Social Security
I suspect most on this list have grown weary of this debate which seems to pit the majority of those posting against one individual whose philosophic point of view probably differs substantially from most on the list. But our esteemed moderator has suggested that it is valuable to debate serious exponents of right-wing views if only to hone and sharpen our own arguments and logic. Thus, I will make one last, somewhat lengthy, attempt to explain social security as it currently exists and why it is important that it be retained for the forseeable future in more or less its current form.
I take it we all agree that technically there is no problem with maintaining the current system (i.e. that the political attack on SS is not technically sound but ideologically motivated) but rather that the debate here has been between those who believe that SS is a desirable and beneficial social program and the one critic who argues against it on ideological or philosophical grounds. In any case, I promise that this will be my last post on the central issue in this debate.
Quoting David Shemano:
>Regarding the role of the family, for which I was criticized by various posters:
>1. However you want to characterize the family (and I never mentioned the nuclear family), I >don't see how anybody can dispute that the family, in just about every culture we know of, >served or serves as the primary "social security" for its members. As a policy choice, I think that >is preferable to placing the primay locus on the state.
>2. I believe that governmental policies affect family formation. As I believe the family as an >institution is a good thing that should be encouraged, I would oppose governmental policies that >discourage family formation and assumption of responsibilities by families.
I suggest that if he didn’t refer to the nuclear family, he certainly implied it. But in any case, he has never given us a definition of what he means by ‘family’. Without such a definition, his argument is meaningless. For instance, I showed that in certain aboriginal societies the basic economic unit was not the family but the multi-family household and it was the household that was responsible for social security. Further, if one household failed, the burden was shared with other houses in the village/community/tribe/clan. I think if one checks through the economic anthropology literature, indeed the historical literature, one would find that with economic ‘development’ the basic unit of social security expanded as social organization expanded and I pointed both to the role of the church and the legal obligations of the landed gentry/aristocracy up to the 18th and 19th centuries to provide a minimum level of social security. Nothing said or implied here suggests that the family (nuclear or extended) in these later societies were not primarily responsible for the welfare of their immediate family but when the family failed to do so for reasons beyond their control or even for personal failure, society created institutions that provided a modicum of relief. (The very term ‘social security’ tells us that it is security of society, not of immediate family.) Modern forms of social security emerged with the industrialization and the destruction of rural society in which was imbedded the previous form of social security.
Before I go into the theory of social institutions, let me deal with David’s second point. No one disputes that government policies can affect family formation. So can economic events. So can corporate policies – though the extent governments can affect family formation is probably much over rated. (E.g. Quebec’s failure to raise the birth rate despite increasing subsidies for children and a fine system of daycare. The birthrate seems to be much more closely related to the cost of having and raising children and, most recently, the rising cost of educating children, in large measure due to spiraling tuition costs . Interestingly, improved social security and government subsidies to education effectively lowers the cost of raising children and, therefore, should encourage family formation, but that is another issue.)
Historically, within the last century, the biggest barrier to family formation and the birth rate was the depression (and less specifically, unemployment). War and post-war prosperity and the emergence of unions and pension plans encouraged family formation and a boom in the birth rate. Thus, Keynesian style expansionary demand management encourages the kind of family formation and family responsibility for economic welfare that David espouses.
In a later post, David writes: “Why have and do women marry in various cultures? Is not a really important reason the (potential) economic security resulting from the marriage? “ The reason for coupling, the emergence of family units (marriage being only one form – currently, for instance, in Quebec there are more children born to unmarried couples than there are to married couples; in one matriarchal society in China, the family is made up of the mother and children and temporarily visiting men. Similarly, in Jamaica a similar form of ‘family’ has become common) is biologically for procreation and the sexual division of labour (see Sahlins, “The Domestic Mode of Production”) Furthermore, in Pacific Northwest aboriginal culture, the primary reason for marriage, at least among the nobility, was to cement political alliances and, as such, were only for a period of time. Multiple marriages/divorce were common and women frequently ended up returning to their households after multiple marriages. Similarly, marriage among the nobility and royal families of Europe were chiefly to cement alliances and to produce heirs of ‘royal blood lines’. So the statement that women marry primarily to secure social security is problematic at best.
Furthermore Shemano writes: “Comparatively, you make the argument that social security at the state level is necessary because of the failure of pre-capitalist institutions during the rise of capitalism. Seems plausible -- social security as we know it was developed in 19th Century Germany. But talk about ahistorical -- to cite 19th Century Germany, or even the economy of the Great Depression, as the end all and be all of assumptions for how should social security be structured. Call me crazy, but when I look at 21st Century United States, I see an economy that has little in common with 19th Century Germany, or even 1933 United States, that mandates I ipso fact accept the solutions that were apparent to policy reformers in the 19th Century or the 1930s.”
