violence and the narcotic merchandise. The housing projects dominated by feuding drug gangs, pimps and addicts are the home of America’s underclass, but is their plight a failure of unrestrained capitalism or a failure of LBJ’s ‘Great Society’?
The Baltimore Police Department, as portrayed in The Wire, is full of corruption, nepotism and incompetence. Career progression and personal promotion take precedence over protecting and serving the public. Detectives are often more interested in winning a personal battle with the drug dealers then creating a better community and the dead hand of bureaucracy stifles personal initiative and altruism. Yet the tyranny of Public Choice Theory endorsed incentives also encourages Baltimore’s cops to simply bring a suspect to trial regardless of the strength of the case. Worse the pressure caused by these top down targets prevent even the most altruistic of cops from tackling the root causes of the crime that pervades dying cities such as Baltimore.
The Wire raises important economic questions caused by the failure of both right wing and left wing policies, perhaps the answer to these failures lies in the less ideological ‘third way’ pioneered by Clinton and Blair. Maybe only time will tell. The Wire doesn’t provide any answers; it simply concentrates on being a great, thought-provoking drama.
