The Reform Of Our Institutions Won't Come From The Top

It's been a difficult month to finish this post. Every day another dollop of decrepitude is revealed amongst our rotting institutions. Systemic slaughter in the NHS. The convenient collapse of a major police corruption trial through 'missing' evidence. Police concealing the misuse of private investigators and spying on victim's families for the chance to undermine public sympathy. Sunlight on vast pay-offs to the departing management of the Savile-stricken BBC. The lengths to which the unions will go to control the Labour Party and use it to enshrine their own power. The Church of England deciding to turn money lender. And, surprise, surprise yet another massive bank fine...because, yes, any bank that relies on a public guarantee of its liabilities and massive tax subsidies through ISAs and so on should regard itself as a public institution.

It's a core theme of this blog to contrast the decline of faith in institutions that have evolved to suit themselves at our expense, with the rise of facilitators who exist to help us solve problems more effectively for ourselves.

Our institutions won't align with the interests of the those who rely on their services while they suppress evidence of their ineptitude, or while trustees and management quibble over their extent of their responsibilities, or while politicians spend their time blaming each other for the mess. These are sure signs that our institutions are stuck in denial and that the MPs and Ministers whose job it is to supervise them are stuck in their own cycle of blame.

Until our institutions understand and accept the need to align with the consumers of their services, rather than the desires of their pompous managers, they will not evolve into efficient, facilitative organisations worthy of our trust and respect.

But I don't believe that our so-called political leaders or the managers of our institutions have either the self-awareness or the skills needed to achieve this evolution. They are merely products of 'the system' that so desparately needs to evolve.

Sustainable reform will only come come from the grassroots rather than the top down. It will only come when each of us takes personal responsibility for turning things around, whether by exposing institutional failings or genuinely working to solve other people's problems rather than merely our own. 

In other words, both the problem and the solution are in our hands.

Roundheads v Cavaliers

Dog eat dog

Last night I found myself in front of "Roundhead or Cavalier: Which One Are You?", a sort of 'Dummies Guide' to the English Civil War which, needless to say, I found quite informative.

Perhaps the key difference between the Roundheads (puritan Parliamentarians) and Cavalier (flambuoyant Royalists) was the Roundhead preference for rigorous discipline over their opponents' dedication to partying and lining their own pockets. Tellingly, the ripely named Prince Rupert of the Rhine (of hunting poodle fame) was unable to prevent his Cavalier cavalry from looting the Parliamentarian baggage while the battle raged. This wasn't so much of a problem early on, at the Battle of Edgehill, but had tragic consequences at the Battle of Naseby which spelled the end for the Royalist cause. 

In the show's closing stages, we were treated to various pundits views on whether modern Britons are more Roundhead or Cavalier in their attitude. And while the comparison wasn't made, it occurred to me that recent events have revealed a certain preoccupation with looting in the heat of battle, resulting in the rolling of heads... 

But beware the Restoration.

  

Cut Greece Loose

Cutting the Gordian knot

Talk about Zeitgeist - last Saturday morning I was in Porto, reading about the Greek crisis in The Economist. It was my first trip to Portugal, which I guess was good timing for them, economically speaking. Next month, Spain receives some of the Pragmatic Pound. And I'd like to think I'm doing my bit for Ireland, albeit on the meter, by assisting a financial start-up there (sorry, still in stealth).

But I won't be bailing out Greece.

Tax-dodging, low productivity and overly generous pensions aside, The Economist reckons the key to that country's dismal plight is political patronage. "Greece needs transparent and impartial rules, but politicians are not keen to limit the scope for dishing out favours." Everything from railways to medical budgets leaks cash to powerful lobby groups.

And, reading on, it seemed to me that in this sense the Greek rioters have more in common with the proponents of the "Arab Spring" than their EU colleagues. As the ebbing economic tide exposes the littered wrecks of corrupt schemes and relationships, the have-nots are descending in droves on the survivors and what's left of their loot. In Syria, the crowds are putting the "squeeze on Assad" by demanding a "civil democracy" that comprises free elections, freedom of speech and assembly, protection of minorities and an end to repression. The longer the government resists, the more citizens withhold labour, and capital flees. In return, the regime dishes out more favours, stokes inflation and the country edges further toward meltdown. Egypt is clearly further along. Libya perhaps further still.

