Out with the guru, in with the geek

What can the UK learn from US politics' number-crunching and precision-targeted campaigning?

Wherever Barack Obama’s target voters were, his campaign team knew how to reach them. It knew which magazines they read and even which bus routes they travelled on. The precision-guided adverts that it placed helped propel Obama to victory against Mitt Romney in battleground states.

The US president’s 2012 campaign was the fullest expression yet of what the American journalist Sasha Issenberg calls a “scientific revolution” in the way elections are fought. In his book The Victory Lab: the Secret Science of Winning Campaigns (Crown Publishing) he describes how the hitherto unimaginable quantities of data assembled by US political parties have enabled them to “micro-target” voters with ever greater sophistication. The “gurus” who rely on hunches are being supplanted by the “geeks” who rely on numbers. Already required reading inside the Beltway (the US website Politico described it as “Moneyball for politics”), the book is now attracting attention in Westminster as all parties search for the elixirs that will deliver victory in 2015.

When I spoke to Issenberg, who is part of a new cadre of stats-savvy US journalists, he told me that the tipping point came in 2004, when: “People in politics realised that the corporate world knows a lot more about consumers than they do about voters.” By acquiring data on people’s shopping and viewing habits and matching it up with their existing canvassing records, parties “were able to develop new statistical models and to look for patterns in the hundreds, sometimes thousands, of individual data points that resulted”. It was after Obama’s number-crunchers discovered that swing-voter households containing teenagers were more likely to support him that the campaign decided to buy ad space in video games. George Clooney and Sarah Jessica Parker were invited to host fundraisers after they were found to have the strongest influence on 40-to-49-year-old women, the demographic group most likely to donate.

As well as harvesting data, the parties are performing what Issenberg describes as “political versions of drug trials”, in which a new campaigning technique is tried on one group of voters while a control group is left untouched. Before a Michigan primary in 2006, the political consultant Mark Grebner sent citizens a copy of their voting history (already publicly available), along with their neighbours’, and informed them that an updated set would be sent to all residents after the election. Turnout increased by 20 per cent among those who received the message.

The words “creepy” and “scary” are the most common responses to such techniques, but Issenberg argues that they are evidence of a fuller, healthier democracy. “These types of nudges work because they make voting meaningful to people and one way they make it meaningful is by appealing to someone’s desire to fit in or not be shamed.”

Rather than relying on crude stereotypes such as “Worcester Woman” and “Mondeo Man”, data-mining allows campaigns to treat voters as individuals. By the 2016 presidential election, if you visit an environmental campaign website you will see an advert on the Democrats’ climate change policy; visit a jobs site and you’ll receive one on their employment policy. In the new era of big data, where the voter leads, the party will always follow.

 

People walk past a poster of Barack Obama. Photograph: Getty Images

George Eaton is political editor of the New Statesman.

This article first appeared in the 25 March 2013 issue of the New Statesman, After God

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation