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Fragmenta Catallactica
"The welfare state's compulsory aid paralyzes people's willingness to take care of their own needs and its financial burden considerably weakens people's ability to do so, while on the other hand, this limitation of self-provision makes people more and more dependent upon compulsory public aid and increases their claim on it."
(Wilhelm Roepke, "Robbing Peter to Pay Paul: On the Nature of the Welfare State")
If the true believers in the nobility and necessity of "social security" will prevent its conversion to a program which explicitly encourages and facilitates even a modest kind of "self-provision," then I hope that it can at least be transformed into a social mechanism of bare-bones coherence: sc., a straight-up, means-tested, Dole for the Elderly, etc. At least then it would truly be social insurance - securing it beneficiaries against extreme indigence.
January 25, 2005 | Permalink
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During the early seventies it will become equally clear that welfare institutions have an analogous regressive effect. The international institutionalization of social service, medicine, and education which is generally identified with development has equally overwhelming destructive byproducts.
There's a small chance you haven't read any of his stuff. A quick Googleing showed none cited.
Posted by: Harry at Jan 26, 2005 5:42:16 AM
I am not sure that the present "reform" initiatives have any genuine interest in encouraging or facilitating "self-provision". If the same amount of money is taken out of the worker's paycheck, and is placed either in Social Security or in privatiezed accounts based upon government dictates, how is that truly different from the status quo? "If we take a wedge of this apple, and call it a slice of orange...." And the economics of Bush's privatization model are, to put it mildly, not in favor of the worker.
At the same time, I have no problem with transforming Social Security into a means tested program. But then, shouldn't it be funded out of the general fund, like SSI, as opposed to by a special tax on wage earners? (And why is it that Social Security contributions are, at present, subject to double and triple taxation? Something, it seems, our nation's leaders find offensive only when it applies to the rich?)
Posted by: Aaron at Jan 26, 2005 7:15:41 AM
Harry,
Thanks for that - I haven't really known much at all about Illich, and am intrigued to make his acquaintance properly. I've done a bit of rooting around today, and have found some statements of his which are quite interesting. I have a feeling that he and Roepke would differ on some matters of importance, but I can see a complementarity there (just as I feel drawn to E.F. Schumacher in some ways). I certainly like his iconoclasm, and that he evidently doesn't sit easily on either side of the tired divide of "left" and "right."
-------
Aaron, my man, good to have a comment from you.
The differences I’d claim for private accounts – taking the same amount which now goes to pay someone else’s current benefit, and instead placing it in a private investment account – are rather marked.
The way that I phrased the mechanism points to the foundational aspect: your own money goes into your own private account; whereas now your money (the surplus notwithstanding) goes to pay someone else’s current benefits, and assuming no changes in the system, when you retire, future younger persons’ then-current earnings would fund your benefits.
Hence, in the quasi-privatized schema, you assume the responsibility and - to my mind, the crucial correlative component – risk for the lion’s share of your own retirement fund (with a compulsory push from state). And, to be sure, either bad luck or bad decisions might leave someone with a paltry fund. But as I understand the phrase “self-provision,” it means assuming the responsibility and risk for a matter of personal importance. Nearly all of the remotely viable “reform” packages have a safety-net provision in them, anyhow, so it’s not part of the bargain that the move to private accounts is all or nothing, by any stretch.
(I also happen to be reasonably confident that private investments, in the long run [and when diversified], are not super “risky” – especially as compared to the spoils-system of government handouts and their alleged “guarantees” – but that’s a separate issue).
Good pt. about how my personal “least good” reform (simple Dole) would be funded – I think you’re right that it wouldn’t make any sense to have a payroll tax to provide the funds. Rather, the "seniors guarantee" would be a variant on general public assistance.
Posted by: Paul Craddick at Jan 26, 2005 9:36:30 PM
Paul, I am somehow not left with a warm fuzzy feeling about a private account that is filled with "my money", such that additional sums are borrowed in my name or are otherwise taxed from me to pay somebody else's current benefit, and where the government regulates the type of investment I can make with "my money". I mean, I see the difference, but I would rather have the government let me worry about starting and maintaining my own private accounts, as I presently do, rather than adding a shell game to the existing Ponzi scheme. But then, those aspects of the plan presumably also offend your libertarian instincts.
Posted by: Aaron at Jan 27, 2005 8:13:56 AM
Hmmm ... Will this help you feel warmer and fuzzier?!
Posted by: Paul Craddick at Jan 27, 2005 9:43:38 PM
One of the earliest criticisms of Social Security, and one I agree with wholeheartedly, is that the pool of money accumulated would prove too tempting and be used for dubious schemes.
The old-age contributory insurance plan is fraught with many other dangers. Enormous reserves, estimated at more than $10,000,000,000 by 1948 and at more than $40,000,000,000 in 1980, are contemplated. These will create a stupendous problem of investment. Experience everywhere indicates that politicians will hardly be able to keep their hands off such easy money. The cold-storaging of so much sorely needed purchasing power not only frustrates the expressed aims of the New Deal but may definitely hamper recovery. The constitutionality of the entire scheme is also extremely doubtful.
There's a fairly common left wing view that the government social insurance provisions were inspired by Bismarck's reforms and designed to take the wind out of the socialists sails. He was an able, clever and pragmatic politician; a true conservative staving off excessive reform.
My own view of social insurance is simplistic and based on a jaded view of human nature. It is defensible to support the feckless and deliberately indigent as long as the truly unfortunate and/or worthy also benefit. It's always going to be cheaper than jailing them.
Posted by: Harry at Jan 28, 2005 2:59:56 AM