Notes from the Panopticon

Moral Hazards

The first sign of corruption in a society is that the end justifies the means. ~ Georges Bernanos (1888-1949)

Between a rock and a hard place

The term "moral hazard" has been around for a long time. It popped into consciousness most recently when Mervyn King, governor of the Bank of England, invoked it to explain why it is not always a good idea for the government to bail out a bank – specifically Northern Rock.

It's like this. People are grown-ups who navigate through the world by taking risks, some of which work out and some of which don't. This is especially true of the banking business. If the risks taken don't work out and the bank finds itself up s*** creek without a paddle, there will be a nasty fall out. Ordinary people with money in the bank will get hurt. If the government bails out the bank using tax payers' money, then the next bank will be less careful, believing that – if the worst comes to the worst – the government will pile in to save it. Risky business practice will become the norm and we shall all go to hell in a hand-basket.

But a big problem remains. We, the poor bank customers, do not have the resources or the understanding to know whether a bank is acting prudently or not. And we would not be given the information on which to base a decision even if we asked for it. So we have to rely on government regulatory systems to check things out for us. Hence the dilemma when government watchfulness fails.

Law of unintended consequences plus

There are many other moral hazards we need to worry about, most of them relating to government activity. It's a bit like the law of unintended consequences but, in the case of moral hazard, the dangers created are evident at the start. The hazard is created by the wilful folly of decision makers.

Loans for honours

Let's start with a topical one. Donations to political parties. For the benefit of readers outside the UK, the Labour government has twice been caught flouting the rules on accepting political donations. The first time, they broke the spirit but not the letter by accepting loans instead of gifts and offered to repay the lenders with honours. The second time, the jury is still out. The claims and counter claims about who did what and who knew what when are the typical spats that go on between politicians when they have broken the rules and been caught out. "I didn't know and didn't mean it" is a feeble response which would not be accepted as a defence in court. Yet that is exactly what we are getting from the politicians who frame our laws.

Why should politicians get away with breaking the law while expecting the rest of us to obey it? Perhaps it's because they have power and the rest of us don't. And it's probably why David Blunkett (former Home Secretary) seemed so indignant when he was caught using public money to pay for his girlfriend's train tickets. The moral hazard here is that respect for law is eroded when the powerful show a blatant disregard for it (if, that is, they think they can get away with it).

Drug culture

And then there is legislation against drugs. Celebrities do not even try to hide the fact that they break the law – and those same celebrities are feted by the political clique and even by royalty. The moral hazard here is obvious. On the one hand, ordinary oiks caught with drugs receive, at the very least, a criminal record and a good chance of going to prison. Their life chances are often ruined, while the rich and famous continue to smoke and snort with impunity.

Politicians bemoan the decline in respect for law and order; they berate an ill-disciplined youth for its failure to behave responsibly. But how can you persuade disadvantaged young people to respect the law when, at the same time, the politicians who frame the laws (and their celebrity friends) fail to do so? You see what I mean by moral hazard.

Slush funds

Which brings me to laws that are unenforceable. The war on drugs is costly both in financial resources and in wasted lives. The demand for drugs cannot be stemmed. Organized crime finds it has a lucrative business and a good percentage of the population is happy to ignore the law. What is it about governments around the world that they cannot break the habit of banging their heads against this particular brick wall? They know they are not going to win (just as the US failed to stop alcohol consumption in the 1920s). Instead they have created a moral hazard. Lakes of illegal money are used to corrupt politicians and officials and, in some states of the world, to subvert entire governments.

Criminal records for all

Moral hazard also comes from the efficient enforcement of regulations that are routinely ignored. Such a high proportion of drivers have been convicted of speeding that many of them accept the status of convicted criminals as normal, not something of which they should feel ashamed. This situation should not be accepted with equanimity and at least the government minister who was caught driving while using a mobile phone was convicted and fined. But he still attempted to mitigate his crime by claiming that he was dealing with important affairs of state at the time.

The hazard here also undermines respect for the law. Unless criminals represent only a small minority of the population, then criminality becomes normal, fear of punishment loses its sting, and punishments become harsher to enforce the law. We end up in a situation where you might as well be hung for a sheep as for a lamb. If I am fined for putting my bins out on the wrong day, why should I leave it at that? I might as well do some fly tipping as well. Not a big deal in comparison with the other examples, but corrosive all the same.

Less is more

According to the Liberal Democrats, "Since 1997 this government has passed 365 acts of Parliament and more than 32,000 statutory instruments." This has introduced well over 3000 new criminal offences. When the government was caught out in the loans-for-honours fiasco, it responded by introducing yet more legislation and has now tangled itself up in that.

The most horrific part of the unfolding saga is not the facts of the case, but a statement by Wendy Alexander (leader of the Scottish Labour Party) in which she rejects any suggestion of "intentional wrongdoing". Her statement clearly shows that an important politician no longer feels bound to obey the law. "I did not mean to do it" may be a mitigating factor – but it is definitely not a defence.

So the government itself has fallen victim to the barrage of moral hazards which it created.

Slippery slope

Mervyn King thought long and hard before the rescue of Northern Rock was put in place. One assumes that an assessment was made and he accepted that the failure of the bank would pose a greater danger than the moral hazard created by the rescue package. Would that the government made more decisions in this way. If only it would think harder before creating so many new laws.