“Just as one example, social security was created in the Depression as insurance, in the sense that the government was insuring you against the unlikely possibility that you might actually reach 65 and retire. Comparatively, 75 years later, where average life span has greatly increased and the average worker can expect 15-20 years of retirement, the "insurance" model is an anachronism, and for you to defend policies created in the Depression as the solution to the issues faced today is more ahistorical than anything I have said.”
A couple of observations first: Shemano is quite content to argue that “plausibly” social security was quite reasonable in the economic conditions of early German capitalism (Bismark) or during the depression but, he argues the economy has changed and social security is no longer relevant to the capitalism of the 21st century. First, I find it kind of interesting that economic development has changed the institution of social security but, according to David, it has not changed the economic institution of the family and marriage (sic). Second, I find his interpretation of social security “as insurance, in the sense that the government was insuring you against the unlikely possibility that you might actually reach 65 and retire” to be quite erroneous and misleading. In Canada, social security along the lines of the American model was not introduced until 1966 (Canada Pension Plan) and although it has a small insurance component to it, it was designed specifically as a pension plan, calculated to provide approximately 25 per cent of the retirement income of average workers/families. I believe the figure for the US is one third or approximately 35 per cent. In other words, the individual or family was/is still responsible for the majority of his/her retirement income. But this is not ‘insurance’ but a ‘pre-bought’ pension (in the same sense that you join a memorial service and pre-buy your funeral service and plot/cremation, as is your wont.)
It also seems strange to me that Shemano is suggesting that North American capitalism has outgrown the need for public pensions, just at a time when the private pension system is collapsing taking away much of the savings that families have thought they put away for their “golden years.” It is interesting that the cost of the implosion of pension plans in the steel and airlines industries is being shifted to the taxpayer (or other working pension contributors) by being offloaded onto the Federal pension insurance fund while, in the case of retired steelworkers, their post-retirement benefits are being unilaterally reduced at the expense of their savings. Meanwhile, those who saved for retirement through K401 accounts (RRSPs in Canada) by investing in Enron or technology stocks (Nortel in Canada) have seen their pensions wiped out by the greed, incompetence, and corruption at the corporate leadership (sic) level. If you know anyone who retired with what they thought was a good savings nestegg, in or around 2001-2 and saw their pension drop by 40-50 per cent virtually overnight – through no fault of their own – and are now forced to rely upon their social security (CPP) benefit to maintain a minimal standard of living, then you will realize just how important that minimum social security benefit is to human decency.
Furthermore, with the decline in private sector unionism, private (savings) pension funds are declining in coverage. I don’t know the figure in the US but in Canada approximately half of male workers are covered, around 40 per cent of female workers (the last time I checked). In other words, less than half of all workers are covered by pension plans. In the public sector, of course, the figure is much higher on average which means in the private sector the average coverage is even that much less. How then can a worker in an unstable job (which economists, employers and governments tell us is the future; i.e. “Labour market flexibility”), with no union or private pension plan and therefore with no employer contribution, save enough to have a liveable pension on retirement? If one is in the professions or business, it is perhaps possible. Indeed, in Canada almost all the RRSP accounts are from the upper income groups (amounting to a major tax transfer from the low income to the high income.) One could go on but I think I have made the point that social security is as necessary now, probably even more, than it was when it was introduced.
Let me, however, finish this with a theoretical explanation within the institutional paradigm. Institutions are created by society to combat asymmetrical information and fundamental uncertainty. (Veblen, Commons, Polanyi, Keynes, among others). Fundamental uncertainty (non-insurable risk) includes in this context the possibility of unemployment at both the macro and micro level, technological change, illness and disability of the individual or a member of his/her family, natural disaster, incompetence or dishonesty of her employer, etc. etc. All of these can interrupt or reduce earnings or increase personal costs creating a fundamental uncertainty as to whether the individual can save and provide for the future. Individuals respond by creating institutions sufficiently large that they can bridge that uncertainty – unions, fraternal organizations, churches, community clubs, union hospitals and clinics, etc. If the fundamental uncertainty is sufficiently large to cover the whole society (mass unemployment, bankruptcy, technological change) the only institutions that can deal with this uncertainty is at the society level – i.e. at the level of the state. That is why social security was created in the first instance and why it is, if anything, even more relevant now.
And, for now at least, that is my last comment on this thread.
Paul Phillips, Sr. Scholar, Department of Economics, University of Manitoba
