The need for political skin-in-the-game (SITG)
“It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” – Thomas Sowell
What Sowell is referring to is the absence of SITG for politicians.
Skin-in-the-game (SITG) is defined as a condition by which an actor shares in the harm caused by suffering a significant loss or paying a penalty if his actions go wrong.
Here are examples of people with SITG:
The common citizen, who often suffers at the hands of politicians as we will see later.
Entrepreneurs who could suffer large financial losses if they get it wrong.
Scientists who dare go against the orthodoxy, risking being cancelled and/or losing funding.
Whistle-blowers who expose frauds, risking loss of jobs etc.
Dissidents and those who die for their beliefs.
In my articles on unfunded liabilities, I referred to Justin Trudeau’s decision to reverse the preceding government’s attempt at moving the OAS age of eligibility from 65 to 67 as a one-sided bet because in doing so, he looked caring and generous thus increasing his popularity while paying no price whatsoever for the problems he was causing. This is a perfect example of an absence of SITG and unfortunately, our entire political system is set up that way. This is huge problem and one that significantly contributes to the mess we’re in.
Without STIG, politicians can engage in policies that benefit them politically while they suffer no consequences when the same policies cause great harm to the population.
Consider some real-life examples:
· As mentioned before, running unfunded liabilities is akin to a Ponzi scheme, which is a criminal offense in Canada and yet politicians can run them with impunity.
· Countless subsidies to companies that end up failing, the price being paid by taxpayers.
· Lending money to corporations in such a manner that default rates are many times that experienced by proper banks.
· Grandiose projects that end up costing way more than planned. For example, the Muskrat Falls project in Newfoundland estimated to cost ($7.4 billion) in 2013 versus the costs reported in March of 2020 ($12.7 billion).
I could go on as there are countless examples of lies, mismanagement and broken promises where no significant penalties are ever paid by politicians.
It doesn’t have to be that way and our ancestors in antiquity knew that. Recognizing that an absence of STIG would lead to problems, they made sure to introduce some. For example, a bridge builder was required to occasionally live under the bridge after construction. Or, roman governors of senatorial rank could be tried before the senate if they did a bad job.
Imagine for a moment how different the behaviour of our elected officials would be if they could be tried for screwing up and if found guilty, sent to jail or fined a large amount. Another possible way of introducing STIG would be to compel them to pay a percentage of cost overruns.
Recognizing that honest mistakes can be made, I’m not talking about setting up some vendetta process that other political parties could use to exact vengeance but rather an independent tribunal that would determine whether decisions were made based on lies, purely for political gain or without proper cost-benefit analysis.
Going back to Trudeau’s decision on the OAS age of eligibility, the tribunal would investigate whether he had looked at the state of its unfunded liabilities, the impact his decision would have on future generations etc. and decide if his decision was purely made for his political gains at the expense of losses for future generations.
At the Libertarian Party of Canada, we are committed to finding ways to introduce STIG for politicians. It is high time that we put an end to their one-sided bets.