This chaos is vital for renewal - though bloodshed is not essential. Back in June '09 I suggested that the UK's constitutional reform must be a messy process, and it's proving just that, but riot-free (you can ignore the photo calls). A dynamic, open, democratic process that encourages broad engagement by all stakeholders cannot realistically be neat and linear.

Though in May 2010 I also suggested going short EU banks and long riot shields. And if things do turn nasty it's perhaps worth bearing in mind Mathias Koenig-Archibugi's reminder to The Economist of the lines from "The Third Man":

“In Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland they had brotherly love, they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.”

The point is, we do the Greeks no favours by bailing out their system of political patronage. The bureaucratic emperors must be shown to have no clothes.

So cut Greece loose, I say. Only then will the Greeks have their Renaissance.

Which 5 Policies Should Be The Power 2010 Pledge?

Vote now for which 5 policies that will form the Power 2010 Pledge.

I voted for:

1. a fully elected upper house;

2. fixed term Parliament;

3. proportional voting, not first past the post;

4. hold elections on the weekends, not Thursdays;

5. caps on political donations;

6. MPs to control the Parliamentary timetable, not the government;

7. the right to vote to recall your MP if he/she is doing a poor job;

8. a ban for a reasonable period of time on MPs taking a job directly related to their work in Parliament;

9. reduce the use of statutory instruments to avoid Parliamentary debate;

10. more 'free votes' in the Commons, rather than voting along party lines;

11. stronger Parliamentary select committees to scrutinise government activity (or lack of it);

12. public consultation should involve a deliberative step involving members of the public;

13. local mayors elected by local residents, not councillors;

14. scrap the ID card programme.

Those Squealing MPs Are Back!

Isn't it reassuring to see the piggies back from yet more holiday, fighting every effort to have their snouts hauled out of the trough?

My personal favourite is the one squealing about 'subjective judgements' in the legal review of her own expense claims, but not the subjective judgements made in how she actually filed them. As a chief architect of the Nanny State she should've known better. Experience how subjectively angry this makes you feel, by staring at the defiant face below for 30 seconds. Then exercise your own subjective judgement at Power 2010.

Reboot Earth - Open Government Data

There are great efforts to encourage open government using the latest technology - particularly in the US and the UK, judging by this Google search. And recently we had the excellent, rather stirring example of Reboot Britain, one aim of which is to draw entrepreneurs and the public sector together.

Of course, it is vital that individual public bodies permit open access to the publicly funded data that they control. However, this doesn't mean "Open Gov" initiatives should be geographically constrained. Otherwise, we'll miss not only the big, global picture, but also the similarities between countries and regions and the people and demographics within countries and regions, worldwide. It is trite to say, but a worthwhile point to make here, that only by understanding the true state of the world now, and the trends that are shaping it, can we know where and how to achieve meaningful change. A need that is perceived to be weak and unworthy of attention in one region, may resonate with the same need that is attracting resources elsewhere. Similarly, mistaken assumptions about wealth trends in certain regions may mean great opportunities go begging. Yet public, cross border collaboration is lacking even in the EU, where forging a single market is the top priority.

That a worldwide approach is necessary was brought home to me by Hans Rosling's presentation at TED 2006, which I've embedded here. It was added in a comment by Steve Har on a recent post on O'Reilly Radar speculating on the future of the US open gov initiative. Hans does a wonderful job bringing public statistics to life, in a way that challenges lack of understanding and preconceived notions about the state of the world, its regions and people.

PS, 1 October 2009: Hat tip to FreeLegalWeb - the UK government has called for developers to contribute to the usability of data.gov.uk , and the Australian equivalent just went live (US data.gov led the way in May)

Will White Paper Deliver Green Shoots for Consumers?

To clear their desks ahead of the summer (and clutter ours to no useful purpose), UK officials responsible for Business, Innovation and Skills have recently released a white paper outlining the government's approach to consumer policy, presumptively entitled "A Better Deal for Consumers".