And there is little evidence that society is improving as a result of all this legislation. Prisons are overcrowded and convicted criminals are released early to make room for new ones. Middle-class criminals discuss the hazards of life with 9 points on their driving licences (next strike and the licence is gone), petty thugs wear ASBOs* as a badge of honour, and government ministers wriggle when they are caught on hooks of their own making. The investigation of a major corruption case is abandoned when a dodgy ally threatens to take its business elsewhere. A self-confessed drug user sings at the funeral of the Princess Diana in front of a congregation that included past, present and future prime ministers, the assembled royal family and a world-wide television audience.

The legal structure has started to creak. Respect for the law is flying out of the window at all levels of society – including the political classes. There is ever-present danger of the endemic corruption which dominates so much of the world. In the map below, the darker the red, the more corrupt the nation. Frightening isn't it?

• An ASBO is an Anti-social Behavior Order. It can be requested by the police, or a local authority and is imposed by a judge without a trial. The person on whom it is imposed is restricted from acting in certain ways or being in certain places. Violation of the ASBO can result in a prison sentence. So it acts as a method of punishing an individual without needing to prove that they have committed any crime other than violating the ASBO.

Christian Right

Rough old week means I have not been able to finish either one of a couple of articles I have on the go. However, a new and good friend has opened my eyes to exactly how grim the Christian Right in the US can be. I need to do more research to fully understand what this misguided movement is doing to America and to the world. A while ago, I came across this Matt Davies cartoon which captures the essence of their creed.

I hope to be back in business next week if nothing else happens and the Christmas season doesn't overwhelm me.

South Pacific and the terrorist threat

"At the heart of racism is the religious assertion that God made a creative mistake when He brought some people into being" ~ Friedrich Otto Hertz 1878-1964

Last week I went to a lively, enjoyable and well-played amateur performance of South Pacific. When Lt. Cable was asked to marry his Polynesian girlfriend, Liat, he replied that he could not. And when my wife quietly asked why not, I whispered the N word in her ear.

Later Lt. Cable launched into what must be one of the shortest songs in the American musical. I had completely forgotten it.

You've got to be taught
To hate and fear,
You've got to be taught
From year to year,
It's got to be drummed
In your dear little ear
You've got to be carefully taught.

You've got to be taught to be afraid
Of people whose eyes are oddly made,
And people whose skin is a diff'rent shade,
You've got to be carefully taught.

You've got to be taught before it's too late,
Before you are six or seven or eight,
To hate all the people your relatives hate,
You've got to be carefully taught!

Let us not forget that the legacy of this attitude lives on in the land which boasts in its founding documents that all men are created equal and have a right to the pursuit of happiness. Rodgers and Hammerstein felt so strongly about the message of this song that they were willing to risk the entire show when faced with opposition (including a law introduced in Georgia outlawing entertainment containing "an underlying philosophy inspired by Moscow.")

Despite the progress made by the Civil Rights Movement, the chances of a black man going to prison are still massively higher than the chances of a white man doing so. According to Bureau of Justice statistics, by the end of 2005 there were 3,145 black male prison inmates per 100,000 blacks in the United States compared to 471 white male inmates per 100,000 whites. And according to the Death Penalty Information Center in Philadelphia, the chances of a black man being executed are 38% higher than for a white man. Clearly, the lesson has been very carefully taught; forty or fifty years of efforts to eradicate this teaching have barely scratched the surface.

Last week I also heard a programme on the BBC World Service about the origins of the Jihad. It included the following extract from a text book for thirteen-year-old boys currently in use in Saudi schools:

There should be total enmity between believers and polytheists. Believers are not allowed to love polytheists or support them, even if they are close to them. Religiously sanctioned love is only allowed towards Muslims. As for the polytheist he should be hated for his unbelief even if he is close to you.

Polytheists include Sufis and Shiites, whom the Wahabis (the dominant clerical group of Saudi Arabia) accuse of idolatry.

It is frightening to think what effect this teaching is having on young Muslims. It is frightening to think what effect it had on previous generations, many of whom are now engaged in "charitable" programmes to fund Muslim schools across the world. It is important to make a distinction between ordinary Muslims and Muslim fundamentalists, but if this is the kind of material that is being offered in general education in an important Muslim state, we should be very worried indeed.

After all the Nazis succeeded in turning much of the German population into a group willing to tolerate mass murder of the disabled, the gypsies, homosexuals, and notoriously, the Jews and others that they considered to be inferior races.

They invoked what they called "Holy Hate"

Now there is war! The Jews forced us into a struggle for life and death ... It has also forced us to give up the "politeness" that in reality is a weakness ... We as a people will survive this war only if we eliminate weakness and "politeness" and respond to the Jews with an equal hatred ... If we do not oppose the Jews with the entire energy of our people, we are lost... Our holy hate will bring us victory and save all of mankind.

Bigotry is everywhere. It is only by recognizing it and rejecting it in our own sphere of influence that we can succeed in fighting it in countries and communities where it is threatening to become mainstream. The teaching of hatred is a danger to the world and must be resisted at all costs.