Budgeting in Switzerland

There has been some concern expressed amongst the financial press that promises made to Scotland will cause budgetary uncertainty and devalue Britain as an economic safe haven (click here). But Switzerland shows that that need not be the case. The OECD published this detailed analysis in 2005. Things may have changed since but reading it reveals a number of things. They have a constitutional commitment to debt containment. The limits are defined mathematically and compensate for the business cycle. 75% of the budget is transferred to sub-national government and social security funds. It's complicated, but shows how detailed financial policy can be implemented in a direct democracy federation by elected, often part time, politicians.
The report also provides a succinct summary of Switzerland's constitutional history:-

"Switzerland came into existence as a national State in the first half of the 19th century as a consequence of a process of political integration of 25 regional communities known as “cantons”. This process culminated in the establishment of the first federal constitution in 1848. This constitution was based on a compromise between a liberal Protestant majority, mostly living in a small number of populous cantons, and a Catholic conservative minority, mostly living in a large number of thinly populated cantons. The rights of the minority were protected through constitutional provisions that guarantee the competences of the cantons and limit the responsibilities of the Federation and through cantonal representation in the federal political system, particularly in the Council of States (the upper chamber of Parliament)."

And it summarises their unique system:-

"The Swiss budgeting system is characterised by three special features that differentiate it from most other OECD countries:
● the political environment, characterised by direct democracy (referendums), federalism and a tradition/system of achieving consensus;
● the debt containment rule, which is a constitutional provision mandating a balanced budget over a business cycle (structural balance);● the nature of the Swiss federal budget as a transfer budget."

The Rational Voter

"I can't see how anyone can be a rational voter without some grasp of how economies work. This has been brought home to me by the miserably low level of debate about the Scottish referendum.
"Very few people seem to know the difference between the pound and the Bank of England. The UK government hasn't said that Scotland can't use the pound. Anyone can use the pound. What it has said is that Scotland can't use the pound and, outside a formal currency union, use the Bank of England as a lender of last resort and set monetary policy. This key point appears to have been passed by many voters. So have the mechanisms by which interest rates are set; the difference between government deficits and government debts; and the way countries raise money in the international markets. This means that far too many people will be voting on something hugely important on 18 September without the tools to understand the implications."

Merryn Somerset Webb, MoneyWeek Issue 707, Editorial.

Merryn is arguing for better financial education, but surely the same rationale could support the view that there shouldn't be referenda because the electorate aren't educated enough to form a rational view. I disagree, but I'll come to that in a moment. First, here's another perspective:

"7 out of 10 Members of Parliament think that only the government is able to create money"

Ben Dyson (Positive Money) on August 19, 2014.

In fact the banks create and destroy money by providing loans in a fractional reserve banking system. So, maybe the political elite aren't as savvy about theeconomy as we may have hoped!

It is my view that good quality debate educates voters. Perhaps that is the single biggest advantage of direct democracy. But I'm not talking about the shouting match that televised debates sometimes descend into. I propose that Interactive Democracy should facilitate written debates where points and counter points are raised and promoted or demoted by the approval of voters. Prior to the referendum you can read the main points or drill into the topic, reading the reference material provided. To encourage this, the debate summary would be presented to you before you reached the voting page on the ID web site. Furthermore, I propose that there be sanctions against lying in public life, to resist the demagoguery that can undermine any democracy.

Taking the Scotland Referendum as an example, I'd hope that debaters would reference the comments made by Economics Nobel Prize winner Joseph Stiglitz, amongst others. And that each side provided properly rigorous financial forecasts, showing their assumptions for scrutiny.

The Key Question

Referenda in Crimea and Scotland have one key yes/no question, but is that question the right one? Shouldn't the Crimeans have been asked if they wanted to be independent, part of Ukraine or part of Russia? The same complexity exists over Scotland's independence referendum as Merryn Somerset Webb explains in her article here. She points out that Quebec did things differently in the 1980s, offering a second referendum once details had been negotiated.
The problem with most referenda is that they are expensive to administer and costly to replicate. Not so with Interactive Democracy (ID): doing it online has tiny marginal costs. With ID, referenda can be frequent and thus much more accurate and refined.
And I suggest that if you don't vote then your Member of Parliament should vote on your behalf, so that frequent plebiscites don't become onerous yet you are always represented.

Trip Advisor

There is obviously a cost to managing any operation and perhaps one of the arts of senior management is to put in place sufficient control systems without the costs becoming exorbitant. This concept applies to government as well as business. As Merryn Somerset Webb writes in this blog post (commenting on Tim Morgan's "Reform Trilogy"), undoing layers of administration from the NHS could save billions.

Over the last 50 or so years there have been serious improvements in quality management, from Deming's Total Quality Management to 6 Sigma, and the notion that improvements in quality can reduce costs by reducing defects is well founded. So care must be taken not to destroy essential management systems. But there is a concurrent idea, that customer experience is important and customers are the best people to judge it. In business, marketing departments have a host of techniques to measure customer experience. Each with their cost.

Trip Advisor offers a different way of doing this. It gets the customer to do the work of contributing to improving the system by offering an easy way for them to express their opinion. This could be applied to government services at relatively little cost.

Such a system may benefit from integration with Interactive Democracy because ID links your identification with your right to vote in an online system. It may be extended to identify you as a patient at an NHS facility at a certain time, indicating that your online opinion isn't mendacious, and giving you the right to express your opinion on-line.

Though the results of such a system may inform patient choice the more important benefit is that it will likely motivate staff to improve in all sorts of subtle ways.