It appears the paper has been prompted by the "downturn" and "the way consumer markets are changing because of the effects of globalisation, and the increasing use of technology by consumers and business to buy goods and services." Which should read: "a dog's breakfast of either previously announced or 'new' but belated attempts to help the vulnerable, tinker with consumer credit, and update enforcement powers and some consumer law."

Don't get me wrong. There's some good stuff in here. But it's beyond me, for example, why it's taken until 2009 to call for a quicker solution to the saga of the bank charges litigation (we've owned some of the key defendants for some time), or to begin the no doubt lengthy process of banning unsolicited credit card cheques, restricting the basis on which credit card issuers can reprice cards after issuing them or ensuring that credit cardholders' repayments are credited towards the most expensive aspect of their card bills first. And, while anything to help those who are overly indebted is to be applauded, we've already heard about the £290m of government funded loans in the budget. And, in the vast scheme of things it's hardly worth mentioning that the government "will invest a further £300,000 in free face to face debt advice [which] will give an immediate boost to debt advice capacity for six months and enable the equivalent of 12 full-time debt advisers to help an extra 1,200 people struggling with crisis debt."

The 'meat', if there is any in this paper, is simply a reference to the unfortunate process of gold-plating the Consumer Credit Directive, and "bringing forward, in due course, a new Consumer Rights Bill which will [no doubt gold-plate] the proposed EU Consumer Rights Directive". The latter exercise has of course been rather undermined by the lack of any real evidence of detriment (see the EC's Consumer Markets Scoreboard).

Guess it's a case of hurry up and wait for that better deal.

Here's an extract of the menu in more detail:

Helping the vulnerable:

• Help to support homeowners and social housing tenants in arrears, and better legal protection for mortgage holders and tenants
  

• ”Breathing space” relief for consumers overburdened with arrears on their utility bills and other unsecured debts
  

• A new debtors’ guide to help those with debt problems understand their options
  

• A new self-help debt advice toolkit to support debtors who want to negotiate repayment proposals with their creditors themselves
  

• A Money Guidance service in the North West and North East of England to help people make better financial decisions and avoid problem debt
  

• A new dedicated NHS helpline to offer healthcare support to those experiencing recession-related stress and anxiety
  

• Improved guidelines for health and social care workers to support people with mental health problems and overburdened with debt
  

• Reviews into how effectively energy and water suppliers protect vulnerable customers from disconnection and help customers with problem debt
  

• Swift enforcement action against debt write-off scams and against firms who exploit the vulnerable in debt
  

• Measures to ensure more responsible debt recovery practices by debt collectors and bailiffs
  

• Programmes to reduce household energy bills.

Tinkering with consumer credit:

• A review of the regulation of credit cards and store cards, including a ban on the sending of unsolicited credit card cheques
  

• Ensuring consumers can access impartial support on choosing and managing credit cards and other consumer credit products
  

• [Gold-plating] the Consumer Credit Directive, including new requirements on all lenders:
• to explain their products to consumers adequately before they enter into a contract, including the consequences of any failure to repay
• to check the credit worthiness of consumers before they lend to them to follow guidance from the OFT to tackle irresponsible lending practices
  

• A review by the OFT of high cost credit markets
  

• A continuing programme of reforms to make the credit market work effectively for consumers and lenders.
  

Updating enforcement powers:

• A series of pilot projects to test the use of new powers to deliver compensation for consumers
  

• A new national strategy and specialist team for internet enforcement on consumer issues
  

• A central “Fighting Fund” to tackle rogues operating on a big scale
  

• A new Consumer Advocate who will co-ordinate work to educate consumers and be a champion for groups of consumers who have suffered a loss at the hands of a business
  

• A mechanism for consumers to get money back that has been recovered from overseas scams
  

• Support for product safety testing of imported goods at major ports
  

• Stronger penalties for rogue traders through new banning orders
  

• Simplifying the confusing array of sources of information and advice to ensure consumers can more easily find the support they need
  

• A new Consumer Rights Campaign.
  

Updating some consumer law:

• Developing rules on new “digital” products to ensure the core principles of consumer protection apply
  

• Looking at how the law on misrepresentation and duress can be made simpler, more transparent and accessible to business and consumers
  

• Reforming consumer law and simplifying weights and measures legislation without diluting consumer protection
  

• Modernising Trading Standards powers to help them deal more effectively with modern trading conditions
  

• Bringing forward, in due course, a new Consumer Rights Bill which will [no doubt gold-plate] the proposed EU Consumer Rights Directive, the lack of any evidentiary basis for which is illustrated in the EC's Consumer Markets Scoreboard.
  

Posted via email from Pragmatist's Posterous

How To Find An Extra £8bn - Fast!

They've been desperately downing the Kool Aid in Downing Street, those who are left. No more polite chat while queuing for the tea urn during cabinet meetings, cup and saucer in hand. Now they're swarming around it at each serving, ripping the lid off and plunging their cups in.

And while we are highly amused by Gordo's ghastly predicament, we are no longer to be distracted from his latest, clunking sleight of hand.

The TaxPayers' Alliance has all the gory details, but at the heart of the matter is the fact that the UK will now officially have two sets of books, as the FT faithfully reported in mid-May while we were still goggle-eyed by certain accounting matters of a more personal nature.

One set of books will be produced under international financial reporting standards to fulfil the Treasury's "promise" to record PFI projects against government's capital expenditure totals; and another will be prepared under European standards, which doesn't bake in the cost of PFI.

I do not need to point out which set of books the Treasury uses for budgetary purposes... Nor do I need to remind you that even the off balance sheet deals are getting bailed out with taxpayer's money.

So, for a start, 60% of PFI projects will remain off balance sheet. But that's not all:

Nick Prior, head of government and infrastructure at the consultants Deloitte, said: "This clarification is extremely welcome for the future of PFI and PPPs. Government departments should now be able to bring forward projects that have been delayed because of uncertainty over budgetary arrangements."

That's £8bn worth of "uncertainty" to me and you, but not even a line item for Darling, if and when he gets up on his hind legs to deliver the next budget.

Let's hope MPs don't forget to mention the fact...

Parliamentary Reform Must Be A Messy Process

Over on Lords of the Blog we've been debating whether Constitutional reform is the answer to our Parliamentary woes. "Lordnorton" bemoans the fact that "a great many people have reform agenda, but agenda that have little coherence... We need to look at Parliament, and indeed our constitutional arrangements, holistically." He's called for a commission on the constitution, "open to all, not just the usual suspects; new technology provides the means for wide consultation. The main challenge will not be employing the new technology, but rather persuading people to submit their views."

I agree. Yet this holistic process should not be engineered from the top down in a nice orderly fashion. A dynamic, open, democratic approach which encourages broad engagement by all stakeholders cannot realistically appear neat and linear. The Internet affords the opportunity to capture, rationalise and unify apparently messy data contributed by disparate opinion-holders whose views tend to be missed in the current formal processes. Sites like mySociety already play this kind of role.

While it seems almost trite now, the BBC heralded the shift toward an interactive, dynamic political process at the "E-envoy" conference in 2002:

“Currently…we are all used to… top down provision of information …whether it’s [from] a media company or the Government to you the audience or citizen. What we want to move to is this interactive model which has lots of conversations in lots of directions. Not only do we communicate to the users in this model, they can communicate back to us and they can communicate with each other, both through us and actually independently of us… Through digital media, like interactive TV, SMS text messaging and the internet, we can create very new networks of information exchange, ones we haven’t seen before.”

"...[W]hen the [pension] reforms are explained to people
they will see that they are the right thing to do."
Gordon Brown, Financial Times 8.11.05

“He cannot allow them any serious discussion about priorities. His view is that it is just not worth it and ‘they will get what I decide’. And that is a very insulting process. Do those ends justify the means? It has enhanced Treasury control, but at the expense of any government cohesion and any assessment of strategy. You can choose whether you are impressed or depressed by that…”
Lord Turnbull,
Permanent Secretary to the Treasury,
referring to Gordon Brown, in 2002
FT.com 20.03.07

While participation in formal “party” politics has been dissipating, citizens have found alternative ways to assert themselves. Any idea that they have become generally apathetic is a myth, as recent events have shown, and the Power Inquiry noted in 2006:

“There is now a great deal of research evidence to show that very large numbers of citizens are engaged in community and charity work outside of politics. There is also clear evidence that involvement in pressure politics – such as signing petitions, supporting consumer boycotts, joining campaign groups – has been growing significantly for many years. In addition, research shows that interest in “political issues” is high.”

In a long-since deleted press release in June 2007, the Cabinet Office warmly welcomed a report that urged the facilitation of a bottom-up approach to the use of public sector information, stating:

“The Government should work in partnership with the best of citizens' efforts, not replicate them. If we really want to deliver better public services, the best way to do that is bottom up. Change is driven by better feedback, open information and more ways in which citizens can make their voices heard about what matters to them. The challenge is for all public bodies to think about how they can respond to the challenges described here."

Citizens themselves are already helping each other in online communities. If 30,000 parents were meeting in a park or football stadium to share information and tips about parenting, government would take notice. That they are doing it online simply means we have to find different ways to take their efforts just as seriously.”

And George Osborne's remarks in November 2007 have often been quoted since:

“With all these profound changes – the Google-isation of the world’s information, the creation of on-line networks bigger than whole populations, the ability of new technology to harness the wisdom of crowds and the rise of user-generated content – we are seeing the democratisation of the means of production, distribution and exchange. … People… are the masters now.”

Lest anyone doubt that a broad-ranging, grassroots, web-based discussion of policies can result in an engaging, unifying event, they should consider Barack Obama's path to the White House.

By all means list your reform proposals in the comments... here are a few from me:

1. prevent the abuse of secondary legislation as a channel for avoiding substantive debate on legislative measures;


2. wholly elected Lords;


3. 4 year fixed terms, with no government discretion as to the precise election date;


4. publication of expenses, interests, emoluments via Parliamentary web site in a format that readily permits analysis;


5. restraint on MPs/Lords taking roles in the industries they oversaw for at least 6 months after leaving office;


6. no second home allowance (but state funded accommodation in a converted local authority housing block reasonably local to Westminster);


7. requirement for both houses of parliament to approve UK's initial and ultimate responses to proposals for European directives.
   

Swinegate and Consitutional Reform

I've just seen some patronising rubbish in the Spectator about concern over MP's expenses being overkill and somehow bad for the British democratic process.

Swinegate is just the straw that broke the camel's back. At different times, on different issues that each of us cares about, we have all felt that politicians are up to no good in their various machinations. Now we've all caught them, red-handed, pulling the same stunt at the same time. It does not matter that we have merely caught a crowd of them failing to do something as basic as filling out an expense form with diligence and propriety. The panic-stricken response right across the political spectrum is clear evidence that the politicians now know that we know just how opaque and unaccountable Parliament is generally.

The great news is that this has alerted a wider community of people to consider what goes on in Westminster. But these are still early days in this process of awakening. So it's way too early to constrain debate by saying that constitutional reform is not the answer, for example. Let's get the whole sorry parliamentary institution laid out on the table and then figure out how to reform it.

More light, please! We have work to do...

Travels in the Blogosphere

It's been a mad week, with my spare time absorbed by an article on the behavioural targeting of internet advertising and responding to a cascade of blogs. Highlights being:

• commenting on Dave's report on SEPA's 50 year plan;



• observing the link between the "Bauman-esque negotiation between moral ideals and the problems and needs of everyday life" and sustainable capitalism;



• debunking the notion of "mass personalisation", which is about as oxymoronic as you can get;



• cheering the Tories' promise to make legislation more accessible, and wondering what on earth the recently re-labelled "Digital Engagement Team" at the Cabinet Office has been doing;



• pushing for publication of MPs and Peers' expenses at mySociety, writing to my MP and wondering what on earth the recently re-labelled "Digital Engagement Team" at the Cabinet Office has been doing;



• and of course eagerly awaiting Blawg Review #214.

I've also updated my own posts on:

• Swinegate;



• Something Decent to Read; and



• Coping with the risk of a spike in mortgage rates.

I suspect that's enough havoc for one week, but I reckon there's more to come...

Low Cost Government

Well, here we are in '09, the last of the Noughties: a fitting epithet for a decade of both reckless abandon and total collapse on the fiscal and financial front.

There's a lot of soul-searching going on, as well as a search for inspiration and leadership. While the US President-elect seems to have risen to the challenge, in the UK the search continues.

Bereft of vision, we look to the past, and it's a sign of the times that I was given Speeches That Changed the World for Christmas. Of course it includes Franklin D Roosevelt's First Inaugural Address, heralding the "New Deal", which has often been referred to in the news lately. It can also be read here.

While FDR's speech and the New Deal must be seen in the context of a more parlous economic situation than today's, and many of FDR's tactics are being deployed today, I was struck by one that's yet to be honoured in the UK:

"... insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced."

I mention it not just because UK civil servants were promised a 2% pay increase in a time of rising unemployment (public sector teachers will get 2.3% extra this year and next, while the Daily Mail shrieks that private schools are closing). I also raise it because New Labour might just mistake the need for fiscal stimulus as a wheeze for saddling us with more civil servants in the long term, who'll generate further cost in terms of random policy initiatives and bureaucracy to justify their existence. See the Taxpayers' Alliance "non-jobs" for examples.

Of course, hiring more public sector workers flies in the face of last September's promise to cut jobs, as reported in the Guardian:

"Separate ONS figures on public sector employment showed the number of people employed by the government fell 44,000 in the second quarter to 5.8 million, the lowest total since the second quarter of 2004. The government has pledged to cut 84,000 jobs by next April as a result of a review conducted by Sir Peter Gershon in 2005."

But as Chancellor, Gordon Brown approved a 13% increase in the public sector workforce from 5.1 in 1997 to 5.8m in 2006, according to the Institute for Fiscal Studies. So, Sir Peter's 2005 review was merely borne on the rising tide.

The IFS also says that public sector pay has caught up with private sector pay, yet about 76% of public sector workers have final salary schemes, versus 17% in the private sector. And public sector pensions are worth 25% of salary versus 20% in the private sector. With pay the same, there's no reason for that gap - if there ever really was one.

But take heart! Perhaps it's a sign the trend is about to reverse that certain people in the public sector are bizarrely receiving their Honours now - it's to reward them before they can be accused of selling out their colleagues.

On that basis, we really should have welcomed the news that, for overseeing massive public sector expansion and bail outs at the taxpayer's expense, the Permanent Secretary of HM Treasury gets a knighthood, while the captains of private sector finance get hunted out of office for their part in Brown's Boom and Bust.

The last of the Naughties?

Let's hope so.

Enjoy the year as best you can!

Better Regulation - Fill Your Boots

For those interested in keeping regulation to a bare minimum, like BERR (yeah, right), here's a little gem from the Office of the Leader of the House of Commons - the Government's rationale for the 2008/09 legislative programme.

It actually wouldn't let me set up any email alerts for speeches, statements, debates, parliamentary questions and so on, but it's a nice idea all the same...

There's plenty of fun to be had figuring out what problem(s), if any, they are trying to solve and comparing the rhetoric with the substance. I have some pet issues to revisit in the coming months.

Meanwhile, look out for random infrastructure projects to be paid for with public funds, like the £1.5bn pledged toward the Manchester congestion charge scheme. New Labour seems to believe it has a lot of taxpayers' money to hand out and not much time to do it!

The Future of Money

Thanks to Blackbeltjones I recently had the privilege of discussing the Future of Money as part of a programme at the Royal College of Art in London.

Based on what I consider to be the relevant drivers of change, the need to solve significant consumer problems from the consumers' point of view and likely sources of resistance to change, I suggested that the innovative retail financial services of the future would tend to share the following characteristics:

1. The service is unlikely to be offered or facilitated by an entity that consumers perceive to be an “institution”;

2. The service solves the root cause of consumers’ critical need in the course of actual or desired activities, linking with trusted third parties to provide a comprehensive consumer experience;

3. The service leverages a shock amongst consumers who subsequently accept that the world has changed, yet helps them to embrace that change;

4. The service leaves day-to-day control of the management of money with the consumer;

5. The service improves rapidly with user collaboration, giving value beyond the facilitator;

6. The service will remain successful so long as the facilitator continues to invest in enhancing the service and meeting related consumer needs rather than seeking merely to enrich itself (i.e. preferring to meet the needs of stakeholders other than consumers);

7. The service is safe, easy to use, and involves communications that are fair, transparent (enabling ready comparison) and neither misleading nor patronising;

8. The service and its operator plays well with the regulators and public policy/opinion-formers.

More soon.

EU Regs Won't Catalyse Cross-border Markets

The European Commission's plans to regulate to create cross-border consumer markets will only limit innovation and growth. Faciliating solutions to more practical problems inhibiting the organic growth of markets would be more helpful.

The European Commission recently announced its decision to propose new EU consumer rules in an attempt to create cross-border retail markets in the EU. The member of the European Commission responsible for consumer policy, Mrs Meglena Kuneva, said:

“I am convinced that consumer policy is uniquely well-placed to help the EU rise to the twin... challenges of growth and jobs and reconnecting with its citizens... The Commission’s vision is to demonstrate by 2013 to all EU citizens that they can shop from anywhere in the EU, from a corner shop to a website, with confidence and equal protection. And we will also show to all retailers that they can sell anywhere on the basis of a single, simple set of rules.
We are a long way from those goals now…”

A long way indeed.

A study by the European Consumer Network on cross border complaints pointed to problems with delivery (46%) and defects or lack of conformity with description (25%) as the two main problems.

Furthermore, Eurobarometer discovered in October 2006 that while 27% of EU citizens shopped online in 2006, only 6% made a cross border purchase online. It also found that consumer perception is focused on more practical concerns: "... it is harder to resolve problems such as complaints, returns, price reductions, guarantees etc” (71%); “there is a greater risk of falling victim to a scam or fraud” (68%); “there is a greater chance of having delivery problems with goods or services” (66%); “there are more problems returning a product they bought at a distance within the "cooling-off" period” (65%). From a business standpoint, “the biggest perceived obstacle to cross-border trade is the insecurity of transactions (61%)… potential problems with resolving complaints (57%)… difficulties in ensuring after-sales service (55%) and extra delivery costs.” A further 43% of respondents cited language differences as an obstacle to cross-border trade. Such issues may point to problems with enforcement of existing laws and contracts, but not to any fresh regulatory opportunities.

Similarly, a May 2007 study by Civic Consulting reveals that efforts to construct a single European market for consumer credit by introducing a new consumer credit directive are flawed. According to the consumer organisations and national banking associations who were polled, “the main [non-regulatory] barriers hindering selling of consumer credit products in other EU Member States are different language and culture; consumers’ preference for national lenders; credit risk for lenders – no access to creditworthiness information; problems related to tax, employment practices etc.; difficulties to penetrate local market; different consumer demand in different Member States; lack of consumer confidence in a brand; differing stages of development of consumer credit; and lack of adequate marketing strategies.” The study concluded that “a single market for consumer credit cannot be expected to be created by harmonisation of legislation alone, and this is a long term rather than a short or medium term perspective.” As such, “the supply side of the market… does not expect increased demand and therefore economic growth from the proposal.”

In short, the European Commission is proposing a regulatory solution for problems that have no regulatory solution. And worse, for those of us who do share an ambition to create cross-border markets, is that, ironically, regulation in this area is likely to stifle innovation and constrain growth rather than promote it. As has been observed by Marsden et al. (2006) in connection with the reform of the TV Without Frontiers Directive, prescriptive regulation tends to cause markets “to develop towards more closed and concentrated structures”. This is because larger participants can afford compliance costs, lobbying efforts and have the bargaining strength to shift liability onto suppliers and consumers in a way that smaller market participants cannot – “hence, incumbents and regulated actors have incentives to drive up regulatory costs in other parts of the value chain”. Complex regulatory regimes may also either avert venture capital investment from attempted innovation in the regulated activity or ensure that it “will only flow to those companies considered to have the ability to ‘play a good game’ with the regulators”.

If the European Commission must play a role in creating cross-border retail markets, then it should help foster solutions to the real obstacles, bottom-up amongst market participants, not pose new ones.

How we view and use money

Simon Gleeson of Clifford Chance has written a very concerning overview of the shortcomings in the Financial Services Authority’s review of how the retail financial services that it regulates are distributed to consumers.

He suggests that the proposed three tiers of advice, coupled with EU-driven changes to the test of what is appropriate, will increase the cost of products, leaving the “mass market” with only the Sunday newspapers to help them invest. Which means they won’t.

To be fair, the FSA says it has an open mind on the proposals, and the initial consultation doesn’t end until December.

But the most troubling aspect of the review is that it proceeds from the perspective of whom and what the FSA regulates, and not in terms of how consumers want to use money. As consumers, we don’t think about who is regulating the different ways we use our money. We just expect it to be able to use it as we wish, without complex, artificial or costly barriers being placed in our way.

There is already very little focus on providing more usable, transparent and cost-effective financial services from the consumer's standpoint, because that would seriously impact bank profitability that is already under pressure. For example, according to Uswitch, figures for RBS Group, as at March 2007, showed that retail profits rose 1.5% (about 25% of group profits) against a rise of 14% in retail write-offs (69% of all write-offs).

Witness also how UK banks have actually gone to court to defend fees that consumers and regulators have long complained are too high; and their grudging agreement to speed up electronic payments, only in the face of competition inquiries.

Of course, over the past decade consumers have seized upon usable Internet technology to disrupt traditional supplier-determined experiences in travel, music, retailing, betting/bookmaking, games, telephony, TV and so on. Social lending and micro-finance are established elements of this rapidly evolving trend, which will surely reshape banking, insurance, asset management and pensions in due course - provided that regulation does not get in the way.

For a further catalyst, look no further than the current credit crisis. The inability of banks to understand who owes what to whom so that they can confidently lend to each other again is illustrative of how badly transparency is lacking. The savers' run on Northern Rock shows that consumer feel it too, and are prepared to act when they consider that someone is less than transparent about what is being done with their money.

So it is now more critical than ever that the FSA views the financial services market not from the perspective of the institutions and products that it regulates, but in terms of how consumers want to use their money transparently and cost-effectively, and what is needed to help them do just that.

Why "Pragmatist"?

A pragmatist is simply someone who acts in an informed way to control his or her personal environment, using a combination of theory and practice. Or as John Dewey put it, "intelligent practice versus uninformed, stupid practice". As a lawyer working on innovative solutions to consumer problems, I see plenty of examples of both types of practice.

A pragmatist does not slavishly follow rules, or political dogma, or "positive thinking" or the herd. To do so would assume a world that is somehow ordered, whereas almost all significant events in history are Black Swans - surprise events that have a huge impact and which we rationalise by hindsight. Rules and dogma can turn out to be badly wrong. The herd is eventually caught out. So it's dangerous to follow. Instead, we must rely on experience and critcial thought to minimise our exposure to the downside of these surprise events, and maximise our exposure to the upside.

The combination of theory and practice that qualifies as "intelligent practice" involves trial and failure. It involves being sceptical and "contrarian". It encompasses the aggressive "tinkering" of entrepreneurs - facilitators - who have helped us wrest control of our own life experiences from the one-size-fits-all experience offered by the established music labels, book publishers, retailers, package holiday operators, banks and political parties. These facilitators make the difference between us 'raging against the machine' in a lone, fragmented way and acting together as individuals in a highly concentrated fashion. And this giant, boundaryless online community of practising individuals and facilitators characterises the "architecture of participation" that lies at the heart of "Web 2.0".

It's perhaps no surprise that the rise of Web 2.0 has coincided with a decline and low levels of trust in our institutions, and findings that "the level of alienation felt towards politicians, the main political parties and the key institutions of the political system is extremely high and widespread [yet...] very large numbers of citizens are engaged in community and charity work outside of politics. There is also clear evidence that involvement in pressure politics – such as signing petitions, supporting consumer boycotts, joining campaign groups – has been growing significantly for many years".

In other words, it may be that institutions are being marginalised by people pragmatically engaging with each other in their own digital communities, not only for retail purposes but also political, environmental, health, and economic reasons.

Big questions arise.

How do the institutions get it so wrong? How do facilitators succeed where institutions fail? How can we bridge the gap between what institutions say is right for us, and what is actually right for us personally? Could today's successful facilitators become tomorrow's institutions? Are today's institutions doomed? Or can they respond, re-organise and align themselves with how "we" individual citizens and consumers behave?

I explore these questions here, and look forward to discussing any thoughts or comments you have along the way.